CASE #2: CANTY INTERNATIONALJK AND THE IMPLEMENTORS FROM SET 1K

BUDDY

FMGT 1KMKGT 1102

Introduction

Canty International

Manufactures wall systems/coverings

Receives RFP Develops Decoline

Bryan Inns Multinational

hospitality firm Requires

replacement wall system

Has specific requirements

How can Canty International conquer competitors and gain the contract with

Bryant Inns?

Key Findings

Canty International predicts a conservative sales potential of 500 square metres a month.

The installation costs are cheaper than current available products.

10 years service life No comparable product

large corporation experience in the industry known throughout the industry funds and resources are readily available to tackle large contracts

ASSUMPTIONS

FIXED COST

Operational Cost per month:

Supervision cost $1,080.00

Inspection cost $165.00

Miscellaneous indirect labour $84.00

Floor-space expense $327.00

Small tools and expense materials $30.00

Depreciation cost -3 building tables & cutting machine

$42.75

Selling & Administration (Excl. marketing program) $3,896.67

Marketing communication program 403.33

Total Operational Cost/Month: $6,028.75

Variable Cost

Techno-fibre $6.55/metre (90cm width) $7.28

Bamboo backing $2.97/metre (90cm width)

$3.30

Environmentally cement $0.96/litre, 8.30 litres for every10 square metres

$0.80

Wages $7.10/hour, 1.84 direct labour hours for every 10 square metres

$1.31

Total materials & labour cost/square metre:    

$12.69

Break Even Prices

500m2 / monthly

2000m2 / monthly

2598m2 / monthly

Variable Cost $6345 $25,380 $32,968.62

Fixed Cost $5,028.75 $6,028.75 $6,028.75

Total Cost $12,373.75 $31,408.75 $38,997.37

Break Even Price

$24.75 $15.70 $15.01

Strengths

High production capacity Up to 2598 square meters per month Can accommodate large companies Can accommodate International

companies Raw materials are produced in adjacent

building eliminating transportation costs

Weaknesses

Has a narrow range of product lines Assembly production generally produces

at a 77% of optimum capacity

Opportunities

Environmental manufacturing

Lasts longer than competitors

Economic New Technology Installation

Included

Threats

Small market Economic downturn Competitors New technology

Competitive Analysis

Soundproof foam Canty International

Higher price Lower price

No installation Installation

Decorative

Environmentally friendly

Target Market

Homeowners Business owners Renovators

Company Objective

Customers

Profit-oriented - Profit Goal 18% Target those value the increase

in prestige  such as Bryant Inns Monopolistic competition

– competition on products Company’s own sales team Based on customer's perceived

value- Quality and service- Product value: save time and cost

Channel members

Competitions

Costs

ALTERNATIVE 1 : Price Skimming

Advantages

High Prices = High Quality

High Profit Margins

Improvement

Attract Competitors

Low Demand Perceived Value

Disadvantages

ALTERNATIVE 2 : Price Penetration

Initial low price Cheap price of only $16.49

Company Objective = focus on marketshare

Customers = homeowners/firms

Costs = $16.49Competition = price warsChannel Members = retailers +

Canty’s Sales

Advantages

Build Market Share Fast

Discourage Competitors

Higher Demand

Low Profit Margins Low Price = Low

Quality? Perceived Value Canty

International’s Image

Disadvantages

ALTERNATIVE 2 : Value Basedand Specialty Promotional Pricing

Promotions to Attract Customers Initially, Higher Price Introduce Promotional Pricing

Advantages

Attracts Customers

Higher Profit Margins

Stacks Well Against Competitors

Builds Loyalty

Draws in Competitors

Higher Profit Margins

Questionable Non-Sale Price

Perceived Cheap Option

Disadvantages

Solution

Price Skimming Strategy

Innovative New Product Lower Prices if Competitors Emerge Perceived High Value

Implementation Plan

Product Requirements Price at $35.58 / m Promotion at Regional Sales Office Internationally Based (Place)

Plan B

Value Based and Promotional Pricing Attract Customers With Promotions

Cash Discounts Quantity Discounts

Durable Product = Gain Large Market Share

Course Concepts

Price Strategies Price skimming Price penetration Value based

The five Cs of pricing: Company objective Customers Costs Competition Channel members

Questions/Discussions

QUESTIONS??