Jones Blair Compay
BACKGROUND AND PROBLEM DEFINITION: The US paint industry is segmented into 1. Architectural coatings 2. Original equipment manufacturing coatings (OEM) 3. Special-purpose coatings. These are sold through various channels like wholesalers & retailers and the target audience are primarily segmented into Do it yourself consumers, painting contractors and professional painters. The architectural coatings (43%) and OEM (35%) are considered to be the cash cows and the stars in the market respectively, while the special purpose coatings accounts for 22% of the total industry dollar sales. But, unfortunately the companies are facing pressure to follow the EPA regulations, to reduce VOC level, which reduces their profits year after year because of high investment into R&D. Because, Jones Blair’s R&D investments are high they had to increase their costs which led them to cater to a niche market of “Do it Yourself” and “Professional Painters” which is catering to close to 50% and 25% of their dollar sales respectively. Even though, the prices were high they are able to match the number of units sold in all centers but the revenue has not increased neither in the DFW or otherwise. Since, many of the competitors have priced their products in an aggressive way Jones Blair faces an acute competition.
MARKET AND INDUSTRY ANALYSIS: Jones Blair Company’s has a strong distribution network which comprises of suppliers who can put their company on the map when rightly incentivized. The company has close to 600 outlets just in the DFW area which concentrate on both “Professional” and “Do it yourself “segments for the company. But, the company has a threat of increase in the competition. Because of which they might lose the retail outlets to the competitor’s cut throat promotional offers and free goods if not now maybe in the future. The company also needs to concentrate in the “Do it yourself” buyer’s behavior. These buyers are interested in a product which is durable, price sensitive, brand repute and other amenities. The company needs to concentrate on increasing their promotional offers with competitive pricing which can help the company not losing its market share.ALTERNATIVE ACTION: As proposed by the management team there are three alternatives that we can perceive here. 1) Increase the advertising investment by an additional $350,000 as per the initial proposal. If the company consider its contribution margin of 35% and calculate its financial return on this investment it would be nearly a 1 million dollars which is a huge investment considering the company’s current standpoint. But, on the hindsight, this would increase the exposure of the company in all the segments of the market which is the ultimate goal.