WHAT IS MICROFRIDGE? A 3 IN 1 DEVICE FULFILLING ALL 3 FUNCTIONS OF A REFRIGERATOR, FREEZER, AND MICROWAVE UNIT TARGETED AT THE GROWING “A HOME AWAY FROM HOME” SEGMENT EXPECTED TO BE PRESENT 10% OF ALL SUCH ROOMS RESTLESS IN HIS PRESENT JOB DESIRES TO START HIS OWN COMPANY HIS FORTE - SALES A UNIQUE IDEA – COMBINATION OF MICROWAVE OVEN + REFRIGERATOR
VALUE PROPOSITION
HELPED TO SOLVE THE ELECTRICITY PROBLEM IN SCHOOLS. SAVED COSTS.
STUDENTS USING MICROFRIDGE COULD COOK SAFELY IN THEIR ROOMS
STUDENTS WOULD PURCHASE FOOD FROM CONVENIENCE STORES ON CAMPUS FOR THEIR MICROFRIDGE UNITS, THUS SAVING COSTS
THE CONCERNS OF STUDENTS’ PARENTS WERE ADDRESSED
THE MICROFRIDGE BUSINESS Target Market
• • • •
School Hostel Rooms Military Bases Assisted Living apartments Small Motels with limited dining facilities
Revenue Models
• Campus Installation – College purchased directly • Campus Rentals – College rented based on students’ forms • Company Rentals – Rental program directly by Co.
Product Portfolio
• Basic MicroFridge Unit • MicroMart • MicroBar
CATEGORY REVENUE SHARES Revenue (1994)
18%
Colleges Military
2%
Motels 55%
Assisted Living Apartments
25%
Colleges • Campus wide installation • Campus rental program • The rental price was $110 and students were charged $130 as rent • Selling and Renting
Motels/Hotels
Other Markets
• 3 million in the US out of which 2 million had no restaurant space • Microfridge ideal for budget hotels and small town motels
• Small Individual apartments • 1 million in the US, numbers expected to grow
Company Rental Program
• Run by Microfridge • All operations carried out by Microfridge • Yearly rental fee was $160
SALES AND DISTRIBUTION Independent Distributors • Felt left out due to emergence of superstores • Much more motivated and dedicated as they carried only Microfridge • Easier to train • Higher bargaining power for the company What went wrong? • Inventory overstocked • Retail channel not suitable • Possible price mismatch due to sale in discount stores Direct Sales Force alongside distributors • Easier to sell • Inventory managed by distributors
MARKET AND DEMAND FORECASTS • THE FIELD SALES FORCE ALLOWED DIRECT CONTACT WITH THE POTENTIAL CUSTOMERS
• THEY ALSO PROVIDED ALL THE REQUIRED MARKET INFORMATION NEEDED FOR THE SUCCESSFUL FORECASTS
• FOR EXAMPLE THE FORECASTS FOR COLLEGES CONSIDERED ALL FACTORS SUCH AS NUMBER OF ROOMS, NUMBER OF STUDENTS, TERMS OF CONTRACT, SURVEYS ETC.
• SIMILARLY FOR ARMY/MILITARY BASES AND MOTELS ADEQUATE CARE WAS TAKEN TO FORECAST SALES AND PROVIDE QUALITY AND PROMPT SERVICE TO EACH OF THEM
• ALSO THEY OFFERED THE FLEXIBILITY OF DIRECT PURCHASE OR RENTALS TO ALL THEIR CUSTOMERS
• THEY EVEN WIDENED THEIR PORTFOLIO TO BRING IN PRODUCTS SUCH AS THE MICROMART TO BE PLACED IN THE MOTEL LOBBY
• REMARKABLE CUSTOMER CARE WITH SPECIAL CARE FOR LARGE ACCOUNTS
INDUSTRY ATTRACTIVENESS Threat of new entrants: Medium • No product difference • Patent Sharing • Non compete Agreement Getting expired in 3 years • No strategic advantage in distribution network • Profitable industry with high Market potential Threat of substitutes: Medium • Price differential between stand alone components(fridge and oven) and Microfridge • Refrigerator leasing companies with regional presence • Low innovation Bargaining power oflevel customers: Low • Few alternatives • High Switching Cost Bargaining power of supplier: Low • Low product differential • No switching cost for Microfridge Intensity of competitive Rivalry: Low • No competitor due to patent protection
STRATEGIC CHOICES SELL OR RENT?
• IMMEDIATE FUTURE SUGGESTED SELL • LOOKING AT THE FUTURE SUGGESTED RENTING AS A BETTER STRATEGIC CHOICE
SINGLE SUPPLIER OR MULTIPLE?
• ELIMINATED NEED FOR OWN DISTRIBUTION CENTER • MULTIPLE SUPPLIERS ENSURED MINIMUM DEPENDENCY (SUPPLY AND PRICE)
MITIGATION OF COMPETITION THROUGH ACQUISITIONS CREATE BARRIERS TO ENTRY AND GAIN COMPETITIVE ADVANTAGE
THROUGH STRUCTURE WHICH CAN’T BE REPLICATED EVEN IF THE PRODUCT GETS CLONED
RESTRUCTURING DISTRIBUTION FROM TIME TO TIME BASED ON MARKET SCENARIO
