BUSM35436 Business Cases Case Analysis Template NAME: CASE: Omega Paw Marks
Guideline
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Key Facts of the Case (no analysis) 1. Omega Paw is the manufacturer of a variety of pet products, including speciality cat items. 2. Michael Ebert is the decision maker; he is the president of Omega Paw and inventor of their bestselling item the “Self -Cleaning Litter Box”. 3. Omega Paw wants to increase its sales over the next couple of years by expanding its marketing/distribution initiatives. 4. There are many distributions options this company has to choose from all with varying costs. 5. A decision needs to be made that can best position Omega Paw for the future.
Problem Statement 5
Main Problem: Michael Problem: Michael Ebert is aspiring to reach sales of $1.7 million by December 2012 year end, $3 million by December 2013, and $5.7 million by December 2014. He is unsure of what route to take in regards to the distribution and subsequent advertising of the “Self -Cleaning -Cleaning Litter Box” to achieve this.
Urgency and Importance: This matter is quite important but is not necessarily urgent. Michael is noticing an increase in the demand for these types of products and wants to make sure that he is doing the best he can to position himself in the market. It would be beneficial for the company to figure out the direction they want to head in terms of expansion sooner rather than later.
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Problem(s) Analysis Background of the problem: To be completely honest there is not really a background to the problem. In I n reality the problem of deciding which distribution method to choose was essentially created by the desire to increase sales. Omega Paw like every other company that wants to increase their sales, is willing to try something new to do so. We just don’t know which distribution plan would be the best at the moment. Strengths:
The company has been able to achieve success in a short period of time. Omega Paws litter box product is one of the most user friendly out in the m arket.
The company is run by an individual who is very dedicated and wants to grow the company. They have done extensive planning for the future, and know what paths they can take. The cost to manufacture their product is relatively low.
Weaknesses:
Reputation was slightly hurt due to rushing a prototype product into the marketplace. The company ’s main product is not a repeat purchase product. The company is not doing as much advertising as they could be doing right now. Their product is priced at around $50, which is quite high compared to some of their competitors.
Opportunities:
Further integration with the US market possible with Wal-Mart and over 37,000 grocery stores. Cat population is estimated to grow on average by 3.6% for the next few years. 33% of the 14.5 million households in Canada have at least 2 cats. $100,000 budget set aside for the marketing campaign. Many different channels of distribution can be explored.
Threats:
A lot of competition from similar style of products. Not every cat owner is looking for the solution that their company offers (the Self-Cleaning Litter box is more of a want, not a necessity). Further expansion into the US market could prove to increase demand past what this company could handle.
Competitor Analysis: There are 3 direct competitors and 1 indirect competitor in the same market as Omega Paw. Direct Competition:
There is the “Everclean Self Scoop Litter Box” which is priced between $53 and $63 and is the most similar in terms of pricing to the “Self -Cleaning Litter Box”. The 2nd competitor is the “Quick Sand” which sells its product for $29 and is quite competitively priced. After being purchased by an American company they have spent $200,000 to $300,000 per week for six months advertising, which gained them a lot of exposure throughout Canada and the U.S. The last direct competitor is the “Lift & Sift” which sells its product for $27 is very similar to the “Quick Sand”. It has only been around for 3 years and although “Lift and Sift” has limited advertising exposure, they have been piggybacking off the advertising campaign of “Quick Sand. “Lift and Sift” was the first product of its kind in mass distribution stores such as Wal-Mart.
Indirection Competition:
There is also indirection competition caused by the basic litter box models. These sell for $10-15 and have continued to represent the majority (approx. 90%) of the litter box market. Although they sell quite well, these litter boxes are awkward, smelly and messy. The other indirect competition that Omega Paw faces comes from a unit called the “Litter Maid”. This unit is the most advanced of all the offerings, and is automated to clean up the
litter once the cat leaves the box. It helps to eliminates odors almost instantly and makes clean up a breeze. It’s currently advertised on TV, magazine and also comes with a one year warranty. It is available for purchase via mail order and cost $129.
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Decision Criteria for Solutions Goals or Objectives: The goal is to reach sales of $1.7 million by December 2012 year end, $3 million by December 2013, and $5.7 million by December 2014. Constraints: There is a budget of approximately $100,000 to support the decision decided by the company. There is also the current manufacturing capacity of 3500 units per week, which would be difficult to increase in a short period of time. Another constraint would be the various markups on MRP that the retailers/distributors require. This increases the final retail price of the product upwards of $50.
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Identification of Realistic & Practical Alternatives available to the Decision Maker Alternative 1: Look into revisiting mail order channels, with the knowledge that the company has today. Alternative 2: Use the $100,000 marketing budget to effectively market the company and continue selling with their current methods, CPD and manufacturer representatives. Alternative 3: Decide to sell the “Self -Cleaning Litter Box” to mass distribution outlets such as Wal-Mart. Alternative 4: Expand into grocery stores in both the United States and Canada. With over 37,000 stores in the United States alone, this could provide great exposure for the company.
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Pros and Cons of each Alternative Pros and Cons of Alternative 1: Look into revisiting mail order channels. Pros:
Shipping direct to the consumer has the highest profit margin for the company. The product seems like it would be suited for the mail order channel. It is a slight novelty product. The company has made some mistakes with this method in the past; there is always
something to learn from mistakes. The mail order system is well received in the United States. Not the most expensive option, costs about $20,000 to run everything.
Cons:
Canadian market is not as receptive to the mail order system. Requires a trial run due to the problems that the company earlier experiences with mail orders. By shipping directly to the customer that means you as a company are responsible for handling the individual complaints/returns.
Pros and Cons of Alternative 2: Continue with the current distribution plan, and use the $100,000 for a general marketing campaign. Pros:
So far this is working for the company. The $100,000 can be used to market the company with effective results Their sales have increased under this method, and in under a year they have achieved revenues over 1 million.
Cons:
The market for this kind of product is expanding; sticking with the same plan may not be enough to grow at the right pace.
Doesn’t seem to ring true with Michael Ebert’s mentality of “grow the business quickly”.
There is a high mark up with the product retailing in Pet Stores.
Pros and Cons of Alternative 3: Sell the litter box unit to mass distribution outlets such as Wal-Mart. Pros:
Getting into Wal-Mart or other mass distribution stores really helps to turn the brand name into a household product. Would almost definitely increase the total revenue of the company in accordance with Ebert’s vision.
Cons:
Omega Paw may not be able to fulfill demand orders sent by Wal-Mart. Some people view products in Wal-Mart or other mass distribution stores of a low quality. They would be put in stores where many of their competitors already have shelf space. It would cost them an estimated $50,000 for tooling, different packaging and advertising.
Pros and Cons of Alternative 4: Expand into grocery stores located in both Canada and
the United States. Pros:
The ability to be in almost every grocery store in the United States would give the product much needed exposure. Could be one the first company offering this kind of product in grocery stores.
Cons:
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This item may not be best suited for a grocery store; it is large and does not seem it would be casually picked up. It would generally be priced slightly higher than the average item found at a grocery store. Lots of shelf space would be needed for the product, especially the larger version of their litter box. To supply to over 37,000 stores may be much more than this company can handle. There are many channels to go through before the product can be present on the shelf.
Recommendation & Implementation Plan - You must have a sentence that says, “ I recommend alternative…” - Do not combine alternatives. Pick just one. - Defend your choice of alternative. Explain WHY it is better than the others. - If applicable, explain how the alternative will be implemented. (who, what, where, when, how)
I recommend Alternative 1, and that is to revisit the option of providing mail order service to companies. I feel this is the best option because there is the ability to have a much larger profit margin by doing business this way and the product seems very much suited for TV campaigns. The product will be able to stand on its own in a mail order campaign as it would not be subject to being placed near other similar products in big distribution stores. I also would go with this option because Omega Paw will retain the ability to set its own pricing versus having to be subject to the mark up of other retailers. One of the potential downsides I can see to this plan is the decrease in volume. Their initial mail order campaign presold 2500 units in 4 months of advertising. While this is before they were well known, I would expect their units sold to decrease. But the potential for higher profit per unit is present and that is something that should be explored when going through with this plan. If the cheapest competitor is selling their product for $27, a higher quality product such as Omega Paws could claim a price of about $35-$40. This whole plan would be implemented by contacting the TV Campaign company and going through with the proposed two week trial plan. The company can handle 3500 units a week and they would be easily breaking even if they were selling 10000 units at $35 each. If they are able to reach their current unit sales which were approximately 50,000 they would be able to hit that 1.7 million by next year. The only thing we need to watch out for is not getting our pet stores and CPD upset with our mail order campaign. Who: Michael Ebert (Omega Paw Inc.) What: Distribute their products via a mail order campaign Where: Across North America, mainly targeting the United States When: As soon as possible.
How: Implement plan with a trial run and see if the demand is there for this distribution method.
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Overall Quality (logical consistency & readability)
