Question

Electech, Inc. (EI) produces a line of semiconductors for electronics products manufacturers. These items range in price from $5-$100 and are used in products the buyer is producing. EI also designs and builds computer networking equipment. The prices of these items range from $5,000 to $100,000. These are used to control production equipment. Usually, they are custom-made to the specifications of the buyer-the firm that will use the product in its own production process.

EI sells nationally through independent sales reps-paid on commission-who work in the large industrial centers across the country. EI is more concerned with the quality of these reps than with the number of them. All of them also sell other lines. EI also uses five full-time salaried salespeople who work out of its corporate headquarters under a sales manager.

The home office salespeople are "technical specialists" who sell almost all the networking equipment, while the "reps" mostly sell the semiconductors. Sometimes, however, the reps will send in leads to customers who want networking equipment. EI also sells some of its semiconductors through a Los Angeles wholesaler who carries stock for West Coast customers.

There are many producers and importers of semiconductors in the U.S.-but several firms have captured large shares of the networking equipment market. EI has held its own, and in fact, over the past five years has increased its market share of these products to over 25 percent-because of its better technical designs.

Industry-wide prices of the more or less homogeneous semiconductors have been forced further and further down over the last seven years-as have industry profits. The price of networking equipment is set by adding a standard markup percent to the direct cost of the items-for overhead and for profit. Following industry practice, all prices are quoted at the seller's factory.
EI publishes a catalog, which is revised periodically. Also, it exhibits in most equipment trade shows.

1. In the EI case, in which stage of the product life cycle do semiconductors appear to be?

		Market maturity
		Sales decline
		Market introduction
		Market growth

2. What kind of products are EI's networking equipment?

		Component parts
		Accessory equipment
		Installations
		Raw materials
		Supplies

Answer 1

1. Answer: market growth

Rationale: El has been increasing its market share constantly up to 25% and this is an indication of the market growth phase.

El's sales are not the highest yet and might increase in future, therefore it is still not in the maturity phase

El's sales are not declining so it is not in the sales decline phase

El's not educating its customers about its products, therefore, it is not in the market introduction phase

2. Answer: Accessory equipment

Rationale: The computer networking equipment to control production equipment are accessories as they can be removed without damaging the production equipment.

They are not component parts as their removal does not damage the production equipment

They are not installations as they are not large pieces of equipment that are sold and can be set up by the customers.

Similarly, the networking equipment is not raw material or supplies but an essential component to the production equipment