CASE 1: De Mar’s Product Strategy Chapter 5

De Mar, a plumbing, heating, and air-conditioning company located in Fresno, California, has a simple but
powerful product strategy: Solve the customer’s problem no matter what, solve the problem when the customer needs it
solved, and make sure the customer feels good when you leave. De Mar offers guaranteed, same-day service for customers
requiring it. The company provides 24-hour-a-day, 7-day-a-week service at no extra charge for customers whose air
conditioning dies on a hot summer Sunday or whose toilet overflows at 2:30 A.M. As assistant service coordinator Janie
Walter puts it: “We will be there to fix your A/C on the fourth of July, and it’s not a penny extra. When our competitors won’t
get out of bed, we’ll be there!”
De Mar guarantees the price of a job to the penny before the work begins. Whereas most competitors guarantee
their work for 30 days, De Mar guarantees all parts and labor for one year. The company assesses no travel charge
because “it’s not fair to charge customers for driving out.” Owner Larry Harmon says: “We are in an industry that doesn’t
have the best reputation. If we start making money our main goal, we are in trouble. So, I stress customer satisfaction;
money is the by-product.” De Mar uses selective hiring, ongoing training and education, performance measures, and
compensation that incorporate customer satisfaction, strong teamwork, peer pressure, empowerment, and aggressive
promotion to implement its strategy. Says credit manager Anne Semrick: “The person who wants a nine-to-five job needs to
go somewhere else.”
De Mar is a premium pricer. Yet customers respond because De Mar delivers value—that is, benefits for costs. In
8 years, annual sales increased from about $200,000 to more than $3.3 million.

Discussion Questions
1. What is De Mar’s product? Identify the tangible parts of this product and its service components.
2. How should other areas of De Mar (marketing, finance, personnel) support its product strategy?
3. Even though De Mar’s product is primarily a service product, how should each of the 10 strategic OM decisions in the
text be managed to ensure that the product is successful?
A. FACTS OF THE CASE
 Significant Company Information:
o Product: Primarily service— plumbing, heating, and air-conditioning
 There are also tangible products (air conditioners and plumbing components—pipe, valves,
faucets, blowers, ductwork, etc.), but the distinguishing product is the service.
o Owner: Larry Harmon— “I stress customer satisfaction; money is the by-product.”
o Assistant Service Coordinator: Janie Walter
o Credit Manager: Anne Semrick
o Location: Fresno, California
o Product Strategy: Solve the customer’s problem no matter what, solve the problem when the customer
needs it solved, and make sure the customer feels good when you leave.
 The company provides 24-hour-a-day, 7-day-a-week service at no extra charge for customers.
o It offers guaranteed, same-day service for customers requiring it.
o It guarantees the price of a job to the penny before the work begins.
o No travel charges.
 It guarantees all parts and labor for one year— while most competitors guarantee their work for 30 days.
 It uses selective hiring, ongoing training and education, performance measures, and compensation that
incorporate customer satisfaction, strong teamwork, peer pressure, empowerment, and aggressive promotion to
implement the company’s strategy.
 It is a “premium pricer”— yet customers respond because De Mar delivers value—that is, benefits for costs.
 In 8 years, annual sales increased from about $200,000 to more than $3.3 million.

B. POINT OF VIEW
This case analysis will focus on the point of view of the Assistant Service Coordinator, Ms. Janie Walter. The main
reason why the analyst chose Ms. Walter is due to the fact that she is someone that is credible and competent. As entitled
of being the company’s assistant service coordinator, she acts as liaison between clients and De Mar. She is always present
on the day-to-day operations of the company. Generally, she is situated at the focal point of the case who get to experience
client-customer relationship as well as owner-employee relationship.

C. STATEMENT OF THE PROBLEM

The central issue for this case study that the analyst would like to address, in the perspective of Ms. Walter, is the
ethical dilemma of managing a 24/7 service company.
This concern stems to several more issues. Aforementioned in the case, as per Mr. Harmon’s dictum, money is
not the company’s goal and yet they are using Premium Price Strategy. Strictly, they were able to capture customers’
satisfaction and generate further revenue through this scheme. In order to maintain this market perception, they have to
implement the determined aforesaid activities. However, this incites a substantial burden on logistics, creating “human
machines” in the process. 24/7 workplaces can put employees under conditions that limit their personal life choices and
development. Moreover, the company could also be using Premium Price Strategy in order to compensate for their
unwanted cost of providing 24/7 service operations— such as the cost of needed parts to support the seven-day operation,
extra general service people, and utilities. Outwardly, the company’s management design is a two-ended sword.

D. STATEMENT OF THE OBJECTIVES

The main objective of this paper is to realign, redesign, and reform the company’s management approach in order
to crack the ethical dilemma. Other objectives are as follows:
1. To scrutinize De Mar’s actual and existing current daily operations;
2. To identify and examine the company’s strengths, weaknesses, opportunities and threats;
3. To stipulate lists of possible solutions to the identified central issue; and
 4. To suggest a new approach of managing the company with nil to little costs through postulating win-win labor
and management solutions.

E. AREAS OF CONSIDERATION
De Mar’s 24/7 Service Operations
Internal STRENGTHS Internal WEAKNESSES
1. Simple yet powerful product strategy 1. High branding and service cost— the market is not
2. A lot of satisfied customers because of: entirely in favor of expensive services
 Selected and well-trained employees 2. It creates “human machines” in the process
 Guaranteed 24/7 service provider  Dehumanization of workers
o “Same-day” service  Limits the development of employees on
o Very high availability of services other aspects
 No extra charges  Limits employees’ personal life choices
3. High perceived service value 3. Employee-fatigue
4. Premium Pricing Strategy:  Threat to health and safety
 High profit margin  Work-related stress
 Eliminated or reduced competition by  Increased in errors and accidents
creating strong entry barrier  Reduced productivity
5. Aggressive marketing approach  Impair quality of service
6. Ultra-competitive workplace environment  Increase scrap and rework
 High job performance 4. Managers don’t have as much personal contact with
7. Flexible working schedule of employees their team members
8. Good public image or reputation 5. Excessive extra costs such as payroll for general
 More referral works service people and utilities expense
 Turn present clients to on-going clients 6. Flexible working schedule could turn out to be a
9. Significant market share as the result of the nature of problem— instead of getting people to show up for
their service operation (24/7) work five days every week, service coordinators
A. Eliminated or reduced competition have to get people to show up seven days. This only
B. Attracts more customers because it is very means more personnel problems.
convenient on their part 7. Complex calculations and pay issues
8. Very demanding work circumstances
9. Struggles in coordination of employees
 Continuous management is taxing
External OPPORTUNITIES External THREATS
1. With growth, the company can expand to: 1. Employees could backfire against the company due
 New markets to demanding nature of their work
 New geographical areas  Less committed employees
2. Improvements in customer service 2. Competitors will also increase their charges in order
3. Increased utilization of capital investment to minimize De Mar’s competitive advantage
4. Reduced pay-back time for investments in automation 3. Possibility of seasons with low demand—where
5. Minimized potential security threats because the benefit can no longer outweigh costs
company is open 24/7 4. Decreasing customer satisfaction due to unwanted
issues regarding services as the effect of:
 The risk of employee-fatigue
 Lack of employee engagements to the
company (less monitored)

F. ALTERNATIVE COURSES OF ACTION

In order to address the demeaning effect of ethical dilemma in the work environment of De Mar, the analyst of the
case postulated three frameworks, taking into account the abovementioned subject matters:
 1. Fatigue Risk Management Approach (FaRMA)
2. Employee Morale Management Approach (EMMA)
3. Payroll Management Approach (PaMA)

ACA NO. 1: FATIGUE RISK MANAGEMENT APPROACH (FARMA)

Fatigue affects everyone regardless of skill, knowledge, and training. It has influences directly on many people's
physical and mental abilities needed to carry out even simple task. There are many factors at both; in the workplace and out
of workplace which can influence fatigue levels. The most important cause of fatigue is the lack of restorative sleep. Fatigue
can also be induced from a combination of interrelated factors. As a response, this case study formulated a framework
called Fatigue Risk Management Approach (FaRMA). It is a comprehensive approach that is based on applying scientific
evidence of sleep knowledge to manage workers fatigue. In order to achieve its objective, managers need to remember the
3Fs: (F)ind the causes, (F)atigue measurement, and (F)atigue management.

a. FIND THE CAUSES

Presented below are the possible causes of employee-fatigue in the case of De Mar Company:
Causes of De Mar Employee-Fatigue
PHYSICAL LOAD MENTAL LOAD ENVIRONMENTAL LOAD
 Forceful exertion  Irregular work hours  Temperature
 Awkward posture  Job demands  Noise
 Static load  Job stress  Light level
 Repetitive environment  Coworker relationship  Vibration
 Decision autonomy  humidity

The table shows that fatigue can have multiple causes in the workplaces. Therefore, there is no
comprehensive single countermeasure to eliminate fatigue from industrial settings that is why it is necessary to
consider ranges of strategies to address the different types and causes of fatigue.

b. FATIGUE MEASUREMENT

There is no single instrument as a gold standard for fatigue measurement, because of the widespread effects
of fatigue on human skills, definitional difficulties of fatigue, and multiple causes of fatigue. However, as a first step to
manage fatigue in workplace, the have to identify and measure fatigue and their causes in industrial settings.

In this case, employees and employers can identify and manage fatigue in the workplace, identify useful
methods for avoiding fatigue or reducing its probability, consider a number of coping strategies for fighting fatigue, and
perform accident investigations after happening fatigue-induced problems. The type of instrument for fatigue
measurement is depending on the decision that must be made by the organization. Measurement can determine one
dimension of fatigue, usually severity of fatigue, or multiple dimensions. Additional measurements can be used to
gather more information about fatigue type or impact or about phenomena conceptually related to fatigue. Below are
examples of variety of procedures to measure fatigue:

1. Severity of Fatigue (Five-Point Verbal Rating Scales and Visual Analog Scale)
2. Epworth Sleepiness Scale (ESS)
3. Horne–Ostberg Questionnaire (HOQ)
4. Laboratory testing of performance measures very specific aspects of performance such as reaction time,
vigilance, and short-term memory
5. Sleep Monitoring
6. Symptom Distress Scale (SDS)

c. FATIGUE MANAGEMENT

Fatigue countermeasures have been divided into two categories: (a) Preventive strategies that are used
before working hours and during rest times, and (b) Operational strategies that are used during the job. There are
varieties of different methods in preventive strategies. The majority of them temporarily relieve fatigue symptoms, then
 help the workers get their job as safely and efficiently as possible. Some of these strategies include minimize sleep
loss, naps during night shifts, education of good sleeping habits to workers, stimulators, and acceleration in circadian
adaptation to different shift types. Meanwhile, operational strategies include operational policies such as timing of
training, frequency of rest breaks, napping policy, and best practice schedules.

Presented below are the possible advantages and disadvantages of this framework:

ADVANTAGES DISADVANTAGES
 Improved safety  Additional costs especially when measuring the
 Improved productivity fatigue level of employees
 More alert, attentive, and mentally prepared  Laboratory tests
employees to do the work  Stimulators procedure
 More accomplishments  Some procedures are really effective but they are too
 Improved health time-consuming.
 Improved employee morale and satisfaction  Sleep monitoring needs more time investment
 Communicates to an employee that the company but it contradicts the timing and nature of the
cares about his or her overall well-being duties of company’s employee
 Happier employees due to better sleeping habits
 Positive and collaborative work environment
 More committed employees
 Reduced further cost
 Boosted productivity
 Lower health costs
 Less absenteeism
 Long-term solution

ACA NO. 2: EMPLOYEE MORALE MANAGEMENT APPROACH (EMMA)

There is always a personal and emotional side of running a business around the clock. In order to remain
productive, managers have to keep their employees happy. However, in the case of De Mar, it is difficult to monitor their
employees due to its flexible time schedule. 24/7 service operation is often criticized by its dehumanization of employees.
Humans are not designed to operate continuously around-the-clock, or on irregular schedules, or with consistent
performance no matter the time of day or night. Human performance does not occur linearly. Strictly, morale is the main
reason why humans will always be superior to machines. Machines have design specifications and operating manuals that
tell users the conditions under which they can use them. The human body is an exceedingly complex machine with very
constrained performance limits, which managers must respect if they are to reliably perform the tasks modern society
demands. As a response, this case study formulated a framework called Employee Morale Management Approach (EMMA).
It is a simple yet powerful strategy in order to boost the company’s employee morale. In order to achieve its objective,
managers need to remember the 3Es: (E)ncourage Work-Life Balance, (E)stablish Trust, and (E)mployee Recognition

a. ENCOURAGE WORK-LIFE BALANCE

Work-life balance is an important aspect of a healthy work environment. Maintaining work-life balance
helps reduce stress and helps prevent burnout in the workplace. By creating a work environment that prioritizes
work-life balance, employers can save money and maintain a healthier, more productive workforce. This can be
promoted through creating less rigid lunch schedules, having conducive office setup, encourage social activities,
team-building exercises, offer perks, and having an “open-door” policy. These are some of the few ways in order
to improve the company’s work-life balance. Outwardly, a direct and personal engagement of the manager is the
key factor in order to achieve these strategy, as in the case of De Mar.

b. ESTABLISH TRUST

A leadership without trust is still a failure of leadership. Investing in mutual trust is one of the most
effective way in order to boost the morale of the workplace. According to research, majority of workers want to
 know more about how decisions are made in their organization as well as want their future company to be
transparent. Employee morale can only reach a certain level without trust in leadership. Transparency and open
communication are useful when leaders need to help explain organizational changes, reduce uncertainty, and get
workers excited about new opportunities. After all, employees are not likely to communicate or contribute if they do
not feel safe expressing themselves honestly at work.

c. EMPLOYEE RECOGNITION

Employee recognition can be expressed in several ways. The employer-employee relationship is the
most crucial aspect of this strategy. This approach includes giving the same opportunities, advantages, and
respect to diversity of employees— especially those who works during daytime and night, giving incentives to
employees, having open and regular communication with employees, empowering employees through feedback
and coaching, and offering above industry-average benefits and compensation. These are just some of the
approaches a manager can apply in order to foster the company’s overall morale.

Presented below are the possible advantages and disadvantages of this framework:

ADVANTAGES DISADVANTAGES
 Nil to little cost compared to FaRMA  It creates more burden to the duties of the manager
 Improved productivity since requires more attentive and focused monitoring
 High morale increases engagement, thus  This is only applicable to in-house employees such as
increasing productivity service coordinators
 Greater attention to the important details  Employees who are always outside the company
 Employees pay attention to details because they need this strategy the most since they at the
care about the outcome of a project frontline. However, due to the nature of their job,
 Improved attendance it makes it even harder for the manager
 As employees discover the excitement of coming  This is also a time-consuming strategy
to work, attendance often increases
 Improved performance and creativity
 Employees get excited about solving problems,
completing projects, and satisfying customers
 Higher quality work
 People care more about what is being produced
 Safer work environment
 A workplace with high morale makes everyone
more conscious of working safely and avoiding
shortcuts that may cause someone to be injured

ACA NO 3: PAYROLL MANAGEMENT APPROACH (PaMA)

One of the greatest disadvantages of a 24/7 service operations is its inflated expenses— especially on payroll and
utilities. In terms of utilities expenses, the company’s high profit margin can compensate the cost. Moreover, it is inherent to
the company since they are operating 24/7. On the other hand, the fluid nature of 24/7 operations create many challenges—
most especially pay issues. It is normal for company’s which operates with flexible time schedule to have a complex
calculations of payroll expenses. Although a time-and-attendance system is the tool of choice when it comes to managing
these types of pay issues, the problem is that most systems are designed with the “standard schedule” business in mind,
expecting the 24/7 operation to settle for manual adjustments to retrofit the system to their own unique needs. As a
response, this case study formulated a framework called Payroll Management Approach (PaMA). This approach revolves
heavily on monitoring the company’s payroll expenses since this is one of the largest expenses a company could have. The
objective of this strategy is to maximize the company’s profitability with the assumption that employees have no other
issues, such as the aforementioned workplace concerns in the first two strategies.

The challenges with 24/7 operations of operating a 24/7 business are vastly different than “standard schedule”
businesses. Because a 24/7 operation does not have downtime, it must determine when one workday ends and the next
begins. This fluidity makes pay issues one of the biggest challenges facing around-the-clock organizations: pay periods,
shift pay, overtime pay and holiday pay quickly become a time and attendance tangle.

Around-the-clock businesses need a time and attendance system designed with them in mind. Specifically, the
successful system offers flexible time definitions, allowing operations to determine their own workday, shift and pay period
boundaries; real-time data for more strategic short- and long-term decision-making; and punch alignment to ensure the
system is finely tuned to appropriately assign hours with minimal manual intervention.

a. FLEXIBLE TIME DEFINITIONS

Three different time designations matter to employers: workday, pay period and overtime. Difficulty
arises when vendors standardize these time definitions in their systems, but a 24/7 operation will tell that there is
nothing standard about these definitions— in any given situation, the day, pay period and overtime definitions can
be different. A key characteristic 24/7 operations should look for is the capability to create their own time
definitions. Flexibility here is crucial because it eliminates the need to retrofit the system with manual adjustments.
Retrofitting adds an unnecessary complication to the system’s operation—eliminating this layer immediately
streamlines its use.

b. REAL-TIME DATA

Real-time data is a powerful tool for the 24/7 operation. The ability to calculate shift and schedule data
immediately reveals how decisions can impact labor budgets, schedule management and more. Real-time data
also assists with broader scheduling and labor management. Armed with this information, the manager adds in the
cost of bringing on temporary help and discovers that this would actually cost the organization more in the long
run. The fact that many systems do not offer real-time data calculation suggests that managers see time and
attendance data as a static record, when in reality real-time data elevates a time and attendance system to a
crucial and responsive management tool.

c. PUNCH ALIGNMENT OR CONFIGURABLE PAY RULES

At its most basic level, a time and attendance system must correctly pair start and end punches and
assign an employee’s time to its correct shift, workday and pay period. The issue for 24/7 organizations is that
systems built for standard schedule businesses are not designed to accurately execute this for around-the-clock
operations without manual adjustments. A time and attendance system that offers configurable pay rules in
addition to flexible time definitions offers the most efficient time tracking for 24/7 organizations. Configurable pay
rules eliminate retrofitting and ensure that hours are appropriately assigned when an employee’s shift overlaps
two different workdays. Although manual intervention is sometimes a necessity, the 24/7 operation cannot be
expected to rely on it and track time and attendance data effectively. Time consuming, manual adjustments
introduce human error and can compromise the accuracy of time and attendance data.

Presented below are the possible advantages and disadvantages of this framework:

ADVANTAGES
 Improved payroll system
 More effective and efficient recording and calculation
of payroll expenses
 Cost reduction in the long-run because they will be
able to improve their cost management
DISADVANTAGES
 Implementing technological advances will always be
costly for the company
 They will need more manpower whose expertise are
technological advances
 This will mean that the company will implement more
training for their employees
 This could cause them more stress and fatigue

G. RECOMMENDATION

Among the three aforementioned strategies, the analyst recommends the Fatigue Risk Management Approach
(FaRMA). This is because its effects are all-encompassing. Going over to the identified problem, the company has already
captured the market’s satisfaction, however, the well-being of their employees became the price of their achievement— this
is where the ethical dilemma enters. FaRMA strategy is a win-win solution for both of the management and the employees.
It fosters employees’ growth and commitment, improves the overall productivity and efficiency of the company, and adds
more value not just to their employees but also to their customers who received the better-quality service provided. It has
also positive effects to the management itself because once FaRMA strategy is implemented, it will incite domino effect on
the entire company— effects such as positivity, satisfaction and increased morale. These are just some of the multitude of
realizations that can be attained while still taking into account the company’s workforce. It may be costly but the significant
effects of this strategy are long-term in nature.

Likewise, operating costs does not appear to be the main issue of the company since their benefits outweighs
these costs—their high profit margin supports this assertion.

H. CONCLUSION

Achieving company success necessitates cooperation among its workers— both employers and employee. It is
the utmost duty of the management to oversee the overall condition of the different aspects of the company. On the other
hand, leaders need followers, which means employees have also their own duties and responsibilities.

Managing workforce fatigue maximizes workforce efficiency. Workers’ fatigue is a significant problem in modern
industry, largely because of high demand jobs, long duty periods, disruption of circadian rhythms, and accumulative sleep
debt that are common in many industries. The severity of problem and ways to deal with fatigue is very different in
industries. The full understanding of circadian biologic clock, dynamics of transient and cumulative sleep loss, and recovery
is required for effective management of workplace fatigue. Providing information and training to workers about the factors
that can contribute to fatigue and the risks associated with it will help them to not only do their job, but also implement
control measures to minimize the risk of fatigue in the workplace. Training about fatigue and relevant workplace policies
should be arranged so it is available to all workers on all shifts. Once control measures are implemented, they should be
monitored and reviewed to make sure they remain effective. Consider implementing trial periods for any new work
schedules and encouraging workers to provide feedback on their effectiveness.

Meanwhile, workers have a duty to take reasonable care for their own safety and health and make sure their acts
or omissions do not adversely affect the health or safety of others. There are different ways workers can make sure they are
not at risk of fatigue in the workplace. To reduce the risk of being involved in a work incident caused by fatigue, they should
comply with the organization’s policies and procedures relating to fatigue, understand sleep, rest, and recovery needs,
assess their own fitness for work before starting, look out for signs of fatigue, monitor their own level of alertness, and make
sensible commuting and accommodation decisions.

Effective Fatigue Risk Management Approach (FaRMA) requires that management and employees work together
cooperatively to combat the root causes of fatigue. This is essential because part of the solution lies in the employees’
hands and part is controlled by management. The challenge, of course, is to build trust between management and
employees to the point where all levels of management and all employees listen to and understand the win-win outcomes
that are possible.