Abstract
Wesco International Inc, which is an American publicly traded company currently, operating in the U.S. The company supplies electrical and repair products and is based in Pittsburgh, Pennsylvania. Most of the company’s business is conducted in the United States. This article provides a microeconomic analysis by reviewing the current demand and supply situation of the company as well as the involved costs of production and recommended strategies that the company could adopt to gain a competitive power.
Introduction
Maintaining successful operations is a hard task for multinational corporations especially in the current market trends and fluctuating customer demands. However, most organizations have strived amidst the market challenges to emerge as the leading suppliers and service providers, with Wesco being a perfect example of the most successful companies in the US and global market. Wesco international has successfully expanded their operations internationally despite the changing market trends as well as the competition in the supply and logistics industry. Being a publicly traded company, Wesco has applied different strategies to secure a competitive position so as to maintain a high value in the stock market, the purpose of this article is to review the microeconomic situation at Wesco International Inc., with particular attention focusing on the demand and supply analysis in relation to the current performance of the company. The paper also reviews market trends that influence the demand and supply of the company and provide recommendations on how Wesco could improve the current performance.
History of the company
Wesco international, commonly known as WCC is a multinational company specializing in the provision of electrical, communication, and industrial maintenance, construction materials and original equipment manufacturers repair and operating products. The company is also leading in the provision of transportation and logistics services. Wesco was founded in the United States in 1922 by Westinghouse Electric Corporation and is based in Pittsburgh, Pennsylvania. The purpose of the company was to sell and distribute Westinghouse’s products (Wesco). The company is a supplier electrical, data communications, general maintenance, repair, and operating (MRO) and electrical OEM products. The current CEO, president and chairman is John Engel, who has been in these roles as of 2008, 2009, and 2011, respectively.
Being a procurement specialist, the company has successfully helped customers from different parts of the world to minimize their supply costs as well as effectively distribute products from over 24, 000 suppliers at the lowest costs while maximizing the profits. Currently, the company serves over a hundred and thirty customers globally. As of the financial reports in the first quarter 2016, the company’s stock according to the New York Stock Exchange is $56.29 -1.25 (-2.17%). . According to their website, Wesco is a publicly traded Fortune 500 company; 2015 sales were $7.5 billion and have over 9,300 employees. Their 130,000 customers include government agencies, schools, commercial as well as industrial businesses, institutions and telecommunications in the domestic and international markets. They have 500 stand-alone stores to provide a full-service presence locally. Wesco (WCC) considers their “long-term success to be fostered by the integrity of our employees and the relationships they build with customers, suppliers, and all stakeholders.”
Supply and demand conditions
The demand for the company’s products is constantly increasing due to the global demand for quality electric, communications and construction materials and all the other distribution and logistics services provided by the company. The industry targets a wide and constantly growing market based on the constant increase in construction and installation of advanced equipment as the modernization process continues. The increased demand can be attributed to the global increase on the need to improve communication and technology in addition to the growing industrial development that demands for more construction materials. This means that the demand for the products and services has increased constantly and this demand is likely to increase in the future, meaning that the industry is likely to increase the current supply.
Similarly, the increased demand for the products provided by the industry has increased the operations of Wesco, especially bearing in mind that the company has a strong customer base. The sales of the company have remained relatively constant in the last few years. However, this demand is likely to increase in the future to counter the increasing demand yhat I created by the increase in disposable income of the customers that has resulted to an increase in middle class population that desires to improve the current living standards into a modern lifestyle characterized by improved communication, houses, and transport means. This however depends on the competitive value and strategy that the company implements in addition to the future changes in prices and the ability of the company to compete with the prices of the supplementary products
Based on the trend in the sales of the company, there is a constant sales trend recorded over the last five years, with the latest sales reports in the financial year 2015 being slightly lower. The decrease can be associated with the increase in the number of competitors, thus reducing the total market share. In addition, the reduction can be associated with the availability of substitutes that have relatively lower prices than the company’s products in addition to the changing tastes and preferences of the customers.
Price elasticity of demand
The price of the products is constantly changing due to the influence of the market demand. The prices based on the increased demand for the quality of products provided in the industry, the price elasticity of demand can be said to be inelastic, whereby customers have little response in regard to the price. The price offered by different competitors has little influence on the demand as the demand is influenced by the quality and durability of the products and services.
Cost of production
Similar to the demand trends, the cost of goods and the operating expenses increased simultaneously for the last four year while recording a decrease in 2015. This can be attributed to the market trends including the fluctuation in shipping costs, emergence of new purchasing behaviors such as the use of online shopping, and increase in operating expenses (Samuelson, 2000). This affects the total profits whereby increase in the cost of production reduced the total profits.
Overall market
Wesco operates as a procurement analyst whereby they sell products on behalf of various manufacturers, thus making the company to be part of the electrical, electronics and construction materials distribution industry. Currently, the industry is highly competitive as there are several organizations involved in the distribution of similar products in addition to providing logistics services. The most prominent companies that provide the most competition for Wesco include Anixter International Inc. Graybar Electric Company, Inc., and W.W. GRAINGER, INC. Wesco however has a competitive advantage over the competitors due to the company’s wide variety of products as compared to the some competitors that have specialized in the distribution of particular products. For instance, Graybar Electric Company specializes in the distribution of electric appliances. This industry is characterized as having low barriers of entry as medium and large distributors can enter or leave the industry freely. This makes the industry to fall under perfect competition market structure. This factor makes the individual competitors to come up with strategic competitive measures to earn a competitive position in the market especially due to the changing consumer needs that calls for the industry to be vigilant in noting the market trends and providing products that satisfy changing customer needs.
Recommendations
Wesco is in a competitive industry and this means that it has to change the current strategies in order to continue having a competitive value in the market. One of the recommendations is for the company to in technology as the customers are shifting the purchasing trends to online buying. The company should also review the current expenses by investing in faster distribution channels such as opening more distribution centers to decentralize the company.
References
Samuelson, N. (2001). Microeconomics (17th ed.). McGraw-Hill.
Wesco http://wesco.investorroom.com/index.php?s=127
Wessels, W. J. (2000). Economics. NY: Barron's Educational Series.
