Winnebago Industries

Introduction

Winnebago industries are financially stable. The firm owns its own land, building and equipment and has no long term debt. Winnebago has been producing motor homes since 1958. This has allowed establishing itself as a leader and innovator in the North American market and the field of motor homes. This made Winnebago a famous brand name and allowed it to be a fixture of American motor culture such as ford and Harley Davidson. In 2001 Winnebago ended its year as the number one motor home maker for the first time in 20 years and increasing its market share in the industry by 10%. Although the numbers look good, sales have actually declined leading to conclusion there are several reasons behind the decline. These reasons include the economy uncertainty resulting from September eleven and more importantly the extremely high increase in fuel prices. Winnebago is going to try to avoid declining sales and retain its leadership of the market.

There are several ways of reducing costs that Winnebago can use to stop the decline of its sales and improve efficiency. Although they can follow the footsteps of several major American corporations by outsourcing production to different countries in order to reduce cost, this move will contradict with its values and mission statement. This could lead to quality decrease and most importantly alienate loyal American clients who are Ethnocentric and prefer buying all American products. This will make Winnebago also lose part of its appeal. This point is proven by the current sate of the American motor industry who is struggling to make profits even as they have outsourced most of their production lines. This proves that outsourcing is not a liable option. Another option is shifting production facilities to different parts of the USA. This could reduce distribution costs but then again Iowa is located in the middle of the country close to all its major markets such as Florida and New York.

Analyze the Situation

Nevertheless there are several issues that Winnebago can address and find solutions for that could contribute to stopping the declining sales and improving Winnebago's overall position as a company. In order for Winnebago to increase its expansion and sales, its internal problems must be addressed clearly with the intension of finding the right solution to put Winnebago back on track to help on holding its position as the market leader in motor homes. These issues include an apparent weakness in the production process of both class A and class C were backlog reached 1600 units an 18% increase compared to the previous year. Another issue includes the change of demographics where the shift of age is affecting the target market. One of the major issues that are clearly visible is the increase of fuel prices. The prices have been going up steadily without decline over the past couple of years and have affected the auto market in general.

Recommendation

I. Since class B accounts for only 2.6% of total production revenue where class A & C represent 92.4% of total revenue, the class B product line should be removed since its revenue only increased by .1 % over the last year. If Winnebago truly were able to remove this part of the business without any financial ramifications , they could used the class B facilities to help support the backlog of class A and C since they are the most popular products and provide the main revenues for Winnebago. This completely justifies the shutting off the class B facility and there is no need to lay off any workers since they can resume work on the other classes. Class A and class C are obviously the main production lines that pump blood into Winnebago. This can greatly help Winnebago in reducing their backlog and increase sales since there is more room for production.

II. Finding a new target market other than the woofies is an important step for Winnebago since this segment of the market is getting too old. Winnebago should shift its focus to baby boomers that are looking for different ways to enjoy their retirement. Winnebago should understand that currently baby boomers are the segment of the market with the most disposable income. A recent rise in popularity in motor homes should increase Winnebago's interest in targeting this segment since recent marketing campaigns proved to be highly successful in reaching these consumers and showing the public how much fun Winnebago's can be and how they can bring families closer together while enjoying their holidays and trips. Although there is evidence of this massive resurgence in the market Winnebago is falling behind in reaching this segment. Winnebago should offer these consumers the ability to customize their Winnebago's since they tend to be individualistic and offer them an extremely wide selection of options to satisfy all their different tastes. These options can include custom interiors, luxurious materials, advanced GPS systems, Wi-Fi, satellite TV hookup and mobile offices. These options can be added as extras on existing Winnebago chassis to reduce costs of new designs. Class A motor homes are probably the preferred choice for baby boomers since they can handle all their requirements due to their bigger sizes.

III.

There are several methods Winnebago can use in order to improve the fuel efficiency of its vehicles. The first thing that comes to mind when this subject is opened are hybrid engines that can reduce the costs of fuel dramatically. Unfortunately today this technology is still too expensive for a company like Winnebago to venture in and benefit from. A hybrid motor home would consist of two engines and electric and gasoline one. For the electric engine to run, electric batteries are required. Their prices are still to expensive and only on large corporation had success with this technology today and that's Toyota. Nevertheless this option should be kept in mind since this technologies price is decreasing. A major factor in improving fuel efficiency is weight. Motor homes tend to be very heavy due to the extensive use of steel and other heavy materials. Winnebago should try to use more aluminum and carbon fiber in building its motor homes since both these materials are as strong as steel yet much lighter. Although these material might sound expensive, when purchased in bulk their prices can be reduced significantly. Winnebago should also apply wind tunnel testing to improve aerodynamics thus reducing drag to improve mileage.

Another method to improve fuel efficiency and mileage is to use advanced diesel engines which tend to be much cheaper than hybrids yet have the same fuel efficiency