David Fabb Holdings Limiad Page 20
Financial Profle end Plan
3.1.3
31.4
rod in coil and encouraged customers to have coil pickled in the parent (wide) coil form at Servo 2.
The batch pickling facility at Stourbridge thereafter concentrated on pickling wire rod in coil
The acquisition of SSH, enzbled Servo to re-enter the shect pickling market and although SSH and
Servo share a similar customer base, the acquisition enabled Servo to offer an added high quality
sheet pickling fecility. SSH has gained the reputation fora high quality produet,
The business is performing well with increased number of shifts, which in effect has created hi igher
‘hroughput and increased productivity. The acquisition also provided extended capacity for shearing
which enabled the targeting of more lucrative markets for heavy gauge shearing,
Competitor Analysis
Servo is a pure oligopoly, in that few companies produce essentially the same service, Corus being
the main competitor, Outside of Corus, Servo is the largest and most comprehensively equipped
service centre of its kind. Although parts of the services match with other processors, competitive
edvantage has beon historically gained through achieving lower costs by pursuing a higher volume
strategy.
Servo is the largest and most comprehensively equipped of all service centres, offering a wide
capacity range for slitting, decoiling, shearing and pickling, Other competitors exist but concentrate
on one process, eg, slitting, decoiting or pickling, but not all processes are offered from one source.
Customers’ overheads are reduced by storing their material at Servo, thus enabling them to choose
the appropriate processing service without the need to incur additional transport costs
Differentiation has been achieved, therefore, by seeking leadership along the lines of keener pricing
structures and an impressive IT service.
Servo is never knowingly undersold in the market, However, opportunities are presented for Servo
te reap the benefit of charging premium prices for slitting and pickling because of the unique
capacity offered for these processes, e.g. heavier coil weights, higher gauge end width raages, and
slit width capacity.
Competitive Forces
Threat of new entrants:
‘There is a minimal threat of the establishment of another service contre of the calibre of Servo as it
would take years to install such machinery, and build up the reputation that Servo has for such a
comprehensive range of facilities.
However, customers have in past years installed their own machinery, but with the current market
conditions and economic climate, the expense of purchasing such machinery and the added problem
of creating enough throughput fo render the facility cost effective and viable, renders this more
unlikely.
Threat of substitute services:
‘There is no threat of substitute services. Customers could have their product pickled at the mill, but
such a service extends delivery deadlines and is more expensive route, compounded also by the
fact that customers have to forecast months in advance to establish what product mix and quantities
they need to order in the pickled state.
Customers could also bny their materials directly fiom Corus in a slit, decoiled, or sheared product,
but this also creates extended delivery times and a higher product cost