Please answer the question using the strategy process.

Matthew Yachts, Inc.

Matthew Yachts, located in Montauk, Long Island, manufactured sailing yachts of all
descriptions. The company had begun by building custom-designed yachts for a largely New
York-based clientele. Custom-designed yachts still accounted for three-fifths of Matthew’s unit
sales and four-fifths of its dollar sales and earnings. Over the years, as Matthew Yachts’
reputation for quality design and workmanship spread, sales broadened to cover all of the
eastern seaboard.

In an effort to capitalize on this increased recognition and to secure a piece of the fastest
growing market in sailing, Matthew Yachts began manufacturing a new standard, fixed-design
craft. Matthew attacked only the high end of this market, as the boat measured 37 feet long.
Nevertheless, even this end of the market was more price-sensitive and less conscious of
performance than Matthew Yacht’s custom-design customers were.

All of the company’s yachts were manufactured at the Montauk plant and shared the
same equipment and skilled labor force. Custom designs were given priority in scheduling, and
the new boat was rotated into the schedule only when demand slackened. As sales of the fixed-
design boat increased, however, scheduling the new boat on a regular basis became
necessary.

Matthew Yachts were built basically from the bottom up. Fabricating hulls was the first
step. Increasingly, fiberglass hulls were demanded for their speed and easy maintenance.
Afterward came the below-deck woodworking, followed by the fiberglass and woodworking on
the deck itself. The masts were turned and drilled separately. Masts and hull were then joined
and the finish work completed.

Over the past year, as the fixed-design craft continued its steady increase in sales, costs
and deliveries began to slide precipitously, especially on the fixed-design yachts. During this
period, when push came to shove, construction of the fixed-design craft always yielded time and
resources to the higher-profit-margin custom designs. As a result, many fixed-design yachts
were strewn around the yard in various stages of construction. Moreover, space in the existing
shipyard was becoming scarce, and a plant expansion of one sort or another appeared
inevitable.

Case Questions

1. Should Matthew Yachts, Inc. stay in the business of building standard, fixed-design
yachts? Why or why not?

2. Describe what the company should do to improve their processes were they are to
remain in this business?

Note: Be specific when answering these questions and use information provided in the
context of this learning module.