Zoecon Corporation Case Study

BACKGROUND AND PROBLEM DEFINITION

1986, Zoecon Corporation’s top management was overhauled and so was their corporate objective. As per the new directives, entire focus was to be on maximum financial returns in terms of both business and products. Zoecon executives need to decide the fate of their insect growth regulator brand Strike Roach Ender, now that its test marketing is over in four cities.

MARKET ANALYSIS

Estimated annual sales of consumer insecticides is around $400 million also, sales forecasted to grow by 10% through 1990. Competition is high with S.C Johnson and Boyel- Midway having 45% and 33% market share respectively. Prime sales are expected in around May to October and main markets are projected to be southern 14 states in US.  Amongst all the available products market is dominated by ant and roach killers which is around 40%. Insecticides in the form of Aerosol sprays and foggers (74%) sold in super market (70%) and drug store (21%). Market research suggest you need at least $10 million to successfully launch a new product with a familiar brand name. However, if producers approach consumers directly, their profit is maximum with 55%, but if done through POC’s its 51% and distributor’s margin is 27%.

STRATEGY ALTERNATIVES

1. Strike Roach Ender distribution extended to cities where Strike Roach Flea is being sold.

Pros- Excellent opportunity to expand as these cities only account for 80% sale of roach insecticides. Besides, this will increase sales as the company can leverage on customer loyalty and brand image.

Cons- Have to increase distributor channels and advertisements which will incur further capital costs.

1. Outsourcing to Pest Control Operators.

Pros- Company will be able to acquire large market share and sell huge amount. Besides, advertisement cost can be controlled as well.

Cons- No control over selling amount with distributors and PCO’s at the helm and lower margins as per the case. Producer’s margin decreases from 55% to 51% when it goes through distributor.

1. Selling hydroprene to the makers of D-Con, Black Flag, and Raid to use it in their products.

Pros- Advertisement costs will be saved as they don’t have to sale a product in the market itself. This will also increase the margins to some extent.

Cons- Will lose a stable market to its competitors. The product itself may vanish from the market. Exhibit- 3 proves that it needs to cover almost 90% market which is not possible.

CONCLUSION & RECOMMENDATION

My analysis says that it will be good for Zoecon Corporation to expand its market share and start selling where Strike Roach Flea is being sold. It’s the easiest way for Zoecon as another product of it has a huge market share which indicates its brand image. Besides if we go by data at Exhibit 1, the Break-even point seems easily achievable. Zoecon just have to use its resources be it Financial, human resource or technology very wisely. If we consider any other option, it’s evident from Exhibit 2-4 that it will suffer a huge loss.

Exhibit 1;

Exhibit 2:

Exhibit 3: