Products and Services
Tucson Electronics offers a wide range of services as outlined in the detailed sections below. It is ultimately the goal of the company to offer a one-stop facility for all home entertainment needs, including both sales and servicing. In this way the company can offer greater perceived value for the customer than many other shops which only offer sales or services.
The industry is highly competitive with suppliers having a great deal of power in setting and negotiating the prices of their products and services to repair shops. In addition, because the customers see the service as undifferentiated and a “commodity” with little value separation between competitors, buyer power is also very high. Finally, the barriers to entry are moderately low, and the large number of competitors in this field, including substitutes (such as do-it-yourself work) mean that the pricing for such services is very competitive. The only way to have an advantage in this industry is a low cost leadership principal applied aggressively or to create higher switching costs through the building of strong business-to-customer ties. It is the aim of Tucson Electronics to create a competitive advantage through both the low cost strategy and by offering greater value through its broader product and service line.
Tucson Electronics will initially have only one factory trained and certified technician in the person of Mr. Munroe. As the company grows and expands, Mr. Munroe will hire trained and certified technicians who are able to prove they have superior customer awareness and interaction. It is the company’s professional people who will fulfill the firm’s contracts and goals. The largest part of the company’s expenses will be in labor costs.
3.1 Product and Service Description
Tucson Electronics provides a wide range of home entertainment repair services. These include:
- Repair and cleaning of home and car stereos and CB radios.
- Repair and cleaning of TVs.
- Repair and cleaning of VCRs and DVDs.
- Sale of used TVs, stereos, VCRs and DVDs.
- Free estimates on repair jobs.
- Authorized warranty servicing on all major brands of home entertainment systems.
- House calls and free pickup and delivery.
Future products and services that Tucson Electronics will prepare to institute include TV/VCR/DVD rental, satellite TV installation and servicing, sales of new TVs, DVDs, VCRs and stereos, and repair/sale of microwave ovens. Mr. Munroe is also investigating the possibility of offering a new product line of home entertainment cabinets at some future date.
Tucson Electronics will be obtaining most of its parts through established dealers and directly through the manufacturers of the relevant electronics. As part of the company’s low cost strategy, the company will seek to purchase parts in large quantities whenever possible to take advantage of volume discounts. In addition, the company will aggressively seek to procure its parts from local suppliers in order to start forming close relations with such companies. It is the ultimate aim of Tucson Electronics to form strategic partnerships with such companies in order to lower overall costs of parts.
A large part of Tucson Electronics enhanced services will be free pickup and delivery of electronics to a person’s home. Mr. Munroe’s cousin, Mr. Thomas Porter, owns Caesar Courier Services, a local company providing pickup and delivery services. Mr. Porter has agreed to provide these services to Tucson Electronics’ clients at discounted prices to Mr. Munroe.
The technological revolution in computers has enhanced our abilities to diagnose and repair our clients home electronics. Tucson Electronics will remain on the cutting edge by instituting the use of computer diagnostic equipment in its shop. The company will continue to seek new ways to provide a better service through technology.
3.4 Competitive Comparison
The electronics repair industry is highly competitive. Each company within this field has high labor costs, low margins, and a high intensity of competition.
Suppliers have a great deal of power in setting and negotiating the prices of their products and services to repair shops. This is due to the fact that the suppliers who absorb the greatest amounts of cash from repair shops are large electronic manufacturing companies such as Panasonic, Emerson, Toshiba, etc. These companies are more consolidated than the repair industry, have deeper pockets, an almost limitless number of substitute customers, and finally they are the single most important supplier to the electronic repair industry. Therefore, these companies can set whatever price they wish to. Furthermore, labor is the single most important expense in this industry, and salaries for such individuals are well known and not very flexible.
In addition, because the customers see the service as undifferentiated and a “commodity” with little value separation between competitors (if they offer a suitable level of quality) buyer power is also very high. Additionally, the costs of our services are not cheap, and buyers are willing to search for the most favorable combination of price and acceptable service.
The barriers to entry and exit are moderately low in this industry. Switching costs are virtually non-existent and the costs to entry and exist the market are low. The large number of competitors in this field including substitutes mean that pricing for such services are very competitive. The only way to have an advantage in this industry is a low cost leadership principal applied aggressively to all aspects of the business or to build up customer relations to a point where the switching costs are raised.
Based on this analysis, Tucson Electronics will pursue a low cost leadership strategy as its primary competitive advantage. Furthermore, the company will simultaneously build up its product and service line to take advantage of the limited opportunity to create higher switching costs through enhanced value creation and to spread out costs.
3.5 Future Products and Services
Future products and services that Tucson Electronics will prepare to institute include TV/VCR/DVD rental, satellite TV installation and servicing, sales of new TVs, DVDs VCRs and stereos, and repair/sale of microwave ovens. Mr. Munroe is also investigating the possibility of offering a new product line of home entertainment cabinets at some future date.
Tucson Electronics will start implementing these new products or services in the following time periods:
- Repair/sale of microwave ovens (3rd Qtr 2004).
- Satellite TV installation and servicing (3rd Qtr 2005).
- TV/VCR/DVD rental (2nd Qtr 2006).
- Sales of new TVs/DVDs/VCRs (4th Qtr 2006).
The capital investment needed for such expansion will primarily come from the company’s accumulated operating cash account. It is anticipated that some of these product/service expansions that require significant inventory, such as new sales, may require additional cash inflow such as loans. The company will be preparing proposals for various lending institutions in anticipation of this need.
Presently the product that is really driving the electronics repair market is computers. While Tucson Electronics is not currently positioned to take advantage of this situation, it is the long-term goal of Tucson electronics to incorporate computer repair services within the company. Once the firm is able to generate enough cash to retain the services of a computer repair technician, the company will evaluate the viability of such a move. It is anticipated that this service will be offered sometime after 1st Qtr 2007.