Dayna Moore, CEO of Tennessee Transmissions, sat dejected in her chair after reviewing the 2021 first-quarter financial reports on one of the company's core products: a standard, fivespeed transmission (product \#2122) used in the heavy equipment industry in the manufacture of earth-moving equipment. Some of the information in the report follows.

Tennessee Transmissions' strategy for this transmission is to compete on the basis of price. The transmission offers no features that allow it to be differentiated from those of major competitors. Tennessee Transmissions' level of quality is similar to the average of the industry.
Also on Moore's desk was a report from her business intelligence unit, on which she underlined the following key pieces of information:
- Commodity transmission components (nuts, bolts, etc.), which all major transmission producers acquire from specialty vendors, decreased in price by approximately 5 percent from January 2020 to January 2021.
- Two major competitors moved their main assembly operations from the United States to China in early 2020. These competitors are believed to have the lowest unit production cost in the industry.
- A third major competitor ceased manufacturing major gear components and began outsourcing these parts from a Mexican firm in mid-2020. This firm increased its market share in 2020 from 10 to 14 percent following a major decrease in sales price.
- Tennessee Transmissions' production operations did not change in any material respect from 2020 to 2021.
- Tennessee Transmissions manufactures approximately 83 percent of the components used in the heavy industrial transmission. The industry norm is to make 57 percent of the components.
- For the balance of 2021 , industry experts agree that quarterly demand for the heavy industrial transmission will be even higher than the levels posted for the first quarter of 2021.

a. Examine the information Moore has gathered. Analyze the data to identify as specifically as possible the problems that have led to Tennessee Transmissions' loss of profit and market share in the heavy industrial transmission market.

b. Based on your analysis in

(a) and the information given to Moore, suggest specific alternatives that she should consider in making her firm more competitive in its market. Use concepts presented in the chapter as the basis of your recommendations.

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MARKET REPORT, PRODUCT #2122 Total sales (dollars), Quarter 1, 2021. Total sales (dollars), Quarter 1, 2020. Total sales (units), Quarter 1, 2021 Total sales (units), Quarter 1, 2020 Sales Data $4,657,500 $6,405,000 3,450 4,200 Market Data Industry unit sales, Quarter 1, 2021 40,000 Industry unit sales, Quarter 1, 2020. 32,000 Industry average sales price, Quarter 1, 2021. Industry average sales price, Quarter 1, 2020.. $1,310 $1,640 Profit Data Tennessee Transmissions average gross profit per unit, Quarter 1, 2021.. Tennessee Transmissions average gross profit per unit, Quarter 1, 2020. Industry average gross profit per unit, Quarter 1, 2021 $ 45 160 75 Industry average gross profit per unit, Quarter 1, 2020. 140