Essay on Federated industries
Thomas Connors will bid for Southern Valley Authority to sell capacitor. The market of it is already matured and price has been eroded (Margin of the price that won the last bid is only $0.02). 85% of customer in the market is price oriented, SVA as well. The product is hard to differentiate.
The goals Connors was given from the manager are... 1. higher margin 2. recover share from 36% -> 50% 3. price stability
How much should he bid? (It's an option as well to withdrow from the market)
Industry capacity utilization is 40%, price is new low
Federated Industries group
3 divisions (Sales)
50 sales force, 10 geographic districts, Customer …show more content…
- Fixed price long term contract, regular delivery, or high switching cost (sell three products as package) etc (Customer)
- Special contract with supplier that enables Federated purchase raw material lower price
- Regulation (Price, patent, etc)
3 What has Federated performance been throughout the period covered in the case?
- Overall, not good. It has been losing market share and sales and finally go into the red.
Industry revenue average price share sales ($M) sales volume share sales ($M) 1977
4 What is your evaluation of Federated pricing policies?
Ad hoc(1977-1980) : Not good. There was no strict price policy even though there was book price. This period might trigger the price war because sales can lower price freely.
Strict book price(1980-1981) : This is worst strategy of five strategies. It lost share and sales because of loss of bid.
Controlled oppotunistic(1982) : Good as experiment
Selective pricing(1982-1983) : Good but too late. Learning from controlled oppotunistic, the company variate price strategy depending on the type of deal. However, price war is already there and resulting in average price dropping.
No book price(1983-) : Need price policies dependent on type of deal
5 Should Federated withdraw from the market? If so, why?