1.1 Dominant Economic Characteristics of the Industry Environment
• Market size: The Industrial Distribution industry was estimated to be $400 billion in 2001, but the industry has many sub-industries within it (16). To name a few, Home Improvement revenues were $73 billion in 2003, $5.1 billion for the Building Materials Wholesale industry, $61 billion for the Electronic Wholesale industry, $10.4 billion for the Industrial Equipment Wholesale industry, and $211 billion for the Basic Materials Wholesale Industry (14).
• Scope of competitive rivalry: All of the top ten companies in the industry have a national impact with their companies, although some have expanded into small international ventures in countries like Canada, Singapore, Mexico, and Puerto Rico. Some of the smaller but still large companies in the industry have a regional impact moving toward national (7).
• Market Growth Rate: The market growth rate from 2002-2003 was both up and down for the top 50 companies in the industry. Half of the companies had declining sales at an average of 11%, 23 of the top 50 companies reported an average of 11.6% in sales gains, and two companies reported flat rates of growth (7).
• Stage in life cycle: The industry is at the mature stage in the life cycle. The major competitors have been established for over 25 years, some dating back as early as the 1920’s.
• Numbers of companies in the industry: There are over 100 “big” companies in the industry. The top fifty companies, the “biggest of the big,” range in sales (2002) from $86.5 million to $4.64 billion and from 20 locations to over 1100 (7). In 2003 the top 10 distributors claimed 13% of the market share, and the next 80 companies following the top ten claimed 10% of the market share (17). The thousands of smaller local, regional, and specialty industrial distributors who in 2001 made up 92% of the industry only had less than 0.1% market share each (16).
•
Bibliography: 2. www.statcan.ca/Daily/English/030312/d030312b.htm This website contains capacity utilization (2002) numbers for various industries that Fastenal sells to. 10. EBSCOHOST “Go ‘Strategic’ with Concrete Fasteners” (2000) This article tells of the fierce competition among fastener competitors and large distributors and the price wars they wage. 11. EBSCOHOST “Modest Growth Expected in Machine Tool Industry” (2001) This article names and explains how technological innovation is a driving force in the machine tool industry, which falls into the industrial category. 17. EBSCOHOST “Top Distributor Talks Business” (2003) The CEO for W.W. Grainger is interviewed and tells of the greatest challenges facing MRO distributors. 18