Oscar Gonzalez

Situation: Richard Hoover is planning to retire. You are contacted by a group who is interested in buying the
company. You are required to answer the following 3 questions:
1.

Quality is very important for the market segment of this company. Is the quality model and
philosophy of this company strong enough to be competitive during the next years?

Despite the fact that I couldnt find information that states whether the company has ISO 9001 or not, I do think
the company is competitive enough when it comes to quality, let me explain why with a course content focus:
The article shows how the company is costumer focused, has total employee involvement, is organization
centered, has a strategic and systematic approach with process improvement, and effective communications.
Although there is no mention of an integrating system and process improvement, we can tell they apply those as
well. This means the company applies total quality management.
The article explains how the company uses 12 out of 14 of Demings points. They dont seem to use #6: Institute
training on the job nor #10 Eliminate numerical goals, posters and slogans, asking for new levels of productivity
without providing methods. But this is because the company never had numerical goals in the first place and
because the everyday job is continuous training, so emphasizing that would be redundant.
2.

Some members of this group believe that the company shall invest in robots and automatic
machinery in order to increase production volume. What will be your recommendation?

I would say no. The competitive advantage for Santa Cruz Guitar Co is that they are a custom shop. They dont
produce quantity, instead they produce quality. The main argument for using craftsmen rather than machines is
that every piece of wood is different in a living tree, having different frequencies and producing different notes.
When you assemble a guitar in pre-made sizes it lacks sustain and color. Its better to dimension guitars to a
deflection and frequency, not to a size. Human made provides better fit and feel than cutting by machine, which
is important for sound and geometry, which translates to added value for their customers.
3.

Information about this potential transaction is strictly confidential. From the video and article
provided, briefly describe to this group your overall opinion about this company and if you believe
that it could be a good investment.

To answer that question we would need to see the financial statements. The transaction would seek a return on
investment in no more than 10 years. 800 guitars sold at $4,000 USD are a net income of $3.2 MMUSD. Lets
say the net profit is 20% of the net income. That would be $640 MUSD / year for profit. So, if the company is
asking less than $6.5 MMUSD I would say go for it!
Why? Because this is a customer focused, sustainable, socially responsible company with the highest quality
standards. The companys empowered and engaged employees produce a useful product filled with added value
and with a steady customer base.
Bibliography:

PDF.
Video: https://www.youtube.com/watch?v=SX0RYR_laeo

Website: http://www.santacruzguitar.com/