Swisher Mower and Machine Company
Situation Analysis
A. Industry
Within the lawn and garden industry, 74 percent of sales came from finished goods, such as lawn mowers, in 1995. Riding lawn mower sales are very seasonal. Front-engine mowers were viewed by consumers as more powerful while rear-engine mowers were viewed as better capable to handle large jobs. However, the front-engine mowers were most popular.
There were ten major competitors in the industry in 1995. Private-label riding mower sales were on the rise. Total industry sales had 65-75 percent coming from private-labels. National retail merchandise chains contributed 24 percent of sales in the retail distribution of OPE.
B. Company
SMC is a relatively small manufacturer with a long history and strong brand image. Sales had been consistent for approximately the past 5 years when SMC received a proposal in early 1996. They were currently selling three main mower units. A zero-turning radius riding mower, the Ride King, which accounted for 63.6 percent of SMC’s total sales and 57.8 percent of their total gross profit in 1995. SMC sold a trail mower, the T-44, which accounted for 8.2 percent of total sales and 13.2 percent of total gross profit. They also produced push mower kits, which contributed 8.2 percent of total gross profit. The sells of replacement parts made up the remaining 20 percent of total sales and 29 percent of total gross profit. SMC had the Trim-Max to introduce as a new product line.
SMC was currently distributing and selling to retailers, wholesalers, and private-labels as well as to Europe and the South Pacific. About 75 percent of total sales were coming from nonmetropolitan areas. Wholesalers represented 30 percent of riding mower sales and 25 percent of sales was from direct-to-dealer sales accounts. The private-label sales accounted for 40 percent of total sales and foreign sale 5 percent.
C. Trends
SMC could expect the consistent sales trend to continue. The industry forecast expected sales to continue to increase in the next year. The industry was continuing to see growth in private-labels.
Problem Definition
Would it be more profitable for SMC to enter a private-label distribution arrangement with this retail merchandise chain or to continue operations in SMC’s current market niche and wait out other opportunities?
Alternatives
A. Identification of Relevant Alternatives
According to the calculations, it will be impossible for the company to reach the sales goal of 12.5 million regardless of which option they choose. However the best outcome is with the option number two which is to develop an exclusive franchise agreement with existing non-exclusive dealers.
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