Fall 2018 Mar 4804u01 Mon Dr B Seatonab

Fall 2018 Mar 4804u01 Mon Dr B Seatonab

Analyze and discuss ABC Door, Inc.'s growth objectives, market share, competitive response, and strategic recommendations based on industry and internal data provided, including market growth, sales, dealer distribution, and market share analysis.

Paper For Above instruction

Introduction

The strategic growth plan of ABC Door, Inc. presents a compelling case of ambitious sales targets juxtaposed against industry trends and internal market performance. To adequately evaluate the feasibility of their objectives and strategize around their market positioning, it is necessary to undertake a comprehensive analysis of industry growth, competitive dynamics, distribution channels, and internal sales performance metrics. This paper critically examines ABC's sales growth ambitions, the implications of projected market expansion, and formulates strategic recommendations rooted in these insights.

Industry and Company Sales Dynamics

The residential garage door industry in the United States demonstrates modest growth, with FY 2017 sales totalling approximately $348.5 million, projected to increase by 2.4% in FY 2018 to about $358.86 million (U.S. Census Bureau, 2018). This indicates a stable but slow-growing market environment. Conversely, ABC Door, Inc. earned sales of $9.2 million in FY 2017, constituting approximately 2.6% of the entire industry market share (ABC, 2018). The company's sales goal for FY 2018 is set at $12.5 million, which equates to a targeted growth rate of 36%.

While this goal reflects an aggressive increase, it substantially exceeds both projected industry growth and the company's current growth rate, which is around 36% of the previous year's sales, or about 35% if planned sales are achieved precisely (assuming linear growth). Considering the projected industry growth of 2.4%, meeting such a goal requires ABC's market share to nearly double, from 2.6% to approximately 3.5%, implying significant strategic repositioning.

Market Share and Growth Rate Analysis

The calculation of ABC’s desired market share for FY 2018 involves projecting the industry market size, which would be approximately $358.86 million, and aligning sales goals accordingly:

- Market size FY 2018 = $348.5M × 1.024 = $358.86M

- Desired market share = ($12.5M / $358.86M) × 100 ≈ 3.48%

This suggests ABC aims to elevate its market share from 2.6% to roughly 3.5%, nearly a 34.6% increase. Meanwhile, the industry growth rate of 2.4% is minimal, confirming ABC's growth goal lies significantly outside natural market expansion.

Analyzing the competitive growth rate:

- Industry sales increase = $348.5M × 0.024 = $8.4M

- Projected industry size = $358.86M

- Required sales increase to meet goal = $12.5M - $9.2M = $3.3M in additional sales

The competitive growth rate — that is, growth driven solely by industry expansion without market share gains — is around 1.7%, calculated as:

\[

\frac{($348.5M \times 1.024) - $12.5M}{($348.5M - $9.2M)} \approx 1.7\%

\]

This places ABC's targeted growth at well above industry expansion, highlighting a need for strategic market share increases.

Potential Competitive Response and Market Dynamics

A diminishing growth rate for the industry, combined with ABC’s aggressive sales ambitions, might precipitate heightened competitive responses. Competitors recognizing ABC’s intention to rapidly increase market share could ramp up marketing, offer aggressive pricing, enhance dealer incentives, or innovate to prevent ABC from capturing additional market segments. Such responses would be consistent with classic competitive dynamics, where firms react to aggressive entrants or strategies by defending their established market positions through increased promotional efforts or price competition.

An enhanced competitive response could considerably reduce the feasibility of ABC’re achieving its ambitious market share targets, especially if competitors already enjoy superior brand recognition or dealer loyalty. This scenario underscores the importance of understanding market elasticity and the strategic environment before executing aggressive expansion tactics.

Probability of Achieving Sales Goals and Impact of Competitive Responses

Without comprehensive market research and detailed internal data, estimating the probability of ABC reaching its 36% sales increase involves caution. Given current market estimates, competitor dynamics, and distribution constraints, a conservative probability might be set around 30–40%. Factors reducing likelihood include limited brand recognition among homeowners, low dealer loyalty to new brands, and potential retaliation from competitors.

The response to the competitive response threat directly influences this probability. A proactive marketing strategy emphasizing primary demand creation (increasing overall market size) may counterbalance competitive pushback by enlarging the “pie” rather than specifically fighting for market share. Conversely, if ABC solely pursues share gains through existing market segments, it risks being undermined by rivals' responses.

Moreover, if the aggressive market share increase is attempted without addressing underlying obstacles—such as consumer brand awareness and dealer loyalty—probability of success diminishes further. Therefore, flexible strategic adjustments and robust market research are necessary to optimize the probability of success.

Assessment of the Consultant’s Strategy: Focus on Enlarging Market Size

The consultant’s recommendation to focus on increasing primary demand and enlarging the overall market pie warrants critical review. From a market share analysis standpoint, this approach could be effective if the total market size is truly expanding and ABC can capture a disproportionately larger share.

However, the data indicates the overall market is growing slowly (about 2.4%), which might not justify substantial increases in advertising expenditures aimed purely at expanding the market. Instead, targeted efforts to bolster ABC’s brand recognition and dealer support could yield more immediate and measurable gains.

Historically, increasing primary demand in a mature, slow-growing market offers limited returns unless accompanied by innovation or value proposition enhancements that persuade homeowners to replace or install doors anew. Without clear evidence of increased demand, such efforts might dilute marketing resources that could better serve targeted market share growth or improve dealer relationships.

Therefore, a balanced strategy focusing on both market expansion, through limited advertising, and strengthening brand loyalty may be more feasible. Combining primary demand stimulation with secondary demand efforts (such as dealer incentives, technical support, and brand differentiation) would likely generate more sustainable growth.

Market Share Targets in Non-Exclusive Dealerships

Currently, ABC’s market share in non-exclusive dealers is around 8% (calculated as $9.2K/$116.1K). Achieving the FY 2018 sales target of $12.5 million, particularly if focused on non-exclusive dealerships, would require reviewing the estimated share needed.

Assuming all sales increase occurs within non-exclusive channels, with existing average dealer sales at approximately $116.1K, the number of dealer relationships needed to sustain increased sales can be estimated. To meet $12.5 million sales solely through non-exclusive dealerships, considering the current sales per dealer ($26.3K, from recent data), the number of dealers handling ABC products would have to increase substantially, or existing dealers would need to significantly increase order size.

Targeted market share in non-exclusive dealers to reach the sales goal would be calculated as:

\[

\text{Required Market Share} = \frac{\text{Target Sales}}{\text{Total Dealer Sales} \times \text{Number of Dealers}}

\]

Given the average dealer sales, to reach $12.5 million, ABC needs to increase its dealer sales share from 8% to approximately 15%, requiring strategic efforts to improve dealer performance, loyalty, and product positioning.

Performance Discrepancies and Research Recommendations

The observed discrepancy between ABC’s dealer-market share (8%) and the expected market share in a three-brand dealer scenario (roughly 30-33%) highlights performance issues. Several hypotheses explain this performance deficit:

- Inadequate dealer support or training

- Lack of brand recognition among end consumers

- Limited dealer incentives compared to competitors

- Distribution limitations or product differentiation issues

- Consumer preferences favoring established brands

To investigate these reasons, a structured research protocol involving surveys, dealer interviews, and consumer focus groups is essential. Key steps include:

1. Dealer Feedback: Gathering insights on barriers to selling ABC’s product, including margins, marketing support, and customer feedback.

2. Consumer Perception Surveys: Assessing brand awareness, preference, and purchase drivers.

3. Competitive Benchmarking: Comparing ABC’s dealer support and product differentiation against competitors.

4. Channel Analysis: Identifying bottlenecks in distribution or dealer engagement strategies.

5. Sales Data Analysis: Monitoring dealer sales patterns and correlating with marketing and support initiatives.

This research would elucidate the underlying causes of the performance gap, guiding targeted strategies for dealer support, branding, and sales initiatives to improve market share effectively.

Conclusion

In summary, ABC Door, Inc.’s strategic ambition to increase sales by 36% in a slow-growing industry presents significant challenges but also opportunities if approached prudently. The key to success lies in understanding and leveraging market dynamics, enhancing dealer relationships, and critically evaluating the benefits of primary versus secondary demand strategies. Recognizing the industry’s modest growth and competitors’ likely aggressive responses, ABC should pursue a balanced approach that emphasizes brand strengthening, dealer support, and selective market expansion. A comprehensive understanding of internal and external market factors through continued research will be essential for realizing their ambitious sales objectives.

References

• U.S. Census Bureau. (2018). Historical Industry Data. Retrieved from https://www.census.gov
• ABC, Inc. Financial Statements. (2018). Internal Company Data.
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