Strong Tie Case

Tim McDonald

5/23/13

Cases – Strong Tie Ltd.

This case involves a manufacturing company Strong Tie, Which has upgraded its automated metal cutting machines and whether or not it has made the company more profitable. From 2006 to 2008 the company has seen net income fall from 1456$ to 7$. The company’s investment in automation has not shown to be a wise investment and has put the company in financial trouble.

Company Background

Strong tie Ltd was opened in 1946 right after WW2 by Bill Johnston. Strong Tie manufactures standardized and customized structural connecters used to reinforce wood joints in buildings, docks and fences. Strong tie was run by Bill Johnston till he passed in 1975 and is now run by his son David Johnston. David Johnston also has three daughters that hold upper management positions.

Product

Strong ties connectors were designed in Winnipeg with input from local building companies. The production process over the last few years has moved to one of high automation. Some human recourse is still need to move materials, pack and ship, transfer work-in-progress and feed machines. This move to more automation came from competition from low wage countries like China. Strong ties still has a good margin on customizable connectors even though they require more labor, buyers are willing to pay a premium.

Connectors are distributed through all national home improvement chains in North America this includes: Home Depot, Lowe’s, Roma, Home Hardware, Eagle, sears. All of Strong Ties standardized products are sold in these stores and they also take customized orders through these national chains.

Market Share

Strong Tie in estimated to have to have 60 percent market share, which has fallen from 70 percent in the recent years. Universal connecters, a US company is estimated to have about 30 per cent. They offer very similar products to Strong tie. The rest of the market is served by a couple of small Chinese companies. Universal connecters...