Precision Worldwide, Inc. Case Study

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Precision Worldwide, Inc. Case Study

Involved Parties:
Competitor-French Firm: Henri Poulenc
Precision Worlwide, Inc.-German Firm
Hans Thorborg-General Manager
Gerhard Henk-Sales Manager
Bodo Eisenbach- Development Engineer
Patrick Corrigan-Parent Company Spokesman

Background: Precision Worldwide, Inc. (PWI) manufactures industrial machines and equipment for sale in numerous countries. Repair and replacement parts account for a substantial part of the company’s business. The replacement part in question, steel rings, occur in the machines manufactured only in PWI’s Frankfurt Germany plant, but can also be used on some competitor’s machines. The steel ring manufactured by PWI has an average normal life of about 2 months. Machines require between 2 and 6 rings to operate. Individual rings are replaced as they wear out. Over the years, competition had increased and now a competitor company, the French firm Henri Poulenc, has entered the market with a superior plastic ring that replaces the steel ring. The plastic ring is less costly to manufacture and has a longer life.

Situation: The PWI sales manager, Gerhard Henk, is asking when this product will be available for him to sell that his competitor already has on the market, particularly in France where the competitor is the strongest. Bodo Eisenbach, the PWI development Engineer, estimates the plastic rings can be produced in about 4 months at a tool and equipment cost of about $7,500. PWI currently has about $390,000 worth of special steel in current inventory that cannot be sold, even for scrap. Patrick Corrigan, from the parent company spokesman, expects Thorborg to exhaust all steel supplies. If sales of the steel ring continued until the plastic rings were ready for the market about 15,100 rings would remain in stock upon the plastic rings release date.

Information supplied from PWI’s cost…...

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