1.

Evaluate the relationship between Crown Equipment and Richardson Smith and how has it
changed over time?
a. Crown Equipment’s forklift business and RS were started around the same time. Collaboration
between them began based on mutual benefits of superior product design at a constrained
budget (transaction terms) and negligible searching costs (house call trip initiated by RS)
for Crown & an opportunity to establish business, presence, and reputation in the heavy
equipment design consultancy space for RS.
b. Initial success established RS as Crown’s sole, long-term industrial design consultant serving
its new product development & corporate identity needs. As the companies grew parallelly,
they maintained a close relationship with RS regarding Crown as a key account that was
personally overseen by RS’s co-founder & Crown treating RS more like a partner than an
external consultant.
c. By engaging RS right from early stages of new product development, Crown made it clear that
it valued RS’s product design expertise and mitigated any information asymmetry that might
have been present. This helped build a symbiotic relationship based on trust that fructified
into multiple service orders for RS and competitive advantage for Crown Equipment through
award-winning product designs. It also led to relationship-specific investments from RS as
was evident from its decision to internally design multi-function control for Crown’s new RC
truck to optimize product costs.
d. For Crown Equipment, changes in the competitive environment demanded faster new product
development and continuing refinement of existing products. The historical product
development times of 4 to 5 years at which RS was able to service would not be acceptable in
future. Another concern was its overdependence on RS for even minor design changes such
as a nameplate carrying Crown logo were becoming overly complicated and taking substantially
longer time to be completed.
e. Besides, after the recent acquisition of RS by Fitch, the interaction between the firms had
become more formal. This casts doubts in the minds of Crown Equipment’s management on
whether close relationships that existed in the past will continue and be acknowledged by the
new owners. Also, with the rise of FRS to be a very large firm with 500 employees and ranked
#2 in terms of annual fee income, its augmented supplier power owing to increased prestige
has made Crown’s management sceptical about FRS’s willingness to do small-scale projects
for Crown in future and the advantage of the terms and conditions for such services.