Banderie Inc Industry and Company Background

Industry and Company Background

Banderie, Inc is located and incorporated in the Indiana with its headquarters and primary manufacturing and distribution facilities located in historic Wantabebig on the banks of the beautiful Lake Wawawow is noted for its longstanding family histories and values. Banderie is the biggest employer in the area and most of the company's employees (and retirees and family members) own stock in the company as a result of an ESOP (Employee Stock Ownership Plan) that was established when the company was formed. Employees are loyal and many of the local families' financial futures are tied to the success of Banderie.

Banderie serves the medium/high technology OEM (original equipment manufacturing) sensor industry that has seen a consistent average annual growth rate of 15%. Banderie was one of the six companies that was established when the sensor industry was deregulated and picked up most of the Midwestern facilities that had focused on the automotive and medical instrumentation markets that had a high presence in Indiana and the surrounding states. The patents, product development capabilities, and sales and distribution channels that Banderie

acquired served primarily these market and geographic segments - although the company produced and served customers in all sensor segments (equally with the other six competitors) as a result of the decentralized strategy of the original company and pursuant to the deregulation agreement.

The company's management, known as the 'Kelley Dream Team', have strong business backgrounds and loyalty to Indiana where most grew up and completed their education. However, Banderie did inherit limited specialized technical resources and the shortage of both development and manufacturing engineering talent may be the major constraint limiting Banderie's growth. Banderie has solid distribution channels and sales support for it automotive and instrumentation markets segments, but these have become limiting factors for supporting the other market segments that have are more dispersed geographically.

Competitive Landscape and the Five Forces

Because of the continued 15% industry annual growth rate, 3 of the 5 competitors appear to have a strategy of 'business-­-as-­-before' and appear to continue to implement a broad strategy that maintains a balanced share and investment in each of the 5 market segments - Low, Traditional, High, Performance and Size. Execution has been less than stellar for 2 of the teams as several are on the brink of

bankruptcy due to heavy investments across all products, inventory shortages and overages have been common as companies attempt to reposition their product offering, and management teams appear frustrated as they seem to overly react to competitive changes. This has created havoc for all competitors in the industry.

The Five Forces are evolving very differently for each industry segment. Those most affecting Banderie for its three key segments (each defined as and analyzed as an Industry) in rank order from 1 to 5 are:

LOW TRADTIONAL SIZE

COMPETITORS 1. Price/Cost &

Large Volume 3. Large volume &

Price 3. From Hi-­-Tech

focused

BUYERS/CHANNEL 2. Price Sensitive 4. Age & Position 1. Position & Age

SUBSTITUTES 4. In Early years 1. Many products 4. Only if Market

NOT satisfied

NEW ENTRANTS 3. from Traditional 2. Passing via other segments & Age 2. Age allows new entrants

SUPPLIERS 5. Payment terms 5. Payment terms 5. Payment terms

Aldwin, Inc and Chessis, Inc appear to have broad strategies as they have remained in all segments and have invested heavily in marketing and automation - but have had financial difficulties. Neither has made a profit, each has received 2 emergency loans and are limited on borrowing with a declining stock price. They are difficult competitors, at the moment, because they are hard to predict. Aldwin has lowered

its prices in both the Low and Traditional segments in order to get rid of excess

inventory while Chessis has several products in the Size and Traditional segments out of position as they attempt to transition to other segments.

Fester, Inc, with most of its operations on the east coast, was and IPO highly funded by GE Capital and has focused on products needed by GEC's parent, Generous Eclectic, that has major sensor needs for its state-­-of-­-the-­-are medical equipment, aircraft engine, and electrical business segments. Most of the Fester management team was recruited and trained by GE at its Crockityville, VA training center and live by the philosophy that they will be #1 or #2 in their business segment, or

divest/exit the segment. Now, nearly half of Fester's sales are to various GE subsidiaries with a strong focus on the high-­-tech segments. Their focus is clearly on the higher end products as Fester has reduced capacity in both the Size and Traditional Segments to fund the R&D needed to add products and reposition in these higher end segments. Fester has been profitable only in the latest round.

Duffis, Inc and Effis, Inc are both investing heavily in the Traditional and High segments while playing 'wait and see' in the Size and Performance. They are allowing their products to migrate from High to Traditional and Traditional to Low and are currently caught with products that are not ideal for either segment. Both could be formidable competitors in the Low and Traditional Segments but with a maximum of 2 products in Low (from the transition) and 2 or 3 in Traditional depending on their success in the High. They have had some difficulty with forecasting with too much inventory as their products transition through the Traditional to Low segments. Effiis has been conservative on spending and, therefore, profitable for most rounds but is struggling with cost and margins in

round 4. Duffis has been attempting to compete on price and cost reductions and is also struggling with its margins.

...