Federated industries
Federated Industries (1984)
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)
(July 1984)
Industry capacity utilization is 40%, price is new low
Federated Industries group
3 divisions (Sales)
Transformer (75.7M),
Capacitar(8.4M),
Switchgear(31.2M)
50 sales force, 10 geographic districts, Customer were 3500 electrical utility
Capacitator
Market share 36% (Downed by 12%, or 6M sales in this 6 years) whereas capacity share is stable on 35%.
Capacitator increases utilities power factor by reducing utilities' power loss 8% -> 3%
By far simpliest of three products in Federated
Customer did not see it as differentiated product
Customer
3500 utilities - 1000 generating and distributing / 2500 distributing only
Large public small public
Investor Owned
A large public utility might order 10+ banks of 20,000 KVAR capacitor that cost approximately $40000 each
(Sales 400K+)
Suppliers
3 large players (F, M, B)
Midland: Sales:1.27B manufacturer of consumer, defence, and industrial
Only company increasing share and sales
Brice: Sales:57M electrical transmission and distribution equipment having sold lower-quality, lower-price products since 1980
Trend
Always industrious capacity is over the demand
History
Federated -> top quality 1977 48%share
Cost has been reduced from 2.7(1977) to 1.96(1983) the division budgeted a loss of 860K, it will be even more if price is stable at 1.98
Pricing strategy history
Ad hoc : Even though there is book price, it can lower the price flexibly
Strict book : Just follow book price
Controlled
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)
(July 1984)
Industry capacity utilization is 40%, price is new low
Federated Industries group
3 divisions (Sales)
Transformer (75.7M),
Capacitar(8.4M),
Switchgear(31.2M)
50 sales force, 10 geographic districts, Customer were 3500 electrical utility
Capacitator
Market share 36% (Downed by 12%, or 6M sales in this 6 years) whereas capacity share is stable on 35%.
Capacitator increases utilities power factor by reducing utilities' power loss 8% -> 3%
By far simpliest of three products in Federated
Customer did not see it as differentiated product
Customer
3500 utilities - 1000 generating and distributing / 2500 distributing only
Large public small public
Investor Owned
A large public utility might order 10+ banks of 20,000 KVAR capacitor that cost approximately $40000 each
(Sales 400K+)
Suppliers
3 large players (F, M, B)
Midland: Sales:1.27B manufacturer of consumer, defence, and industrial
Only company increasing share and sales
Brice: Sales:57M electrical transmission and distribution equipment having sold lower-quality, lower-price products since 1980
Trend
Always industrious capacity is over the demand
History
Federated -> top quality 1977 48%share
Cost has been reduced from 2.7(1977) to 1.96(1983) the division budgeted a loss of 860K, it will be even more if price is stable at 1.98
Pricing strategy history
Ad hoc : Even though there is book price, it can lower the price flexibly
Strict book : Just follow book price
Controlled