American Connector Company Case Study
As DJC enters the U.S. market, they will be able to quickly produce lower cost items and ACC can compete in one of two ways. The company can either choose to compete using their current strategy of increased variety and flexibility or completely change their strategy to focus on cost. ACC needs to determine what the needs of the customer are, and determine if the increased product variety is truly valued or if reduced variety and cost are val-ued.
Exhibit A on page 5 shows that nearly 60% of ACC’s increased costs over DJC come from their strategy of offering a broad product range. If the increased product variety is proven to be valued, efforts need to be focused on improving operational efficiency as many costs stem from inefficiencies within the plant. Furthermore, they would then need to emphasize service and quality as their strengths instead of cost. Even if they eliminate all operational inefficiencies, American Connector will still offer a product that is 30% more expensive than DJC. It should be further noted that an entrant of another major player in the marketplace would likely increase volume costs for ACC as demand would drop by some amount. Is the marketplace willing to pay a 30%+ premium for custom connectors? This is a question that must be seriously considered by ACC, as it is likely that many customers