F ‘Nell del Sure is currently aced with an opportunity to obtain a contract with a mass merchandising retailer to sell their products at 10% below their current prices. The contract would start out with an initial purchase of $750,000 and possibly generate as much as 4 million in sales annually. The dilemma is whether or not the company feels that this contract is a good fit strategically. Also of concern is whether or not this opportunity conflicts with the organizational culture. 2 Available Courses of Action 1 .
Accept the contract with the department store This alternative would require tripling the amount of replica products that the F’ Unix el Sure is producing. One question that F’ Unix del Sure should address is, how would this affect the image of the company? Their focus would be somewhat taken away from acquiring authentic products and directed towards the replica industry. From the SOOT analysis in the appendix, one of Fennel del Subs strengths Is the ability to produce high quality replicas. This strength aligns well with the opportunity to obtain the contract with the department store.
When evaluating opportunities, It Is good to classify them in terms of the type of strategy employed. Since the contract tit the department store would not necessarily be a new offering, they are looking to execute market penetration with their existing products. The retailer currently sells similar products, and is going to attempt to sell F’ Unix del Sure as a more exclusive line. This is a market position strategy In which they are trying to utilize the price and quality attribute of positioning to compete.
A few questions that need to be asked are ; What is the desired position? -The position is an exclusive line of decorations, priced higher than current offerings by competition. F’ Unix del Cur’s products must be understood by customers to be the real deal”, even if they are replicas. ; Which competitors must be bested to gain the position? -Competitors very similar to F ; Nell are signing salary contracts with retailers, but pro- vide a mixture of quality of products. F’ Unix needs to deliver solid quality every time in order to compete well. Is Fiend del Sure capable of holding the position? -F ‘knell’s success in holding the position will depend on several factors. Can they Increase their volume of replica products to meet the demand? Will current the quality of their decorations stay in the top tier, and can they build brand equity ever time that allows them to retain a sustainable advantage? 2. Create a sub brand of products that are sold in retail stores. Fiend del Sure could create a sub brand of their replica products, which are only sold in mass merchandising stores.
This alternative has several pros and cons. Pros: ; Evoke the reputation for quality associated with their products to sell in the retail environment ; Could utilize a down-market stretch to capture more sales at the lower end of the market. ; Overall growth of the business could enable Fiend del Sure to have more purchasing power in the authentic market. Cons: ; If replica brand is too good, sales from it my begin to cannibalize the genuine artifacts. ; Some potential customers might perceive the company as being too cheap if they sell in these stores. Splitting into two brands may cause conflicts within the company and erode the culture they have worked hard to establish. ; Current suppliers may feel undercut by cheap replicas that are sold in retail 3 Recommendation Currently, the gross sales of F’ Unix del Sure is at $MOM and information indicated that it has been growing its sales by 20% a year from the previous decade. Adding the retail account will increase estimated sales by $MM on top of current growth. With current growth at $MM over the previous decade, $MM would be a 16% increase.
The question that remains unanswered is can Fiend del Sure keep their current growth with the competitive conditions, and would adding the new contract hurt their sales? Since their current demand is already calling for more replicas to be made, perhaps F ;Unix del Sure should negotiate with their retailer to obtain a contract that allowed them to sell a dual braded offerings, replicas and genuine artifacts and crafts. They loud sell the brand name as “Fiend del Sure Designs” This plan would allow them to retain their current plan, and Just retool for increased production.
This opportunity could neutralize the threat of a hyper competitive environment that is inevitable. Also, choosing this plan of action would allow them to keep their core culture and be honest about the source of their offerings. Perhaps their new marketing statement could be: “For the savvy cool elector and interior decorator , Fiend del Sure Designs provides a beautiful rustic look that will I transform any space with real world charm.
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