Product details

This is the second of a two-case series (104-095-1 and 104-096-1). IskraEMECO produces electricity measuring meters (electric power meters). The meters are custom manufactured for residential, commercial and industrial uses. The company is the seventh largest manufacturer of electricity meters in the world. The firm has several joint ventures and sells its products in sixty four countries. IskraEMECO produces two types of meters that measure power consumption: induction (classical) meters, and electronic meters. Manufacturing of classical meters requires a very labour intensive process. Electronic meters production is capital intensive. The company has found a niche in the marketplace by custom manufacturing to customer specifications. Management is proud of the company''s product and customer service quality. Top management believes this is their comparative advantage in attracting and keeping customers. The manufacturing process for classical meters is linear with parts and components produced according to quotas specified in the incentive system. The company is in the process of changing to cellular manufacturing. A very large percentage of parts and components are either produced by the company or bought from local firms. The company uses a standard costing system for product costing and incentive payments. The finance and accounting department managers are concerned that their departments are unable to provide relevant and timely information for decision making such as pricing, and outsourcing. There is a similar feeling on the part of marketing and manufacturing managers. Pricing of the products are done on a contribution margin basis. There is increased competition everywhere especially within Slovenia. Profit margins are shrinking. The employees and management are majority shareholders in the firm. The outside owners are pressuring the company to pay cash dividends but management wants to finance growth, and research and development internally. This case was sponsored by the Indiana University CIBER Case Collection.