G.E. had a large competitive advantage in the large turbine industry for three primary reasons: better R&D and hence improved technology, a clear focus on larger, more technologically sophisticated units, and its status as a price leader in the market. GE had almost twice the R&D budget of both of its major competitors, while simultaneously spending less on R&D as a percentage of sales. This allowed it to have the best technology in the most important market segment in terms of growth: large, complex units that had the lowest per-megawatt cost. In addition, these turbines were built far in advance, and were not subject to price volatility of the more competitive small turbine landscape. Finally, its status as the price leader allowed it to set more consistent prices in both upturns and downturns in its market and not be subject to intense negotiation. The large turbine will be more profitable in the long run due to economy of scale effect where it makes more sense to buyers as the cost for them is less than buying the small turbines. The addition of capacity makes sense because it affects the placement of orders that are dependent on short lead time as customer wish to receive the order ASAP and might go to the source that can deliver sooner. Westinghouse has a stronger hold in the small/medium utilities market and Federal utilities. As such they better direct their R&D towards finding better solutions to this market then going head to head with G.E. on the large utilities market. G.E. on the other hand should continue its current strategy as the marketing leader focusing on the large utilities allowing within time to capture mid size utilities as the solutions they offer will be affordable by this market. As G.E. is facing unsuccessful attempt to increase prices, it should single out to Westinghouse to follow an increase across the board and each player stays in its own segment of the market.
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