Strategic Parts Pricing For Original Equipment Manufacturers
Reduced capital spending and tight money conditions have created a difficult business environment for original equipment manufacturers. Facing a dramatic drop in demand, many Original Equipment Manufacturers (OEM) have severely cut costs to conserve cash - often by curbing production capacity and jettisoning resources. Some have also played a potentially risky trump card: Raising the price of spare parts needed to service an installed base of original equipment. Admittedly, the industrial manufacturing service parts market has often experienced lengthy periods of inelastic price sensitivity, so there may be minimal negative consequences in the short term. But eventually such protection will erode and some customers will take their business elsewhere.