Sweco parts list

Harvard Business School 9-380-167 Rev. February 18, 1984

George S. Yip, DBA candidate, prepared this case under the supervision of Associate Professor Michael E. Porter as a basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. The case is based in part on a report by Richard O. Adams, Craig A. Jensen, Eugene P. Nesbeda, and Steven R. Wilson, all MBA 1979. Some financial and market data are disguised.

Copyright © 1980 by the President and Fellows of Harvard College. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means without the permission of Harvard Business School. Distributed by the Publishing Division, Harvard Business School, Boston, MA 02163. (617) 495-6117. Printed in the U.S.A.

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SWECO, Inc. (A)

Well, we've done it. You and I know the process works and the equipment works, but it won't be easy to convince the old-timers who have drilled all their lives without it. That includes the people in my own company.

With these words in November 1972 Dr. Peter Hamilton, of the production research department of a leading international oil company, encouraged Les Hansen, of SWECO, to enter the oil field equipment industry with a new piece of oil well drilling equipment that SWECO had developed, partly at Hamilton's instigation. SWECO called the new product a sand separator, though it was known in the industry as a mud cleaner.

SWECO, Inc.

SWECO was founded in 1917 as the Southwestern Engineering Corporation. During the 1930s Southwestern went bankrupt, and the Miller family, owners of some of the stock, assumed management control of the company to protect their position. Under new leadership, SWECO began to concentrate on the manufacture of heat exchangers and the engineering and construction of refineries and other process plants. The latter proved to be a highly competitive, and therefore not very profitable, field.

In 1947 an event occurred that would completely change the nature of SWECO's business, an event described by Howard Wright, Jr., SWECO's president, as the most important in the company's history. This was the acquisition of the so-called Meinzer Motion patent, a technique for inducing vibration in process equipment in three dimensions rather than two. This patent provided the basis for SWECO to enter production of vibratory machines for use in industrial screening, finishing, and grinding processes. In 1972 nearly all of SWECO's business came from the manufacture of vibratory equipment based on the Meinzer Motion principle. SWECO had sold off its last nonvibratory business in 1969, a sale that had reduced the company to one-third of its previous size. Looking back, however, all SWECO executives thought that the sale had been an excellent decision.

Business Areas

In 1972 SWECO's revenues of just under $15 million came from three divisions: Process Equipment, Finishing Equipment, and Environmental Systems. Foreign sales accounted for approximately 15% of total sales. (See Exhibits 1 and 2 for SWECO's financial statements.)

For the exclusive use of S. Sayeste, 2018.

This document is authorized for use only by Sibiya Sayeste in Strategic Managment taught by Fairweather, Peter, SUNY - New Paltz from January 2018 to May 2018.

380-167 SWECO, Inc. (A)

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Process Equipment Division. Process Equipment accounted for over 50% of revenues and was SWECO's oldest division. It had two major product lines. The first and more important was the Vibro-Energy separator, which screened solid particles from liquids or other solid particles. SWECO supplied separators to firms in many industries throughout the world. More than 15,000 SWECO separators were in use in 1972 in such industries as chemicals, food, ceramics, and pulp and paper. Some of the materials screened were cereals, detergents, sugar, clay, fertilizer, sand and gravel, salts, plastic pellets, wood chips, soybeans, paint, and apple juice.

SWECO separators were vibratory screening devices with from one to four decks (layers) of screens of varying mesh. The material to be screened was fed to the top layer. As vibration forced the material to the edge of the screen, the smaller particles or liquids passed through the mesh and the larger particles were funneled off from the periphery. Further passes through lower, finer screens removed increasingly smaller particles.

A vibratory separation machine consisted of a large metal cylinder, with layers of screen cloth inside, and spouts for inflow and outflow of materials. Units ranged up to 6 feet in diameter and were built with a variety of special configurations and custom features. In addition to selling separators, SWECO sold replacement screens and spare parts. These items were a continuing and profitable source of follow-on business. In 1972 SWECO separators ranged in price from $1,000 to $10,000; replacement screens sold for between $50 and $400 apiece.