Victoria Heavy Equipment Limited Possible Alternatives 1) Become a crane parts supplier (as a separate entity) 2) Cut spending

on unnecessary items (such as ying in customers on private jets) and focus on reliability 3) Focus on custom cranes where a price advantage exists Figures from Income Statement ($000s) 2005 Revenues Expenses Net Income 129,519 121,000 3,695 +9.9% +10.7% -3.3% 2006 142,329 134,000 3,575 +7.1% +8.2% -46% 2007 151,414 145,000 2,445

From 2006 to 2007, there was a 46% drop in Net Income. Cost of sales is rising disproportionately to revenue. Porters Five Forces Model Competitors: Victoria, Washington, Texas Star, other smaller rms Supplier Power: low - 85% of materials are manufactured in-house Buyer Power: high - likely lots of price negotiation, especially depending on payment options, volume purchases, and the fact that there is little difference in price between competitors Substitute Products: crane rentals Barriers to Entry: high - investment is sizable (engineering and manufacturing), need large industry contacts for suppliers and buyers, market is relatively small considering the price per crane to be about nearly one million dollars Customer Attributes - primarily contractors - very sensitive to machine dependability - more sensitive than to price, since protability depends on timeliness to complete a job - expect exceptional service

Competitive Landscape Washington - 50% of the world market; 30% of the Canadian market - Victorias largest competitor - growth of 15% per year - network of 100 strong dealers, over 200 outlets worldwide World Market Share

35% 50% 15%

Canadian Market Share

10% 30%

60%

Recommendation and Rationale 1) Become a crane parts supplier (as a separate entity) Rationale: Working cooperatively with a select rm or two to supply their parts will provide Victoria with more business, but will also be advantageous to a rival rm. However, partnering with this rm may weaken others in the industry. This also lets Victoria take advantage of their cost-advantage by producing in-house. 2) Cut spending on unnecessary items (such as ying in customers on private jets) and focus on reliability Rationale: An even bigger purchase driver than cost is reliability . Engineering dollars should be spent on manufacturing the most reliable and easily xed machines. This also needs to be accurately communicated to customers to show how they would save money and time in the long run, given that these are the two largest factors when considering a crane purchase. 3) Focus on custom cranes where a price advantage exists Rationale: Capitalizing on the price advantage may be worthwhile to customers in the short term, but most are looking at long-run costs. This market is also likely too small to make the price-advantage worthwhile, and doesnt focus on quality engineering. Overall recommendation: Alternative #2