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Analysis of the United Display Cases, Inc. (UDCI)
UDCI believed it has a good product but he still hasn’t able to attract investors or convince banks for financing. For this goal, UDCI needs to present its break-even operating capital and projections of production volume that will yield maximum profitability. A successful product launch can be a major point in convincing financiers and it would need a cost-effective marketing strategy as current finances are limited.
For its plan to distribute through, it needs to determine a price it will pass to retailers that can generate more sales than direct selling.
There are no direct competitors but there are products that are nearly similar. The gap in features is not much for these companies to eventually come-up with equivalent competing products.
Analysis
Organizational Vision
People of all ages will enjoy miniature toy cars and its accessories in many ways. They are not only for playing but also great for decoration.
Mission Statement
UDCI will make products that will enhance the enjoyment of people in miniature toy cars.
Objectives
Acquire financing to expand operations either by attracting investors or securing loans from banks. Operational capital requirements and income/profit projections are necessary.
Improve product features to stave off future competition.
Create a marketing strategy and plan that will address the target markets (housewives, male collectors and children)
Establish a retailer network that will maximize revenues. A viable transfer price needs to be determined.
Consider other forms of advertising and distribution.
Provide more product differentiation that will appeal to the different target markets.
Obtain more feedback from customers and suppliers.
Current strategy
UDCI stumbled on a successful marketing strategy in mail-ordering and intends to maintain it. After getting patent protection for its plastic version, it ventured in retailer distribution for expansion. After an unsuccessful partnering, it remains open to this direction.
Products would continually be improved for the collector’s market which has become a premium market with rare cars fetching increasingly higher prices.
The current target customers are as follows:
CUSTOMERS MOTIVATION
Collectors (mostly men), parents Need for storage of the cars, decoration and display
Partners of collectors Gifts for collectors
Children Need for storage of the cars
The efforts of both marketing and product development will be towards these customer groups. Product features will be designed differently per customer group.
The company would determine its financial requirements for present and future expansion and use these in sourcing funding from investors and banks. Potential large distributors would be approached to test the viability of partnerships. A confirmation from any one would give confidence to the company to pursue financing for the product launch.
SWOT analysis
Strengths
An established market that is linked to the miniature car collectors’ market
Continuing innovation in new materials and designs
Patent has been secured for products
Proven sales method in the mail-order system
Interest from distributors
Defined customer groups for more specific target marketing
Availability of hobby magazines for targeted advertising
Product has a wide age demographic
Weaknesses
Limited financial resources
Lack of capability in writing business plans
The product concept is easy to use by competitors by using different designs (ex.ship instead of a truck)
Majority of sales are for gift which are from October to January only
Different market segments require distinct product differentiation
Poor research capability shown in unawareness of children’s magazines
Opportunities
Use of the web for e-commerce
Feedback hasn’t been solicited from customers and suppliers
There may be specialty magazines that carry ads (ex. Children magazines)
There are large retailers that may agree to carry the product
Threats
A large popular furniture maker can create a similar product
Next generation may no longer see the appeal of miniature toy cars
Children will take more to mobile gadgets and computer games than toy cars
Competitive Analysis
The absence of a direct competitor may not last as the product design concept is easy to exploit by furniture makers. UDCI’s technical advantage so far is its mastery in miniature detail and aesthetics. It also has a commercial advantage in owning the patent for the plastic display case. Competitors may need to use other materials other than plastic which may be less durable or too costly.
The makers for display cases for larger cars are not competitors as the smaller-sized Matchbox/Hotwheels cars form a different market.
There are makers for carrying cases for UDCI’s cars and they can also be made wall-mountable just like those for makers for larger cars. This can take away a portion of the market who value savings and flexibility more than aesthetic value. UDCI should consider making matching carrying case product for its wall-mounted one.
Financial Analysis
Assumptions
The break-even price should be achieved at the end of the first year.
125,000 would be sold which is 50% of the sales volume for the wooden cases. Customers would replace their display cases with the plastic one.
Sales volume would increase by 15% every month for the first year.
The cost for the plastic mold of $10,000 will be amortized for one year.
The analysis shows that the capital requirement to achieve break-even at the end of the first year is 776,000 which can come from investors or banks. UDCI can pass a price of 32 to retailers who can price customers at 20% more for about $39. The range of prices for carrying cases of other companies is $14 to $25 so for a more durable and decorative product, UDCI’s price should be reasonable.
Implementation Issues/Problems
There are enough ideas and data to come up with a business plan to present to investor and banks but there is currently no competency to produce this document. Feedback from customers and suppliers is also needed to fine-tune the product and come-up with differentiating features that will match market segments. Customers also can provide a feel for the acceptable price point.
For a successful launch, more marketing methods have to be known so market segments can be reached effectively. Definitely, web marketing needs to be considered. Research on competition must be practiced. In general, there is already an established product but marketing must upgrade to exploit it.
Evaluation/Control Procedures
UDCI can consider engaging a business consultant to assist and evaluate the effort in making the business plan and marketing survey. One measure is the number of customers that have been queried and how much feedback have been gathered. It can also test various methods of marketing and evaluate effectiveness.
Alternative Solutions to Problems/Issues
Solution 1:
Hire a business consultant to come-up with a business plan for presentation to investors and financiers and a marketing plan for a product launch.
Advantage
IDCI can get a tried and proven approach to boost business. There are many providers for this service.
Disadvantage
This can be costly.
Solution 2: Identify several customer customers and pick their brains regarding the product and the business.
Advantage
This will provide real and relevant data.
Disadvantage
There may not be qualified customers who have the available time or motivation to participate. A material incentive may be necessary.
Solution 3: Try e-commerce. Marketing and order-taking taking can replace the mail-order system.
Advantage
This is the most cost-effective business strategy. The market of UDCI is middle class and most likely internet savvy. In 2015, a survey reported that in the US and the UK, 61% and 71% of consumers make most of their purchases online (Roesler).
Disadvantage
The owners and personnel have to hurdle the learning curve for e-commerce.
Recommended Course of Action/Justification
UDCI doesn’t have much of a competitive advantage that other makers can hurdle. It has to grow as much as it can as soon as possible so it can afford to give low prices through economies of scale. Solution 1 would be the best way. It can make it do the best things right time, first time and would set UCDI for the long term, as well.
Implementation Plan
UCDI should find a business consultant that in can afford which has experiences in investor sourcing, bank loans and marketing. He should also exhibit general traits and skills like integrity, communications, problem-solving and trustworthiness. (White)
The CEO can set two plans in motion: short-term and mid-term. The short-term is to implement product launching using a cost-effective marketing campaign which could be the use of the web. The marketing manager will work with the consultant on market research to understand more of its customers. The mid-term goal is to come up with a business plan and new achievements which could attract investors or convince banks for loan that it needs for expansion. The CEO will a form with his marketing and operations heads for the business plan.
Works Cited
Roesler, Peter. "Why Small Businesses Need E-Commerce Now More Than Ever". Inc., 2 Feb. 2015. Web. 28 June 2015. <http://www.inc.com/peter-roesler/why-small-businesses-need-ecommerce-now-more-than-ever.html>.
White, Doug and White, Polly. "The 5 Essentials of Choosing a Consultant". Entrepreneur, 4 Nov 2014. Web. 28 June 2016. <https://www.entrepreneur.com/article/238710>.
