Situation analysis
You are the primary decision-maker in the case. What are your objectives? What are the relevant facts from the case? What decisions/problems/opportunities must you face?
As the primary decision-maker in the case, it will my duty to first take stock of the present situation in terms of the strengths of Airgun Products, Inc. (API) and the current challenges it faces concerning maintaining its market share and furthering the growth of the company in terms of revenues and profitability. To bring about such improvements it will be imperative to steadily remove the inherent weaknesses that have arisen due to the developments taking place as a consequence of the new strategies introduced by API’s competitors. Notice will also have to be taken of the increasing competition emanating from e-commerce and of the propensity of a larger number of customers preferring to purchase air guns and air gun-related products via the internet. Although in the five years, commencing from 1989 when the company began its modest operations, API has made significant strides in terms of business growth and market share, a lot still needs to be done to survive in a competitive environment that is consistently increasing not only from within the country but also from manufacturers in other countries.
The market for air guns is considered to be a niche in the sense that the customers primarily comprise field shooters competition shooters, target shooters, and hunters. People use air guns now more as a hobby than to fulfill essential requirements. Of a total estimated market that is worth $51 million in the US, API accounts for about $1.2 million which is not much of a market share. There is hence a need for the company to fasten its seat belts and do something extraordinary if it is to survive in the constantly increasing competitive environment. The company has to effectively counter the competition emanating from its four major competitors in introducing new strategies to woo the customer. The customer segment for air guns is fairly flexible in patronizing the company that will offer them the best prices and after-sales service. Hence there is a strong need to tap the customer base most effectively. Recent trends, especially in this market segment have indicated increasing preferences of customers to buy directly from the company websites in paying through credit cards. Although API’s sales figures have been increasing steadily over the past few years the company has to improve overall profitability. The biggest challenge for the company is to make a success out of its e-commerce initiatives especially in the face of several such efforts having failed for other companies. The challenge requires the company to transform itself from a catalog-based phone sales company into a triumphant online sales and catalog company. Issues have to be identified that are pertinent to improve the profitability of the company and decisions taken about the management of the organization; whether the present owner and a single manager should continue to assume the leadership and decision making roles or there should be a shift in the management strategy by changing the organizational structure.
In 2004, the company realized that to increase sales it needs to make the best use of its online and offline resources by influencing its customers. There has to be a marked change in the way API has been looking at its market especially because of the recent negative results. Pertinent issues have to be identified regarding market segmentation, identification of the advantages and disadvantages regarding paper and online catalogs, and concerning creating value as an online intermediary.
Solution analysis
What are the possible solutions? What would you do? Why? How do feel about actions taken? What are your recommendations?
The strongest need is to identify the important issues and formulate a plan to enable the company to improve profitability. Market segmentation has to be understood in the context of the two groups of customers who buy through the company website and those that buy directly. The company’s foray into distributing more paper catalogs while continuing with the online catalogs is a good step but research should be conducted to ascertain the changing patterns in buying habits of customers about the two options. Based on the results a suitable strategy can be formulated in meeting consumer aspirations. API will have to create immense value for itself by acting as an intermediary between the bigger suppliers and consumers by giving incentives and add-on benefits for purchasers which are not being provided by its bigger competitors because of their high volumes. Under the circumstance, API needs to provide better bargains to customers and to make efforts in reaching out to a larger customer segment by way of a strategic advertisement plan that addresses and influences the perceptions of customers. The advertisements must be designed so that the brand personality is directly associated with those of the prospective customers which will carry the company forward in creating a shift of customers from other companies to API.
It is not enough for the website customers to be contacted continuously but customers who are brought in by way of the print catalogs should also be further pursued with added vigor since there is immense potential in this segment. They need to be serviced and contacted regularly so that they perceive a sense of caring and concern for them by API. The fact that API has shifted into new premises that house its offices, warehouse, and repair facilities is indeed a positive sign. However, the company needs to exploit such action to the maximum by informing customers of the available facilities to make the purchase of air guns from API a pleasant experience because of the hassle-free services and guarantee of spare parts availability as enabled by the repair facility and warehouse respectively. API should not stop with the practice of sending newsletters to customers due to its having become cost-ineffective. An alternative means of sending it by mail can be started to keep customers aware of the offers and facilities provided by the company.
Case Review and Reflection
What have I learned from this case? Does this remind you of any other business situation? How does this relate to your own experiences?
The case study enables one to learn a great deal from the changing pattern in which businesses have started to operate. With the increasing popularity and success of ecommerce, there is a widespread change in the purchasing habits of people by way of the varied choices available and the convenience with which products can be purchased. There is a marked transformation by way of introducing strategic techniques in attracting the customer and in addressing the needs of the different segments. The size of the market has now crossed international boundaries which is the prime reason for API to make changes in the way it should do business. There is intense competition and in such an environment it is the survival of the fittest in meeting consumer aspirations. The days of customers having limited choice due to the presence of a small number of suppliers in the market are now over. Consumers have to be given maximum utility and value by evolving a constantly changing strategy that must change with innovations and technology.
Most businesses today cannot thrive without adopting the e-commerce option which is evident in almost all classes of consumer products and services. Efforts have to be made to woo the customer by offering him a product that gives him maximum value for his money. A similar example, though not of a niche product is the e-commerce potential for books which has transformed the way people buy books. There is now a wide array of choices in buying whatever book is required, but companies must adopt the best marketing techniques in impressively presenting through its website, which should be consumer-friendly by providing the maximum convenience and utility in shopping. The best example of a company that is exceptionally successful in this regard and as experienced by me, is amazon.com which is now popular throughout the world. The customer has to just name a book and it is available at amazon.com for easy purchase through a convenient process. After-sale service is effectively managed by the company. Books can be returned within a specified period if the customer is not satisfied. Such customer-friendly strategies carry forward the company towards greater success.