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The Timken Company - Strategic Financial Management

Essay by   •  April 25, 2016  •  Case Study  •  1,260 Words (6 Pages)  •  1,470 Views

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KINNAIRD COLLEGE FOR WOMEN

Strategic Financial Management

 AMNA NAEEM

MAHNUM MOEEN

SYEDA IRTIQA BATOOL

MAJOR: ACCOUNTING & FINANCE

SEMESTER: 8

Submitted to ma’am madeeha


 The Timken Company

Elaborate on the concept of ‘Bundling’ Strategy. Moreover, explain why The Timken Company adopted the Bundling Strategy?

A marketing approach where numerous components or products are packaged into one bundled solution. In simple, it means to add new products to the portfolio of products. To overcome the costs of acquisition, this strategy has become increasing common. For example, to maximize the amount of business from each customer, banks bundle banking products. If one holds more than one savings account and multiple loans, he often earns benefits of interest.

Profits on individual sales can significantly increase overtime through product bundling strategy when it is effective. Selling multiple products or components in one solution means a greater initial return on the costs of acquiring a customer. Bundling is sometimes used to as a way to package less popular products with items in high demand, although this reasoning is sometimes criticized. Longer-term opportunities for add-on sales can be created when there are multiple products in a customer's hands.

Bundling offers many benefits to the customers. When buying products, customers want to attain maximum satisfaction through purchase and they want to address needs and solve problems through buying. Customers find it convenient and beneficial, if they have a multiple needs and the product bundle addresses most or all of them. Moreover, when buying bundle of products, customers often experience economies of scale. They typically understand that the total price is lower when the products are purchased as a bundle, if they have a need for the individual components in the bundle

Businesses may fail or succeed with product bundling as with other strategies of business. if customer convenience and value is your motivation, long-term benefits and better customer relationships  are developed.

For both unbundled and bundled options, your business should carefully analysis revenue and profit projections. This strategy makes little sense if bundled solutions generate lower profits with no customer advantages. Tracking bundling performance and customer satisfaction helps ensure long-term benefits.

Reasons the Timken Company adopted the Bundling Strategy:

•        At lower costs foreign competitors were making to great extent simple products that the companies of United States could produce them so Timken decided to adopt the bundling strategy.

•        Timken wanted to differentiate their products and produce higher margins in order to increase their basic product with adding more number of components so that they can meet needs of customers with a higher value added products.

•        In order to increase profits Timken adopted the Bundling strategy as it was highly in debt.

By analyzing the internal and external conditions of Timken Company, justify why it should opt for further acquisitions

Timken should opt for further acquisitions to build up a competitive edge. As the competition among the companies is becoming tough due to which, for the company to survive in this competitive environment, it should opt for acquisitions.as through bundling Timken’s sales were increased by 38% which forced the suppliers to increase their efficiency as customers not only want value addition but also expect from suppliers to do increasing number of tasks. Furthermore to increase the market share, it should opt for acquisition, making them third largest producer of bearings in the world which will help give Timken clout in negotiations with customers and suppliers.

Besides, Timken would use the products of Torrington under the name of Timken’s company and using Torrington’s name as a brand name, resulting in increased range of products. Through this acquisition Timken was able to increase its penetration in global bearing market by 7% to 11%. The Torrington’s sales in 2001 of $1.1 billion will broaden Timken’s portfolio and expand the global size and scope of business. Acquisition is accretive for earning per share and Timken expects some cost savings through this acquisition. Timken should acquire to achieve the economies of scale, eliminate duplicate costs, achieve operating efficiencies. The acquisition will also significantly strengthen the presence of Timken in Europe, Asia and other emerging markets by acquiring Torrington. The combined company's engineering expertise will enable our customers to benefit from innovative new products and leading-edge components to further enhance their competitive positions. The concept of Synergy will work. Torrington's sophisticated needle bearings solutions for automotive power train applications provide a strong complement to Timken's leading tapered roller bearings and precision steel component solutions for wheel ends and drivelines. The acquisition will also allow Timken to expand its service offerings to new markets and leverage its geographic presence to provide products and services to the aftermarket.

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