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Introduction Mueller-Lehmkuhl (ML), a West Germany company, was established in 1876, as a producer of shoes accessories.

Later, it added other products, including the single post snap fastener. ML merged with a Hannover firm called Weiser. In 1929, it also merged with Felix-Lehmkuhl and became MuellerLehmkuhl. By 1938, it was acquired by the Moselhammer group. Also, it formed a joint venture with the German subsidiary of the Atlas group, an American multinational. Atlas consisted of six major businesses, one of which Apparel Fasteners complemented ML. Atlas Germany serviced a broader customer base. The objective was to integrate MLs technological superiority and higher margins with Atlass access to the market. As a result of the merger, ML has substantially increased its sales volume and had estimated revenue of $103 million. Product Description ML manufactured both Snap fasteners and attaching machines. Snap fasteners are used by garment industry to replaced buttons and buttonholes. ML produced about 700 different fasteners in five major product lines s-spring socket, ring socket, two open prong (brass and stainless steel), and tack buttons. Each product line was designed for specific application. The s-spring fasteners were used for medium-thick materials (1.4 mm to 2.0 mm). The ring spring heavier fasteners were used for thicker materials (up to 6.5 mm). The open prong fasteners were especially well suited for use on thin (.25 mm to 75 mm). The tack buttons were used to replace conventional buttons and were usually used on blue jeans. Also fasteners were customized either by applying various colors of finishes or by embossing the customers logo on the cap. ML manufactured six attaching machines three manual and three automatic machines. All the machines could be modified to attach any of the companys fasteners.

Manual machine placed the two parts of the fastener into machine by hand. In automatic machine, one or more of the parts was positioned automatically. The three manual machines differed from each other in the position of the operating switch and the motivating force. Automatic machines were used for high-volume production, the increased speed offsetting the higher cost of the machines. The three automatic machines differed from each other in the number of parts automatically positioned and the speed of operation. Over the years, the firm had developed a policy of selling the manual machines and renting the automatic ones. Manual machine were sold because they were not expensive unlike automatic. Automatic machines were rented on an annual basis. The company inventoried about 10% of the 7000 rented machines until new orders arrived. These returned machines was modified enable them to attach a different fastener. Modification was expensive required replacing all components specific to the fastener. The estimated average modification cost $2000. ML viewed reliability and fast response as an important sales tool. The estimated expected service was to about $4.5 million In order to mark up for this cost of providing service, ML attached two conditions to the rental of a machine: (1) only ML fasteners were to be used on the machine and (2) at least $10,000 worth of fasteners were expected to be purchased during the year. In uncertain conditions, the average rented machine attached only about $7,000 worth of fasteners per year.

Market Condition ML had positioned itself in the large-volume market. Large volume referred to the quantity of a given fastener sold, not to the overall fasteners consumption by a given firm. ML broke target market into two major segments: (1) large companies purchasing large volumes of a number of different fasteners and (2) smaller companies needing major quantities of a single fastener. The large-volume customers accounted for 85% of fastener sales. European market was dominated by four firms. These

four accounted for 65% of the fastener market. The European market was characterized as a stable oligopoly. Additional 13 firms accounted for the rest of the market. Most of these firms sold both fasteners and attaching machines. The exact percentage of MLs fastener sales to customer using thirdpart equipment were not known but approximate of 10%. MLs fastener and attaching machines were considered as superior quality. They had never been any price wars among the four major players in the market. There were several factors that helped reduce level of competition between the major players. First, companies developed longstanding relationships with their customers; policy of renting machines, coupled with designing the fasteners so they could be used only in the suppliers own machine, made switching an expensive; and there were no standard prices. Although the firms did compete on three dimensions: the quality of the fasteners and in particular, the tolerance to which they were manufactured; the performance of the attaching machine; the quality of service provided.

ML sold its products in approximately 20 countries. These countries were different in regulations, costs, taste, tariff barriers, payments terms and currency languages and safety. To deal with these differences, ML used agents in some countries, distributors in others, and regional sales offices in yet others to sell fasteners while attaching machine were always purchased or rented directly from ML. Due to European overall market growth rate 1%, ML considered to look for emerging markets, in particular Africa. Unfortunately, the merger with Atlas had reduced MLs opportunities for geographic expansion, since the continuing offshore movement of the garment industry was moving MLs business into serviced serviced by other Atlas divisions.

Production Process