Squirrel Defense, Inc. (SDI) started its business in October 1998. In 1999 SDI sold 112 Town-style and 334 Country-style feeders. It incurred a loss of $26,607 to end up with a negative checking / savings balance of $ 7, 308 and total current asset of negative $128. In addition to starting business at the wrong time of the year it is facing inefficient manufacturing design and process, incoherent promotion and advertising with potential customers and noncompetitive pricing.
* Starting business at the wrong time : SDI started its business in the wrong time of the year.
It failed to capture the large orders of its desired retailers in the first quarter of 1999. This made it rely on small orders. It made them suffer all through 1999.
* Manufacturing design and process : Despite missing the large orders, SDI faced problems filling the small orders as well. Inefficient manufacturing process parting coming from product design made them to slow sales for production to catch up. The award winning product design resulted in a difficult to manufacture product for SDI.
* Promotion and advertising : SDI promotion and advertising is also incoherent with its potential customers. Despite their projection of sales to older retired people their customers turned out to vary from 30 to 75 years of age consisting mostly of women. Future projection also says that an average customer is likely to be within 40 to 60 years of age with a college degree with an increasing probability of women as the characteristics of member ABA. There current advertising featuring “mom-and-pop” people reflects older people more.
Moreover the current marketing needs to address the product’s not hurting Squirrels, a crucial issue for an nature-friendly company.
SDI did not address the required issues in it’s advertising and promotion.
* Noncompetitive pricing : Solar Feeder is also priced with giving concern to the competitive conditions. It is significantly high priced above other competitor products. Despite its appeal and look it should priced based on market condition to foster sales.
SDI’s inability to sell in large volumes then result in high distribution cost to add to overall high fixed cost with low sales volume to make the company suffer financially heavily.
These problems reflect management’s lack of business knowledge, engineering knowledge, and an overall lack of strategic direction- the main issues management needs to address. SDI needs a business plan, a vision that will be further translated into a strategic plan and strategic and financial objectives.
Central Issue
The central issue is to set the strategic direction of the company to meet the desired vision about the company in futures. SDI’s current problems are due to the lack of overall strategic disintegration. Setting this direction right at present would be central to the existence in future.
Present Strategy & Effectiveness
* Product Line: Currently there product line consists of two styles i.e. “Town” and “Country”. The Town style was a higher end model.
* Production: SDI outsourced some of their production tasks. But, they performed the primary assembly.
* Pricing: Initially the product’s pricing was based on profit markup not on competitive market conditions. This resulted in significantly high price above competing products.
* Advertising: SDI used posters with images of 1950s “mom-and-pop people. They also used flyers and materials in loud oranges and greens, as well as psychedelic greens and yellows.
* Promotion: The solar feeders were promoted through trade shows to traditional and high-end birding stores, and through the company’s website. They promoted the product to lawn and garden stores, as well as nurseries and birding stores.
* Distribution: SDI mainly worked with several large companies that distributed garden supplies to retailers. The small retailers could order from these distributors at a lower cost than UPS. But, because of SDI’s large production problems they could not produce in mass. So, they had to use UPS.
* Customer Service: SDI gave a 30-day money-back satisfaction guarantee, one -year warranty on parts.
It appears that between the two products it is producing the Country-style feeders are receiving more acceptances. In 1999 SDI sold 112 Town-style and 334 Country-style feeders. However sales is at quite low level for both the styles. Despite the initial interest demand it generated for its attractive look inefficient production made sales low, which says that production process requires more efficiency. High production cost coupled with high markup resulted in high prices that reduced the viability and appeal of the product. Similar problem is with advertising with advertising and promotion. It is not generating sales among older retired people whom they targeted in their advertising using mom and pop image.
However initial promotion through trade shows, law and garden stores is working well as evidenced from the enthusiasm about the product. But inability to generate orders of large quantities acted as impediment to realizing inexpensive distribution channels.
All these made the company incur a loss of $26,607 to end up with a negative checking / savings balance of $ 7, 308 and total current asset of negative $128 in 1999.
Recommendation
* Nature harmonious company image: SDI needs to reposition their image as a nature harmonious instead of just Squirrel free solar feeder. Already the company is having a difficult time not only explaining the working process of their bird feeder also that it does not hurt Squirrels. It is obvious that bird lovers would not want to harm Squirrel to feed the birds. Hence to promote the products viability and appeal to the growing bird watcher and lovers SDI must communicate that it want the bird’s feed to reach the birds and they are not hurting Squirrels along the way when keeping them away. Big Top’s long running mechanical harmonious image designing surely supports such an image. They should try to develop not Squirrel harmful nature friendly image.
* Name of the product : Solar feeder is meant to make the wild birds reach their feed preserving it from Squirrels. These customers are people who love nature and beauty. One of the main reason of Solar feeder’s initial demand is its artistic attractive look. Two of the successful feeders WildBills and Big Top’s name may be a key to generate an image. Hence SDI might consider renaming its product to strengthen its look and appeal.
* Product Development: Despite the numerous awards that the product has won it is difficult to implement in manufacturing. Its time to redesign the product keeping manufacturing and cost of production in mind especially for the “Country” style so that time consuming adjustments are reduced through flexibility. However the basic features should preserved along the way. This time designers and manufacturing should work together to make the product a success. This would enable faster production at cheaper cost to meet large volumes.
* Production: Once the product is developed with manufacturing in mind it is likely to foster production. Given the very high level of current gross wage they should consider automating production to cost-effective level. After switching to a more flexible design they would be able to outsource most of components keeping only the main assembly in their own hand. This would make them keep degree of operating leverage at a tolerable level while achieving higher levels of production.
* Pricing : Price should be based on competitive conditions, cost of production and the perceived the value of the product.
* Advertisement: SDI must change their advertisement right away. They should come up with more appealing advertising not targeted to a specific age level over 30 years using television employing telemarketing concept with an homely natural product appeal. The same appeal should be communicated using direct mail for print media. SDI should avoid current practice of building advertisements, which focus on any particular age group. This would help them to reach larger target market. This advertisement should focus on the basic functions rather than technology. Birdfeeder is a very homely product so we must create a homely atmosphere in the advertisements.
Keeping the American culture and target group (30 and over women and typically housewives) in mind we believe that the best way to advertise is through television. This advertisement should be like Telemarketing. This would help SDI to show how the bird feeder works and reach the housewives more effectively. SDI should also use direct mail. This direct mail should be delivered through the postal department, which will make it cheaper. SDI could also use home and garden publications that offer regional or local editions for the five states with the highest population of bird watcher. All these adds should refer to the company’s website.
* Promotion: Given the current premature stage of the company SDI should focus on retailers during promotion. They should provide retailers with flyers, brochures or a demonstration video (optimized version not stimulating the impression that the squirrels get hurt) in order to communicate the product benefits (and how it works) to retail staff and consumers. SDI must get the birdfeeder into catalogs of specialized retailers. This would increase sales.
* Website: SDI’s website is not designed according to their customers. It should be more user friendly so that their main segment (35-75 year old affluent women) can use it and order products online. This would also help them in improving their company image, as they would be able to show that their feeders do not harm Squirrel and make more sells. More inter-active user friendly features with customers in mind must be added to the website for better communication.
Once the image of company is set in right course with product design keeping in mind manufacturing with the right degree of operating leverage with integrated marketing communication sales would be expected to rise opening the way to cheaper distribution channel other than UPS thus to lower competitive price and higher sales leading to better financial statistics.
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