Case: Replacement Decisions Falconville Pump Company, Inc. Brandon Joiner, president and chief executive oncer of Falconville Pump Company, Inc., has a potentially serious problem on his hands. The eamings ot the firm were essentially tlat 2015 in spite ot a general upturn in the industry. Now, well into the fourth quarter of 2016, the picture is even gloomier EPC's performance has continued to deteriorate and, for the first time since 2000, a loss was incurred in the third quarter. Unless things improve quickly, it is possible that the company will shw,' a loss for 2016 as a whole. This problem is particularly frustrating to Joiner because it comes on the heels ot a report in one ot the leading trade joumals that rated FPCs products as superior to those ot all competitors in the industry in terms ot durabilty and customer serwce_ Falconville Pump Company is a major producer of deep-well submersible pumps for commercial applicatons, irrigation equipment, and liquid distribution systems. Originally the company specialized in agricultural systems requiring large pumping volumes and high lift (wells over 500 feet deep), but that segment ot the business represents less than 10 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 renge S50,OOO-S300, 000, although it is not unusual to find contracts for several million dollars in pipeline transportation systems. Historicaln most ot FPCs sales have been to companies who were expanding their operations and therefore needed additional capacity. Recently, though, economic u ncertainties 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 ot these trends, FPCs major sales target has shitted to retrofitting and upgrading existing plant and equipment Although the original agricultural product line ot 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 ot technological sophistication ot the various products increased markedly so that today a high degree ot technical expertise is required to match the appropriate