Academic journal article Journal of Case Studies

Winds of Change at Measurement Equipment Supply Company, Inc

Academic journal article Journal of Case Studies

Winds of Change at Measurement Equipment Supply Company, Inc

Article excerpt

This case was prepared by the authors (Burton and Pope) and is intended to be used as a basis for class discussion. The views represented here are those of the case authors and do not necessarily reflect the views of the Society for Case Research. The views are based on professional judgment.

Introduction

As Bill Smith got off the phone, he pondered over the implication of the call for him and the company that meant so much to Bill and his family. Measurement Equipment Supply Company, Inc. (MESCO) was a regional distributor of pressure, flow, and temperature measurement equipment for the oil and gas industry. The phone call was from OEM Products, Inc., a long time manufacturer of control equipment for which MESCO had served as a distributor. Now, in a practice that was becoming increasingly common among many other manufacturers, OEM Products wanted to go around MESCO and service their end customers directly, essentially cutting out MESCO's role in the distribution network and thus avoiding the discounted pricing traditionally provided to distributors. Could OEM Products successfully do it? Perhaps they could, along with other manufacturers. Bill was concerned.

Background

MESCO was a third generation family business located in the Big Country of West Central Texas. Born out of an opportunity to service the oil and gas industry, the 50 year-old company operated as a wholesaler of industrial equipment such as controls, pressure and flow meters, gauges, thermometers, and related accessories.

The company was positioned as a distributorship servicing mid-range supply houses and small "mom and pop" stores that, in turn, supported individuals and smaller suppliers. Although the company sold a variety of products, its strength was in its product knowledge and stakeholder relationships formed over the past 50 years. The company's motto, "We've Got You Covered!," emphasized its role as a full service provider, shaping its business around the needs of the customer and the relationships that were formed through this service.

The majority owner, Bill Smith, functioned as President and CEO of MESCO. Bill's father had organized the company as a closely held family corporation, established upon the values of family, church, and community in building business relations. As a result, Bill keenly understood the importance of integrity and faithful stewardship in building the relationships that had established a business presence for MESCO in the West Texas community. For both inside and outside sales functions, Bill emphasized the importance of the face-to-face, personal connections that build and strengthen a business. Because of these connections, Bill claimed that they (i.e., the people at MESCO) were "... good at what we do, AND we do it ethically and morally right." These practices and beliefs had worked well in keeping the business profitable for 50 years.

Repeat business was established based on core principles that added value to the customer stakeholder relationship and defined the value system for the company. Customers stayed with MESCO because of predictability of service; there were few "unknowns" when it came to interacting with the company. Product quantities and business processes were predictable yet flexible, which meant that customers received the right products consistently, with many products delivered to their door on the same day an order was placed.

The following details summarized the company's makeup:

* Customers: Approximately 1000 customers were on record with about 35% making regular purchases. Of the 1000 listed, 40-50% were oil and gas and small municipalities; 20-30% small and light industry companies, and a small number of end users (approximately 10%). The company stocked warehouses in Odessa, Midland, and Lubbock, principally servicing the greater West Texas region. The market served by MESCO extended east to west from Sweetwater, TX to the eastern half of New Mexico, and north to Amarillo and south to the Interstate 10 corridor. …

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