Romulac Inc._case study answers

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					Case Scenario: Romulac, Inc.

Copyright: Taranjeet Gill MBA

Romulac Inc. (RI), a subsidiary of a large successful manufacturing conglomerate, supplies a
key component in the assembly of residential cooling systems (air conditioning units, etc.).
There has been tremendous consolidation in RI’s industry, to the point where only five
suppliers of this particular component account for nearly 90% of U.S. industry sales.
Paralleling this trend, its customers - comprised of makers of branded residential air
conditioning units like Carrier and Trane - have seen similar levels of consolidation in their
own industry. Half of these firms produce all their components in-house, while the balance
purchases them from specialized component manufacturers like RI. RI’s business is
extremely capital intensive, and their 40% share of the market allows them to also be the
most profitable domestic player. Strong competitors exist in Europe and Asia. Although like
RI, these foreign players’ strongholds are their home regions, with negligible presence
outside of the region. Some of the larger Asian manufacturers have signaled an interest in
more aggressively pursuing the lucrative U.S. market. RI is presently considering a $400
million dollar investment in a new plant, which will create a component that is much quieter,
more efficient, and is likely to satisfy future regulatory standards. While the core technology
for the new component is very old, RI’s engineering and design skills have allowed them to
retain their low cost-advantage, even though the component will represent a significant
improvement over products currently provided by its competition.



[a] Develop an argument as to why RI should try to be a first-mover with this new
technology.

Being the first mover has got several advantages. Romulac can maintain the technological
leadershi
				
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posted:9/24/2011
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Description: Comprehensive case analysis for Romulac Inc., strategic management.
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