Chain Saw industry
Stihl should definitely continue in the manufacturing of premium quality chainsaw. It has established the reputation as the world’s leading producer of chain saw in 1973 and Stihl is well known for its excellent customer service. Its worldwide corporate sales increased for more than twice since 1972 to 1974. . It should continue on expanding its market in the United States since the market in the US has been growing and its population is increasing too. The sales of pro and farmers market segment is expected to grow at 10 % per year.
Stihl is well known for its premium quality saws that are targeted primarily for the pro and farmers market segment. Moreover, the pro and farmers market segment would bring in a relatively high amount of revenues and profits. Plus, it is guaranteed that the pro and farmers market segments will replace their chainsaws within a few years (guaranteed revenues) since they use the chainsaw for heavy duty purposes. The farmers would not likely be able to use electrical chainsaw if they are working in rural areas that have a convenient access to electricity power.
I think Stihl should not manufacture chainsaws for the casual chainsaw market segment even though its demand has been increasing. Stihl should just let other firms enter the casual users market. Stihl should just focus on producing and exporting the chainsaw for pro and farmers market segments. The increase in sales of chainsaw for casual users might be temporary since it is just a social trend, energy crisis and increased leisure time. The casual users are also not willing to spend money on expensive chainsaws. They are more priced sensitive users. They also will not likely replace their chainsaws within a short period of time since they do not use the chain saw often or for heavy-duty purposes. The casual segment would probably prefer the lighter type of chainsaw like the electric chainsaw. Producing chainsaw for the casual segments will definitely change Stihl’s image of being the world’s leading producer of chainsaw for the pro and the farmers market segments.
Although the sales of chain saw would eventually flatten out, Stihl can still maintain a constant amount of revenues since the pro and the farmers would not stop using chainsaws. Pro and farmers market segments would only accumulate 45 % of the total chainsaw unit sales because of the increase use of chainsaw by the casual users. However, only about 15% of urban or casual users will buy chainsaw. Stihl should not fight for the smaller piece of the pie. Also, there are thirteen other manufacturers who target the casual user market. Therefore, Stihl should not enter the casual user market as it is too competitive and it won’t be as profitable as the pro and farmer market segment.