Casr 10.2, answer part "a"

Massachusetts Stove Company: Analyzing Strategic options CASE 10.2 usetts Stove Company: Analyzing Strategi Options The woodstove Market e the early 1990s, woodstove sales have declined from 1,200,000 units per year to approxi units per year. The decline has occurred because of stringent new federal EPA regulations, which set maximum limits on stove emissions in 1992; (2) stable energy prices, which reduced the incentive to switch to woodstoves to save on heating costs; d in consumers' lifestyles, particularly the growth of two-ncome famili During this period of decline in sales market was flooded with stressed prices companies closed their doors or liquidated inventories made obsolete by EPA regulations. Downward pricing pressure forced surviving companies to cut prices Deput or Years many position financially, with excessive inventory, high debt, little cash, undol turers in precarious low margins. receivables, and me shakeout and consolidation among woodstove manufacturers and, to a lesser extent cialty retailers have been dramatic. The number of manufacturers selling more than 2000 units a year (characterized in the industry as "large manufacturersn has declined from ximately to 35 in the prior ten years. The number of manufacturers selling 2000 units per year (characterized as "small manufacturers) has declined from approximately 30 to 6. Because the current woodstove market is not large enough to support all of the surviv ng producers, manufacturers have attempted to diversify in order to stay in business. Seeking relief, nearly all of the survivors have turned to the manufacture of gas appliances The Gas Appliance Market gas log sets, (2) gas fireplaces, and (3) The gas appliance market includes three segments: aux fres" that can be installed in an existing fireplace. They are primarily decorative and have little heating value. Gas fireplaces are fully assembled fireboxes that a builder or contractor can install in new construction or in renovated buildings and houses. They are mainly decorative and are less expensive and easier to maintain than a masonry/brick fireplace. Gas stoves are freestanding appliances with a decorative appearance and efficient heating characteristics (log sets and fireplaces are large, estab- The first two segments of the gas appliance market distribution is pri- lished, stable markets. Established manufacturers control these markets, and five years old marily through mass merchandisers. The third segment (gas stoves) is less than Although it is growing steadily, it has an annual volume of only about 100,000 units (almost identical to the annual volume of the This is the market to are cur market, and there manufacturers have turned for rel woodstove stoves are pe The gas stove market is not as heavily regulated as the Gas heat and renty no EPA regulations governing the emissions of gas heating appliances provide or by an aging population because they thermostat ambiance but require no effort. They can be operated with a wall switch or of Tom P. Morrissey in the aration of this case. prep authors acknowledge the assistance