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Case: Replacement Decisions Falconville Pump Company, Inc. Brandon Joiner, president and chief executive officer of Falconville Pump Company, Inc., has a potentially serious problem on
Case: Replacement Decisions Falconville Pump Company, Inc. Brandon Joiner, president and chief executive officer of Falconville Pump Company, Inc., has a potentially serious problem on his hands. The earnings of the firm were essentially flat in in spite of a general upturn in the industry. Now, well into the third quarter of the picture is even gloomier. FPCs performance has continued to deteriorate and, for the first time since a loss was incurred in the third quarter. Unless things improve quickly, it is possible that the company will show a loss for as a whole. This problem is particularly frustrating to Joiner because it comes on the heels of a report in one of the leading trade journals that rated FPCs products as superior to those of all competitors in the industry in terms of durability and customer service. Falconville Pump Company is a major producer of deepwell submersible pumps for commercial applications, irrigation equipment, and liquid distribution systems. Originally the company specialized in agricultural systems requiring large pumping volumes and high lift wells over feet deep but that segment of the business represents less than percent of total sales today. Most of the sales volume for the past five years has been in the areas of sanitation control systems, chemical and petroleum production, industrial process cooling systems, and pipeline transportation systems. Although most of the systems are specifically designed for individual customers, they tend to be constructed from standard modules that can be produced in volume to realize substantial economies of scale. These systems generally sell in the price range $$ although it is not unusual to find contracts for several million dollars in pipeline transportation systems. Historically, most of FPCs sales have been to companies who were expanding their operations and therefore needed additional capacity. Recently, though, economic uncertainties have caused the firms to be more cautious in increasing their capacity, and, although interest rates have fallen substantially, there is a reluctance to assume greater levels of debt for risky expansion projects. Because of these trends, FPCs major sales target has shifted to retrofitting and upgrading existing plant and equipment. Although the original agricultural product line of the company was based on technology that was substantially more advanced than usually encountered in the industry, the selling skills required to tailor the equipment to the job were no greater than for other manufacturers. Over the years, though, the degree of technological sophistication of the various products increased markedly so that today a high degree of technical expertise is required to match the appropriate equipment modules with a particular application. Consequently, the FPC sales force tends to be dominated by engineers or persons with at least some engineering background. The sales force works closely with potential customers to demonstrate the advantages of using Falconville Pump Company equipment. Since most sales involve a number of separate components or complete systems, the total dollar volume that can be generated from a single order makes it well worthwhile for the salespersons to devote considerable time and effort to closing each sale. The immediate cause of Joiner's preoccupation was a report he had received that afternoon from Janet Avery, the recently appointed vicepresident for marketing. In an attempt to discover the causes of the firm's sagging sales and to identify ways to turn them around, Avery had prepared an indepth analysis of business conditions in the industry and changes in the competitive positions of the leading firmsincluding Falconville Pump Company. Industry sales had been growing slowly for the past four years. In and FPC experienced a growth rate that was slightly higher than average, but since that time, they have not kept pace with the leaders. Hence, several firms were found to be increasing their share of the market at the expense of FPC On the basis of her analysis, Avery concluded that the primary cause of the market share erosion the firm is now experiencing is the change in profile characteristics of the target market, along with FPCs failure to adapt its marketing strategy to reflect new environmental conditions. Up to now, Falconville Pump Company's marketing strategy has focused only on the engineering aspects of the products, and the firm's promotional literature reflects this orientation. Such an emphasis is considered to be appropriate for two reasons. First, engineering excellence has always been the hallmark of FPC The rating of the company's products as most durable in the industry reflects this attention to technical details. Second, the primary customer contacts are the design engineers who must integrate the FPC equipment into larger
Case: Replacement Decisions
Falconville Pump Company, Inc.
Brandon Joiner, president and chief executive officer of Falconville Pump Company, Inc., has a
potentially serious problem on his hands. The earnings of the firm were essentially flat in in
spite of a general upturn in the industry. Now, well into the third quarter of the picture is
even gloomier. FPCs performance has continued to deteriorate and, for the first time since
a loss was incurred in the third quarter. Unless things improve quickly, it is possible that the
company will show a loss for as a whole. This problem is particularly frustrating to Joiner
because it comes on the heels of a report in one of the leading trade journals that rated FPCs
products as superior to those of all competitors in the industry in terms of durability and customer
service.
Falconville Pump Company is a major producer of deepwell submersible pumps for
commercial applications, irrigation equipment, and liquid distribution systems. Originally the
company specialized in agricultural systems requiring large pumping volumes and high lift wells
over feet deep but that segment of the business represents less than percent of total
sales today. Most of the sales volume for the past five years has been in the areas of sanitation
control systems, chemical and petroleum production, industrial process cooling systems, and
pipeline transportation systems. Although most of the systems are specifically designed for
individual customers, they tend to be constructed from standard modules that can be produced in
volume to realize substantial economies of scale. These systems generally sell in the price range
$$ although it is not unusual to find contracts for several million dollars in pipeline
transportation systems. Historically, most of FPCs sales have been to companies who were
expanding their operations and therefore needed additional capacity. Recently, though, economic
uncertainties have caused the firms to be more cautious in increasing their capacity, and, although
interest rates have fallen substantially, there is a reluctance to assume greater levels of debt for
risky expansion projects. Because of these trends, FPCs major sales target has shifted to
retrofitting and upgrading existing plant and equipment.
Although the original agricultural product line of the company was based on technology
that was substantially more advanced than usually encountered in the industry, the selling skills
required to tailor the equipment to the job were no greater than for other manufacturers. Over the
years, though, the degree of technological sophistication of the various products increased
markedly so that today a high degree of technical expertise is required to match the appropriate
equipment modules with a particular application. Consequently, the FPC sales force tends to be
dominated by engineers or persons with at least some engineering background. The sales force
works closely with potential customers to demonstrate the advantages of using Falconville Pump
Company equipment. Since most sales involve a number of separate components or complete
systems, the total dollar volume that can be generated from a single order makes it well worthwhile
for the salespersons to devote considerable time and effort to closing each sale.
The immediate cause of Joiner's preoccupation was a report he had received that
afternoon from Janet Avery, the recently appointed vicepresident for marketing. In an attempt to
discover the causes of the firm's sagging sales and to identify ways to turn them around, Avery
had prepared an indepth analysis of business conditions in the industry and changes in the
competitive positions of the leading firmsincluding Falconville Pump Company. Industry sales
had been growing slowly for the past four years. In and FPC experienced a growth
rate that was slightly higher than average, but since that time, they have not kept pace with the
leaders. Hence, several firms were found to be increasing their share of the market at the expense
of FPC On the basis of her analysis, Avery concluded that the primary cause of the market share
erosion the firm is now experiencing is the change in profile characteristics of the target market,
along with FPCs failure to adapt its marketing strategy to reflect new environmental conditions.
Up to now, Falconville Pump Company's marketing strategy has focused only on the
engineering aspects of the products, and the firm's promotional literature reflects this orientation.
Such an emphasis is considered to be appropriate for two reasons. First, engineering excellence
has always been the hallmark of FPC The rating of the company's products as most durable in
the industry reflects this attention to technical details. Second, the primary customer contacts are
the design engineers who must integrate the FPC equipment into larger
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