Fastenal Industry Situation Analysis

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1. INDUSTRY SITUATION ANALYSIS

1.1 Dominant Economic Characteristics of the Industry Environment

• Market size: The Industrial Distribution industry was estimated to be $400 billion in 2001, but the industry has many sub-industries within it (16). To name a few, Home Improvement revenues were $73 billion in 2003, $5.1 billion for the Building Materials Wholesale industry, $61 billion for the Electronic Wholesale industry, $10.4 billion for the Industrial Equipment Wholesale industry, and $211 billion for the Basic Materials Wholesale Industry (14).
• Scope of competitive rivalry: All of the top ten companies in the industry have a national impact with their companies, although some have expanded into small international ventures in
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To the buyers, there is little difference in the products except for things like price or guarantees, etc.
• Scale economies: Large distributors have a better advantage negotiating with suppliers because they buy thousands of products in bulk. Market leaders have a huge competitive advantage because they get better prices; it is easier for scale of economies can be realized through acquisitions and mergers for larger companies because of their resource and financial strength.
• Learning and experiencing effects: Learning and experience effects are not a huge factor for products, but they are very important for service and e-commerce. Being able to keep up with and invent new and better services for customer is key o sustaining a competitive advantage. With e-commerce being so recent and innovative, learning and experience effects with internet operations are to be expected and anticipated. Companies within the industry must continually stay on top of shifting customer needs and concerns in order to continue growing and retaining its customer base.
• Capacity utilization: Capacity utilization is on of the factors that the level of activity in the industrial construction market depends on (3). The capacity utilization for the construction industry, machinery, and other related industries related to industrial distribution range between 80 and 90 percent, with an overall average of 82.9% (2). There is a common belief by economists when utilization rises above

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