Husky Model

Q What is the nature of the threats faced by husky?

Ans:

Following are the two main threats Husky was facing:

a) Economy of Scope: The first one seems to be related to the failure of Husky to give proper importance and emphasis for achieving the economy of scope, i.e. adoption of a wide view of the plastic industry.

The shortage of resin needed for the PET resin makers, caught Husky by a surprise. This shortage severely damaged the processor sector of the industry and thus, it heavily affected the equipment manufacturing companies. The implication of the crisis above was highly severe for Husky, since the PET production accounts for the highest contribution for Husky’s profitability. Adopting a wider scope of the industry might lead Husky to take actions for preventing this shortage by warning the industry in advance.

b) Increased Competition: The second reason for the difficulties Husky was facing was the entry of competitors to the PET business that launched substitute products with significant lower cost. These new products increased the bargaining abilities of the customers or, in other words, decreased the willingness of the customers to pay for the more expensive Husky’s product.

Q What should Husky Do?

Ans:

The short-term actions Husky should take for improving the business status are as below:

a) Reduce the Margin on Products: Although this might cause a hit on the overall profitability , still Husky might need to consider this option in the short term as this action will improve the status of Husky’s products relative to the substitute products. Moreover, this action might pose greater barriers to entry for other competitors to enter the PET business. To get the financial compensation to mitigate the profitability impact of this action might be achieved by limiting the extensive worldwide support for the lower-priced product that might still be better relative to the substitute products.

Moreover, this action should be executed and...