Fluent Essays

1, pay attention to classify 13gas saw companies 2, Short and concise introduction paragraph . u only need to write about  how did u classify the company . how many groups，in the introduction paragraph  u can classify them by quality、cost and the other . you did this order before avoid similarities.  4 Attachments Surname 4 Assignment Instructor Student’s detail Date The Strategic Groups in The Chain Saw Industry The strategic mapping of the Chain Saw industry provides a clear insight into the competition level that exists between the rival groups in the industry. By considering the geographical coverage and breadth of company products, a clear picture of strategic alignment in the chain saw industry is drawn. The strategic alignment of several firms in the industry is dependent on the existing competitive pressure and a need to experience profitability. The increased demand for the chainsaw in both Europe and America saw a rapid increase in the number of companies entering into the market. The existent of the distinction between the market for the gasoline based and electric powered chain saw was insignificant in reducing the level of competitiveness in the industry. Although some companies choose to deal with the production of gasoline saws, they still faced competition from others that chose to combine the different products. Due to the high number of play and stiff competition positioning itself strategically was essential to ensure its survival and a guaranteed market share. From the reading, a detailed analysis of the chain saw industry reveal that the players utilize multiple strategies to overcome direct competition from their peers in the market. The high demand for the chain saw was critical in leveraging the performance of individual companies in the industry. The entry of some foreign company into the United States market, especially from Europe, expressed their technological leadership in the production of chain saw. Some of the foreign companies that had intensified their operation in the United States came from countries such as Germany, Sweden Japan, and Canada. First, the company geographical distribution and marketing pattern reveal a deliberate strategy geared toward overcoming highly competitive pressure. Depending on the geographical operation of the individuals companies some relied on dealers to achieve competitive advantage in penetrating some market segments. For instance, some of those companies in Europe that did not possess a manufacturing license to operate in the United States resulted in relying on private dwellers as a strategy to penetrate the North American market. The critical aspect of some company positioning themselves in the United States was because the United States demand for Saw Chain almost equal to the rest of the world. On the other hand, some manufacturer restrained their operations in the local markets. As a strategy to maintain control over the supply, the wholesale distribution was exclusively operated by the companies or their affiliated private dealers in the various market segment. Secondly, the breadth of product offered by each player provided a strategic differentiation in the industry. The ability of the chain saw to be designed into different dimensions based on length, horsepower and quality provided the players with the different option of designing their models. Further, the ability to segment the market into different categories based on the use of the Chain not only provided an opportunity for specializing in satisfying the need of each group. The market segment had a different need for the chain saw ranging from, learning land by farmers, commercial logging, and clearing storm damages. The wide variety of needs provided broad options for the companies to choose their target group in their distribution. A diagram illustrating strategic groups in the saw chain industry group 1 -solo -partner -Desa industries (Remington) group 2 -Roper -Beaird-paulon -Skil group 3 -Pioneer -Stihl -Homelite -McCulloch -Jonsered -Husqvarna -Echo Coverage (geography) Product breadth Based on the two variables; the geographical coverage and product breadth three different strategic groups are identified in the industry with each strategic group characters displaying distinct character as discussed below: Group 1 The strategic group involves those companies that limit the operation in the local market. Considering their relatively small market size, they offer their products at a competitively low price in the local market. The companies geographical limitation is evident considering that they had no subsidiary in united states and their export was relatively small. Additionally, their product breadth was quite narrow with the model produced having some striking similarity based on size and appearance (p.15). The chain saw dealers in this category comprised of Solo, partner, and Desa industries also know as Remington. Group 2 Companies in this particular strategic group provide moderately wide product variety with not so well developed distribution and marketing network abroad. Their products are of a standard quality that fetches medium prices in the market. For instance, Beaird-Poulan products just meet standard quality and are sold at a low price (p. 11). Their minimal operation in market abroad is balanced by cooperating with affiliated dealers that distribute theyre their products in selected regions. Companies in this strategic group category include Skil, Beaird-Poulan, and Roper. Group 3 The third group is compromised of the companies that combine both wide geographical coverage in their distribution and marketing accompanied by a wide variety of product model. Moreover, they occupy they occupy the largest market share in United States markets with McCulloch and Homelite occupying a 28\% and 27\% of the market share respectively. The first in this group sought a strategy of operating various subsidiaries in foreign countries as well as their local country market. Members in this particular strategic group attempted to ease the competitive pressure from other players in the industry by offering a product of premium quality which fetches high prices in the market. For instance, Stihl and Husqvarna offered high-quality saw chains targeting specific market segments; pro and farmer (p. 12). Moreover, Stihl like the majority of the players in this group exclusively distributes its products through its affiliated dealers. Other competitors in this category include Pioneer, Jonsered Husqvarna, and Echo. Member in this strategic category had manufacturing unit and market and distribution subsidiaries spread in various countries. For instance, Stihl operated manufacturing centers in three different locations; Germany, Brazil and the United States. Although they incurred the high cost of production to produce premium quality products, the highly compensated the expense and more, enjoy a comparative advantage in distributing and marketing their products abroad. For instance, McCulloch had more than 8,000 dealers with manufacturing division spread across the united states in regions such as Los Angeles, California and Arizona. Reflecting on the above strategic map, the three strategic groups identify the challenges that an emerging company is expected to face in the industry. For instance, Group three members demonstrate to dominate a large market share and comparative advantage of producing a wide range of products that fetch a premium price in the market. Therefore, the emerging company is left with an alternative to concentrating more on local sales adopting a low-price mechanism that aligns to its less focus on product quality. The large size of international companies enjoy the economy of scale and hence are to concentrate and manufacture products that are tailored to meet their customers need. Bibliography The chain saw the industry in 1974. (1985).Harvard Business School. Case 3 prompt What are the strategic groups in the Chain Saw Industry? 1. Draw a strategic group map, identify the strategic groups within the industry, and label them. 2. Write a brief paragraph describing each strategic group--who are the players in each group, and what is the collective strategy that each individual group is following? · create a strategy group map, explain/describe each strategy in different paragraphs 1. Find the group first, draw a diagram. Not exactly 2 groups (most important because grade is based on if the groups are correct. For example: CK and LV should not be in one group) 2. Then figure out the axis (not as important as the groups) 3. Explain: Group 1 follow XXX strategy. List some of the players/companies in group 1 and explain a little bit (For example, Nordstrom focus a lot in customers satisfaction) 4. Explain: Group 2 follow… 5. … Group map/diagram examples: Harvard Business School 379-157 Rev. June 12, 1985 This case was written by Associate Professor Michael E. Porter with the assistance of David Collis, James DeBelina, Jon Elsasser, James Hornthal, and R. Gordon Shearer, all MBAs 78; and Susan Mayer, MBA 79. It is based on published sources and interviews with industry participants, distributors, retailers, suppliers, and observers. The case was written as a basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. Copyright © 1979 by the President and Fellows of Harvard College. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means without the permission of Harvard Business School. Distributed by HBS Case Services, Harvard Business School, Boston, Mass. 02163. Printed in the U.S.A. 1 The Chain Saw Industry in 1974 After a long period of relative stability, the U.S. chain saw industry was experiencing rapid growth in early 1974, stimulated by increased consumer interest in chain saws as a result of the energy crisis, a trend toward self-sufficiency, and the back-to-nature movement. Long dominated by Homelite in the mass market and the German company Stihl in the premium segment, the industry faced other changes in the early 1970s. Two major companies had recently been acquired by large parents, and many other participants had taken a renewed interest in the industry because of its upsurge in growth. The Product Chain saws were motorized devices for cutting wood, and were sold to a wide range of industrial, commercial, and household buyers. There were two basic types of chain saws, which differed in the nature of their power unit (power head). Gas saws were free-standing units powered by an internal combustion engine of 2 to over 8 cubic inches of displacement. Electric saws utilized an electric motor, which was fed by a cable that had to be connected to an electrical socket. Domestic U.S. sales of chain saws over the 1949–1973 period are outlined in Table A.1 Exhibit 1 shows a typical chain saw and identifies its major parts. Besides the power head, chain saws differed in two important dimensions. The horsepower of the power head varied from 1.5 to approximately 8.5. More powerful saws were designed for heavy-duty uses such as logging and construction; less powerful saws were sufficient for a homeowner to cut firewood and do light clearing of land. Chain saws also differed in the length of their cutting bars (from 10 to over 24 inches); long-bar saws were designed, by and large, for heavy-duty applications. 1The U.S. market for chain saws was approximately as large as that of all the rest of the world. For the exclusive use of Y. PAN, 2019. This document is authorized for use only by YONGNAN PAN in Competitive and Strategic Analysis-1 taught by JERAYR HALEBLIAN, University of California - Riverside from Jan 2019 to Jul 2019. 379-157 The Chain Saw Industry in 1974 2 Table A Domestic Chain Saw Sales, 1949–1973 (thousands of units) Year Gas Saws Electric Saws Total Saws 1949 40 40 1950 60 60 1951 95 95 1952 111 111 1953 150 150 1954 220 220 1955 248 248 1956 277 277 1957 248 248 1958 321 321 1959 363 363 1960 340 340 1961 340 340 1962 375 375 1963 381 381 1964 453 453 1965 501 501 1966 515 515 1967 518 518 1968 554 554 1969 613 613 1970 633 na 633+ 1971 750 na 750+ 1972 899 175 1,074 1973 1,400 312 1,712 Source: Manufacturer interviews; for pre-1972 data, Walter J. Williams, The United States Chain Saw Market, unpublished manuscript, Amos Tuck School, Dartmouth College. Note: Sales of electric saws were very small before 1970. These differences translated into a wide variety of chain saw models, with some manufacturers producing over 20 different saws. Prices for chain saws reflected this broad range of products (based on number of units in the price segment): Retail Price Segmentation 1970 1971 1972 < $140 12\% 20\% 22\% 140–170 12 27 26 24 47 48 170–300 49 47 300–700 76 4 5 100\% 100\% 100\% Source: Chain Saw Manufacturers Association; dealer and manufacturer interviews. Chain saws had a useful life of approximately five years of regular use. For the exclusive use of Y. PAN, 2019. This document is authorized for use only by YONGNAN PAN in Competitive and Strategic Analysis-1 taught by JERAYR HALEBLIAN, University of California - Riverside from Jan 2019 to Jul 2019. The Chain Saw Industry in 1974 379-157 3 Markets Industry participants had traditionally segmented end users of chain saws into three categories: professional, farmer, and occasional or casual. Professionals used chain saws as one of the primary tools of their trades. Along with professional loggers, the pro segment included commercial and government buyers—such as building contractors, municipal employees, and local park district workers—who used chain saws as auxiliary tools. Industry sources estimated that the great majority of pro users purchased saws with cubic-inch displacements of 4.5 or greater. Farmers used chain saws for a variety of activities on their land, as shown in the following 1972 survey. Farmers generally purchased saws in the 2.7-cubic-inch to 4.5-cubic-inch displacement range, although some purchased even larger saws. Farm Uses of Chain Saws Specific Use \% of Survey Respondents Reporting Use Tree maintenance 54.1 Land clearing 49.8 Fence posts 49.4 Firewood cutting 28.8 Timber 26.2 Pulpwood 1.3 Source: Kansas Farmer Both pro and farm users tended to employ chain saws heavily and require regular service and repair. They were also frequent purchasers of replacement chain. The term casual users referred to homeowners or campers who used chain saws for cutting firewood, trimming trees, pruning, or clearing storm damage. The casual users were a very diverse group with a wide variety of needs, and their saw usage rates varied accordingly. Casual Uses of Chain Saws Primary Use \% of Casual-User Market Fireplace (occasional wood cutting) 60–70 Home heating (heavy user) 10–15 Camping 10–15 Suburban acreage (light clearing work) 5–10 Nonuser (gift, etc., put immediately on the shelf) 5–10 Source: Manufacturer and distributor interviews Not infrequently, the casual users need for a chain saw was very transitory, such as a one-time tree- clearing project. After this use the saw might be used very lightly if at all. Other casual users were regular users of saws. Most casual-user saws were estimated to have power heads with less than 2.7-cubic-inch displacement and bar lengths of less than 16 inches. Most casual users purchased saws that cost less than $200: For the exclusive use of Y. PAN, 2019. This document is authorized for use only by YONGNAN PAN in Competitive and Strategic Analysis-1 taught by JERAYR HALEBLIAN, University of California - Riverside from Jan 2019 to Jul 2019. 379-157 The Chain Saw Industry in 1974 4 Chain Saws Sales to Market Segments \% Sold to Cost Farm and Professional Users Casual Users < $100 3 23 100–200 7 67 200–250 33 8 250 or more 57 2 100\% 100\% Source: Chain Saw Manufacturers Association; manufacturer interviews. The estimated breakdown of unit sales of gas chain saws by the domestic end-user segment was as follows: Units in Thousands 1972 1973 Professional 259 315 Farmer 210 282 Casual user 430 803 Total 899 1,400 Source: Chain Saw Manufacturers Association; manufacturer interviews. Once purchasers of chain saws became regular users, they tended to trade up to saws with either more power or more features. Chain saws in regular use required service, repairs, and the purchase of replacement saw chain. Professional users consumed approximately 5–30 seven- to eight- foot loops of saw chain per year, and farmers typically used 3–5 four- to eight-foot loops if they were regular saw users. Pro and farm users also typically replaced the guide bar two to three times and the sprocket three to five times over the life of a saw. Usage of chain varied markedly in the casual-user segment, and there was little reliable evidence of how much chain the average casual user consumed, though it was believed to be less than one four-foot loop per year. A four-foot loop of replacement chain cost approximately $10, and bars and sprockets were somewhat more expensive; costs varied by size and manufacturer. Although the pro and farmer segments had long been the dominant markets for chain saws and still dominated the market in terms of dollar sales because of their much higher average prices, the casual-user segment had begun to grow rapidly. Before 1963 gas saws were sold almost exclusively to professional woodcutters. That year a leading competitor, Homelite, introduced its lightweight XL-12 saw, priced under $200; McCulloch soon followed with a similar model. The unprecedented combination of light weight and low price was cited by observers as stimulating the birth of the casual-user market. Industry sources attributed the recent spurt in casual-user sales to a number of factors, among them increased usage of fireplaces and wood-burning stoves as a result of the energy crisis, social trends emphasizing a return to nature and escape from urban living, ownership of second homes, and increased leisure time—all concurrent with wider availability of lower-priced saws, some costing less than $100. The casual-user market was expected to continue to grow rapidly for at least the next five years. The pro and farmer segments were primarily replacement markets by 1974, though they were expected to grow at approximately 10\% per year. Pro and farmer sales tended to be somewhat cyclical, in keeping with the cycles in their end-user industries. For the exclusive use of Y. PAN, 2019. This document is authorized for use only by YONGNAN PAN in Competitive and Strategic Analysis-1 taught by JERAYR HALEBLIAN, University of California - Riverside from Jan 2019 to Jul 2019. The Chain Saw Industry in 1974 379-157 5 Distribution Chain saws reached end users through a complex array of two- and three-stage distribution channels. Exhibit 2 gives a schematic diagram of chain saw distribution and indicates the most important channels in 1974. Retail Channels Servicing dealers. The servicing chain saw dealers were the most important retail channel in the chain saw market. They were full-service outlets carrying broad lines of chain saws and offering extensive purchasing assistance to customers. Some dealers sold only chain saws, but most were lawn and garden stores or building contractor supply outlets. Chain saw dealers were franchised to carry the brands of individual manufacturers, and approximately 25\% of the dealers carried only one line. However, most dealers carried the product lines of more than one manufacturer; the average was approximately two lines per dealer. Multiple line dealers generally carried the line of only one of the two major manufacturers—Homelite or McCulloch—and identified themselves with one of these firms. Approximately 45\% of chain saw dealers were in rural areas, 35\% in urban areas, and 20\% in the suburbs. Dealers provided service, sold replacement chain and accessories, and had an average sales volume in chain saws and related products of $150,000 to $200,000 per year. Many were owned by former gasoline engine mechanics. Sales were seasonal and reached their highest levels in the summer months. Dealers advertised primarily through local newspapers and radio, and many manufacturers had cooperative advertising programs that shared advertising costs with dealers on a 50/50 basis. Dealer margins for chain saws ranged from 20\% to 40\%, with margins on service and accessories significantly higher. Margins were lowest on the lower-priced saws, and some dealers claimed to sell saws at or near cost and make their profit on service and accessories. Other retail channels for chain saws were as follows: Lumber and home centers. Both independent and chain lumber and home center stores catered to homeowners and contractors. These outlets offered a limited line of saws without service and with limited accessories. These stores sometimes bought saws direct from manufacturers, but they usually bought through distributors. Chain saws were not a major item for these outlets in 1974. Department stores. Major department stores sold chain saws, particularly the large national chains (Sears, Montgomery Ward, and J. C. Penney). Some of the smaller department stores carried chain saws, but they offered relatively few models and little or no service. The three large chains were major outlets for saws, and all sold fairly full lines of saws and accessories. They did not carry expensive, high-quality saws because of the difficulty of selling them. Sears and Wards had their own service; Penneys referred customers to the nearest manufacturer-authorized service center. All three offered credit, which was an effective marketing tool that many other channels for chain saws did not have. The three leading chains as well as some other department stores had significant catalog sales of chain saws as well as over-the-counter sales. The Big 3 sold an estimated 20–30\% of their saws through catalog operations. The major department store chains sold both private label and brand name saws, purchased directly from manufacturers in large volumes. Total sales of chain saws to the top three chains were estimated at several hundred thousand units in 1973. Sears and Wards sold only private label saws; Penneys sold brand name saws, though it had sold private label saws in the past. Wards and especially Sears required their suppliers to redesign products to give them distinctive lines. Farm stores. Both independent and chain farm stores supplied farmers with a wide line of farm products including feed, equipment, and fertilizer. Examples of farm store chains included Agway For the exclusive use of Y. PAN, 2019. This document is authorized for use only by YONGNAN PAN in Competitive and Strategic Analysis-1 taught by JERAYR HALEBLIAN, University of California - Riverside from Jan 2019 to Jul 2019. 379-157 The Chain Saw Industry in 1974 6 (500 stores), Tractor Supply (250 stores), and Quality Farm and Fleet (23 stores). Most farm stores carried a full line of chain saws and accessories, purchased either direct from the manufacturer or through distributors. Some of the chains handled private label as well as several lines of branded saws. Independent farm stores usually offered service on chain saws, and these outlets resembled chain saw dealers. Farm store chains were much less likely to offer service. Farm stores were concentrated in the West and Midwest and sold to professionals and casual users as well as to their primary customers—farmers. Sales of chain saws in these outlets were growing, but more slowly than the market as a whole. Hardware stores. Both local independent stores and chains that carried full lines of hardware products offered relatively wide lines of saws, including those of several competing manufacturers. Many offered service and a full line of accessories for the saws, but generally their service was limited in scope, compared with that of chain saw dealers. Hardware stores were characterized by a high level of customer purchase assistance. Although hardware stores purchased from independent chain saw distributors, an important volume of their chain saws was purchased through wholesale hardware buying groups, such as HWI, American Hardware, Ace Hardware, and Cotter and Company. Chain saws represented a minor fraction of the sales of hardware stores, and hardware stores as a group represented less than 10\% of chain saw sales in 1973. Catalog sales. Aside from catalog sales through the major department stores, there were some very limited sales of chain saws through exclusively catalog firms such as Aldens. These firms typically carried models from many manufacturers, with their focus on smaller saws and related accessories. No service was offered, and customers were referred to the nearest service center. In addition to these major channels for chain saws, some stores in two other kinds of outlets began adding chain saws to their lines. A few mass merchandisers such as K-Mart began carrying very limited lines of lower-priced chain saws with limited accessories and no service. They purchased direct from manufacturers. In addition, some of the major auto store chains such as Western Auto began limited sales of chain saws on essentially the same basis. These firms either bought direct or through cooperative buying groups. The breakdown of dollar volume sold through retail channels in 1973 was approximately as follows: Servicing dealers 50–65\% Department stores 20–25\% Farm stores 10–15\% Hardware stores 5–10\% Others < 10\% Wholesale Channels There were three types of wholesale channels for chain saws. By far the most important was wholesale distributors owned by or exclusively affiliated with the chain saw manufacturers. Most manufacturers had between 20 and 50 distributors who sold to various types of retail dealers. In a few cases the distributors sold direct to large professional or industrial end users. In addition to regular chain saw distributors, catalog distributors and dealer cooperatives (or buying groups) were involved in wholesaling chain saws. Catalog dealers purchased saws direct from manufacturers and resold them to smaller distributors who did not specialize in chain saws. The buying groups were retailers banded together to secure favorable purchasing terms from manufacturers. These were most important in hardware stores. For the exclusive use of Y. PAN, 2019. This document is authorized for use only by YONGNAN PAN in Competitive and Strategic Analysis-1 taught by JERAYR HALEBLIAN, University of California - Riverside from Jan 2019 to Jul 2019. The Chain Saw Industry in 1974 379-157 7 Manufacturing Chain saw manufacturing involved a complex assembly operation using a variety of fabricated parts. Parts could be divided into two major categories: those relating to the power head, and attachments (bar, chain, and sprocket). Parts fabrication included machining, die casting, forging, heat treatment, plating, and metal-stamping operations. Of these, die casting involved the most significant investment and degree of difficulty and required extremely close tolerances. Exhibit 3 lists the major parts of a chain saw along with an estimate of the percentage of total cost represented by each part for a gas chain saw model with annual production volume of 100,000 units. There were economies of scale in the production of most significant components of the saw. Cost savings were also achieved through automation, particularly in machining and assembly. The total tooling investment required to produce all these parts (except saw chain, guide bars, and sprockets) for a chain saw model was estimated at approximately $300,000–500,000 in 1972. Chain saw manufacturers varied greatly in their levels of vertical integration; the manufacturer represented in Exhibit 3 had approximately an average level of integration. The very largest manufacturers were almost completely integrated, though they usually purchased some saw chain, bars, and other specialized parts. Saw chain and bar manufacture required significant investment and involved quite sophisticated and often proprietary technology that had been mastered by specialist outside suppliers. Medium-sized firms purchased attachments as well as die castings and sometimes forgings, but did most of their own machining and then assembly. Some very small manufacturers were solely assembly operations. Industry participants believed that integration lowered unit costs if the volume of parts produced internally was large, relative to volumes produced by specialist outside suppliers. Specialized suppliers existed for all the major chain saw components, and many had been supplying the industry for decades. In carburetors, for example, specialized outside suppliers had such great annual and accumulated volumes that no chain saw manufacturer produced carburetors in-house. An approximate breakdown of costs for a typical chain saw manufacturer was as follows: Purchased parts and material 45–70\% Direct labor 7–10\% Indirect labor and overhead 24–40\% Source: Estimates based on manufacturer and supplier interviews. It was estimated that an efficient, highly integrated chain saw manufacturing facility with two production lines required a capital investment in excess of $15 million for a productive capacity of 600 saws per day. A less integrated plant had a lower minimum efficient scale and significantly lower capital cost. The Electric Chain Saw Market A number of characteristics made electric chain saws quite different from gas saws. The majority of electric saws sold for less than $50 and were capable of only low horsepower levels.2 Horsepower of electric saws was inherently limited by the amperage capacity of conventional electrical wiring. Electric saws were sold primarily to the construction market, where the flammability of gasoline posed a safety hazard, and to casual users, who had very low power requirements. Average casual purchasers of electric saws were generally believed to differ somewhat from casual gas saw 2For a customer who did not already have one, the cost of a long heavy-duty extension cord added $10–20 to the cost of an electric saw. For the exclusive use of Y. PAN, 2019. This document is authorized for use only by YONGNAN PAN in Competitive and Strategic Analysis-1 taught by JERAYR HALEBLIAN, University of California - Riverside from Jan 2019 to Jul 2019. 379-157 The Chain Saw Industry in 1974 8 buyers in 1974. Electric saw purchasers were believed to be extremely price sensitive and in some cases also less outdoorsy and less comfortable tinkering with gasoline engines. Some observers also noted that electric saws were often purchased by women as gifts. Distribution of electric saws was primarily through contractor supply outlets, hardware chains, and home centers as part of the electric tool line. Almost no electric saws were sold through servicing dealers, who had little expertise in electric motor repair. Electric saws required little service, partly because of the reliability of electric motors and also because they were used less intensively than gas saws. Competition There were approximately a dozen major manufacturers of gasoline chain saws in 1974. Some of these also produced electric saws, but the markets for gas and electric saws were quite distinct. There were major competitors in electric saws who did not produce gas saws, and vice versa. The major firms and their estimated positions in the gas chain saw market are shown in Table B. Stihl and Solo were German companies; Jonsereds, Husqvarna, and Partner were based in Sweden; Echo was based in Japan; and Pioneer was a Canadian firm. Each was a significant producer outside the United States.3 Table B Estimated U.S. Market Shares of Gas Chain Saw Manufacturers 1970 1971 1972 1973 Homelite 35\% 31\% 28\% 28\% McCulloch 33 33 27 27 Remington/Desa 8 12 Beaird-Poulan 8 12 Stihl 7–8 6 Roper 6 Pioneer 4 Skil 3 Echo (entered 1972) 1 Very small shares: Husqvarna, Jonsereds, Partner, Solo Source: Manufacturer interviews Note: Omitted figures were not available. European firms had been the early pioneers in the chain saw industry, and they still maintained technological leadership according to most observers. The other major competitors were U.S. firms, which had grown up largely since World War II. Homelite and McCulloch sold outside the United States as well as domestically, exporting 10–20\% of their volume; the other U.S. companies were largely domestic competitors only. Stihl had a relatively small but stable share in the United States, and Echo had entered the U.S. market in 1972. The other non-U.S. firms had very small shares in the U.S. market, which they met exclusively through exports. Tariffs on chain saws were significant in the United States as in other countries; they ranged from 5\% to 15\%. 3In addition to the non-U.S. firms listed, a number of other producers—such as Danarm, Dolmar, and Alpina— exported minor volumes to the United States. None were considered significant factors in the market. For the exclusive use of Y. PAN, 2019. This document is authorized for use only by YONGNAN PAN in Competitive and Strategic Analysis-1 taught by JERAYR HALEBLIAN, University of California - Riverside from Jan 2019 to Jul 2019. The Chain Saw Industry in 1974 379-157 9 The estimated 1972 domestic dollar sales of chain saws of the leading U.S. firms were as follows: $ millions Homelite $30 McCulloch 30 Remington/Desa 11 Beaird-Poulan 9 Roper 6 Pioneer 4 Skil 3 A profile of each of the major competitors is given below. Exhibit 4 summarizes their product lines, Exhibit 5 their prices, Exhibit 6 their advertising spending, and Exhibit 7 their corporate financial results. Homelite Homelite, a division of Textron, Inc., was acquired in 1955. Textron had over 30 divisions in many diverse businesses overseen by a corporate staff of less than 100 people and classified as shown in Table C. Divisions were managed autonomously, but measured and compensated on the basis of strict annual return-on-investment criteria. A group vice president monitored division results and consulted on major decisions, but did not interfere with operations. Corporate 10-year targets were growth at an average compound rate of 8\% and net income growth at a compound rate of 10\%. Homelite, a leader in the U.S. chain saw industry for many years, was one of Textrons most successful divisions, though its market share had begun declining slightly. The division, part of Textrons consumer segment, was one of the corporations top profit contributors. In addition to chain saws, the Homelite Division produced lawn and garden equipment, snow blowers, and some construction equipment, such as pumps and generators. Although chain saws were by far the largest part of division sales, Homelites other businesses were being expanded through new product introductions. Table C Sales and Net Income of Textron by Business Segments ($ in millions) 1973 1972 Sales Net Income Sales Net Income Consumer $614.1 $29.4 $557.4 $26.1 Aerospace 499.0 23.4 505.9 27.2 Industrial 392.6 21.1 335.9 10.3 Metal products 352.7 20.3 279.2 8.5 Homelite produced a very wide product line in chain saws, with a large number of models and engine sizes. It sought to provide a high-quality product, which was marketed to all the major market segments through an extensive network of servicing dealers. Homelite sought to segment the market and offer saws aimed at all significant customer groups. Separate marketing managers directed activities in the consumer and professional markets. Homelite had been a pioneer in producing lightweight chain saws in the 1960s, but in 1973 its products were not known as leaders in safety and comfort features. For the exclusive use of Y. PAN, 2019. This document is authorized for use only by YONGNAN PAN in Competitive and Strategic Analysis-1 taught by JERAYR HALEBLIAN, University of California - Riverside from Jan 2019 to Jul 2019. 379-157 The Chain Saw Industry in 1974 10 Homelites policy of in-house distribution was unique in the industry. It had over 40 in-house distributors, who served over 10,000 authorized dealers. Homelite was particularly strong in hardware stores and farm stores; it also sold its brand of saws to J. C. Penney. Homelite did not sell through mass merchandisers or for private label. The company spent heavily on advertising— including some consumer advertising of the Homelite brand name—using television, magazine, and radio, as well as dealer-oriented advertising and advertising directed toward farmers. Homelite also utilized occasional price promotions on selected models. Homelite manufactured chain saws in two plants in North and South Carolina, constructed in 1957 and 1959. Homelite was not integrated into die casting, but it manufactured its own bars and purchased saw chain from its sister division, Townsend, which manufactured precision metal parts. Townsend had entered saw chain manufacturing in 1971 in a South Carolina facility. McCulloch Corporation McCulloch, long a highly regarded manufacturer of chain saws and other products using small, two-cycle gasoline engines, was considered a pioneer in the U.S. chain saw industry. Until 1973 McCulloch was privately held, and its chairman, Robert McCulloch, was also chairman of McCulloch Oil. He had long been heavily involved in R&D and had designed products ranging from electronic ball cups for golf greens to …