cond issue facing the company is, a supplier of whom ABC purchases its electric motors from for its welder has raised the price by almost 10%. In looking at this, the bargaining power of the supplier is very strong because the switching cost might be very high. Moreover, it will become damaging to the company based on the current reduction in price within the industry if the problem is not solved. The company will not be able to compete with their competitors price. As a result, they will incur further loss in market share and profitability. Finally, there is an industry wide competition for welders which leads to frequent price reductions. As a result, ABCs cost structure has been affected. In looking at this issue, ABC has relied heavily on its strategy of product differentiation and maintaining its traditional core competency, which is welding machine with limited or no diversification over the years. Now it is force to restructure its competitive strategy by lowering the cost of its product while maintaining quality or force to conglomerately diversify, which means selling new product to new market whereby creating a market niche, such as, the auto industry.The recommendations of the strategic planning committee can help solve these problems in various ways. For instance, the recommendation that was made by the committee to backward integrate to make electric motors would be an excellent move because of the fact that the company will have control over the quality as well as the price of the motor. In addition, by making its own motors the company will be able to reduce the component cost, thereby, increasing the profit it makes on its welders. Not having a supplier can reduce the time and effort of maintaining a steady external relationship. In order to implement this strategy, one must consider appropriate structural mechanisms, which needs to be established as to ensure coordination of activities between welder and mot...
