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Husky

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3. What has caused Husky’s current difficulties?
The makers of PET resin appeared to have underestimated resin demand by a wide margin, which led to a shortage of resin. Resin makes up 58% of Husky’s total cost. Also, the demand for Husky’s product dropped. They had added too little capacity, and PET prices had soared. In some cases, processors simply could not obtain resin. Processors halted their expansion plans for products made with PET and put order for new equipment on hold. Resin makers were expanding capacity to make up for the PET shortfall, and Husky’s management team expected PET supply to return to “normal” levels within 2-3 years.
Also, Husky’s success had not gone unnoticed. Competitors decided to enter their businesses, especially the PET business. A series of rivals launched new products in Husky’s core market segments at lower prices (i.e. Mannesmann Group). Schad noted, “These competitors do not have the specialized expertise that we have developed, but operate for a much lower cost base. By modifying mainstream machines to suit the preform application, they won over customers who are willing to purchase less expensive technology.”
However, Husky remained unresponsive to market changes. Husky management believed that its machines continued to perform relative to the best competition in the market. But they offered a narrow range of products. 70% of revenues came from PET systems. Husky mainly focused on the market of medium tonnage machines. They also had a low production volume. Husky only produced around 300 machines per year. From this, they could not reach economies of scale, meaning they were unable to gain a cost advantage that arose with the increased output of a product.
Even though their current strategy has allowed them to be the market leader, some changes need to take place to defend and hold their market

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