According to Dr. Richard Welkers, president of Mueller-Lehmkuhl: The merger with Atlas has significantly increased our ability to compete with the Japanese.
As we are now the largest single manufacturer of apparel fasteners in Europe, we can reap the benefits of economies of scale. At the moment, we are cost competitive with the Japanese. While the Japanese have lower wages and overhead, we are closer to the market and have lower selling costs. Historically, the Japanese have been most successful when they were the low-cost producer. Currently, the Japanese are pricing 20% below us. It is not enough to offset our quality advantage, but if they can match our quality or drop prices even further, we could have a problem.
Company BackgroundMueller-Lehmkuhl (ML), a West German producer of apparel fasteners, was founded in 1876 as a manufacturer of shoe accessories. Soon after, other products were added, including the singlepost snap fastener. Production of these items increased substantially when the company merged with a Hannover firm called Weiser. In 1929 Mueller-Weiser merged with Felix Lehmkuhl to become Mueller-Lehmkuhl. Sales growth and product diversification continued, and in 1938 the firm was acquired by the Moselhammer group.In 1982 ML formed a joint venture with the German subsidiary of the Atlas group, an American multinational.
Atlas was a conglomerate of six major businesses, one of which—Apparel Fasteners—complemented ML. At that time ML dominated a relatively small segment of the market, while Atlas Germany serviced a broader customer base. The objective of the merger was to integrate ML’s technological superiority and higher margins with Atlas’s access to the market. While substantially increasing its sales volume, one effect of the merger was to limit ML’s potential markets to Europe and Africa: the rest of the world was serviced by other Atlas divisions.
In 1986 ML had estimated revenues of $103 million1 (see Exhibit 1).1 In 1986, the exchange rate was $1 equals DM 2.1. Research Associate Dagmar Bottenbruch prepared this case under the supervision of Professor Robin Cooper as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. Copyright © 1986 by the President and Fellows of Harvard College.
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