Reference no: EM13106796

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. Discuss questions: Should Matthew Yachts, Inc. stay in the business of building standard, fixed-design yachts? If Matthew Yachts does so, how should it continue?