Luxor Technologies was the leader in the wireless communication domain during 1992-1996. It did produced state-of-the-art advancements but it's pure concentration was on applications engineering. In the process it developed low-cost high quality products. It had patents for both new technology developments and applications engineering. Application engineering was the major concentration.
Initially, there was very little competition to Luxor. But as time passed by and the advancements in technologies improved, other companies also started implementing the concept of applications engineering to design low cost high quality products. This posed as a serious threat to Luxor.
The primary concern that bothered Luxor was the technology risk. Risk analysis could confirm the threat that Luxor had from technology.
In other words, I had to decide if it should rely solely on applications engineering, and subside on state-of-the-art- advancements or if new technology state-of-the-art-advancements also had to be given equal importance.
The marketing department was given the task of evaluating the impact of the former change in strategy, and the engineering department evaluated the latter change.
The marketing department presented the following list:
1. The company's future growth rate will be cut short.
2. Luxor will still remain strong in applications engineering but will need to improve the state-of-the-art development work.
3. Luxor will be required to provide outside vendors with information.
4. Luxor may no longer be vertically integrated (i.e., have backward integration).
5. Final product costs may be heavily influenced by the costs of subcontractors.
6. Luxor may not be able to remain a low cost supplier.
7. Layoffs will be inevitable, but the number of layoffs should be reduced in the next term.
The engineering department presented the following list:
1. Luxor could hire more staff personnel with R&D skills. However this would be an expensive effort.
2. Luxor could slowly retrain part of its existing labor force using existing, experienced R&D personnel to conduct the training.
3. Luxor could fund seminars and university courses on general R&D methods and communication.
4. Luxor could use tuition reimbursement funds to pay for distance learning courses.
5. Luxor could outsource technical development.
6. Luxor could purchase or license technology from other firms, including competitors. This assumed that competitors would agree to this at a reasonable price.
The management had to decide which way to follow for the improvement.
1. Can the impact of one specific risk event, such as a technical risk event, create additional risks, which may or may not be technical risks? Can risk events be interrelated?
- Yes risks can be interrelated. For example, say a project has a most likely date to be completed by. A technical risk such as a malfunction in technical equipment may delay the delivery date of the project. Thus a technical risk may be responsible for a scheduled risk .
2. Does the list provided by marketing demonstrate the likelihood of a risk event or the impact of a risk event?
- The list provided by marketing makes a note of uncertainties that may happen on altering a particular strategy. These possibilities are uncertainties that 'may' occur as a result of change in strategy, and these uncertainties will have a tremendous impact on the projects and business.
3. How does one assign probabilities to the marketing list?
i. The company's future growth rate will be curbed in