Question

2. The tollowing discussion focuses on the change in Timken has an 11 percent share of the world market for bearings. However, imports into the United States doubled to $1.4 billion in 2002 compared with $660 million in 1997. Timken believes that the uniqueness of its product helps protect it from foreign competition. However, the company still lobbied the Bush administration to top what it calls the dumping of bearings at low prices by foreign producers in Japan, Romania, and Hungary production and selling strategies of Timken Co the Canton, Ohio, firm that is a major producer of bearings: 64 To counter the low prices 2003 began bundling its bearings with other parts to provide industrial business customers with products specifically designed for their needs. Timken ha begun bundling prelubricated, preassembled bearing packages for automobile manufacturers in the early 1990s. Evidence indicated that companies that sold integrated systems rather than discrete parts to the automobile manufacturers increased their sales. Other industrial customers put the same pressure on Timken in the late 1990s to lower prices, customize, or lose their busine to lower priced foreign suppliers. Manufacturers are increasingly combining a standard part with casings, pins, lubrication, and electronic sensors. Installation, maintenance, and engineering services may also be included of imports, Timken Co. in a. What factors in the economic environment, in addition to foreign imports, contributed to Timken's new strategy in 2002 and 2003? b. How does this strategy relate to the discussion of bundling presented in the chapter? What additional factors are presented in this case? 3. The following discussion pertains to the pricing policies of Linear Technology Corp.: e semiconductor industry Linear Technology Corp. has maintained strong profitability by operating at the fringes where competition is low and margins are high. This midsize company makes 7,500 arcane, unglamorous products that solve real-world problems for a long list of customers, including analog chips that are too cheap for customers to haggle over, but perform chores too important to ignore. Many of Linear's chips cost less than 50 cents to build and sell for three to four times as much, but customers seldom complain about the markup. Suppliers, such as Timken, saw this as a means of dispensable to the manufacturers. The strategy also required suppliers to remain in proximity with their customers, another advantage over foreign imports. This type of bundling does require significant research and development and flexible factories to devise new methods of transforming core parts into smart assemblies. The repackaging is more difficult for industrial than automobile 58% Page 287 of 520

Answer 1

Solution

a.In addition to the foreign imports,factors like :

1.Selling integrated systems instead of discrete systems to the customers has increased the sales.

2.Customizing the parts supplied according the needs of the customer and

3.Providing allied / supporting services like installation,maintenance and engineering services along with the parts to the customers

b.contributed to Timken's new strategy between 2002 and 2003

So,Timken as per it's strategy began bundling it's bearings with other parts to provide businesses with customized products as per their specific needs.

Additionally as part of this strategy,Timken also focused on remaining in proximity to the customers which will clearly lead to them having an edge over their peer i.e cheap imports.

c.The price elasticity of demand in this industry is less as per the description given above.In other words,the the variance in demand in response to variance to the price is very low and almost negligible in this industry.

Two reasons were put in support to this argument:

a.All the companies / players in the industry are well established over years and they have built a very deep relation with their customers.

b.In view of the customers,the cost of the analog chips is not more than 5 % of the total cost of producing their end product,so they do not feel the necessity for putting rigorous efforts / focus on bargaining / looking for low cost.

This market model is a kind of oligopoly because there are a number of players in the industry and all the players are providing the same product.

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