ABC Electric Company
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 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 dropped. 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. Because 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 need to be address in order to stabilize their competitor 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. The company will not
be able to compete with their competitors price. As a result, they will incur further loss in
market share and profitability. Finally, there is an industry wide competition for welders,
