1. Japanese entrant in the European market M/s Hiroto Industries, sold fasteners at price 20% less than that of Muller Lehmkuhl, with same quality products.
2. ML offered fasteners which were compatible to assemble only with their attaching machines, but Hiroto Industries manufactured fasteners which are compatible even with Muller Lehmukuhl’s attaching machines.
3. This compatibility and a better price range made the customers slowly drift towards Japanese manufacturer’s fasteners.
4. Hence, this has also had became a better deal for the distributors, which later preferred Japanese make.
Corrective Steps/Solutions for Muller Lehmukuhl:
1. ML was bundling the price of the attaching machines with their fasteners price, if this is unbundled the price of the fastener will eventually come down.
2. The price of the fasteners can be reduced by 20% without compromising with the quality of the products ML will still make a profit range of 38% – 48% in its product range Product Cost Estimate:
3. As ML had a very strong R & D, a fastener can be innovated which can be easily fitted without the help of any attaching machines.
4. The attaching machines can be upgraded by ML by making it compatible with the fasteners manufactured by various manufacturers in the market, thus a separate market for ML’s attaching machines will be created.
5. Loyalty rewards can be given to its customers who are complying with loyalty norms, also a better purchasing price can be offered to these customers for a various range of orders. Profit on Fastener Sales:
Sale of Fastener $96,000 Total Production Cost $70,000 Attaching Machine Production Cost $16,700 Fastener production cost $53,300 Sales & General Administration $20,600 Total production Cost on Fastener $73,900 Profit on fastener $22,100