Strengths weaknesses opportunities and threats

The following discussion covers Eastern's strengths, weaknesses, opportunities, and threats.

Strengths. Eastern had made a concentrated effort to retain its competitive position in the marketplace through technology. Its major strength was its capability to continuously produce quality products, focus on technology and capital improvement, and keep wages and salaries relatively high for its employees while controlling costs. Capital improvements and improved management and team practices made it possible to achieve record premium production in the recent past. Eastern continued to demonstrate its leadership in technological improvements and plant capital investment.

Eastern had experienced the longest run at full capacity in its history, remaining one of the few North American smelters not curtailed due to the recent metal surplus caused by the flow of aluminum into the world market from the Commonwealth of Independent States. Eastern continued to show resilience and responsiveness in the face of changing market conditions.

Eastern was working hard to empower its workforce by improving knowledge, skills, and responsiveness. It sought to align its incentive and reward programs, partnership practices with hourly employees, performance appraisal systems, and quality and process improvement initiatives with key long-term strategies. It faced the future turnover of the workforce with a strong commitment to use change to build a leaner, more integrated, and productive plant team.

At the heart of its strength was Eastern's traditional core competency to choose, operate, and improve process technology effectively; to produce a variety of difficult-to-produce new premium products; and to understand and meet new customer needs. Whatever initiatives Eastern undertook, it knew it had to continuously improve these success drivers.

Weaknesses. Eastern's products (called primary, slab, billet, tee, and foundry pig) were priced by the worldwide commodities market. High quality and excellent service of these products ensured a positive customer relationship, but Eastern could not control the selling price of the finished product.

Eastern knew that it was a high-cost plant compared to other producers, primarily because of the age of the facility and technology, and because of high wages, salaries, and fringe benefit levels. Because Eastern had little or no control over the market price, the cost of producing aluminum became a key determining factor in remaining globally competitive. In fact, 75 percent of all aluminum in the world was being produced at a cost lower than Eastern could produce it.

Eastern faced major challenges in turning over its workforce and creating a more energetic and knowledgeable workforce team. Past practices had not always inspired employees to align themselves with the best interests of the plant, and commit themselves to new product and service concepts and continuous improvement through teams.

Eastern needed to improve its capability to learn and document its successes, in short, to become a "learning" organization. Past practice had not always taken advantage of what the organization had already learned through the years.

Opportunities. Demand for aluminum was continuing to rise; supplies of aluminum had increased each year with primary aluminum products now sold on a worldwide basis. Eastern had the opportunity to position itself midpoint on the world cost scale, the point at which 50 percent of world production costs would be higher than Eastern. In achieving this position, Eastern could take more advantage of its high-quality products and services, and improve productivity.

A reduction of four cents per pound by 1999 would have placed Eastern in that competitive position, keeping mind that other aluminum plants were also attempting to reduce their costs.

Eastern's major opportunity was to improve its process efficiency and productivity through a combination of technology and capital improvement, building a more efficient workforce, and reducing labor costs. The four cents per pound cost reduction could be achieved by:

1. Conversion of potlines (production lines) to a new "point feed" technology, already underway, a major "new process" concept

2. Reduction of manhours per ton by 15 percent from 1996—2000

3. Reduction of non-value-added costs wherever possible through process improvements, total quality management, ISO 9000 certification, and other quality initiatives

Eastern had a major opportunity to improve its human resource practices and programs as the plant transitioned its workforce in the coming five years, both through better training and development of supervisory and hourly employees, and better, more effective assessment and hiring practices.

Threats and risks. If Eastern did not continually reduce costs, their position would worsen because:

1. New plants with lower costs would open

2. Existing competitive plants would reduce cost and improve their cost position

3. Other plants with higher costs would close, worsening Eastern's position

The most critical of these risks was the possibility that power costs would continue to rise beyond Eastern's capacity to absorb them. This scenario represented the most significant threat to Eastern's continued growth and had to be avoided. In addition to power costs, the long-term cost of coal could be another important threat to Eastern's growth, as well as unanticipated environmental regulations, particularly from the federal Clean Air Act.

In addition, although Eastern had made major progress in building a more team-based culture, the process could not be slowed by resistance to change and failure to be clear about new roles and functions. Therefore, one source of threat and risk came from within, that being the threat of slow deterioration of the momentum of teamwork and process improvement already underway. Such a step backwards could always happen as a result of neglect, as well as lack of trust and respect in the organization.

Eastern's strategic plan was an integrated set of strategies, initiatives, and measures supporting an overall goal of competitiveness. Figure 2-1 presents a graphic depiction of the company's eight key strategies. Each strategy was seen as serving the central goal of world competitiveness, but each strategy was also inextricably tied to the others, indicating a strong interdependency of all plan elements. If any one strategy and risk reduction plan was not accomplished, overall achievement of the goal suffered.

The plan described plant strategies, initiatives, and measures of success. Initiatives were programs and projects underway or planned to help accomplish a particular strategy. Measures were indicators of progress and were used to monitor achievement of the eight key strategies.

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