Jone's Blair Company Case Study

BACKGROUND AND PROBLEM DEFINITION:

U.S. Paint industry is classified into three categories: Architectural coatings, Original Equipment Manufacturing (OEM) Coatings and Special purpose paints with total industry sale ratio of 43: 35:22. U.S. paint manufacturers are under pressure from Environment Protection Agency (EPA)’s 3-step programme where they have to cut down their volatile organic compounds (VOC) to 45% by the end of 2003. Owing to many such factors, paint industry is witnessing a decline in a number of companies by 2-3%.

Jones Blair Company specializes in manufacturing and marketing Architectural coating and OEM across U.S. Most of its sales comes from Do-it-yourself and professional customers who form 50% and 25% respectively. Its distinctiveness is product quality and service. JBC is now looking for a potential new market in southwestern America, but so far the management has been indecisive in terms of marketing strategy.

MARKET AND INDUSTRY ANALYSIS:

JBC’s strength lies in its high-quality product and firm hold on Do-it-yourself and professional customer which is expected to grow by 1-2%. Besides they distribute their products in 200 independent paint stores, lumberyards, and outlets. Blaire’s company spends 3% of net sales on ads out of which 55% is spent on the cooperative programme. But, as per the data present, ads only reach 25% of the people and further, the company has only 8 sales representative. Competition too seems very high with 600 companies onboard along with their aggressive spending on promotions and higher-quality products. JBC has also done very well by maintaining a contribution margin of 35%.

ALTERNATIVE COURSE OF ACTION:

1. Increased spending of $350,000 in the corporate advertisement.
As per the survey, ads so far have reached only 25% of their target customers but the company needs minimum 30% awareness level to move their sales. But, at the same time company have to increase their sales to recover the other baggage of ad costs.

2. 20% reduction in price 
Jones Blaire products have highest market price owing to its quality and service. Reducing the price will help the company to penetrate a competitive ridden market and form base. But, at the same time, 20% reduction will also bring down contribution to 15% only and to sustain the above decision they have to produce more which in this scenario seems impossible for the company.

3. Hire Sales representative-
JBC has not been able to add any significant account in last 5 years so new sales representative can help bring new accounts in non-DFW zone. However, this will cost company additional $60,000. But, as per Exhibit 1, the company would need $0.1714 million extra sales to recover the cost and number of accounts he will convert is approx. 3.

4. Only guard margins and control costs:
Keep running everything as it is. Barely keep tabs of company’s margin and control costs.

CONCLUSION:

From the above analysis, my inference would be JBC should completely avoid discounting any price rather stick to maintaining the price. However, some quick steps would include an increasing level of awareness amongst the public and then add sales representatives who will focus on non-DFW zones to develop profitable accounts.