Tyrell its full potential. Problem/Critical Issue The problem Jolson

Tyrell Thomas Tarboro

Strategic Marketing Concepts

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January 13, 2018

 

Jolson Automotive
Hoist Case Study

 

 

Introduction

                Jolson
Automotive is pressured with the decision to push their product harder within
the U.S market, or expand into the European market. Jolson has created a
quality and safe product that had become a true contender on the automotive
hoist market. To keep the growth of the company at a fast paced the option to
move into the European market came after Jolson read a feasibility report on moving
into the European market. After reading the case, it was stated that even
though there was research into what kind of market the Jolson lift would garner
in Europe, the research was not sufficient enough to make Gagnon and Jolson
confident to make a decision based off of the research results. The information
provided needed to be in depth and detailed to help make the decision for
Jolson to make sure his company would see its maximum growth potential in the
country. However, if Jolson decided to stay in the U.S market, steps would need
to be taken to ensure that the U.S. manufactures were pushing the product to
its full potential. 

 

 

Problem/Critical
Issue

                The
problem Jolson Automotive Hoist encounter is deciding on whether to attack the
U.S. market aggressively or enter the European market. Where the problem lies
is with the availability of the information on the market for the European
market and whether Jolson Hoist will thrive within the European market. Making
this decision can come at a cost because Jolson and Gagnon have some options at
their disposal allow for licensing from a European company, venture into a
partnership with a European company, or directly invest and assume all of the
risk if this venture doesn’t pan out.

 

 

Situation

                Jolson
is deciding on whether to enter the European market or aggressively pursue the
U.S market. The difficulty with aggressively pursuing the U.S market is with
the competition and growth rate of automotive hoist. About 49,000 hoist a year
are sold within the U.S. With these hoists the price ranges from $3,000 to
$15,000 making hoist purchases an investment. If each hoist was sold at $3,000
dollars the estimated sales would be $147,000,000, and if they are sold at
$15,000 dollars the estimated sales would be $735,000,000. Which would be a
significant amount of an investment for any company. However, these estimation
in sales also leaves a good amount of profit for any company competing in the
automotive hoist market. With almost 16 hoist manufacturers competing within
North America, 4 of them from the Canadian market and 12 in the U.S market, the
U.S. market is dominated by two companies: AHV Lifts and Berne Manufacturing.
These two companies alone account for more than 50% of the hoist manufactured
and sold within the U.S.

                This
can be a difficult market to enter as hoist are purchased by essentially: new
and used car dealers, automotive repair shops, independent garages, and
automotive chains. These shops and dealers have most likely formed a strong
relationship with their hoist manufacturer and the company that deals them
their hoist. Where Jolson Automotive Hoist can thrive within the U.S. is the
fact that they manufacture surface hoist and they would be entering a market
where surface lifts accounted for approximately 79% of total North American
unit sales or 38,925 units. Jolson has thought about adding an office to New
York to help bolster the sale along the eastern states.

 

S.W.O.T. Analysis Diagram
1

 

Strengths

·        
Has a good reputation as a company

·        
Sells product with some of the leaders in the
industry

·        
Product can be placed in numerous locations

·        
Easy to install

 

Weaknesses

·        
Receives 78% of sell price in U.S.

·        
Product is looked past does not generate a lot
of sale for wholesalers

·        
Competition throughout the market drives lower
sale prices

 

Opportunities

·        
Entering European Market

·        
Aggressively attack the U.S. on the eastern
states

·        
Potentially partner with a U.S. manufacturer

 

Threats

·        
Thriving U.S. manufacturers

·        
Sunken investment if direct investment in
European market

·        
Risk of entering a market that doesn’t return
investment

 

Problem Statement

                A
decision needs to be made now because now that other companies are aware of
Jolson Automotive Hoist interest in entering the European market, there is the
risk of other manufacturers creating a similar design and attacking the
European market, which will saturate the market before Jolson Automotive can
enter it.

                In the
past many companies have replicated their own version of another company’s
product to expand their target market. Often in business before a deal or a
move can be made by a company, other companies know of the move to be made
before it is completed. Jolson who is already competing with the U.S. market
and Canadian markets in North America could find themselves competing with one
of the companies trying to compete to enter the European market.

 

Analysis and Evaluation

 

Decision
Criteria 

                With
the many decision that can be made by Gagnon and Jolson for the expansion of
the business, there are many factors that can help decide which direction the
business should go. Factor such as: can Jolson take over the U.S. Market by
attacking the market on the east coast or is merging with an established
business from the European sector going to bring Jolson the expansion into the
European market that will help his business grow or remaining in the market
that they are already thriving in.

                With
any decision research should be conducted to make sure a business can eliminate
all risk factors prior to making a definite decision. Since Jolson is in the
automotive industry their research needs to be tailored to the advancement in
technology and how will vehicles be maintained in the future and what will the
up keep of motor vehicles be and how will the hoist be utilized in the
industry. Understanding the trends in industry will help Gagnon and Jolson
determine the best option for Jolson Automotive Hoist.

 

Strategic
Alternatives   

 

Ø 
Attack the
U.S. market by implementing an office in New York.

Ø 
Enter
European market.

Ø 
Remain in
the same market and master their current target market.

 

Analysis and
Evaluation

Ø 
Attacking
the U.S. market by implementing an office in New York

 

The advantage in attacking the U.S. market by implementing an
office in New York gives Automotive Hoist, the ability to increase sales along
the eastern border, while giving them a pipeline to the mid-Atlantic and
south-eastern states. Because of the increase in sales it proves to be a high
profit for Canada as the dollar ratio is 1 Canadian dollar to .80 cents on the
U.S. dollar. By adding sales people in the U.S. Jolson can improve their unit
sales by almost 53 units a year which would result in an increase to be
estimated at $522,470 (Diagram 1). Implementing an office in New York would
prove to be very beneficial, because Jolson would receive 100% of the commission
of the hoist sales and with the constant increase in car dealerships being open
and the sale of American made cars being developed that will eventually need
maintenance hoist sales could increase rapidly in the U.S.

                Where
this method could prove to be costly, is in the financials of opening an office
and training new staff to sell the hoist with the same skill as the Canadian
staff. However, even if Jolson relocated sale people from Canada the business would
be accountable for the relocation fees and that depends on if the staff is
willing. By entering the U.S. market there can be a conflict with U.S.
wholesalers who may not be willing to make Jolson Hoist a priority over American
made hoist.

 

Diagram
2

Profit
per Salesperson

The
potential profit per salesperson can be estimated by multiplying the price
per unit by number of potential units sold then subtracting the salary of the
salesperson Calculation

 

 

$10,990

Price
Per Unit

X
53

Units
Sold Per Salesperson

=
$582,470

Total
Sales

(-
$60,000)

Salesperson
Salary * Found by dividing $240,000 by 4

=$
522,470

Profit
Per Salesperson

 

 

Ø 
Entering
the European market

Entering the European market can be challenging as they have
a few options to choose from when making this decision. Jolson can: Assume all
the risk by using a direct investment, enter a joint venture with an established
European company, or license out Jolson Automotive Hoist to the European
market.

                By
using the licensing approach or the joint-venture method it allows Jolson the
ability to work with an established European company that has already formed
relationships with dealership, etc. in Europe. However, by doing a joint-venture
Jolson would loss 50% of the profit because of the agreement that was first
sent over. With licensing the hoist Jolson can make anywhere between $306,870
and $336,040 in Germany, France, Spain, United Kingdom, and Italy (Diagram 3)

 

Diagram 3

 Geographic Region

Jolson
Sales

Calculation

Germany

$88,400
– $90,310

(.05
x $1,768,000 / .05 x $1,806,200)

France

$64,900
– $65,800

(.05
x $1,298,000 / .05 x $1,316,000)

Italy

$62,370
– $71,800

(.05
x $1,247,400/ .05 x $1,436,000)

United
Kingdom

$55,000
– $65,010

(.05
x $1,100,000 / .05 x $1,300,200)

Spain

$36,200
– $43,120

(.05
x $724,000 / .05 x $862,400

 

 

Ø 
Remaining in their current Canadian Market

 

One alternative that doesn’t seem to benefit Jolson
Automotive Hoist, would be remaining in their current market. Even thought this
is a market that Jolson has seem to master and is looking for an expansion
opportunity, it is not always the right time to make that move and could ultimately
be the demise of the business. This would be the least risky move to make and
would not cost the business any money, but this can keep the business from
becoming a bigger force in the automotive industry.

 

 

 

Recommendation

                Under
the circumstances of all the options available to Jolson Automotive Hoist, I believe
that establishing a personal office in New York. By doing this Jolson can obtain
100% of the sale as apposed to 78% that they are getting from the current
retailer. Because their current retailer is not selling at full potential because
the wholesalers focus is product sale and not pushing the Jolson Hoist. There
is also a larger potential for Jolson Hoist because there is a larger market of
vehicles the will need to be maintained. There is a population of 264 million
people with more than 146 million registered vehicles. This makes the U.S. a
vastly larger market than the Canadian market.

                The
reputation that Jolson Hoist holds for safety and quality will allow Jolson to appeal
to mechanics and garage owners on the quality service Jolson Hoist can provide
for their company. Since the ability to move into the European market was
financially available, it would be financially easier to open an office in New York
and be significantly cheaper.

 

 

Implementation
Plan

Ø 
Locate a prime location for a personal Jolson
Automotive Hoist office.

Ø 
Research surrounding competition and need for
hoist

Ø 
Once office is open allocate resources for staff
to be successful in sales of Jolson Hoist.

Ø 
Establish relationship with local garages and
dealerships.

Ø 
Set financial sale goals to determine if New
York office is paying off.

Ø 
Once market share has increased within the U.S.,
venture into opening a partnership in the European market.