Emerson Electric

Case 8-3: Emerson Electric

Emerson Electric is a manufacturing firm that specializes in motors and fans based in St. Louis. They have manufactured parts for such popular brands as Fisher Control Valves, Skil, Dremel, Craftsman power tools, In-Sing-Erator waste disposals, Copeland compressors, Rosemount instruments, Automatic Switch valves, and US Electric Motors. The firm has many US and foreign competitors, some include GE, Westinghouse, Siemens and Hitachi. When compared to competitors Emerson Electric does not partake in broadly diversified activities such as financial services, aircraft engines, plastics, etc. The firm's strategy has been to acquire smaller firms to diversify manufacturing mix but they stay within the manufacturing sector.

Emerson is decentralized into 40 divisions for each product line that the firm manufactures and each division is run by a president. After 1990, Emerson reorganized into 8 business segments to take advantage of common distribution channels and relevant technology expertise. The 8 divisions are: 1) fractional horsepower electric motors; 2)industrial motors, 3)tools, 4)industrial machinery and components, 5)components for heating and air conditioning, 6)process control equipment, 7)appliance components, and 8)electronics and computer support products and systems. The 8 divisions were managed by the Office of the Chief Executive (OCE) which was comprised of a CEO, President, Vice Chairmen, 7 business leaders and 3 corporate officers.

In the 1980s the firm realized that they were not as competitive in its 8 divisions when compared to foreign competition, at this point in time the firm decided to change its strategy to become the best cost producer. Cost and quality of products have been the main focus of Emerson, they kept track of defects per million parts and set goals for the division to lower costs and defect count. The new "Best Cost Producer Strategy" places a huge emphasis on being competitive with process,...