Precision Worldwide, Inc Case

Precision Worldwide, Inc.

Known Facts

• May 2004 – Book value of Special steel: over $390,000

• cannot be sold, even for scrap

• Machines affected made in Frankfurt

o Priced between $18,900 and $28,900

o 1000 workers in the plant

o Sold by separate Sales org

• Repair & replacement parts substantial part of business

• Steel rings can be used on similar competitor machines

• In general, plants outside the US have considerable leeway to make their own decisions

• Japanese manufacturers entered market with lower price spare parts in 1990

• Competition increases due to lower quality/lower priced machines

• Steel Ring

• Normal life of two months.

• Depending on extent of machinery used.

• Replaced in seconds.

• Different models of the machines required from two to six rings

• Replaced individually

• Plastic Ring

• Produced by mid-September

• Required equipment $7,500

• Competition

• Supply them for sale in France.

• Compete with Henry Poulence Company

• Inventory

• Steel rings ordered in large amounts.

• The inventory problem is irrelevant if the new rings could be produced at a substantially lower cost.

The Players

 2004 PWI General Manager: Hans Thorborg, German Plant; Steel Retaining Ring

 Competitor: Henri Poulenc France, new Plastic Ring, longer lifespan, lower manufacturing cost

 Sale Manager Gerhard Henk, concerned about competition from plastic ring when it entered the market, for sale to customers in France, where Henri Poulenc had deepest market penetration

 Bodo Eisenbach development engineer estimated that PWI could produce the plastic rings by mid-September with an investment of $7,500.

 Patrick Corrigan, US parent company (title unknown)

Background Information