Diamond Power CorporationManaging the Transition from Maturity to Decline: Essay Diamond Power CorporationThis case study, prepared by Richard C. Scameborn, follows the DiamondPower Specialty Company from its humble beginnings in 1903 to its decline in1991. The birth of Diamond came with the invention of the hand cranked sootblower. As the years and technology progressed, so did the Diamond soot blower.
Along with this main product, Diamond also added several other products to itsline, but none had the profitability of the soot blower. Diamond had the marketto itself for a number of years, but eventually two competitors sprang up tochallenge Diamond: Copes-Vulcan and Bayer Company. Competition did not becomefierce until World War II, when the soot blower became a major commodity used bythe U. S. Navy to clean boilers on board its ships. At this point, the sootblower industry became a seller’s market and the need for strategy (bothcorporate and business) became a necessity for growth and survival.Order now
Diamond Power’s main mission at its beginning, to produce soot blowersthat would efficiently clean the inside of boiler as it continued working,basically stayed the same up until the addition of competition into the market. At this point, Diamond had to revise its mission to include technologicaladvances to stay ahead of it main competitor, Copes-Vulcan. With the passage oftime, production efficiency and technology were not enough. Diamond eventuallyhad to add foreign sales, customer service, and replacement part production toits original plan to keep ahead of the game.
By the 1970’s, the mission tosupply replacement parts and service became one of Diamond’s top priorities asit opened parts and service plants in New Jersey, Georgia, Ohio, Texan, Colorado,North Dakota, California, and Washington. Diamond Power’s goals over the years seem to stay pretty congruent withits mission up until the early 1980’s. Basically, Diamond’s goals includedstaying on the moderate levels of technology, building a foreign market byexporting machines and parts and establishing joint-venture manufacturingcompanies overseas, establishing an extensive and profitable domesticaftermarket support system that included minifactories that supplied both partsand service, and to keep the upper hand on the soot blower market share. Diamond Power’s parent corporation, McDermott, Inc, utilized severaldifferent corporate strategies to try to achieve Diamond’s goal of a profitableand extensive aftermarket support system. However, some of the decisions made byMcDermott, Inc in regards to its replacement part division caused more harm thangood.
For example, when a small operator began to copy and sell Diamondreplacement parts at a lower cost than Diamond with great success, McDermottoverrode Diamond executives’ wish to acquire the operation. This decision hadfar-reaching repercussions as will be discussed in later paragraphs. McDermott also had to take action where Diamond was concerned when itbegan experienced severe financial difficulties in the late 1980’s and early1990’s. McDermott had to implement a major costcutting effort and restructuringplan to keep from going bankrupt. This plan included putting pressure on Diamondto increase profits.
Diamond had to take implement several business strategiesin order to appease its parent corporation. Decisions made on the corporate level had a direct affect on thebusiness strategies implemented by Diamond Power. The development of theaftermarket support system was a plan with several long term benefits. The plan,developed by the marketing vice president at the time, involved a nationwidenetwork of minifactories that offered service and replacement parts that couldbe delivered in a matter of hours to industries in need. Diamond’s high marketshare on soot blowers allowed the company to lower its new equipment prices andrecoup any losses through its replacement part division. This resulted inincreased sales in both new equipment and parts.
Diamond’s competition, Cope-Vulcan, did not have any service centers and only limited replacement partmanufacturing, and therefore did not reap profits as high as Diamond Power’s. However, not all of Diamond’s business strategies worked as well as thereplacement part and service system. Under the pressure of McDermott, Inc, Diamond felt it had to makeseveral rash decisions in order to increase profitability. First, Diamond didnot purchase Bill Blalock’s low production company that made Cope and Diamondparts. This allowed a foreign company to buy it out and break into Diamond’sdominant part industry.
It also allowed Cope-Vulcan to increase its partproduction market by forcing it to implement an aggressive management team andadd new products to its line. Diamond responded to this by deciding .