American Connector Company Case Essay

1309 Words Oct 14th, 2008 6 Pages
American Connector Company Case
Severity of Threat by DJC
The American Connector Company (ACC) should be extremely concerned with the im-pending entrance of DJC to the US landscape. Any new entrant will most likely be of the mentality to try and take as much market share as quickly as possible. This course of action usually involves a period of time when the new company will plan on operating at a loss, and will thereby be will-ing to price below market average with small margins. Realization of this threat would immedi-ately disrupt ACC’s pricing strategy and could affect long term profitability.
The threat of lower prices is compounded by the intensity of the current competitive mar-ket. ACC should be concerned with any new
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The ACC employed a strategy that emphasized an increased variety of products and flexibility in production, while DJC emphasized a strategy of cost reduction and utilized a number of tactics to decrease their costs overall. Among the major tactics was a cultivation and maintenance of close ties with suppliers and distributors in Japan, simplicity of design and manufacturability over innovation, and an emphasis on being highly efficient in manufacturing. This strategy difference appears to be the sole driver in the cost difference of the materials as the close ties with suppliers, lower costs associated with a simpler cheaper design, and the attention to details such as the use of a 2,000 piece packaging reel instead of a standard 1,500 piece reel minimize the cost of materials.
Furthermore, the ACC strategy of offering increased variety requires shorter production runs which inherently increases the cost associated with each product and packaging, as idle time due to process changeover would increase between each product production (4.8% of time com-pared with 2% for DJC). The strategy of increased variety and production runs by the ACC would also affect labor in a number of ways. Direct labor costs would go up due to a larger amount of idle time associated with process changeover and the chance of increased problems associated with the