David Fabb Holcings Limted Financial Profile and Plan 31.5 3.1.6 Bargaining power of buyers: Servo is never knowingly undersold in the market and the processing fucility offered by Servo ‘enhances the value of customers" products at 2 predetermined competitive price, together with the offer of a JIT service, therefore, the bargaining power of buyers is low. There is no better service in the market place. ‘The wide ranging facilities offered by Servo means that customers cut out the cost of transportation Devause thoy take advantage of the full spectrum of processing services from one location, thus ‘making the rovte through Servo a cost effective and discounted processing service, rendering lower bargaining power Rivalry among existing competitors ‘There are few competitors who could match the service offered by Servo for competitiveness, and @ JIT service. Customers prefer to have thew material delivered directly from the mill, and enjoy ¢ free storage period pricr to having the full range of cutting facilities available to them. Bargaining power of suppliers Considerable buying power enables the Group to take full advantage of the economies of scale and thus obtain supplies at competitive prices. Suppliers are keen to target Servo as a potential customer, and itis often the case that suppliers will apply a loss leader principle for a limited period in order toplace Servo within their portfolio. Servo continually trawl the market place for competitive supply and a new “cost reduction” team is in place to test markets and procure competitively. Current Market Issues Over the last five years product mia has changed dramatically and certain sectors within the processing facility has become more labour intensive, thus reducing productivity. It can be noted from the scale of charges that the Company partly addresses the productivity issue by applying « “pyinimum hump sum charge” Customers” suppliers of raw materials are continually forcing prices upwards and our customers clients are attempting to reduce their cost exposure and are attempting to force product prices down Servo are maintaining their required scale of charges for processing as the service it offers enhances the quality of the core product which in tum commands a fair price for services while remaining the ‘most competitive in the merket. The uncertainty surrounding the UK operations of Corus continues to be a source of concern to their customers, The inevitable end result is shat their customers will look to forcign suppliers for ‘potential raw material supplies. Procurement of material from foreign sources would have a positive impac: on the levels of processing for Servo as opportunities would be available for increased processing, which is presently carried out by Corus Group Service Centres. Materials would be imported mn the raw state, i.e. wide coil, thus tendering increased demand for pickling, slitting and decoiling. Current Business Strategy Itis planned to move processing facitities eventually from Servo 1, Stourbridge, to Servo 2 at Dudley. Already owned, additional slitting and dezoiling lines, will be installed ai Dudley and the ‘two sites will operate whilst new line installations ‘ake place, thus providing an uninterrupted process flow to customers.