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Introduction
Bill and Kent Smith established Surefooting Foundations, Inc. (SFI) in 1978 as a residential foundation repair company. The need for foundation repair arises when the typical foundation concrete slab settles due to expanding or contracting soils. Repairs normally consist of digging under the existing foundation, jacking the foundation back into position with hydraulic jacks and then pouring new concrete under the foundation. SFI’s planned new product, a foundation stabilizing system, could dramatically increase revenues.
Organizational Vision, Mission and Objectives
SFI will help people to enjoy the ownership and comfort of their homes with the peace of mind that there will be no danger of foundation failure at any time; to preserve the value of their homes as assets by minimizing major repairs. SFI will continuously tap new technologies to deliver products and services that will make foundation repair effective and affordable to all homeowners.
For all home owners and builders, SFI aims to:
Spread the information of the effects of soil dynamics to the integrity of house foundations
Promote the technology of the foundation watering soaker hose system (soaker system). It will also use its marketing campaigns to describe the technology
Continuously improve its soaker system products to become more affordable
Become the best known brand for the technology
Capture 70% of the market which are the home owners in the areas with high probabilities of soil movements
Develop a market demand estimation method which will track the growth of home construction and the changing bearing soil and climactic conditions in the country
Current Strategy
There are currently 124.6 million houses in the United States (Number of households) and with climate changes due to global warming, millions of houses will suffer from soils expansion and contraction which will damage their foundations. There are 17 states with climactic conditions that make homes highly susceptible to foundation failures and there are about 38 million houses in them (Brown 1984).
The product requires a considerable amount of labor in terms of installation and with the manpower just enough to serve one state, distribution has to proceed in three phases. Phase 1 identified the four cities of Tulsa, Oklahoma City, Forth Worth and Dallas for the field test. Phase 2 will be the coverage of the most problematic state which is California which alone makes up 28% of the target houses. Success in Phase 3 will expand the company and would enable establishing branches in the other 16 states. Phase 4 would set-up regional centers in the rest of the U.S. assuming that the demand would not be as dense as the 17 states.
The product development team will work closely with the installation teams to find out if models of the product can be developed based on the varying conditions of the customer homes. Marketing and sales would also provide feedback on customer responses to the price offers for every model.
SWOT Analysis
Strengths
SFI has already been in business for almost four decades and has already created a name for itself as a as a specialist in foundation repair. Any product introduction would be met by the market with an assumption of viability
The product had just been invented, patented and has the potential to be a ground-breaking marketing success without any competition.
The long-term foundation stability provided by the product is superior to the current ones in the market.
SFI has a strong marketing practice which optimizes its large customer database and builders’ network
Weaknesses
SFI is taking a high risk-high reward proposition as the product has not yet been field tested.
The introductory cost is much higher than the average repair cost encountered by customers.
Opportunities
The foundation repair market is still underserviced with only 55.6% having had repairs.
Unfortunately, global warming is causing extreme weather changes which cause draughts and increasing cases will produce more foundation failures.
Uncertainties in the economy can make people more conservative with their assets and this includes preserving the value of their houses by quality maintenance which is offered by the soaker system.
There is resurgence in the housing market which will spur building of new houses and renovation of old ones for resale or rental. Foundation maintenance can be included in the building works. (Sparshott 2016)
Threats
The technology is actually simple and the patent may not prevent competitors from developing similar products.
The builders can become competitors if they include this option in their work package.
There is a trend among builders in focusing on bigger homes which are built with sturdier foundations. (x3)
There is a shortage of labor among builders 25% from its peak in 2006 which can hinder the building of new houses.
Competitive Analysis
The traditional foundation repair remains as a competing service product because of its lower price at the typical quotation of $2,500. This is a hefty 37% lower than the current price of the soaker system at $4,000 and at which point, 40% of the home survey respondents stated that they were no longer extremely interested.
Surprisingly, there is little interest from the upper income groups which have houses which are worth at least $85,000. This indicates a belief that the quality of construction has infused a maintenance-free foundation. In this sense, high-end builders compete in the foundation repair business.
As a direct competitor founded since 1933, Olshan Foundation Solutions ("Foundation Repair Resources") has operated longer than SFI. It has a wider area of operations in 38 cities in 14 states. 17 of those cities are in Texas which makes it an intense rival of SFI. While SHI has maintained its focus on foundation repair, Olshan has extended its offering with the other foundation solutions as follows: basement waterproofing, exterior water management, crawl space recovery, wall anchoring, commercial services, builder services, plumbing services and foundation resources. Olshan may have more services but its solution for soil movement isn’t as specific to draught as a soaker system.
A smaller but excellent competitor is G.L. Hunt ("Foundation Repair”) which operates exclusively in Texas. It is 9 years younger than SFI but has a wider range of services such as slab foundation, pier and beam, soil stabilization, completion details, foundation drainage, combination pier, concrete description. steel piers, irrigation systems and drainage solutions. Hunt’s Automated Foundation Irrigation Systems is a direct competing product which runs on solar power timers but SFI’s soaker system two other power sources which are wind-driven generators and ordinary house current provide greater assurance of continuous operation.
Financial Analysis
SFI’s soaker system costs $3,650 per installation but this includes an engineering report from a partner soils engineering firm which provides the depth for optimum foundation stabilization. Inclusive of a 19% mark-up, the resulting price is $4,500 which customers found affordable with financing over five years.
The initial upfront investment for the delivery expenses for the soaker system line is $150,000 for each branch which makes for a total of $600,000 for the four cities in Phase 1. To be added is a marketing budget of $50,000 for all locations for the first three years; the next years would require only $25,000 annually.
Based from the Tulsa operations which already started, a 2-4% market penetration was assumed which projects to a 10 year period before investments will have been recovered. This is too long and a five year period was set which implies that product development has to produce a more affordable version at about half the cost.
Implementation Issues/Problems
The first challenge is to conduct successful field tests whose results will be used immediately by the marketing campaign. The strategy is to acquire customers with the applicable foundation problems to agree to a heavily discounted implementation but without a success assurance. In case of failure, SFI will guarantee a solution by using its older but proven foundation solutions.
The distribution of the initial customers in the four cities cannot be predicted. In case there is a wide imbalance where one or two cities will have an overwhelming demand, a transportation and logistical strategy has to be drawn to move resources where they may be needed.
Evaluation/Control Procedures
The measure of success for a preventive solution like the soaker system will take about 2 years of observation. A quality team will be formed to collect data on all installations. Any adverse result will trigger a joint team of repair and product development personnel to simultaneously fix the problem and conceive of improvements to the product.
Works Cited
Brown, Robert Wade. Residential Foundations: Design, Behavior and Repair, 2nd Edition. New York: VanNostrand Reinhold, 1984. Print.
"Number of households in the U.S. from 1960 to 2015 (in millions)". Statista, The Statistics Portal, n.d. Web. 24 July 2016. <http://www.statista.com/statistics/183635/number-of-households-in-the-us/>.
Sparshott, Jeffrey. "The U.S. Housing Market in 9 Charts". The Wall Street Journal, 23 Jun. 2016. Web. 24 July 2016. <http://blogs.wsj.com/economics/2016/06/23/the-u-s-housing-market-in-9-charts/>.
"Foundation Repair”, n.d. Web. 24 July 2016. <https://www.glhunt.com/foundation-repair/>.
"Foundation Repair Resources", n.d. Web. 24 July 2016. <http://www.olshanfoundation.com/foundation-repair/>.
