University of the Thai Chamber of Commerce II 418-1 International Business Strategy Case Study Analysis Student: Izabela Campos ID: 5501502038 Prof. Dr. Dr. Jakarn Srmoon 2!2015
Janmar Coatings, Inc.
Case Summary
Janmar Coatings is a painting company in the southwestern U.S. he industry is di!ided in three segments" #1$ architectural coatings% #&$ original e'uipment manu(acturing #)*+$ coatings% and #,$ special-purpose coatings. Architectural coatings represent 4, percent o( the total industry dollar sales% and estimated to e 1& illion dollar-plus in U.S. sales. Aout /0 percent o( architectural coatings dollar sales are rought in y do-it-yoursel(er painters purchases. 2ro(essional painters purchases are accounted accoun ted (or aout a out &/ percent percen t o( the dollar sales. he rest is (rom go!ernment% e3port% and contractor sales. he three main types o( distriutors are mass merchandisers and home impro!ement centers #/0$% special paint stores #,5$% and hardware stores and lumeryards #14$.
Problem/ Issues
he current prolem Janmar Coatings is (acing is how to cost e((ecti!ely mar6et the products and what wh at area are a is the est place to mar6et. mar6e t. he company relies on leadership to help ma6ing decisions regarding the mar6et% and a(ter two senior e3ecuti!e meetings% there was no resolution. Janmar Coatings% Inc. has to decide where and how to e3ecute corporate mar6eting e((ort e((ortss in the southwes southwestern tern United States. States. Janmar Janmar Coatings Coatings is current currently ly co!ering co!ering all /0 counties% and their main (ocus areas are the 11 counties in the 7allas-ort 9orth area. he main issue :onald Burns% the president o( Janmar Coatings% is ha!ing is trying to come up with a solution to mar6et his company in the most cost e((ecti!e way during &00/. A(ter & long meetings with his e3ecuti!e team% hes still with no clear direction. ;e has gathered an approach (rom each o( his team memers% including" <2 o( Ad!ertising% <2 o( Sales% <2 o( )perations% and <2 o( inance% and now has (our solutions to consider.
Analysis and valuation
Beside suggestions gi!en y the senior e3ecuti!es and the president o( Janmar Coatings% Inc.% there are three ways to deploy Janmar products #2aints and sun-dries$. irst% since 50 #80 million$ o( Janmars architectural coatings products were sold in 79 area% the company should distriute more o( its products to that area in order to ma3imi=e sales. :egarding the non-79 area% the ma>ority #?0$ o( that area deals with @do-it-yoursel( method to paint their houses or rooms% and usually the decision e((ected y the price o( the product. here(ore% Janmar has two options (or the non-79 area% either to cut the prices o( their products% or to de!elop a new lower 'uality category that has the same rand name ut cheaper than the premium category. he competition in Architectural coating segment are increasing. Companies see6ing growth and a higher sales ase to support increasing costs are ma6ing ac'uisition. +a>or products o( paint (or the architectural coatings segment include Sherwin-9illiams% Ben>amin +oore% the lidden unit o( Imperial Chemicals% 22 Industries%
Course of Action
According to the <2 o( Ad!ertising% one strategy could e to increase ad!ertising y ,/0%000 to household segments (or corporate rand awareness. he rea6-e!en dollar !olume would e'ual to 1%000%000. his was calculated y di!iding the incremental e3penditure #,/0%000$ y the contriution margin #0.,/$. he pros with this is that it can impro!e the rand awareness amongst mass merchandisers and other paint rands% as well as attract do-it-yoursel(ers in oth 79 and non-79 areas. *!entually% this would lead to an increase in companys sales. he con would e ta6ing the ris6y step o( this e3tra e3pense. According to the <2 o( )perations% the second strategy would e to cut the price y &0 o( all paint products and use current ad!ertising udget to promote price reduction. he current total contriution is 4%&00%000. 9e get this numer y multiplying ,/ and 1&%000%000 together. A(ter price reduction #.1/E.80 F 18.G/$% the sales would ha!e to get &&%400%000. 9e otained this numer y 4%&00%000E.18G/. he pros to this strategy are that you can increase sales in the short term and it ecomes more competiti!e. he cons are that it is too di((icult to reach the new sales amount and lowering the price could a((ect purchasing decisions. According to the <2 o( Sales% the third strategy would e to hire new sales representati!es. How% the direct cost to 6eep one representation is 50%000 annually. o reco!er a representati!e the cost is #50%000E.,/#contriution margin$ F 1G1%4&8$ 1G1%4&8.
he est thing aout this strategy is that it is the most a((ordale and reasonale than the other strategies. ou could increase the numer o( do-it-yoursel(ers and catch the attention o( pro(essional painters at the same time. It may not e a guarantee% ut it is de(initely the most reasonale. According to the <2 o( inance% the last strategy could e to do nothing. he pro in this case would e that Janmar Coatings would gain more sales due to an increase o( do-ityoursel( household uyers. he con would e that the company would e less competiti!e ecause it ecomes less accommodating.
Potential !utcomes
he <2 o( Ad!ertising has proposed to increase corporate ad!ertising with a large emphasis on tele!ision. he <2 o( Sales proposed hiring a new (ield representati!e to help generate new accounts. he <2 o( )perations has proposed a &0 price cut on all Janmar product sales. he <2 o( inance proposed that nothing e done that the company continue with their current e((orts and 6eep a ,/ contriution margin. A(ter loo6ing at the companys o!erall goals and (inances% I would agree with the <2 o( Sales. Based on his suggestion% I elie!e it would e a smart time to hire a new sales representati!e (or Janmar. he cost attriuted to company (or hiring a new sales representati!e would e 50%000 per year. And the amount o( sales re!enue needed to co!er this e3pense is 1G0%000. ;owe!er% i( this sales representati!e position is correctly used% they will e ale to ma6e this margin ac6 rapidly. Because y concentrating on only de!eloping new retail accounts in the non-79 area% the company could generate lots o( sales to a rand new uyer mar6et. Janmar has reali=ed that they need to (ocus more energy on the K7o-it-yoursel(ers as they say% or 7I.
"ecommendations
Janmar Coatings% Inc. should pursue going a(ter the 79 area and increasing their numer o( do-it-yoursel(ers. I would recommend going with the idea o( <2 o( Sales% adding an additional sales representati!e that will mainly (ocus on de!eloping new retail account leads% is a good idea. An increase in mar6et share will e caused y an increase in retail outlets% where the do-it-yoursel(ers go to uy the Janmar Coatings products.
