Ferrofluidics Case Study

Case Analysis: Ferrofluidics

Problem Statement

The fourth generation of the 'Six-Four-Two' puller is full of bugs and hurting the division on several fronts.

Ferrofluidics has been losing profits from its Systems Equipment Division (SED) after a slow start and poor market entry with their puller products. Despite product potential in a market of demand, SED has had only one good financial year. SED's fourth generation 'Six-Four-Two' puller is hurting the division's reputation and ultimately the company. Additional problems that support the initial problem statement include narrow focused vision on product upgrade and newer generations instead of debugging the current product production. SED had focused too heavily on future products and market share that they neglected current customers. The division focused on new undeveloped technologies in other markets before having a solid position in current endeavors. Lastly, the upper management of SED believed they were fully capable to put their 'materials-based' technologies such as the silicon pullers into an effective fabrication and assembly process.

Short Summary of the Facts

Ferrofluidics occupied their Systems Equipment Division (SED) because "they perceived the production of silicon pullers as a relatively 'low technology' industry, where the application of their technological expertise would give them a huge advantage." To get the division started, Ferrofluidics purchased a company that had previously entered the market and continued to push their product with limited success. SED developed their own designed and labeled it the 'Six-Four-Two' puller derived from the size of the ingots it produced. In early 1982, it was the most advanced puller of its time. Because of the silicon industry's rapid growth and to secure a larger control of the market, SED continued to market newly designed generations of the puller. The first few years the division operated at a loss due to continued research and development and initial start-up to include the purchase of Varian and their outdated technological assets.

It was not until the fourth generation of the "Six-Four-Two" puller that they accrued their only operating profit. The fourth generation was initially a great success by tripling SED's sales in 1985. However, during that same year the fourth generation started to report serious quality problems and interest in the machine quickly began to decline. Although the quality problems were reported, the division continued new Research and Development in a fifth generation 'Six-Four-Two' puller and into other new undeveloped pullers such as the gallium arsenide puller. This fade of interest due to reliability problems and quality assurance of adequate rectifications started to harm the entire product line and the company. After the severe quality problems surfaced and dwindling sales began a new manager was brought ashore to bring new ideas and solutions to the struggling division.

Analysis of the Facts*

S (Strengths) - Ferrofluidics has a strong expertise background in the technical magnetic fluid technology where is there is a demand for such technology. The company is believed to be successful in other markets where it has applied their technology in lubricants, sealing agents, frictionless bearings, and damping agents. SED has a new manager bring fresh ideas, vision, and insights. Both the company and division are aware of the shifting market and its new location along the Pacific Rim.

W (Weakness) - Ferrofluidics bought a company to help launch SED, but Varian's technology and their assets were considered obsolete and outdated. The initiated start-up costs proved unsuccessful and hindered the momentum of SED entering the market with their full potential.

SED started the design and development of a fifth generation of the 'Six-Four-Two' and continued the investment of the divisional assets into Research and Development all the while knowing their fourth generation puller was in urgent attention. The fourth generation lacked the support it needed and ultimately started to hurt the division's reputation it built during its initial success.

Although the company had limited success in North America, the market is shifting to overseas markets along the Pacific Rim. SED is not geographically situated for foreign market in its current location. Recent trends are proving that buyers are buying locally. SED is losing market share both due to quality assurance problems and shifting markets outside of their reach. SED

SED's Research and Development in the gallium arsenide puller is pulling valuable resources away from fixing current problems. Not only is the division having trouble with this research, the product is not expected to be complete for a considerable amount of time.