Quality Metal Service Center Case Write

Quality Metal Service Center Case Write - MA 827 Strategic...

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MA 827 Strategic Cost and Profitability Analysis Quality Metal Service Center Case Write-up Yi Zhou (Joey) Quality Metal Service Center had a long history of over a century and has grown into a national metals distributor. In 1991, its sales were well over 750 million. Industry Value Chain Service Centers bought metals from mills and smaller firms (metal producers) in large lots, and then sold their products efficiently to metal users in smaller lots. Consumers and also buy metals directly from mills, but in larger quantity and less specialty products. Metal Producers -> Service Center -> Metal Users Service center is in the middle of the industry value chain. Porter’s 5 Forces Suppliers: Service centers can only buy metals from mills and smaller firms, and in large quantity. Moreover, the price of metals is usually controlled by several big milling companies.-> Medium/High power. Customers: Metal users usually purchase metals from a few suppliers to ensure product quality, availability and service requirements. -> Medium power Threat of New Entrants: Metal service center does not require a large amount of capital to set up. But since quality and productivity has become metal user’s first concern, reputation becomes very important in this industry, which constitutes a barrier of entrance. -> Low/Medium power Substitutes: Most metal users prefer purchasing from service centers over metal producers, because they need to reduce raw material inventories, scrap and risk of obsolescence, and would like to buy specialty products directly and enjoy more customer services. -> Low power Rivalry: The metal distribution industry is mature and highly competitive. -> High
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This note was uploaded on 11/08/2011 for the course MA 827 taught by Professor Wain during the Summer '11 term at BC.

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Quality Metal Service Center Case Write - MA 827 Strategic...

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