The first factor in the economic environment that affected Timken’s was acquiring Torrington.

It
was a strategic move that allowed Timken vertical integration of products and services, and the
opportunity for bundling. Bundling is the selling of 2 separate products as one single item
(Stremersch & Tellis, 2006). The second factor that affected Timken’s economic environment,
caused by foriegn imports, was the Continuing and Dumping Subsidies Offset Act (CDSOA),
which allowed companies negatively affected by imported items being sold within the US at less
than fair value (DHS, 2015). The CDSOA is determined by the International Trade Commission
who determines if a domestic producer has been materially injured by the importing of imported
goods. Timken was able to offset losses from heavy foriegn importing of competing goods in
their market sector, through the Continuing and Dumping Subsidies Offset Act (CDSOA), which
added $66M of income to their balance sheet. The third factor that affected Timken’s economic
environment was the US economy within 2002, which was rocked to the core by one of the
biggest corporate financial collapses of all time. The Enron scandal and its bankruptcy failure
resulted in catastrophic effects that resounded through Wall Street, and the entire US economy. It
left many individuals, and entire business sectors wondering how to make up for losses caused
by the ripples of the financial earthquake Enron’s collapse caused. Due to all these factors in
2002 and 2003, companies, such as Timken, sought to increase productivity and sales, and turned
to strategic pricing and bundling of customized products (Tejeda, 2003).

Timken’s pricing strategy relates to Chapter 11 because it is based on second-degree pricing

discrimination, particularly bundling. Second-degree pricing discrimination occurs when a
company attempts to sell a higher quantity of its product by having standalone products grouped
into bundles (Webster, 2015). Timken reported a 58% increase in sales year-over-year in 2003.
The majority of those sales were from the recently acquired Torrington, which accounted for
54% increase in sales during that period (Timken World, 2021). Additional factors that needed to
be considered in this case are that Timken leveraged itself to acquire companies such as
Torrington, which further enhanced its ability to bundle additional product lines and services.

The pricing strategy of bundling has been very beneficial for Timken. As of 2017, Timken
operates in 33 countries, employees over 15K employees, and in 2017 reported sales of $3B
(TImken, 2021). Bundling of products helped Timken grow its market share both domestic and
abroad. Profits from bundling services helped generate capital funding for mergers and
acquisitions, that make Timken a market leader today.

References

Bar-Gill, O., (December, 2006 ). Bundling and Consumer Misperception. Retrieved from on
April 21, 2021
https://www.researchgate.net/publication/30504964_Bundling_and_Consumer_Misperception

Department of Homeland Security. (2015, July 2). Distribution of Interest to Affected Domestic
Producers under the CDSOA. Retrieved from on April 21, 2021
https://www.dhs.gov/sites/default/files/publications/OCFO/Customs%20and%20Border
%20Protection%20%28CBP%29%20-%20%20Distribution%20of%20Interest%20to
%20Affected%20Domestic%20Producers%20under%20the%20CDSOA.pdf

Stremersch, S., & Tellis, G., (2006, May). Strategic Bundling of Products and Prices: A New
Synthesis for Marketing. Retrieved from on April 21, 2021
https://www.researchgate.net/publication/228178715_Strategic_Bundling_of_Products_and_Pric
es_A_New_Synthesis_for_Marketing

Tejeda, C. (2003, October 7). The Allure of 'Bundling'. The Wall Street Journal. Retrieved from
on April 21, 2021 https://www.wsj.com/articles/SB106547638145897300

Timken. (2021). The Timken Company Announces Results for 2003 and Fourth Quarter.
Retrieved from on April 21, 2021 https://news.timken.com/2004-01-22-The-Timken-Company-
Announces-Results-for-2003-and-Fourth-Quarter

Timken. (2021). Timken to Announce Second-Quarter 2018 Financial Results on July 31.
Retrieved from on April 21, 2021 https://investors.timken.com/financial-news/press-
release/2018/Timken-to-Announce-Second-Quarter-2018-Financial-Results-on-July-
31/default.aspx

Webster, Thomas J. (2015) Managerial Economics (ME): Tools for Analyzing Business
Strategy. Lexington Books. Retrieved from on April 13, 2021
http://ezproxy.lsus.edu:2048/login?url=http://search.ebscohost.com/login.aspx?
direct=true&db=nlebk&AN=935122&site=ehost-live&ebv=EB&ppid=pp_i