Analysis of the Present Situation of Palladium Doors Inc - Case Study Example

? Case Study Analysis of the of the Table of Contents Table of Contents 2 Executive Summary 3 Problem Statement 3 SWOT Analysis 4 Strengths 4 Weaknesses 4 Opportunities 5 Threats 5 PEST Analysis 5 Political 5 Economic 5 Social 6 Technology 6 Alternatives 6 Analysis of the Alternatives 7 First Alternative 7 Second Alternative 7 Third Alternative 8 Fourth Alternative 8 Decision Criteria 9 Qualitative Method 9 Quantitative Method 9 Implementation 10 References 11 Appendices 12 Executive Summary The study has been prepared in order to understand the present situation of Palladium Doors Inc. The company has set a goal to increase the sales by 36 percent within 2004. There are four alternatives chosen by Robert Hawly and his team of senior executives for achieving the targeted sales goal. The study will reveal the best alternative option for achieving the target. The cost associated with the chosen alternative has also been shown. The projected Gross Profit and Net Profit figure have also been reflected here. The study will reflect the strengths, weaknesses, opportunities and threats of the company. It will highlight the analysis of the Political, Environmental, Social, and Technological environment of the operational market in which the company is operating. Problem Statement Palladium Door, Inc. is one of the privately owned producers of different commercial and residential garage doors. In its product line, the company manufactures both insulated and non insulated cables, steel garage doors, supplies, rollers, springs and the side roller tracts. The company wanted to increase the sales by 36 percent in the year 2004. Robert Hawly, the director of sales & marketing, was concerned that whether the present distribution strategy which was used by Palladium would be able to achieve the goal. Although the company has shown a steady growth from past 10 years, but the market share of Palladium was only 2.6 percent. The senior executives of the company were made to believe that this sales goal was justified and would help the company in attaining a large sales volume for the preservation of its buying position with the suppliers. During its growth period, Palladium has even exceeded the industry growth. Three new plans have been chosen for the achievement of the company’s goal. There are four different point of views related to the marketing decisions. SWOT Analysis SWOT analysis will help to analyze various organizational issues (Mintzberg et al., 1998; Ansoff, 1965). It is a traditional method for making strategic plans (Dickson, 2002; Glaister & Falshaw, 1999). The SWOT analysis will help in selecting the best strategic option followed by the decision making after understanding the inter relationship between the company and its respective environment (Pahl & Richter, 2009; Ferrel & Hartline, 2010). Strengths 1. When Palladium was in its growth stage, it had a sales growth which was even higher than the industry growth. This is a significant strength of the company which has helped it to achieve a remarkable position in the market. 2. The company has a good partnership associated with the exclusive dealers. The exclusive dealers are responsible for almost 70 percent of the company’s sales. This will help the company to achieve the targeted sales goal. 3. The company is one of the biggest steel door manufacturers. Weaknesses 4. Although Palladium has shown a steady growth from past 10 years but the market share of the company was only 2.6 percent. 5. The company had only 50 additional dealers in previous 10 years. This was counted as one of the weaknesses of the company. Opportunities 6. Palladium has high opportunities by expanding its operations in the North West and West markets, where the houses build are aging. 7. There exists low brand awareness in the market where Palladium operates. This gives the company an opportunity to attract the customers who are not brand conscious. 8. Palladium has the opportunity to extend the total number of exclusive dealers which in turn will increase the sales volume of the company. Threats 9. Low sale is generated by the non exclusive dealers. If the company is not able to increase the total sales within the next year then it will result in losing its position in the market. 10. The market share of Palladium is very low. If the company cannot improve its performance within next few years then it might result in losing of its market shares. PEST Analysis The environmental scanning of Palladium Doors, Inc. will help in understanding the risks associated with the environmental factors (Lorat, 2009; Applegate & Johnsen, 2007). Political 11. There is no political barrier to the company as there are no strict rules and regulation made for the commercial and residential garage doors manufacturers. 12. As the company is a local manufacturer, it does not outsource its products. Thus it does not have any threat from the political environment of its operational market. Economic 13. Globally, measures are being taken to increase the purchasing power of the consumers in the developed countries. This will improve the economic condition as well. It is expected that the demand for the products of the company is going to rise in future. Social 14. The young generation prefers customization in the designs of their residence as well as their garages. Palladium has the opportunity of providing differentiated garage doors to the customers. Technology 15. Presently, it has become very important to increase the security measures. Using security locks, automated system in the garage doors are in increasing demand. This provides an opportunity to the company in providing quality garage doors with all the above mentioned facilities. Alternatives Robert Hawly and his team of senior executives chose three plans for achieving the sales goal of the company. There were four alternate viewpoint associated with the marketing decisions. The first alternative was to increase the total number of independent number of dealers in the existing operational market of the company. The second view point was to develop a franchise program (exclusive) by transferring 27 independent dealers to Franchise Exclusive Dealers. The third view point was reducing the total number of dealerships by not granting any kind of formal exclusive franchises. The fourth and final viewpoint was not to bring any change in the number of independent and exclusive dealers or the distribution strategy of Palladium. Analysis of the Alternatives First Alternative In the first view point, the senior executives supporting it thought that it will be important to add more 100 dealers for increasing the total sales of 2.4 percent according to the industry trends. They decided that these dealers would be independent (non exclusive) dealers in 100 markets where the products are not served by the exclusive dealers. Hawly knew that adding 100 dealers in the existing market would not be very easy and would need increased sales force for servicing the non exclusive dealers. The senior executives had a belief that this particular plan had a broad opportunity in its long run (like three to four years). However, it was really unrealistic to acquire 100 new non exclusive dealers within a time span of 1 year as it would require huge sales force. Second Alternative In the second alternative, the executives thought that each of these dealers will represent different market where each market has high potential and is a participant of new advertising and promotional program. These dealers would sell those products, which were in high competition and were supplied by local and regional garage door manufacturers. They would be selling the Palladium doors in their markets and would be given a definite franchise fee. According to the senior executives, if this strategy would be adapted, then the franchisee program in the 27 markets could easily be served by the promotion program. The previous 50 markets which would be served by the exclusive dealers would remain unaffected as the promotion program had already been budgeted including these dealers. The main advantage of this alternative was that these exclusive dealers will help the company in driving the majority portion of the sales. Moreover, Palladium would be receiving franchisee fees. However, it is expected that this alternative strategy will have limited or less flexibility in the future. Third Alternative The third alternative was planned for reducing the number of independent dealers to 200. The executives who were supporting this approach had a number of reasons to support this alternative plan. Firstly, the analysis of the sales of dealers reflected that almost 70 percent of the company’s sale was produced by those 50 exclusive dealers of Palladium Door. This success was achieved by the company without the implementation of the formal franchise program. Secondly, these executives thought that if the company commits to a formal franchise program then it would result in bringing limitation to its flexibility in the future. Moreover, according to them, there is a chance of increasing the sales force effort and the sales by giving more time to less number of dealers. The disadvantage of this alternative was that the company losing one third of the company’s independent dealers will have a negative impact on the sales figure. Fourth Alternative In the fourth view point, the executives supporting this plan thought that the current distribution policy would do well. But it has already been stated that the present distribution strategy of the company was not adequate for achieving the sales goal. The best alternative which should be chosen by Palladium Doors is transferring 27 independent dealers to the Franchise Exclusive Dealers. The advantage of this alternative is that these exclusive dealers will help the company in driving the majority portion of the sales. Moreover, Palladium would be receiving franchisee fees. The total cost structure for choosing this alternative has been shown in Appendix 1. The total cost has expenditure has been estimated to be $ 10201900. Decision Criteria Qualitative Method It is known that the executive dealers of Palladium Doors, Inc. are responsible for 70 percent of the company’s sales. Thus the transfer of 27 independent dealers to franchisee executive dealers will help in increasing the sales of the company. The promotion program will help the company in driving the majority portion of the sales. Moreover, Palladium would be receiving franchisee fees. Moreover, there is less sales generated from the independent dealers. The transfer from independent dealers to executive dealers will have a positive impact on the financial performance of the company. Quantitative Method The implementation of the second alternative will give the company a gross profit of $ 3107300 and a net profit of $ 2227300 (as shown in the Appendix 2 and 4). Thus the financial performance of the company is projected to be very impressive in the next year. Implementation Palladium would divide the responsibilities of the dealers into two different segments. The franchisee executive dealers will have the responsibility of selling those products which are in high competition and are supplied by local and regional garage door manufacturers. The existing independent dealers will be given a target sales figure to be achieved for increasing the total sale of the company. References Ansoff, H.I. (1965). Corporate Strategy. New York: McGraw-Hill. Applegate, E., & Johnsen, A. (2007). Cases in Advertising and Marketing Management: Real Situations for Tomorrow's Managers. New York: Rowman & Littlefield. Dickson, P.R. (2002). Dynamic versus static SWOT analysis. American Marketing Association, 48(2), 257-79. Ferrel, O. C., & Hartline, M. D. (2010). Marketing Strategy. Connecticut: Cengage Learning. Glaister, K.W., & Falshaw, J.R. (1999). Strategic planning still going strong. Long Range Planning, 32(1), 107-16. Lorat, N. (2009). Market Audit and Analysis. Berlin: GRIN Verlag. Mintzberg, H., Ahlstrand, B., & Lampel, J. (1998). Strategy Safari: A Guide through the Wilds of Strategic Management. New York: Free Press. Pahl, N., & Richter, A. (2009). SWOT Analysis - Idea, Methodology and a Practical Approach. Munich, Germany: GRIN Verlag. Appendices Appendix 1: Total Costs (including salary Expenditure) Cost of Goods Sold (sales*0.75) 9321900 Salary Expenses 880000 Total 10201900 Appendix2: Calculation of Gross Profit Gross Profit of Independent Dealers ($ 2300*273) $ 627900 Gross Profit of Exclusive Dealers ($ 32200*77) $ 2479400 Total Gross Profit $ 3107300 Appendix 3: Calculation of Sales Representative 273 Independent Accounts 300 Independent Accounts X Sales Representatives 8 Sales Representative X= 7.28 77 Exclusive Accounts 50 Exclusive Accounts X Sales Representatives 2 Sales Representative X= 3.08 Thus, Total Sales Representatives = 8+3 = 11 Appendix 4: Calculation of Projected Net Profit Palladium Door, Inc. Projection of the Income Statement As on 31st December, 2004 Net Sales (3107300/ 25%) 12429200 (-) Cost of Goods Sold(12429200*0.75) 9321900 Gross Profit 3107300 (-) Salary Expenses 880000 Net Profit Before Tax 2227300 Read More