Augat Electronics Essay

1906 Words Sep 24th, 2011 8 Pages
Augat Electronics Inc.
- A Case Analysis
1. Critical Issues
Canadian market for Cable TV connectors is expected to grow substantially in the coming years. Given the current product quality and the maturity in Value Added Services provided by the Cable TV companies, the basis for purchasing decisions seems to be changing. Given the current market share that Augat has and situation, it will be of at most importance to penetrate one or more of the multiple service operators (MSOs) that dominate the Canadian market. Augat believes that Snap-N-Seal might be the product that would help Augat reach mainstream status
The most significant problems in this case as far as Augat goes is their decision(s) pertaining to
a. Pricing Strategy in
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For end-users like Rogers, EZF connector costs around CDN $0.80, which is ~$0.69. I would price Snap-N-Seal at $0.70/connector.

1. Value proposition for MSOs

One of the biggest advantages or rather strengths of using Augat Snap-N-Seal is its quality and the fact that it has a 100% success rate and no additional service calls would be required. Based on really conservative estimates it appears that it would cost as much as 7 times for service calls as it would cost for the parts while using EZF. The biggest worry for Rogers, per say is the Cap Ex involved in acquiring new tools for Snap-N-Seal. But using the Razor-Blade model of promotion, Augat should give-away the tools for free to the MSOs. This would eliminate the biggest hurdle that Augat and its distributor(s) have to overcome in convincing MSOs to make the migration to Snap-N-Seal. Besides it takes lesser time to install Snap-N-Seal (about 2 to 3 times faster than EZF), MSOs will be able to manage their service technicians better.

Category Product Raychem EZF Augat Snap-N-Seal Price/connector for end-user 0.69 0.70
No. of connectors required (avg of 14 connections/household) 29400000 29400000
Tool Cost 75.00 0.00
No. of tools required (@4000 customers/sales tech including Rogers) 1050 1050 CapEx 78750.00 0.00
Cost for replacing all connectors (to at least 50% of subscribers) 20275862.07 20580000.00
Cost of Service calls (@$100/call, 5%

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