Current Strategic Situation and Options Available To Sonance - Assignment Example

Running Head: Management and Accounting Name Course Lecturer Date Sonance at a Turning Point Question 1 Current Strategic Situation and Options Available To Sonance The current strategic situation and option available to Sonance is venturing the mass market using the Architecture Series product line. As such, this report will focus on the option of “try to enter the mass market with Architecture Series product, take advantage of the housing boom by acquiring more production builder contracts for the Architecture Series product line”. This is the most viable and most strategic option for this company at this point in time that the management had to make a very important decision about the future of the company. The mass market is very promising, the Architecture Series product would enable the company to made increasing sales. Customers in this market would purchase this product consistently because it has many innovative features that meet the needs of the customers as Kameoka & Kuriyagawa (2005) reports. In addition, the company would take advantage of the boom in the housing market; the company will seek to acquire more contracts with the construction builders (Terhardt 2005). By acquiring more contracts with the construction builders, it would maintain increasing sales as well as build the reputation of the company. The customers who will be installed with the company’s products through the contracts will not feel the costs of the products because it will be included in the total costs of the house. This will create positive goodwill of the company in the mass market; the benefits would therefore spread in the market and thereby surge up the sales. The Architecture Series established by the company is well known in the market and this offers benefit in that customers know the performance of the product. Improvement process would follow after. The company has developed very much since its inception in 1982, it has been experiencing mixed growth over the period and it is currently trying to reestablish itself again in the market after a period of poor performance. The company has several market segments as it focuses on different markets. The context growth trends indicate that the company was struggling in the market; this was because of increased competition from different companies offering better products. The basis of competition on innovative products, the company did not invest much in research and development, it focused on its original series. The competitors introduced competitive products with innovative features, this made Sonance company to lose its customers to the competitors (Metfessel 2006). The customers collaborate through different distribution channels used by the company. Customers get to understand the different products offered by the company for different markets. Each market segment has its own distribution channel. The following are the analysis of the channels used by the company. Exhibit 1 Sonance –agents – retailers – consumers Sonance – sales agents –retailers – sales points - consumers Sonance –whole sellers –consumers Sonance –sales agents – consumers Exhibit 2 Channel members Characteristics Sonance Producers of quality products Mass merchandising Sales agents Good market understanding Mass merchandiser Whole sellers Extensive market understanding Bulk stocking Good product management Fair pricing Consumers Quality judgement Question 2 Strategic Options for Sonance to Generate Profitable and Sustainable Growth for the Company and Sales Momentum for Its Products Growth in profitability and its sustainability is something that Sonance needs to critically consider so as to facilitate improvement in their performance. To achieve growth in their profitability and thus record a sales momentum for its products the management will need to consider improvement of the quality of their products. This will promote customer attraction since the quality of their product will advertise the products thus growth in sales and subsequently more profits will be earned. Sonance can also initiate growth in its profitability and sales momentum as well as sustain it by considering a change of it business strategies this is because for any company to achieve growth in its profit as well as achieve increase in its sales momentum it should have good business strategies that will promote growth in business culture, will facilitate decision making as well as facilitate adequate utilization of human resources within the organization (Beserman 2007). The company can also consider diversification of its products so as to increase its market spectrum and achieve growth in profitability and sales momentum in the long run. Diversification of its product will also increase its opportunities in the market thus, increase in sales and growth in their profitability. Sonance should consider changing its marketing strategy to target its customers directly so as to facilitate reduction in its cost of distribution as well as enhance its customer relationship so that it is possible to convince their customers about their products. Thus, the company can consider mass-merchandising account so that they will be able to cut their operational cost as well as target mass customers. This will be effective when the company consider proper development of their products alongside providing a well-defined channel of distribution for their products so that the business access to its customers adequately. Selling to many customers at the same time will stir up growth in the company’s profitability and result in growth in the amount of sales (Skelton 2014) Sonance should more aggressively pursue production home developers by collaborating with home developers to install home theater and other electronic appliances for customers. This will help in increasing market for their products through indirect target of customers since even customers who would not have considered utilization of their products will consume them indirectly and the cost of such products will not be realized directly. The company should re-focus its strategies on high-end installers so that they are able to improve their performance. From the findings of the research and development department the company will be able to introduce more innovative products that will enhance the competitive advantage of the company thus, enhance expansion in their market. The company will achieve this by ensuring that it introduces products that will increase their market share as well as enhance customer satisfaction this will help in reducing the losses that had earlier been experienced in the company as a result increased competition. Targeting architects and interior designers of custom homes directly is also a good way to facilitate growth in sales and profitability for the company since it will enhance increase in market share. Targeting customers in their homes directly will increase customer’s access and thus facilitate growth in their profitability and sales since they are able to target customers directly (Beserman 2007). Sonance should lower their prices so as to enhance their competitive advantage and increase their sales. This is because with enhanced competitive advantage the company will be able to attract more customers thus enhancing growth in their profitability and sales momentum which will result to sustainable growth for the company. Sonance should also be prepared to improve their marketing strategies so that they enhance growth of target market and as a result increase their market share as well as their sales and profitability performances will be enhanced (Receivers et al., 2009) Question 3 Sonance Best Position in the Short Term and Long Term Success The architecture series analysis focuses on the dealer channel. This alternative will be leading production in the mass market. There is high retention of customers especially the ultra-high end dealers; the rate of retention is expected to be 90%. The company will be able to regain the customers it lost in 1999; the company will be able to attract 50% of the mass market dealers. The pricing of these products will range at $780 per pair. The research and development team together with sales team will advisethe company on the best price to sell the products. The company will also consider the competition so that it does not price the products too expensive. Customer mix decisions will involve the company dropping some of the mass market retail consumers in order to focus on the semi customer and custom installation markets. The company will also consider reducing the unit price of the original series product line, the unit price would be down to $90 from $150. This would encourage customers to purchase the products with confidence; the gross margin will increase by 30%. However, the unit costs relating to installation of the products is not expected to reduce but the retention rate would increase. As indicated above, the retention rate would increase. The second alternative is launching the detachable iPort; the company would continue to focus on the mass market retail. This market contains one of the most productive customers; the iPort presents a unique brand. This will position the company and give a competitive advantage (Jiang et al., 2004).This alternative indicates that the detachable iPort had a lower rate of retention of 5% as a compared to the other alternative above (McNair et al., 2013).This is because the market has a Lot of competitors with similar products. In addition, the company has decided to use price leadership to price its products in this market. As such, it has set a higher price for its products than the competitors’ products. Though this may hurt sales of the product in the short run, it is a good strategy in the long run as customers will gain confidence with the products because of the innovative features of the product and therefore make the company iPort their preferred theater system. This would increase the iPort sales to at least 40%. Nevertheless, the growth rate is expected to decrease because of the pricing strategy adopted by the company for this market, it would decrease by 5%. The sales agents would not take the pricing strategy lightly because it will affect the product promotion and consequently sales. In both alternatives, there is no expected change in production builders as price is the most determinant factor in the market, moreover, activities in one market does not affect the other market indicating that the markets are independent of each other.as such, decisions concerning one market does not affect the decisions on other markets (Schroeder et al., 2011). The proposal position Sonance at tight working capital in the short term but at a very competitive position in the long term. The company will be able to maintain a sustainable business while still recording growth in all its markets in the long term. The launch of architecture series at %750 will make more sales and increase the gross margin by 45%. This price is within the market rangeand the product has added advantages in that they have more innovative features than the other products in the market (Bose 2007). This will attract more customers and therefore the company will increase its market share. Launching architecture series at $2,500 would reduce sales, gross profit margin and the growth rate. The retention rate would also reduce considerably because the company would lose many customers. The price is too high and the competitor prices are much lower at $1,500 for the closest. This is not an advisable price and therefore the company should implement the recommended price by the sales team. Launching detachable iPort is a very strategic idea by the company; this product will realize the real benefits to the company (Giroux 2007).This is a unique product with unique features, it contains customers’ needs and therefore it meets customer expectations. The company should not pursue more production builder contracts for Architecture Series, it should look to make independent sales as the production builder contracts will be affected the economic downturn and harsh economic conditions in the housing market. As such, it is essential for the company to establish an independent business. Selling Sonance is not an alternative nor is an option, the company productive and profitable enough to sustain itself. Question 4 The Next Step for Sonance In case our proposed business strategy is successful, then the business should remain highly consolidated in the industry by working in integration with businesses offering different products which will facilitate differentiation of the market products as well as development of their products to facilitate customer satisfaction and thus increase in sales momentum. This will enhance sustainability in its performance especially after proper engagement of product differentiation so that Sonance will be able to outperform their competitors. This is because in a highly consolidated industry there are so many competitors who may affect performance of the company especially if they fail to apply appropriate marketing strategies that will facilitate access to a larger market share. Therefore, participating in a highly consolidated market will facilitate increase in the market share of the company especially if proper engagement of customers is done so that there is increase in sales and profitability and eventually the performance of the company will have improved (Struthers et al., 2010). Marketing strategies used by the company will facilitate in improving the performance of the company sales and result in growth of the company’s profitability. Product differentiation through branding is an effective way to market the product. The company can also decide to market their products through considering their functionality where the customers can be trained on how to utilize the product so that they are confident about it. The company can also market it product by providing product specification to its customers and also assisting customers on how to use the product. Thus introducing a new product and having it advertised, packaged and well branded will facilitate marketing on the basis of the product. Prices set for our product will also promote marketing of the products being launched. This is because the pricing of the products will be determined through market forces. So, the prices set for the product should be lower than those of competitors so that it will facilitate in enhancing the company’s competitive advantage which will facilitate in improving market share of the company thus facilitating growth in sales and profitability (Glaeser & Gruber 2007). The company should engage in product promotion as one of their marketing strategies, since they are targeting mass customers then, advertising through mass media as well as public relations will facilitate access to customers and persuade them about the new product and its benefits to the customers. The company can also choose bright colors for the products logo and packaging so that it will facilitate in advertising of the product by being appealing to the customers. Having distribution channels well defined in the organization will facilitate access to customers. This can be done through various distribution channels so that point from where the product is accessed are increased (Innovations 2005). References Beserman, R, 2007, Sonance emission band of crystal phosphors, J, of Luminescence 8 (1974) 326, In the 3rd and 7thlines of the Introduction, one must read:“5682 A line of a krypton laser” instead of “5282 A line”, Journal of Luminescence, 8, 510. Bose, S, 2007, atonality and Beyond: The century when composers and audiences parted company. Cables, H, & Cable, I, 2010, the rise of Sonance, industry review: 8, 510. Giroux, D, 2007, Nietzche et Sloterdijk, corps en ré sonance. Glaeser, G, & Gruber, F, 2007, Developable surfaces in contemporary architecture: Journal of Mathematics and the Arts, 1(1), 59-71. Innovations, D, 2005: Iport/Iportmusic. Jiang, Y, Zhang, M, & Wu, W, 2004, on health functions of Sonance Herbal Drink, the beverage industry, 5, 008. Kameoka, A, & Kuriyagawa, M, 2005, consonance theory part II: Consonance of complex tones and its calculation method, the journal of the Acoustical Society of America, 45(6), 1460-1469. McNair, F, Olds, P, & Milam, E, 2013, fundamental financial accounting concepts: McGraw-Hill Irwin. Metfessel, M, 2006, Sonance as a form of tonal fusion, Psychological Review,33(6), 459. Receivers, A, Blinds, M, Mounts, T, Vogel, S, Loudspeakers, F, Loudspeakers, O, & Displays, F, 2009: Infrastructure Electrical. Schroeder, R, Clark, M, & Cathey, J, 2011, financial accounting theory and analysis: text and cases, John Wiley and Sons. Skelton, P, 2014, Q and A: A view from the top. Struthers, S, Curtis, J, Call, R, & Berges, J, 2010, U.S. Patent No. 7,792,524. Washington, DC: U.S. Patent and Trademark Office. Terhardt, E, 2005, pitch, consonance, and harmony, the journal of the acoustical society of America: 55(5), 1061-1069. Appendices 1 Exhibit 3 Dealer margins and EVC analysis: Speaker-Craft (SC) Sonance Original Series Sonance Arch Series $750/pair Sonance Arch Series $2500/pair Sonance Arch Series Priced at dealer EVC=0 Steps to compute EVC=O Price A Retail price $365 $550 $750 $2500 (4) C/B B. % margin to custom installation 85%   C. Gross margin to dealer (A x B) $275 $355 $245 $245 (3) G+F D. Time to install (hours) 0.5 1 2 2   E. Cost per installation work hour $60 $60 $100 $100   F. Cost to install (D x E) $30 $60 $200 $200   G. Total profit to a dealer per speaker pair(C - F) $245 $295 $45 $45 (2) J H. % profit to custom installation dealer (G I A) 67% 54% 6% 1.8%   I. SpeakerCraft   J . Dealer's margin per 2 hrs. of labour 1 (2 * C I G) $980 $590 $45 $45 (1) as SC K. Dealer's EVN2 labour hour vs. SpeakerCraft     Speaker-Craft Sonance Original Series Sonance Arch Series $750/pair Sonance Arch Series $2500/pair Sonance Arch Series Priced at dealer EVC=0 Vendor's (Sonance and SC} margins analysis:           Price to the dealer $90 $140 $505 $875 COGS $40 $50 $200 $200 Vendor margin per pair (L-M) $50 $90 $305 $675   EXHIBIT 4 iPort Arch. Series - Arch.Series-   iPortand Architectural Series breakeven analysis   Price Price     $750 $2,500   Breakeven Analysis   A. Sonance sale price to retailers $245 $305 $875 B. Cost to Sonance $125 $200 $200 c. Sonance margin from sale (A - B) $120 $105 $675 D. Sonance % margin on sales (C/A) 49% 34.4% 77.1% E. Additional R&D $1,500,000 F. Marketing 'ask' for launch   G. Cost to bring to market $5,125,000 $2,000,000 $2,000,000 H. Break even # of units to sell (G/C) 42,708 19,047 2962 I. Break even $$ (H x A) $10,463,460 $5,809,335 $2,591,750       Market Sizing I. Total number sold worldwide in 2005 22,500,000 J. % sold in U.S. 47% K. Number sold in U.S. in 2005 10,575,000 L. % Market share needed for breakeven 0.40% M. Average # speakers sold by each dealer per year (30* 15)   N. Number of new dealer accounts for AS breakeven (H/M)   Read More