In the heavy-truck industry, many buyers
operate large fleets and are highly moti-
vated to drive down truck prices. Trucks are
built to regulated standards and offer similar features, so price competition is stiff;
unions exercise considerable supplier
power; and buyers can use substitutes such
as cargo delivery by rail.To
create and sustain long-term profitability
within this industry, heavy-truck maker Paccar chose to focus on one customer group
where competitive forces are weakest: individual drivers who own their trucks and
contract directly with suppliers. These operators have limited clout as buyers and are
less price sensitive because of their emotional ties to and economic dependence
on their own trucks.
For these customers, Paccar has developed
such features as luxurious sleeper cabins,
plush leather seats, and sleek exterior styling. Buyers can select from thousands of
options to put their personal signature on
these built-to-order trucks.
Customers pay Paccar a 10% premium, and
the company has been profitable for 68
straight years and earned a long-run return
on equity above 20%
In the heavy-truck industry, many buyersoperate large fleets and are highly moti-vated to drive down truck prices. Trucks arebuilt to regulated standards and offer similar features, so price competition is stiff;unions exercise considerable supplierpower; and buyers can use substitutes suchas cargo delivery by rail.Tocreate and sustain long-term profitabilitywithin this industry, heavy-truck maker Paccar chose to focus on one customer groupwhere competitive forces are weakest: individual drivers who own their trucks andcontract directly with suppliers. These operators have limited clout as buyers and areless price sensitive because of their emotional ties to and economic dependenceon their own trucks.For these customers, Paccar has developedsuch features as luxurious sleeper cabins,plush leather seats, and sleek exterior styling. Buyers can select from thousands ofoptions to put their personal signature onthese built-to-order trucks.Customers pay Paccar a 10% premium, andthe company has been profitable for 68straight years and earned a long-run returnon equity above 20%
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