Instructional design/Force field analysis/A case study for practicing FFA

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Your Task for the Case
Here is a case regarding Huffy Corporation's evaluation on its current strategy. Suppose that you are a consultant who is working on assessing Huffy's strategic decision. Your client, a manager in the administration department, provided you some examples of external forces and internal forces collected and analyzed from the annual reports and wanted you to identify forces for change and forces resisting change from these external and internal factors.

The Case of Huffy
The 1982 sales of bicycles in the United States dropped approximately 40 per cent. Sales were at the lowest level in 15 years. Huffy Corporation, the United States’ largest manufacturer of bicycles, received 90 per cent of its revenues from bicycle sales. Given the decline in sales and the pessimistic projections for the short-term future, Huffy was forced to evaluate its current strategy. It was necessary for Huffy to decide whether to remain with its current strategy for selling bicycles (its major product) through mass retailers (its major outlet) or to consider a diversification strategy.

External Forces

One of the general changes in society impacting many businesses in the U.S. is the increasing birth rate. Where there were slightly over three-million children born in 1975, the U.S. Department of Health and Human Service estimates the birth rate will increase to 4.5 million children per year for 1985 to 1990. This ‘baby boom echo’ is in large part the result of children from the post World-War II ‘baby boom’ starting families. The delay in starting families by this group has created an increased disposable income per child, making investments in infant’s and children’s products potentially attractive. Yet with their emphasis on bicycles it would be a number of years before the new births represent potential customers for Huffy. Being able to market products for infants and toddlers thus is a pressure encouraging Huffy to undertake a different strategy than was used in the past.

Another pressure to change strategies was the increased interest in physical fitness. The physical fitness interest is relevant to Huffy as a producer of bicycles, but it is also of interest to all firms interested in producing physical fitness related equipment and supplies. Given Huffy’s contacts with mass retails, diversification into other products related to sporting goods and physical fitness has potential strategic fit.

A significant force for many smaller firms (including Huffy) considering diversifying into physical fitness products is the entry of firms with large resource bases into the market. West Bend Company and Campbell Soup have both aggressively entered the market. West Bend expects sporting goods to account for 20 per cent of its sales within one year of entry. Campbell Soup increased the number of outlets selling its sporting goods products from 60 to 1500 outlets in five months. Campbell’s sees the diversification as a part of its ’health and well-being’ theme. The entry of large firms into the market for sporting goods and fitness products may serve as a significant force against movement into the market by Huffy.

Another force against some diversification strategies is Huffy’s strong association with mass retailers. The association of the Huffy name with mass markets and discount sales may prove a barrier to producing or marketing premium quality products through specialty shops. While such market may not represent the potential sales volume of mass markets, higher profit margins may make such diversification strategies attractive.

A final external force favoring Huffy’s diversification from its concentration on bicycles is competition from imports. The Bicycle Manufacturers’ Association projected a 30 per cent increase in bicycle sales in the U.S. for 1984. However, nearly all of the increase was expected to result from imported cycles. The increased competition from imports is an especially salient force for a single product company such as Huffy where 90 per cent of sales were from bicycles. The threat of imports is one force causing Huff’s management to undertake a diversification strategy designed to reduce bicycle sales to less than 50 per cent of corporate sales.

Internal Forces

There were also a number of forces within Huffy that were relevant to the selection and implementation of diversification strategies. One of the major internal pressures for change was Huffy’s strong research and development department, the Huffy Tech Center. Using the Tech Center’s new technology, U.S. cyclists won two gold, two silver and a bronze medal in the 1984 Olympics on bicycles produced by Huffy. They were the first Olympic medals won by U.S. cyclists since 1912. Huffy Tech Center has also allowed the firm to introduce innovative new products in sporting goods, in tricycles and in other youth-oriented products.

Huffy’s response to the decreased sales of 1982 provided a strong internal base from which to diversity. In response to the sales decline, Huffy closed two production facilities and modernized other facilities to produce the same number of bicycles with fewer personal and at a lower per unit cost. This move provided the firm a strengthened profit margin and existing facilities in which to produce new products.

The major internal force opposing diversification efforts is the limited experience of Huffy management. The firm’s management team has a proven record of successfully marketing bicycles through mass retailers. The ability of existing management to successfully market a more diversified product line through other retail outlet (e.g. specialty shops) was a major consideration in diversifying from its basic bicycle business.

Your Analysis
According to the definition and examples we talked about earlier, you might now be able to tell your client what the forces for change are and what the forces resisting change are by completing the following questions. {These are the external forces influencing Huffy's strategic decision, please choose the one(s) that work(s) for changes. - Name associated with mass markets. + Rising birth rates. + Public interest in physical fitness. - Entry of firm with larger resources bases. + Pressure from imports
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{These are the internal forces influencing Huffy's strategic decision, please choose the one(s) against changes. + Limited management experience. - Strong research and development efforts. + Distribution channels limited to mass retailers. - Modern production facilities with excess capacity.
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 * Check your results of analysis to see if they correspond with this graphic.[[Image: FFAF2.jpg |500px|center|Force impacting Huffy’s diversification strategy]]