Strategic MGT Memo / ONE PAGE ONLY!!!

Case Introduction

January 2018

Christopher J. Killoy was named President and Chief Executive Officer of Sturm, Ruger & Company in May of 2017. He was tasked with establishing direction as firearm demand continued to slow following a record breaking increase in gun sales. The significant spike in 2016, a presidential election year, was at least partly the result of consumer fears that a Hillary Clinton presidency would result in stronger gun regulation.

Bad news and regulatory threats tend to serve as positive influences for the highly volatile U.S. gun and ammunition manufacturing industry. Calls for increased gun control measures drive Americans to purchase weapons based on concerns that the federal government might further limit Second Amendment rights. In addition, terrorism and high-profile mass shootings also tend to increase gun purchases, as Americans remain concerned with their personal safety, as well as the looming potential for new regulations that could ultimately restrict their personal freedoms.

Given that Ruger operates in an industry characterized by random and significant swings, how can Killoy develop a strategy that will help the company both navigate and thrive in this volatile environment?

Bill Ruger: A Man with a Passion

Bill Ruger, co-founder of Sturm, Ruger & Company, Inc., had a passion for firearms that was ignited when his father gave him his first rifle on his twelfth birthday. In high school, Ruger joined the rifle team and spent much of his free time reading books on firearms and disassembling guns, just so he could learn more about how they operated. At age 22, he dropped out of college with two years remaining and accepted an offer from the United States Government to be a machine gun designer. The salary was not enough to support his family, so he left after only months on the job.

With World War II on the horizon, the U.S. Army was looking to replace its machine gun. Consequently, it published specific requirements which Ruger himself used to build a prototype. When he could not find a manufacturer that was willing to produce his design, he decided to join Auto-Ordnance Corporation, a firearms manufacturer with multiple government contracts. During Ruger’s four years with the company, he learned valuable mass production manufacturing techniques and realized the importance of product innovation for stimulating demand and gaining a competitive advantage over competitors.

In 1946, Ruger left Auto-Ordnance to start The Ruger Corporation—a venture through which he hoped to accomplish three things:

· (1)

supply parts to the firearms industry;

· (2)

develop a hardware tool line; and

· (3)

produce an automatic pistol.

Unfortunately, this venture did not go as planned. A short three years later, the company went bankrupt. Through this failure, Ruger learned a valuable lesson that shaped the future of Sturm, Ruger & Company: when you borrow money, it is much easier to fail than if you have no debt at all.

In 1949, Ruger met firearms enthusiast Alexander Sturm, a Yale graduate from an affluent family. Together, they founded Sturm, Ruger & Company, Inc. to manufacture the automatic pistol that Ruger had intended to produce in his failed company. The company was seeded with a $50,000 investment that came from Sturm, and with Ruger’s new “no borrowing” policy, the company has no long-term debt to this day.

In 1951, Sturm died of hepatitis, so Ruger went on to run the company by himself. Ruger was known for his high level of integrity and frugal mentality. Rather than splurging on fancy offices, he would pay out dividends to his shareholders because he believed that they had better uses for the cash than he had. Ruger was extremely motivated by his passion for firearms, and that passion transformed the company from its humble beginnings in 1949 to generating over $200 million in sales by the time Ruger retired in 2000.

Bill Ruger: A Man with a Passion

Bill Ruger, co-founder of Sturm, Ruger & Company, Inc., had a passion for firearms that was ignited when his father gave him his first rifle on his twelfth birthday. In high school, Ruger joined the rifle team and spent much of his free time reading books on firearms and disassembling guns, just so he could learn more about how they operated. At age 22, he dropped out of college with two years remaining and accepted an offer from the United States Government to be a machine gun designer. The salary was not enough to support his family, so he left after only months on the job.

With World War II on the horizon, the U.S. Army was looking to replace its machine gun. Consequently, it published specific requirements which Ruger himself used to build a prototype. When he could not find a manufacturer that was willing to produce his design, he decided to join Auto-Ordnance Corporation, a firearms manufacturer with multiple government contracts. During Ruger’s four years with the company, he learned valuable mass production manufacturing techniques and realized the importance of product innovation for stimulating demand and gaining a competitive advantage over competitors.

In 1946, Ruger left Auto-Ordnance to start The Ruger Corporation—a venture through which he hoped to accomplish three things:

· (1)

supply parts to the firearms industry;

· (2)

develop a hardware tool line; and

· (3)

produce an automatic pistol.

Unfortunately, this venture did not go as planned. A short three years later, the company went bankrupt. Through this failure, Ruger learned a valuable lesson that shaped the future of Sturm, Ruger & Company: when you borrow money, it is much easier to fail than if you have no debt at all.

In 1949, Ruger met firearms enthusiast Alexander Sturm, a Yale graduate from an affluent family. Together, they founded Sturm, Ruger & Company, Inc. to manufacture the automatic pistol that Ruger had intended to produce in his failed company. The company was seeded with a $50,000 investment that came from Sturm, and with Ruger’s new “no borrowing” policy, the company has no long-term debt to this day.

In 1951, Sturm died of hepatitis, so Ruger went on to run the company by himself. Ruger was known for his high level of integrity and frugal mentality. Rather than splurging on fancy offices, he would pay out dividends to his shareholders because he believed that they had better uses for the cash than he had. Ruger was extremely motivated by his passion for firearms, and that passion transformed the company from its humble beginnings in 1949 to generating over $200 million in sales by the time Ruger retired in 2000.

Vision

From its start in 1949, Ruger has lived up to its motto of being an “arms maker for responsible citizens” and has strived to achieve its vision:

“Sturm, Ruger & Co., Inc. is one of the nation’s leading manufacturers of rugged, reliable firearms for the commercial sporting market. The only full-line manufacturer of American-made firearms, Ruger offers consumers over 400 variations of more than 30 product lines. For more than 60 years, Ruger has been a model of corporate and community responsibility.” 

Consistent with its emphasis on community responsibility, many advertisements focus on the importance of being a safe gun owner, while safety messages are posted on the Ruger website. Ruger believes in and invests in educational programs emphasizing safe gun ownership and gun use, knowing that this education has the potential to save lives. The company has dedicated materials and other resources to the promotion of gun safety to all gun owners, including through youth programs. Each Ruger gun is designed with safety in mind by incorporating both internal and external safety measures. Recently, Ruger partnered with Project HomeSafe to deliver gun safety materials and cable locks to inner city gun owners who may not otherwise have access to the needed gun safety materials. However, these types of programs are sometimes met with skepticism. As Ruger has stated in its Ruger Red Book—Firearms Ownership in America—Our Responsibility for the Future:

“Firearms safety education can and has demonstrably reduced needless accidents with firearms, particularly among younger persons. Yet, any suggestion of such a widespread educational program is immediately met with the response that it is actually ‘promoting guns.’ If we took this attitude toward sex and drug education programs, we would be accused of being naïve and immature.”