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Question: 2 the tollowing discussion focuses on the change in timken...

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2. The tollowing discussion focuses on the change in Timken has an 11 percent share of the world market for bearings. However, imports into the United States doubled to $1.4 billion in 2002 compared with $660 million in 1997. Timken believes that the uniqueness of its product helps protect it from foreign competition. However, the company still lobbied the Bush administration to top what it calls the dumping of bearings at low prices by foreign producers in Japan, Romania, and Hungary production and selling strategies of Timken Co the Canton, Ohio, firm that is a major producer of bearings: 64 To counter the low prices 2003 began bundling its bearings with other parts to provide industrial business customers with products specifically designed for their needs. Timken ha begun bundling prelubricated, preassembled bearing packages for automobile manufacturers in the early 1990s. Evidence indicated that companies that sold integrated systems rather than discrete parts to the automobile manufacturers increased their sales. Other industrial customers put the same pressure on Timken in the late 1990s to lower prices, customize, or lose their busine to lower priced foreign suppliers. Manufacturers are increasingly combining a standard part with casings, pins, lubrication, and electronic sensors. Installation, maintenance, and engineering services may also be included of imports, Timken Co. in a. What factors in the economic environment, in addition to foreign imports, contributed to Timkens new strategy in 2002 and 2003? b. How does this strategy relate to the discussion of bundling presented in the chapter? What additional factors are presented in this case? 3. The following discussion pertains to the pricing policies of Linear Technology Corp.: e semiconductor industry Linear Technology Corp. has maintained strong profitability by operating at the fringes where competition is low and margins are high. This midsize company makes 7,500 arcane, unglamorous products that solve real-world problems for a long list of customers, including analog chips that are too cheap for customers to haggle over, but perform chores too important to ignore. Many of Linears chips cost less than 50 cents to build and sell for three to four times as much, but customers seldom complain about the markup. Suppliers, such as Timken, saw this as a means of dispensable to the manufacturers. The strategy also required suppliers to remain in proximity with their customers, another advantage over foreign imports. This type of bundling does require significant research and development and flexible factories to devise new methods of transforming core parts into smart assemblies. The repackaging is more difficult for industrial than automobile 58% Page 287 of 520
88 PART 1 Microeconomic Analysis Linear made a 3% profit on its $1.1 billion sales in 2006, more than five times the average for U.S. industrial companies. However, other bigger chip makers, including Texas Instruments Inc., Richtek Technology Corp. of Taiwan, and Freescale Semiconductor Inc. of Austin, Texas, are now moving into the market and others may follow suit. Unlike in the digital chip world, in which a single winning design bought by a few big customers can yield huge profits, Linear would rather see its order book packed with small to midsize orders from companies too busy to haggle over prices. Intermec Inc., which makes mobile data scanners, uses Linear chips to obtain extra life from its devices batteries. The chips total cost is less than 5% of the naterals budget. Performance is crucial for this company price is not. Traditionally the dozen or so major analog chip companies have tiptoed around one anothers product lines, helping keep profit margins high. Each company established its strength decades ago, making it easy to extend existing product families and deepen relations with longtime customers. We chip away a little at each others specialties, says Jerald Fishman, chief executive of Analog Devices. But there isnt a lot of direct competition. Discuss how price elasticity of demand influences the pricing strategies of Linear Technology Corp. What market model best describes this industry? Explain.
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