A Narrow Product Line | Restructuring & Re-Engineering
What is a Narrow Product Line?
A narrow Product Line is where an organization has one or a few sets of products that have been produced.
Characteristics of Narrow Product Line
A narrow product line tends to have higher production costs because the output is lower.
Output tends to be lower, and it has higher production costs because the fixed costs of production, for example, the buildings and the overheads in general, are all born by a single line of production.
It means that production costs will tend to be higher. Total production costs are not just variable costs of production, the cost of the raw materials and the direct labor and the machinery inside.
But the costs of the overheads as well when they’re apportioned and brought to bear. It is a higher cost system.
A narrow product line tends to be higher cost, but it also reduces the opportunity for scale. Economies of scale are related to the size of the organization. Bigger organizations can imply more specialist machinery and more specialized personnel, which ultimately reduces the cost per unit of making the product.
Bigger organizations can negotiate finance better from the banks cheaper, and they can have specialist departments for research and development, so overall larger organizations have more scale economies.
Of course, large organizations can get too large where the out of control there’s simply far too big, but that is another issue (Diseconomy of scale)
But a narrow production line will tend to have higher production costs because all the business costs are born by one line of output. Secondly, there are reduced opportunities for economies of scale.
Generally speaking, economies of size are not associated with single-line production unless that one single line of prediction is phenomenally large.
A single line of production has to develop some form of distinctive competence. Thus, a single line of prediction, there must be core competencies within the production system, specialist machinery and skilled workers, and so on.
But is that sufficient to enable it to compete effectively in the marketplace with a single line of production.?
For example, there is no opportunity to brand the product because of inefficiency due to distribution and marketing. Therefore, a narrow product line or a single line of production tends to restrict core competencies because they’re only required for that single product, hence higher production costs.
All the organization’s cost falls on that product, and they’re fewer opportunities to exploit developing, exploit economies of scale.
Reasons That A Business Offer A Narrow Product Mix/ Narrow Product Line
- Product Width – They have several different product lines but are not entirely related
- contracting – Involves pruning weak brands can strengthen the remaining brands in the line.
- Ease on management
Restructuring and Re-Engineering
When you look at tall and flat organizations, streamlining would be moving from a tall organization down to, ah, flat organization. It’s getting rid of some of the organization’s levels and trying to reduce the organization’s bureaucratic costs.
It is restructuring, trying to streamline the authority, the hierarchy of authority, reducing the number of levels. That’s the idea behind restructuring.
Reasons for Restructuring
- It’s downsizing the workforce to reduce costs because not all the workforce may be necessary. Again, there may be duplication in the workforce. Some of the workforces may be implied just to service the organization itself because the organization is so complex that simplifying the organization by restructuring the organization will save costs.
- Another reason for these changes could be a change in the business environment. This could be forced on the organization, the economy may be changing and it means that and levels of income in the economy are falling that say so that consumers have less to spend. They’re becoming more discriminating.
- Again, the company needs to restructure to be competitive. It could be that competitors, perhaps from overseas, are entering the market, and market share has been lost, so they need to restructure to cut costs to cut prices to regain their market position.
- It could also be that they’ve simply got excess capacity and the need to restructure to optimize the use of resources. It may be that the existing production facilities are too big. There’s wasted space, or there’s wasted office space, and thus restructuring makes sense to cut costs and optimize the use of capacity.
- It could be that the organization simply grew too tall and inflexible. Over time, managers often look for managers under them to deal with the next layer of managers. They’re inserting subordinates all the time. This happens in many organizations, and it happens in universities, the public sector, etc. It is common, particularly in large companies, where managers request a direct subordinate to help out, but that position becomes permanent. After a while, it will be a very large and very tall organization with many layers of bureaucracy, and restructuring simply looks critical at all of this and aims to reduce the costs.
Summary of Restructuring
The whole idea of restructuring is to improve the competitive advantage that the product has in the market built on its core competencies to enable it to stay on top by ensuring that it’s charging a competitive price that it’s not overly expensive.
Re-engineering can be defined as the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements. Re-engineering is looking critically at what is being done to see if it can be improved to see if it can be changed.
So it’s perhaps looking at the final product and then working backward from the final product to see how it can be done, how it can be improved, how the production process could be changed, how the output process, the process that the output passes through can be altered to achieve dramatic improvements in terms of cost savings and efficiency.
It doesn’t really focus on the functions, but it focuses on the processes which could across the functions.
It looks at the product itself and tries to re-engineer it to try to imagine ways of making the product differently, but which may be more efficient.
Sometimes products are made because that’s the way it’s always been made and no one has got round to thinking about the product itself, to see if there’s a better way of doing it.
Re-engineering addresses this directly by looking at the product in an attempt to come up with cost-saving methods and efficiency methods. its re-engineers the processes that go to make the product.