Sample Profile of Dominant Economic Characteristics of the by t758Tn77


									Sample Profile of Dominant Economic Characteristics of the Sulphuric Acid

Market Size: $400-%400 million annual revenues; 4 millions tons total volume.
Scope of Competitive Rivalry: Primarily regional; producers rarely sell outside a 250-
mile radius of plant due to high cost of shipping long distances
Market Growth Rate: 2-3 percent annually
Stage in Life Cycle: Mature
Number of Companies in Industry: About 30 companies with 110 plant locations and
capacity of 4.5 million tons. Market shares range from a low of 3 percent to a high of 21
Customers: About 2,000 buyers; most are industrial chemical firms
Degree of Vertical Integration: Mixed; 5 of the 10 largest companies are integrated
backward into mining operations and also forward in that sister industrial chemical
divisions buy over 50 percent of the output of their plants; all other companies are
engaged solely in the production of sulphuric acid.
Ease of Entry/Exit: Moderate entry barriers exist in the form of capital requirements to
construct a new plant of minimum efficient size (cost equals $10 million) and ability to
build a customer base inside a 250-mile radius of plant
Technology/Innovation: Production technology is standard and changes have been slow;
biggest changes are occurring in products – 1-2 newly formulated specialty chemical
products are being introduced annually, accounting for nearly all of industry growth.
Product Characteristics: Highly standardized; the brands of different producers are
essentially identical (buyers perceive little real difference from seller to seller).
Scale Economies: Moderate; all companies have virtually equal manufacturing costs but
scale economies exist in shipping in multiple carloads to same customer and in
purchasing large quantities of raw materials.
Learning and Experience Effects: Not a factor in this industry
Capacity Utilization: Manufacturing efficiency is highest between 90-100 percent of
rated capacity; below 90 percent utilization, unit costs run significantly higher
Industry Profitability: Subpar to average; the commodity nature of the industry’s
product results in intense price-cutting when demand slackens, but prices firm up during
periods of strong demand. Profits track the strength of demand for the industry’s

Source: Crafting and Implementing Strategy (10th edition) by Thompson and Strickland

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