Case Study :
Please study the details given below and answer the questions given at the end of the case Zwick Electrical
“Did the consultants come up with anything?” asked Wilton Zwick. His brother, Carlton, nodded affirmatively. “There are several possible alternatives. In terms of alliances it looks like they have identified two potential partners. Here, take a look for yourself.” Wilton quickly scanned the report’s front page. “Hmm, Asea Brown Boveri and Siemens?” Carlton and Wilton Zwick are, respectively, president and vice president of Zwick Electrical Incorporated (ZEI), a privately held company. Carlton joined ZEI in 1983 after earning a marketing degree. After receiving an engineering degree in 1975 Wilton spent 4 years with an electrical-products division of a major firm in Pittsburgh. He then joined ZEI in late 1989. ZEI began operations in 1952 when Gunther Zwick, Carlton and Wilton’s father, opened for business in Cleveland, Ohio. In the early years ZEI’s product line was limited to electric motors and parts. The company gradually expanded its product line to include power transformers, high-voltage switchgear, and metering devices. By the mid-1960s ZEI had added production facilities in Cincinnati, Ohio, and Louisville, Kentucky. In 1978 gaps in ZEI’s product line prompted the elder Zwick to purchase EL Transmission and Power (ELTP), a Memphis-based power transmission equipment company. Although ELTP’s Memphis headquarters was closed, ZEI retained the Memphis distribution center and engineering department. ELTP’s manufacturing plants in Chattanooga (Tennessee), Springfield (Missouri), and Shreveport (Louisiana) continued operations under ZEI. During the 1980s no further acquisitions were made. The plants in Cincinnati and Chattanooga were significantly expanded to handle ZEI’s increasing business. Minor renovations were made in the Cleveland and Springfield facilities. Although business took a sharp downturn in the early 1990s ZEI management remained optimistic about the future. At Wilton’s urging the engineering staffs were increased and plans were made to build a modern facility in the Southeast. In 1994 ZEI opened a new plant and distribution center in Greenville, South Carolina. This plant specializes in power transformers and high-voltage switchgear. In 1998 Gunther retired from ZEI. At that time he appointed Carlton as president of ZEI and Wilton as executive vice president. In reality Carlton is in charge of everything except product design. Wilton oversees product design and consequently works closely with the engineering and production departments. Following the downturn of the early 1990s ZEI enjoyed modest growth until 1999. The American power business, plagued by overcapacity, had stagnated. It became obvious that ZEI’s Cleveland, Louisville, and Shreveport plants were seriously outdated. A decision was made in 2000 to renovate Shreveport and close production facilities in Cleveland and Louisville. This decision was particularly difficult for Carlton to accept. Carlton believed that ZEI could not expect loyalty from its workers unless it demonstrated concern for their welfare in difficult times. Wilton, although sympathetic to the plight of the workers, had been watching European and Japanese firms erode American’s market share in the power business. He felt that ZEI must remain competitive. If that meant closing noncompetitive facilities, then so be it. At this time the Zwick brothers also decided ZEI needed to aggressively pursue international markets. ZEI had sporadically exported in the past—but only if a foreign customer initiated the contact. Electing for a more proactive posture, ZEI entered into an agreement with an export management company, Overseas Venture Management (OVM). OVM acts primarily as a manufacturer’s representative for ZEI in Western Europe. OVM receives a commission on each sale of ZEI product plus a fixed rate for representing ZEI at European trade fairs. In 1998, the...
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