Case: Steel Door Technologies
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Overview
Industry: The steel door industry has been growing over the past decade as buyers are switching from old, worn, heavy wood doors to light and reliable steel doors. Sales are expected to grow at 2.4% in 2003 to $2.05 billion. There are several large manufacturers with Clopay leading the industry with sales of about 20% of total industry sales ($400 million). The industry is expected to exhibit growth in the future.
Company: Steel Door Technologies is a small, privately owned regional manufacturer of residential and commercial garage doors. They have exhibited above average growth over the past decade and have a sales increase goal of 36% from 2002. They are considered one of the smaller manufacturers, currently operating in only 12 states. Their sales for 2002 are projected at $9.2 million, 70% of which is contributed by their 50 exclusive dealers and 30% from the remaining 300 independent dealers in 150 markets.
Issue: The issue at hand is whether or not to change the distribution strategy and/or composition of dealers in order to reach the 2003 sales goal.
S.W.O.T.
Strengths
Above average sales growth for past decade
50 exclusive dealers contributing 70% of total sales
Each dealer is visited twice a month by a representative.
Increased advertising budget
Good buying position with raw material suppliers
Weaknesses
Only 2.6% share of their market, 0.46% industry sales 2002
Limited distribution network
Limited number of representatives
300 dealers only contributing 30% of sales
SDT brand is low on independents sales proportions
Only 2 distribution centers
Opportunities
Thousands of unexploited dealers in currently served markets
Thousands of unserved markets
Independents looking to switch exclusively to SDT
Threats
Independent dealers do not sell brands at an equivalent rate.
Large manufacturers have superior buying power and as such a higher ability to fluctuate their prices
Slowing economic growth
Problem Statement: Is the 2003 sales goal of $12,500,000 attainable under the current distribution system?
Alternatives:
Increase number of dealers
The reason management proposed this alternative is because they feel that the sales goal is too high for existing dealers to reach. They estimate that 100 additional dealers will be needed to reach the goal. This is a very hard task to complete in such a short time frame and would be costly in implementation expenses as well as new representative costs. This is very risky and not a good plan given time limitations.
Exclusive Franchise
This would create 27 new exclusive dealers in high potential markets. This is also very hard to implement because all of the dealers would have to sell off their other brands and will take time and lots of legal work. The brand is not very well recognized as far as franchising is concerned and could limit flexibility in the future.
Reduce number of dealers