ABC Electric Company

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ABC Electric Company

Introduction

ABC Electric has been in business since 1970. The company makes hand-held arc welders its primary customers are construction firms, shipbuilders, auto-repair shops, and “self-help” amateurs. The company has 30% of the current market share along with four other competitors it has an annual sales of $800 million.

The company has a satisfied customer-base. Although, their products are priced above the competitors, customers prefer ABC’s welders due to their superior finish, reliability, and durability. Recently, demand for hand-held welders in the U.S. was steadily growing at a rate of 7% rate annually but has currently drop. However, demands are growing in the West European market, which is currently value at $1 billion.

Recently, ABC Electric found its market share and profitability decreasing. Due to the fact that the company has made some gain in its customer base by improving product quality and service while maintaining price. Moreover, a component supplier of ABC has raised its price by almost 10%. In addition, industry wide competition has generated excessive price reduction, which help in the fluctuation of the company profitability.

Strategic Issues Facing ABC Electric

ABC Electric is facing several issues that needs to be address in order to stabilize their competitors growth as well as increasing their market share and profitability. These issues are closely related to their external competitive strategy, which seems to be non-existence on a whole. Base on my brief discussion above, I believe that ABC Electric has in-voluntarily allows, one of its competitors to make advancement by improving its quality and service of their product without increasing price. Due to the fact that, ABC perceived its customers to be immune to price thereby remaining loyal to its product because of the quality and reliability that comes with the product image. As a result, this perceived brand loyalty created a threat to the company. The second issue facing the company is, a supplier of whom ABC purchases its electric motors from for its welder has raised the price by almost 10%. In looking at this, the bargaining power of the supplier is very strong because the switching cost might be very high. Moreover, it will become damaging to the company based on the current reduction in price within the industry if the problem is not solved.

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