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    Sharoo Sunny
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    DJC's entry into the American market poses a threat to American Connector Company based on the following: 1) DJC's production costs in the US would be $20,241 compared to American Connector's costs of $33,790, giving DJC a cost advantage of $13,549. 2) If American Connector cannot reduce costs to match DJC's lower prices or improve service levels without increasing costs, they will be threatened by competition. 3) American Connector has increased product varieties but failed to adopt latest technologies, which could impair its future performance against a competitor like DJC.

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    ACC(A)

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    DJC's entry into the American market poses a threat to American Connector Company based on the following: 1) DJC's production costs in the US would be $20,241 compared to American Connector's costs of $33,790, giving DJC a cost advantage of $13,549. 2) If American Connector cannot reduce costs to match DJC's lower prices or improve service levels without increasing costs, they will be threatened by competition. 3) American Connector has increased product varieties but failed to adopt latest technologies, which could impair its future performance against a competitor like DJC.

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    4 views1 page

    Acc (A)

    Uploaded by

    Sharoo Sunny
    DJC's entry into the American market poses a threat to American Connector Company based on the following: 1) DJC's production costs in the US would be $20,241 compared to American Connector's costs of $33,790, giving DJC a cost advantage of $13,549. 2) If American Connector cannot reduce costs to match DJC's lower prices or improve service levels without increasing costs, they will be threatened by competition. 3) American Connector has increased product varieties but failed to adopt latest technologies, which could impair its future performance against a competitor like DJC.

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    © All Rights Reserved
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    of 1

    a. Is DJCs entry into American market a threat to American Connector Company?

    Give
    reasons. Substantiate your answer as much as possible with data available in the case.

    a) The production cost if DJC sets up a plant in US is calculated as below.

    Raw material, Product


    Raw material,
    Packaging
    Labor, Direct
    Labor, Indirect
    Electricity
    Depreciation
    Other
    Total

    Cost of DJC
    Ind Cost in
    Adjusted Cost
    ex
    Kawasaki
    in US
    0.6
    12.13
    7.278
    0.6
    1.1
    1.1
    0.8
    1
    1

    2.76
    3.02
    0.75
    1.4
    1.8
    4.24
    26.1

    1.656
    3.322
    0.825
    1.12
    1.8
    4.24
    20.241

    This means the cost difference between DJC and American Connector would be
    13.55 (=33.79-20.241). Then ACC should be able to either reduce the cost for the
    same service level (flexibility and customization) or it should improve the service
    level at the same cost. But whether increasing the service level is warranted by the
    customers would be deciding the success of ACCs move.
    b) If ACC lies above the frontier created by the low prices of DJC in US, there is a
    threat of competition. There has been an increase in the varieties offered by
    ACC from 3500 in 1986 to 4500 in 1991, but then due to financial crunch ACC
    has failed to adopt the latest technologies which could impair its future
    performance.
    c) If the industry movement towards standardization of product specifications
    gains ground, it would be advantageous for DJC

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