To set a strategic plan for Able, we need to make an assumption about the goals of senior management. Either the company is going to be turned around in order to resist the takeover or it us going to improve the situation in order to become more attractive. The basic difference between these two strategies is the decision to cut costs or make investments. Because of the difficulty in turning employee morale around if the acquisition is going to go through, we will assume that the company is strategizing to avoid the buyout.
The first strategic decision is to concentrate its efforts on one market. The company is not large enough to compete across the full range of power tool products. Because of the high profit margins and the lack of any dominant company, Able should concentrate on the professional power tool market. This will help them protect their financial returns as they pull themselves out of their distressed state. Besides, any competitive advantage the company gains in the consumer market evaporates so quickly that the research costs cannot be recouped. The slight declines in this market segment are not a concern, because once the company regains its strength it can easily offer high-end consumer products again.
Eliminating product lines will also reduce overhead costs. Marketing, research, training, and other management services can be concentrated. Results will be achieved faster. Everyone will be working on the same project rather than squabbling. Plus, if the company loses people due to fear, it will probably not need to replace them.
The second strategic objective is to close the two plants and build a new one. For all of its difficulties the company has managed to make a profit two of the last four years. This should allow them to borrow the money for this investment, whereas it would be impossible to so for simple maintenance. Adding on extra debt will not please the Walden, who will change its mind a...