07108067 2012

J&J Electrical contractors, Inc: Remaining Viable in a high competitive industry

The J&J Electrical Contractors case is an example of a small regional family business that has
found a way to compete against the larger and more comprehensive electrical contractors in the
industry and be successful. The company is currently run by a husband-and-wife team, John and
Jean Abernathy, with John serving as CEO and Jean as CFO. The company has a growth of 75 %
.In 2005 its revenue are $2.98million which increased in 2005 which is $5.22 million.

Issues

How can J&J expand into private projects?

How can J&J expand into other sectors and other geographic areas?

How they keep up with its competitors?

How they can increase their (NIAT)?

Analysis

As shown in the exhibit #1 porters five forces model there are new entrants, Suppliers, rivals,
buyers, substitutes. In according to competitive analysis there is intense competition. There are
low barriers to entry. There are many competitors .The basis of competition are price, quality,
reputation. A few very large national competitors but they go after large contracts. Competitors
include Buck Electric, Power Plus, Daniel’s Electrical Construction Co., McBride Electric, and
Champion Electric. Buck Electric specializes in solar photovoltaic. Most competitors are doing
residential construction field, whereas J & J Electric is focused more on commercial and public
sector. The target market is all residential, commercial, industrial, and public-sector electrical-
contracting work in the Inland Empire. Future customer needs are renovations and add-ons

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Evaluation of options

Reduce ratio of public/private jobs

They should Reduce ratio of public/private jobs.They become more selective in pursuing public
projects but persue the lucrative comunity-college and university bond projects,they get more
residential –remodeling and commercial work.Do more research within the growth areas.They
should hire a marketing consultant to help promote the company’s name in the private
sector.They should Continue working closely with other general contractors.They should
Continue the company’s culture of outstanding service and ethical operations.They should
increase market share .They should finance through cash and debt .

Expand geographically

They should Expand to other high growth areas in Southern California and expand in northern
California .Open new locations one at a time in devolving parts of the in Inland empire .Acquire
small 1–3 person firms in the right locations that have the right skill sets.They should Continue
bidding on school and community-college project but now in an expanded area.They should
Continue the company’s culture of outstanding service and ethical operations

Offer advanced technical services

Begin offering high-tech services such as home-audio or security systems, low-voltage

installations, or alternative-energy-power sources and to Increase market share.They should Seek
and hire individuals (not all at once) with the experience and expertise to install both systems and
alternative-energy-power sources. Form strategic alliances with manufacturers of alternative-
energy-power sources and telecom/network systems.they should continue current programs.
They should train employess in these new areas .

Decision criteria

Their sales have gone up but profits are going down. Net income after tax (NIAT) was declining.
To build their relationship if they do bad project, they just fix the problem, take the loss and go
on. There are so many competitors coming into the electrical contracting market. Due to increase

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in competition they can only get job by going so low on bids .energy costs and metal price
increases plagued the construction industry as these were critical in performing construction
work .Crude oil prices also increase as record .lack of investment in exploration and production
of precious metals. Increasing energy and material costs meant increasing production cost for
electrical contracting firms. There is greater difficulty in estimating function. The lowest price
was only one of the variables that could win or lose a bid. Competition was intense in 2005.J&J
has limited geographic expansion into different markets. It competed only locally. The
construction cost have gone up .Steel is going to china because it has an industrial revolution
going on over there .Unpredictability of the prices of essentials commodities was particularly
troubling as it made it more difficult to accurately estimate project costs .estimated function is
very important because jobs bid too low resulted in losses and those bid too high resulted in
failed bids. J&J mix of public and private work. In early days it focused primarily on private –
sector projects in the inland empire.

Implementation Plan

To increase NIAT they should increase revenue .They should increase market share .They have
to acquire market share and resource necessary to advance technology for raw materials and
operating equipment .They should hire individuals who are experienced in both new and current
systems they should Implement training and development programs.They should maintain
customer loyalty . Stay current with the latest technological advances.They should Offer price
incentives for first-time customers. If copper-wire costs increase, causing NIAT to lag
projections by 15%, then J&J should use R. F. Romex wire instead of electrical conduit

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Exhibit: 1 Porter five Forces

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