Iva Velkovska
9/21/2011
Berkshire Threaded Fasteners Company Case
OVERVIEW
Berkshire is one of the eight companies in threaded fasteners industry in New England. The company produces three types of metal fasteners (nuts & bolts), including 100 series, the 200 series and the 300 series. The products are sold by the company’s salaried sales force throughout New England. Berkshire Threaded Fasteners Company has recently lost their president, John Magers. The resulting appointment of his inexperienced son Joe Magers has led to the company’s loss of confidence. Brandon Cook is the recently appointed general manager who was hired to turn the company around after a loss of $70,000 in a good business year. Cook would have full authority to run the company and explains the reasons for every decision he made with the hope to train John Magers for successful leadership upon Cook’s retirement. Thanks to Cook’s management the first half of 2000 was a modestly successful period, but the second half of this year will be a challenging period because of price reduction on 100 series. With excess capacity for all industry players and very similar products, price competition was always a threat for the industry. Several changes have been proposed by the company management to increase profit and improve long-run profitability.
ANALYSIS
Careful analysis is needed in order to determine Berkshire’s business strategy. At first one would think it was product differentiation because of the inelastic demand in the short run. But one thing that should also be noted is the fact that for most goods, demand is much more price elastic in the long run than in the short run. This combined with the fact that Berkshire is convinced that it could not individually raise prices without suffering substantial volume declines, and that all the products of the different manufacturers in the industry