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The Chain Saw Industry In 1978 Case Solution

Solution Id Length Case Author Case Publisher
2278 709 Words (3 Pages) David J. Collis, James Debelina, Jon Elsasser, James Horntahl, R. Gordon Shearer Harvard Business School : 379176
This solution includes: A Word File A Word File

In the chain saw business all Porter's forces are significant and powerful and due to this, their average earnings of the industry decrease. For example, a) the buyers – professionals and farmers are a significant element which has made the company devote special items and prices to them; b) on average suppliers constitute 64% of the production costs of the chain saw.

Following questions are answered in this case study solution

  1. Which of the five forces are important in the chain saw industry? Why?

  2. Which firms are the winners in 1978? Which are the losers? Why?

  3. What should the following firms do after 1978: Stihl, B-P, Homelite?

Case Analysis for The Chain Saw Industry In 1978

This gave them considerable leverage in the business; however, production integration was advantageous to the greatest firms that did not depend so much on suppliers; c) The replacements were also of some industrial growth, but not particularly significant compared to the other factors. No electrical chain-saw equipment was found until 1971, although some market share began to be gained since 1972. It is essential to point out that the knowledge or skill for developing their own electrical equipment was not in all firms who produced the gas chains saw (the conventional type); d) currently, there was extremely significant potential for entrance to the business due to the tremendous market expansion in recent years. In addition to US firms, foreign industries began to join the US market, and fusion and acquisition were undertaken; e) the rivalry grew greater, and the greatest illustration was that, between 1970 and 74, the two US market share leaders lost their share. 

2. Which firms are the winners in 1978? Which are the losers? Why?

We may assume that the winning ones in the year 1978 were Homelite, Beaird-Poulan, McCulloch, and Stihl. In Homelite, the industry's biggest chain saw backlog has seen record levels. In spite of significant market share losses, their advance tax return on sales (ROS) also increased by two percentage points. The number 1 unit sales were Beaird-Poulan in 1978, with its pretax ROS dropping to 8-11 percent because of the increasing sales base. They have boosted the TV and magazine advertising. McCulloch's sales and income grew considerably in 1977 and 1978 despite the 7% market share loss from 1972 to 1977. Stihl was the fourth largest unit seller in the United States but in terms of dollar sales, they were the second largest, due to their high price ranges. They developed new items that focused on the bottom end and started a big publicity effort. Remington/DESA experienced problems of quality, leading to sales of around 20 percent.

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