Winnebago Case Study Analysis Winnebago Strategy Heavy reliance

Winnebago Case Study Analysis • Winnebago Strategy – Heavy reliance on a vertical integration strategy for manufacturing • Relying on fixed vehicle configurations that cannot be modified either in the channel or in mfg. which has given them economies of scale – Created and sustained a viable distribution channel in a highly fragmented industry – Competing on breadth of product line over its customization – Capitalized on demographic and psychographic trends and entered the market at an excellent time to capitalize on them – Over time, a recognition of service and warranties being an issue – yet not enough to get to 100% accountability in their channels • • Even at their best, 14 warranties to contend with from a customer standpoint Customer yearns for accountability from RV vendors to cut out finger-pointing of which problem belongs to which subsystem (electrical, plumping, etc. . ) – Keep U. S. government regulators at bay including the NHTSA through lobbying • Steel frame construction is a strategy to keep NHTSA from overly-regulating the industry and driving costs up – No real response to the gas shortage and the long-term issue of energy shortages and higher potential costs • • R&D focuses on Thermo-Panel very smaller footprint vehicles at lower prices Minnie Winnie is a cop-out – did not deliver a lower-priced vehicle at a smaller footprint

Winnebago Case Study Analysis • Why Has the Company been Successful? – Branding and value differentiation against hundreds of other competitors • Became the “Kleenex” of RVs – the name synonymous with the brand – Successful development and support of their dealer channel • First-mover advantage in this area given their manufacturing capacity • The large channel management team in the industry • Very successful in generating and sustaining dealer loyalty – Demographic trends in disposable income and time are driving purchases of higher-end camping vehicles and options • Baby boomer families • Recreational habits of Americans in the 1960 s – Relatively low saturation level of the market • Estimated to be between 10% to 50%

Winnebago Case Study Analysis • What is the structure of the recreational vehicle industry? – Fragmented and favoring those manufacturers with deep expertise on the most costly components • Chassis and engine mfg. – 49% of all consumers say the dealer influenced or recommended their RV • Major re-direct in the channel, only 2% say price – Major overhang of vendors – too many vendors chasing too few buyers • • Channel cannot support the number of vendors in the market during time period of case As of January 1, 1973: 650 mftrs and 704 plants – Major overhang of the distribution channel as well • • 10, 000 recreational vehicle dealers 1972: Avg. dealer sales of $242, 000 and 75 vehicles in inventory 10% to 15% of dealers had sales over $1 M; largest is Winnebago dealer with $9 M in sales Structure: One or two salesmen, small service area & rental units – Dealers are a major force in re-directing sales in the industry • 86% of all sales as reported by the dealer are from switched brands – Distribution channels that lack consistency of service programs and policies • • WBI considers it a “win” when they are down to 14 warranties to track on the consumer side Warranties used as differentiators with little/no knowledge of their cost to the company – Majority of sales are in the Pacific States – 15 year life of RVs mean brand loyalty and trade-up are critical

Winnebago Case Study Analysis • Evaluation of WBI Strategy – Disconnected from the shifting value chain of the industry – Manufacturing strategy lacks focus and vision • On-again, off-again approach to Reno plant • Must think of distributed manufacturing as a viable alternative to survive – Easily Distracted • Modular Housing – entirely different value chain and industry • R&D focused on vertical integration first, new product innovation last – Costs spiraling up due to: • Not being thorough enough about make/buy decisions • Willing to pay the costs of transportation when having a plant in the Pacific makes much more sense • Lack of supply chain management & optimization – this is also leading to higher sourcing and procurement costs – Complacent in channel management, product development, customer service – R&D only focused on vertical integration, not on how to create “category killer” products • Minnie Winnie at 50% of the cost and double the gas mileage

Winnebago Case Study Analysis • What should Hanson Do? – Immediately create a more demand-driven manufacturing, supply chain and sourcing strategy • Define and executive a Sales & Operations Planning process to make sure his factory doesn’t have the bullwhip effect drive them out of business • Look to strategic sourcing strategies that including heavy quality management programs to source materials rather than build them – Create a strategic plan for distributed manufacturing • Pacific has more demand than any other area; must get a final assembly plant there – Set up dealers to win • Better use of financing and flooring programs • Get a dealer mgmt. system in place to better manage pricing and inventory – Invest in R&D for smaller, lighter and more fuel-efficient RVs • Look to partner with Toyota for a Minnie Winnie that doubles gas mileage and drops the price by 50% – Licensing and Intellectual Property • Set up licensing as a profit center and license the production process in Australia, Europe and Asia to derive revenue from intellectual property – Benchmark production performance and implement lean manufacturing concepts • Focus needs to be on improving internal efficiency more than vertical integration

Winnebago Case Study Analysis • Problems – Manufacturing is completely disconnected from customer demand • • • There are no reliable approaches to capturing demand translating it into product No Sales & Operations Planning (S&OP) process in place to manage variations in consumer demand – Creating a “bullwhip effect” of production management, hence the immediate lay-offs when production drops Majority of sales are in the Pacific states yet so much vacillation of building a plant there – Highly Ineffective Supply Chain Management and Supply Chain Optimization Strategies • • 65% to 75% of the wholesale price of an RV is based on component parts 80% of all chassis produced by Dodge with Chevy, Ford and International Harvester providing the balance – Too much of a reliance on vertical integration • Lacks lean manufacturing principles which were revolutionizing manufacturing at this point • No focus on internal efficiency and better process management • No real analytics for benchmarking individual production center and process performance • No mention of metrics to measure collaboration of the company or a focus on greater effectiveness of knowledge transfer inside

Winnebago Case Study Analysis • Problems – – – Heavy demands on the dealer channel that are based on the assumption of continual growth • 90 days inventory initially without flooring programs and then with • Heavy forecast demands on the dealer • Relatively low margin for the size of the sale • Shift to auto dealer-like requirements of a show room and support • All equate to the dealer being stressed out to sell more and make quota Not realizing GM is a potentially lethal competitor due to a much more advanced and sophisticated dealer channel • 13, 000 dealers and each has sold trucks and SUVs before – they know the sales cycle well • Well down the experience curve on managing service and support, including how to be the single point of accountability • Anticipated NHTSA requirements and built to their specifications before they were enacted • GM is well down the experience curve on dealer management (pricing, price exception management, co-op funding, new product introduction process, product re-positioning, knowledge of the selling cycles of consumers, financing expertise at the dealer and consumer level, brand awareness, advertising management and effectiveness tracking, R&D transfer from trucks; ownership of the midtier of the SUV market with the Suburban, et. al. ) Lack of new product development that leads into entirely new markets • Continues to compete in a red ocean despite deceiving market growth statistics • Minnie-Winnie is a fail – not a lower price for a smaller footprint? Only 5% of revenue