Swot Analysis Of Electrical Equipment Industry

810 Words4 Pages
1.2 Industry Profile: The Electrical Equipment Industry consists of companies that make a range of products for a diverse customer base. This sector is fragmented, but there are a few members that lay claim to a sizable portion of sales. Products include electrical motors, commercial &industrial lighting fixtures, heating, ventilation &air conditioning systems &components, and, among others, electrical power equipment. Operating structures involve high fixed costs. Too, copper, aluminum &steel are essential raw materials used in the manufacture of products. (Fluctuations in commodities prices can have an impact on the group's earnings performance.) The industry spans all corners of the world, &it is subject to the influence of the macroeconomic…show more content…
The Institute of Supply Management's Purchasing Managers Index provides a near real-time view of manufacturing production, employment levels, new orders, supplier deliveries & inventory turnover. A reading above 50 indicates expansion, & one below that figure marks a manufacturing contraction. Durable Goods Orders, released by the U.S. Census Bureau, is another important statistic. Such consumer goods last three years or more & are relatively expensive. Month-to-month trends are a good indication of whether the economy is cycling up or down. Additionally, the Federal Reserve Board regularly releases capacity utilization figures. Utilization is high when deem & is strong &low when deem & is weak. Capacity utilization rates above 80% suggest that equipment spending will rise; such levels may also indicate that inflation will…show more content…
Nonetheless, R & D outlays are important to the industry. Innovation allows a company to improve its competitive position. Managements work to keep up with shrinking product life cycles & attain standardization to maintain cohesiveness &save money. Generally, net margins hew close to 10%. For equipment makers with little or no debt, net margins about match operating margins. Those with significant debt obligations often have net margins in the single digits. Managements tap the equity & debt markets, &use cash, for expansion &acquisitions, depending on the comparative cost of capital & their tolerance for risk. The industry has a history of substantial merger & acquisition activity. Scale is important to profitability. Only a handful of the companies included in our grouping have annual sales below $1 billion. Acquisitions offer access to new markets & products, as well as ample cost synergies. Usually, the larger the company & more extensive the record of buyouts, the less risk there is to investors. Final
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