1978 Chainsaw Essay

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STRA – 6201 Chain Saw Industry in 1978 Which firms are the winners in 1978? Which are the losers? Why? What should these firms do after 1978? From 1974-1978 all the major firms saw increased sales and net income but as time progresses and the market stops growing the firms that have best positioned themselves will begin to dominate the competition. An indicator firm success can be found in looking at firm Return On Sales (ROS). ROS = Net Income/Sales Revenue, it is a measure of firm efficiency and firms with higher ROS are demonstrating an ability to control costs and/or charge a higher price for their product(s) as opposed to competition. Lower ROS firms have lower income in relation to revenue and increasing net income is harder. In 1978 Emerson (Beaird-Poulan) and Electrolux (Husqvarna) are the industry leaders in ROS at 7.9%. Black & Decker (McCulloch) had an ROS of 5.9%, Stihl 5.1%, Textron (Homelite) 4.9%, Roper 3.3% and Skil 2.3%. Emerson and Electrolux are the winners here and are best positioned for the future in the chain saw market. Electrolux’s ROS has decreased since 1974 while Emerson’s has grown slightly. This could indicate that Emerson has the slight upper hand between the two. It should also be noted that Stihl was a new entrant to the US market and had a bit of a niche position as a manufacturer of premium chain saws only, it did not have a saw priced lower than $100. From 1974-1978 Stihl maintained its position in the premium market and gained sales at the high-end of the casual user market. Stihl could also be considered a ‘winner’. The firms with lower ROS, ‘losers’, must find ways to reduce costs from their operations/products and/or be able to charge higher prices without losing unit sales in order to increase their ROS and avoid domination by the more successful firms. What type of competition is found in each

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