Case Synopsis
Bill Ruger, one of the co-founders of Sturm, Ruger & Company, had a lifelong passion for firearms and an entrepreneurial spirit. His first attempt at starting his own company failed, but with financial backing from Alexander Sturm, he was able to start a second company in 1949. Always a savvy money manager, Ruger was both frugal and innovative. He quickly realized that his company couldn't compete against known brands like Smith & Wesson, Remington, and Colt, so he pursued a low-cost strategy, which required technical design innovations that saved money in manufacturing. In the end, Ruger created less expensive but extremely well-made rifles, pistols, and revolvers and achieved the market position the firm still holds today. Ruger was also a firm believer in gun safety and created ads and other content that educated gun owners on the proper use of firearms.
Today, Sturm, Ruger & Company is one of the top seven U.S. domestic gun manufacturers. Competition is fierce, and three international firms are also active in the U.S. market. The company's products, often involving 50 to 100 parts, are expertly crafted using high-tech machine tools in four manufacturing facilities across the United States. Innovation has been and continues to be a core competency at Sturm, Ruger. The firm dedicates more than $10 million a year to R&D, and sales of new products (models that have been in the marketplace for less than two years) account for approximately 30% of annual sales.
The firearms manufacturing and distribution industry is closely regulated through legislation. Most federal regulations are implemented through the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF), although all states have equally stringent regulations. Like all firearms manufacturers, Sturm, Ruger must comply with these regulations when dealing with distributors and dealers, which all require licenses to operate in this heavily monitored industry. Related to political and legal influences, the National Rifle Association (NRA) is an extremely active association boasting more than 5 million members. Dedicated to protecting the "right to bear arms," the NRA has a powerful lobbying wing, actively supports presidential candidates that support the NRA's aims, and has been extremely effective in shutting down proposed gun control legislation. With such a huge membership, it's not surprising that the NRA wields a great deal of control over firearms manufacturers, too.
In the firearms industry, competitive rivalry is strong, political forces routinely threaten new regulations, and the market sways dramatically, often in response to political forces (such as presidential elections) and sociopolitical forces (such as consumer responses to mass shootings or increases in crime rates). Thus, despite its efficient operations and respected reputation for quality, innovative products, Sturm, Ruger & Company still faces a number of challenges.
1.Use the seven segments of the external environment to identify threats and opportunities in Sturm, Ruger & Company's external environment. Which of these threats might cause you the greatest concern if you were a shareholder?2. When launching his company, which business-level strategy did Bill Ruger adopt, and why? What are some of the risks the firm could face by continuing to use this strategy?
3. Compare and contrast Sturm, Ruger & Company with its two biggest rivals, American Outdoor Brands Corporation (AOBC) and Remington Outdoor Company. After conducting your analysis, what strategic recommendations can you make for Ruger?