Palladium Door, Inc. wants to increase 2003 sales by 36% in 2004. There is concern whether the current distribution strategy used by Palladium would be adequate to achieve the goal. The company will examine four distribution alternatives including, increasing the number of dealers, reducing the number of dealers, increasing the number of exclusive dealers, and maintaining the current distribution approach. After examining these four alternatives, it must be decided which distribution strategy will maximize sales and if any will increase sales by at least 36%. External Analysis
Market analysis Palladium Doors is a leading manufacturer and distributor of garage doors and parts. The market consists of a number of national, regional and local brands. Palladium Doors currently operates at a regional level with two distribution centers targeting the Rocky Mountain States and northern Texas. The market of door manufacturing is two billion across the United States with a 90% focus on steel doors manufacturing with projected growth is at 2. 4% annually. The sales target for Palladiums next year is 12. 5 million which represents 36% increase from the previous year.
With these aggressive targets, Palladium must increase focus on multiple high risk but targeted marketing projects. Palladium is in the manufacturing and distribution business not retail. Palladium is in the middle of the supply chain for doors. It relies heavily on its network of independent dealers to funnel its products into the market to the end user which utilize the product. The supply chain starts with material manufacturing of equipment, and then flows into product manufacturing, distribution, retail sale then installation and maintenance.
Palladium has a number of approach alternatives it could take into reaching its aggressive sales growth goals. Regionally, Palladium could expand its footprint into surrounding markets maintaining its market share percentage and focusing on expansion into new markets. This approach would require adding additional independent dealers in these new markets. Alternatively, Palladium could approach either vertical expansion moving up the supply chain to material manufacturing or down into retail and even retail sales and service of its doors.
Horizontal expansion also offers another means to increase sales objectives by expanding its offerings into markets such as residential doors and customized and specialty doors. Customer analysis Although palladiums end users are receiving the doors and associated parts, palladium relies on independent dealers for installation and service to the end users. Of its independent dealers, some of the dealers have exclusivity, only offering palladium door products to its customers while other dealers offer palladium door products in addition to other competitor’s products allowing customers to easily compare product lines.
The customers, dealers, look for a reliable product which meets the end-users motivators including price, reliability, and innovativeness increasing their own sales goals. Since the dealers rely on repeat business including repair, the products Palladium sells need to meet this last line motivator. Palladium is in an interesting position where its customers actually want to buy more products as if the dealers are increasing purchasing; it is increasing their own sales. Product marketing can leverage this model, empowering its dealers to promote Palladium product sales.
Sustaining and building mutual relationships between Palladium and its dealers will promote growth for both parties. Traditional wood doors are a smaller portion of the market which is being replaced by more durable steel doors which now make up 90% of the door market. Innovative products as in most markets involve research and development costs and risks but offer first mover advantages that Palladium could use to reach its aggressive growth goals. Competitor Analysis Palladium competes against national, regional and local competitors.
Each competitive level offers challenges and leverage models that Palladium must adjust its marketing and product offering to match. With national brands, they offer lower contributing research and development costs. With a brand that ps across the country its research and development costs as well as overhead costs can be proportionally the same as regional companies yet offer larger offerings since sales are larger. These brands can also choose to reduce their R;D and overhead rates yet sustain a large pool of resources.
Although they are compete with Palladium, they may choose to target (allocate marketing resources) to other non-competitive environments where market share is more easily attainable. Regional brands and local brands which operate in the same arena and level as Palladium do not have the flexibility to move to other profitable markets. With little flexibility in geographic resource allocation, these competitors are engrained in the market. The competitive environment is for independent dealers and sustaining those relationships.
These dealers promote brands and establishing the relationships controls which product the end-user prefers. As mentioned previously, the relationship between the dealers and Palladium provides a leverage model which is a key component to increasing market share from other competitors. Environmental Analysis Palladium is not regulated stringently in comparison to other consumer products. As with any manufacturing product however, any safety defect that could cause harm to the end users could detrimentally affect Palladium image.
With the dealers at the forefront of the product installation, the relationship between each other also is affected. If Palladium’s products are faulty and a safety hazard, then in correlation the dealers installing the product are portrayed as faulty and unsafe. Likewise, if the dealers installing Palladium doors install a product inappropriately then the result could affect Palladium. Since Palladium is represented to the end-user of its products through the dealers, the relationship is mutually associated through not only sales but also imagine.
The cultural landscape of door production is focused on new technology that is cost efficient but more so reliability. As the majority of sales come from home refinishing rather than new home purchase, consumers are upgrading products. Insulated doors that increase the ‘green’ of homes can be capitalized on with emerging legislation for reduction in home energy consumption. If legislation can supplement end-users purchase price for a product verse a competitors, it will give Palladium a competitive advance on price as well as image.
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