Post on 09-May-2015
description
MOUNTAIN EQUIPMENT CO-OPT H E P R I VAT E L A B E L S T R AT E G Y
C A S E S T U D Y A N A L Y S I S
Presented By:
Chitwant TahalyaniDr. Swati Gogawat
Kedar Risbud
CASE SYNOPSIS
The case details the current scenario of the sports equipment market in Canada vis-à-vis MEC’s strategies.
Mountain Equipment Co-op (MEC) is a well-known Canadian retailer of gear for mountaineering , rock climbing, ski touring, hiking.
CASE FACTS
•Owns the mainstream name-brand market•Market leader - 20 % share of industry
FORZANI
•Entry-level mainstream -Hockey, Football, Basketball•10% share of market•Employs young adults, pays minimum wages
WALMART
•Focus on niche sports -Scuba Diving, Running, Biking•Higher-end, higher-priced•Employs active sports participants
INDEPENDENT
STORES
MEC HOLDS ONLY 1.2 % OF THE MARKET
HIGHLY FRAGMENTED MARKET
SPORTING GOODS MARKET VALUED AT
$7.5 BN A YEAR
M A J O R C O M P E T I T O R S
GRADUATED INTO OFFERING 3 MAJOR USPS
Focus on wilderness-
oriented recreational
activities
Co-operative corporate structure
Economic, Social,
Environmental Sustainability
15 stores across Canada
Online & physical revenue - $248mn
1,387 employeesRetail wage of $10 to
$11
To break the mold of a
‘knock-off-artist’
Built design team in 2003 for
developing private label
Not mainstream Hiking
CampingClimbingSnow sportsWater sportsGreen buildingCommunity grantsCanada-wide parks
Brands:Arc’teryxBlack DiamondPatagoniaPrana
38 % OF SALES OWING TO PRIVATE LABEL
PROBLEM DEFINITION
MEC EXISTS IN A HIGHLY SATURATED AND MATURE MARKET WHERE THERE IS FIERCE COMPETITION BETWEEN COMPETITORS FOR
MARKET SHARE
PEOPLE MACHINESMETHODS
MATERIALS MANAGEMENTENVIRONMENT
• Shortage of willing employees in Canada
• Cheaper labor available in Asian countries• $19 CAD vs. $0.6 CAD
per hour
Developing private brands
Cost of materialhigher in Canada
• Extended lead times in Canadian factories
• Less responsiveness to market demands
• Moving manufacturing away from Canada
• Pricing competitors’ brands higher in category of own private labels (thermarest)
• High-handed behavior with suppliers
Acquisition of cheaper machines
in overseas markets
EFFECT
•Private-labeled products eating into other brand sales in its own stores• Seen as infringing on intellectual property owing to copy-
>replace model•Negative public perception owing to cutting of Canadian jobs• Souring of relations with suppliers• Seen as not abiding by its own highly vaunted policies and
only seeking profits
CASE INFERENCES
CANADIAN MARKET SHARE BY COMPETITORS
Forzani Total Canadian Tire Walmart MEC Independent Stores
Others0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
40.00%
45.00%
MARKET PLAYERS
MEC IS COMPETING IN HIGHLY FRAGMENTED MARKET
IT ENJOYS ONLY 1.2% OF THE TOTAL MARKET SHARE
COUNTRY OF ORIGINCanada
30%
Other70%
PRODUCT ORIGIN
Canada Other
MOST OF THE PRODUCTS ARE GETTING MANUFACTURED IN ASIA BECAUSE OF LOW COST, LABOUR, MANUFACTURING COST ETC.
PRODUCT CATEGORYPRICE RANGE (CAD)
PRIVATE LABELS OTHER BRANDS
WEEKEND & ALPINE BAGS 69 - 144 123 - 198
WOMEN’S HIKING CLOTHING 25 - 55 73 - 79
PRIVATE LABELS ARE CLEARLY SOLD AT A MUCH LOWER PRICE THAN OTHER BRANDS
BUSINESS MODEL
UNDERCUT
COPY
MANUFACT-UREPRICE-OUT
REPLACE
RECOMMENDATIONS
•MEC must refrain from unethical practices like selling competitor’s brands at higher prices• Improve relations and work practices with local suppliersAbstain from handing out threats of lawsuits
•Build a positive public image and brand equity by standing by their company philosophiesLeveraging social media to connect with their customers and appease them
T H A N K YO U