Executive SummaryNow Shoes for Moos is only a potential company built by Jim. The product is the special shoe for cows, combined with foot treatment, easy cleaning, durable and reusable.
Jim hired his bother-in-law, Tom and have a limited amount of investment capital. Jim is trying to make a decision that chooses an alternative to distribute and promote their products.Decision StatementStarting Shoes for Moos is feasible. Considering lack of management depth and the good function of shoes, it is recommended that Shoes for Moos use the direct Mail method to distribute Moos shoes to the target market.
AnalysisInternal AnalysisFor the management expertise, the strength was that the Shoe for Moos was a family-owned business. The weakness was that Jim and his brother-in-law had their own jobs, they cannot fully focus on this venture. For the market share and growth rate, the strength was it had a potential identifiable distributor and promotion plan. However, there was no distribution network, and it was lack of experienced salesman.
For the production, it was unique, and high quality under a reasonable price. The weakness was that there were two competitors; one provides lower-quality, cheaper products. The other was intended for clinical use with high price products. For the R&D, the professional efforts to ensure improved quality and better product design.
The weakness was the test process spent too much time and the samples were not big enough. For the finance, there was no debt for Shoe for Moos. But its limited capitals only have investment of &25,000. For the Manufacturing, the sole manufacturer ensures excellent quality, good research and development capabilities and available manufacturing capacity.
The weakness was their had a minimum inventory of 100 shoes. (Exhibit 1)Macro-EnvironmentFor the economic environment, the large market size means the economy of scales for this industry is large. The average size of Canadian dairy farms was steadily increasing. Shoes for cow has a wild market range to gain profit.
However, Shoe for Moos was a new brand, low brand identification leads to hard to let consumers accept it. Therefore, the marketing leaders should come up with accurate brand position and advertising to create the best impression in customer’s mind. For social environment, the opportunity was the number of cows in the US and Canada is relatively large. The threat was the farmers had their treatment solution and their reaction to this novelty product is uncontrollable.
For the technological environment, they have a mature technology that can provide the opportunity in increasing the quality of product. With implementation of new technology, the cow’s foot problem will be eliminated. Thus, management group should be aware of this opportunity in order to capture the customer demand. On the other hand, the threat was they don’t have patent for the product, so the competitors can duplicate.
Therefore, company need pay continuing attention to testing the product and gives the promotion to attract more customers.(Exhibit 1)Consumer AnalysisThe potential users of Shoes for Moos were the owners of dairy, beef, show, research, and breeding cattle were; but the target market would be focused on dairy farmers. The hoof disease leads to decline the profit for the dairy famers. The cows became ill with foot problems would directly result in decline the milk production by 20-80 percent.
If the hoof disease gets worse that require antibiotics, not only lost all milk production, but also increase the cost for farmers; which $15 to $30 on the particular antibiotic and $50 per visit on veterinarian service call, so the farmer will lose at least $72.5 to $110 per cow. If the situation get worse, the sick cow has to be killed, result in farmers will lose at least $3100. The cattle for breeding, research and show normally have a higher investment, and the cost would not be an issue for the owners.
Beef cattle are treated differently and could account for 20 percent of Moo shoe sales. There were two high seasons that consumer would buy the Moo shoes, which were winter and spring, since they were the high seasons for bacterialgrowth that would cause the hoof disease. The moo shoes enable the cows to continue working, avoid spreading the hoof disease, and reduce the lost for farmers.Market AnalysisKaufman Footwear is the only supplier for the Shoes for Moos Inc.
The market for shoes that aided cows with hoof disease is significant. There are 16,611,000 cattle, calves and dairy cows in Canada. The dairy cow population in Canada is 1.1 million milk cows and more so in the United States with over 9.
2 million milk cows. Studies have shown that anywhere form 22,000 to 220,000 dairy cattle are infected twice a year, which were spring (March, April) and fall (October) in Canada alone by hoof disease. Seasons and climate change is a direct factors leading to hoof disease, and it would resulted in the demand of Moos shoes, so the demand is cyclical. Even though there were two substitute products, it would not influence the market of Moos shoes, their products focused different market.
There were two market channel, direct mail and establish dealers in each area. Jim was the person who has control in the channels of distribution. Based on both distribution channel options, the market does not have much room to grow; it has shown that the numbers of farms is declining, and the farmers have already made their own solution with a cheaper and less effective way.Competitive AnalysisThere were two major competitors in currently market for hoof disease.
One was the hoof shoe, which mainly target structural problems for cows rather than medical problems. Although its price of 21.8 is comparatively cheap, its weakness is obvious that the shoes get infections to worsen due to the height of the shoe; it was only advertise through direct mail catalogues from United Stated. The other competitor was primarily used on horses and was a strictly clinical use hydrotherapy shoe.
The main limitation to spread in farmer’s cows was the price; it was too high that $400 per pair to afford for farmers. Overall, these two products were not typically used for hoof disease, which was an obvious differentiation advantage for Shoes for Moos. Therefore, there was no threatfor the shoes for aid hoof treatment in cows.CriteriaThe criteria should be mainly focused on three elements to evaluate the Shoes for Moos.
Firstly, the alternative should minimum the unit price under a reasonable break-even volume to be competitive in the market. Secondly, the alternative should capture market need and match the supply with demand. Finally, lower the cost and maximum the profit.AlternativesThere were two alternatives for Jim to consider, weather continues forward with the plan of selling Moos Shoes or not.
If Jim wanted moves forward he have to consider the price, promotion issues and which distribution channel would work best for his Moos shoes. Distribution and promotion was an important factor on how Moos Shoes to be priced. The first alternative Shoes of Moos is worth to consider could be direct mail strategy, Jim would maintain one-to-one relationship with customers and would provide full control over the product and advertising. The significant advantage for direct mail is that Moos shoes don’t have to carry any inventory or do any shipping because the Foundation for the Mentally Handicapped will be responsible for the shipping process, but this company may not be able to keep up with large order quantities.
For Moos shoes, the shipping price for the product is only $2.67 per shoe, which include $2 fixed postage and variable packaging cost $0.67 per shoe, thus the price of the product could gain highest return. Also, Shoes for Moos would guarantee a one-year warranty that would not be covered by the manufacturer of the product, and increase the cost.
Direct mail may also save time and commuting fee for clients because the product can be delivered to customers, on the other hand, it can’t get access to real product and evaluate product quality (Exhibit 2) The second alternative for Moos Shoes is that establish dealers. The advantage was that Moos shoes would get be exposed quickly and to a large geographical area. The shoes would be available for the farmers without placing an order. This alternative provides customers the chance to visually see the product beforepurchase.
Customers can directly go to local shop and get the product. Dealers would actively promote the product in stores and get larger orders. However, in order for this to work Jim had to offer a minimum 40% of margin and protected territories. Jim also had to consider hiring a salesperson at approximately $100,000 per year or do the work himself.
Breakeven analysis:After final meeting with Kaufman footwear, the price of Moos shoes is $19 per shoe. (Exhibit 3) Alternative for direct mail:Unit price= 19+2.67= $21.67Unit break-even volume = 20879/ 21.
67= 964 unitsAlternative for establish dealers: (required 15 samples and 40%-50% margin) Unite price =19*(1+40%)= 26.6 (minimum)Unit break-even volume = (20879+15*19)/26.6 =796 unitsIf hired a salesperson, additional $100,000 is required for one-year salary Unit break-even volume= (20879+100,000)/ 26.6 =4545 unitsRecommendationConsidering the selling season for Shoes for Moos only available for twice a year, and the consumer groups were relatively stable, direct mail was the best way to distribute for Jim.
The analysis indicates that Shoes for Moos Inc. should move forward with new venture through a distribution method of direct mail. The break-even analysis clearly showed above that, direct mail ($21.67) was better than establish dealers ($26.
6) because the lower unit price would be more competitive in the market; the price is still competitive even if Jim require 20% margin as well (21.67*120%=$26) and the alternative 1 (964 units) was under a much more reasonable unit break-even volume than alternative 2 (4545 units); the smaller break-even volume were lower selling pressure to balance the cost. As Jim and his brother-in-law have a limited amount of investment capital, the best way was lower the cost first, so they should try to enter market in an economical way, and build a good reputation of quality to customers. Even though direct mail cannot offer large orders, it matched the inventory size; therefore they don’t have to pay extra inventory expense.
Thus, direct mail is more benefit Jim to start a new business in this case.Action of PlanThe short-term objective for Shoes for Moos should be develop a clear distribution channel to enable the company run well, and create a clear plan to get into market, make sure the advertising and promote was effective. The middle-term objective for company was establishes a good reputation for brand and builds brand awareness, they were important to differentiate than other products. In order to accomplish this goal, the total budget will be $35,000 in this period.
For the long-term objective was developing a stable customers base to ensure the company get profit and build stable relationship with retailer. (Exhibit 4)Exhibit 1: SWOT AnalysisStrength/OpportunitiesWeakness/threatsInternal analysisFamily-own businessPotential identifiable distributor and promotion planUnique production but reasonable priceProfessional efforts of R&DNo debtGood manufacture back upOperator cannot focused on this ventureNo distribution networkLack of experienced salesmanTwo competitorsTest process was too longSample is not big enoughLimited capitalLimited inventory only for 100 shoesExternal analysisMarket size is largeDistinctive nameGood function for productsMature technology for testNumbers of farm is declineLow brand identificationFarmers have own treatment to cowsWould attract more competitorsNo patentExhibit 2: Strategic Alternative: Direct mailPros:Cons:Maintain one-to-one consumerLimited on orders quantitiesFully control the product and advertingOne-year warranty requiredNo need carry any inventory and shippingCannot access real product and evaluate qualitySave time and commuting feeDirectly delivery to customersProduct could gain highest return at the least expensive priceStrategic Alternative: Establish DealersPros:Cons:Expose quickly, get wider geographicalHigh margin shareAvailable shoes for customers without ordersStrong promotional supportProduct is visual in the local shopLarger order availableExhibit 3: Annual Fixed costTrade Show:Stratford Farm Show$100Canadian Vet Show$1235Toronto Farm, West Farm Show and Quebec Farm Show$950 (150+350+250+200)Total:$2285Magazine Advertisement$545Ontario Milk Produce$720xftv vProducteur de Lait Quebecois$1265Video tape$2200Promotion Samples$285 (570/2)Rent$4800 (400*12)Telephone line installation$5711-800 Number$1809 (69+1740)Automobile expense$9100Miscellaneous postage$200Legal and audit fees$1200Patent cost (Lifespan is 14 yrs.)$375 (5000/14)Cost for owning mold (Lifespan is 14 yrs.)$375 (5000/14)Total:$20,879Exhibit 4: Action PlanShort-termDevelop a clear distribution channelCreate a clear plan for getting in marketMiddle-termEstablish a good reputation for the brandBuild brand awarenessTotal budget $ 35,000Long-termEstablish a stable customer baseDevelop relationships with retailers
