Camar Automotive Hoist
Problem Statement: Camar Automotive Hoist (CAH) produces top quality automotive hoists. The company is currently faced with making a critical decision which may significantly effect its future operations and long term competitiveness. The president, Mark Camar has just received a proposal about the option to enter into the European market, prepared by the Camar marketing manager. Mark Camar must decide on a course of action that will maximize profits and keep risk to a minimum level. Issues: Camar’s current marketing strategy does not maximize market share potential.
Presently, 75% of sales are generated from small businesses. Therefore, the marketing strategy must address the issue in order to be able to focus on its large volume of small business clientele. Camar is faced with making the decision of how, where and when to expand. The three feasible choices are: 1. Enter European Market through Direct Investment 2. Enter European Market through License 3. Expand Sales-force in U. S. , and simultaneously enter the European Market through Joint Venture Presently, customers are not informed about the different types of hoists sold and are unable to distinguish brand differences.
Thus, promotional strategies need to concentrate on product and brand differentiation. In doing so, customers from perceiving
Camar has successfully acquired large scale accounts by consistently surpassing the quality of major competitors’ safety features. The Camar Hoist is also favoured by customers because of its innovative mechanisms which allow for rapid installation procedures and minimize the need for maintenance. The existence of NAFTA offers Camar a competitive advantage due to the ease of trade available with the United States. Also, Camar owns four patents which protect the Lift’s unique features from competitors trying to duplicate them.
As a strategic promotional tool, Camar’s potential buyers are mailed a catalogue containing detailed information about the Camar Lift which allow them to have information prior to contact with CAH. This strategy allows customers to educate themselves about the Lift and generate any additional questions for the sales representatives when making the actual purchase decision. In addition, several custom features can be added to the Camar Lift to make it suitable for a variety of tasks, including rust proofing, muffler repairs, and general mechanical repairs. Weaknesses: Camar is faced with the difficulty of increasing its market share.
The company’s small market share is largely due to customer unawareness of brand differences, and the fact that its U. S wholesaler focuses only 20% of its efforts to CAH. Furthermore, Camar’s premium price is a potential deterring factor in customer purchases. Also, Camar only offers one type of hoist, which is the Scissor Lift. This results in Camar losing out on potential profits from selling different types of hoists such as the In-ground Single Post Hoist, or the Surface Four Post Hoist. Opportunities: Camar faces many opportunities for expansion in several geographic areas.
Considerations for increasing market share, and thus sales volume, include expanding into the European market, and the option of eliminating the use of a wholesaler in nine U. S eastern states. Since the eastern states generate the largest sales volume, the U. S. wholesaler can be replaced in these nine states with a much more aggressive sales force pushing the product and creating brand awareness and differentiation. Mark Camar’s expertise in engineering and ability to innovate will hedge against obsoleteness of the product. Threats: Camar’s greatest threat is its existing competitors, as well as emerging new competitors.
Obsoleteness of the Scissor Lift is also a growing concern. As Camar has only a small fraction of the market share in the hoist industry, the goal for achieving higher sales may cause the firm to lose focus on technological advances. Additionally, Camar faces a possible threat of suppliers not complying with their contracts, hence damaging the company’s image as a quality product and service provider. Decision Criteria: The following must be considered in making the decision regarding how Camar will expand its target market: •Increase profits •Maintain reputation Maintain quality of product •Increase market share •Maintain minimal levels of distribution channels •Maintain personal selling and customer relationships Alternatives: Considering the criteria outlined above, there are three feasible alternatives available to Camar: 1. Enter European Market through Direct Investment: Advantages: Camar will have complete control over its reputation, operations, and product direction. The company will collect 100% of the profits earned. In addition, Camar would be able to take advantage of investment incentives from foreign governments.
Disadvantages: Camar faces possible economic and political instability in a foreign environment. This could seriously disrupt smooth operations. A major downside of this alternative is that it will require high initial investment costs. Also, Camar will have to establish its own supply chain and client base. Furthermore, in order to establish a functional plant in Europe, Camar would have to allot scarce time and capital into recruiting and selecting a labour-force. The most negative factor of this alternative is that Camar will bear all the losses incurred, if the expansion fails.
Assessment: Camar will increase its profits as a result of selling in the European market. Camar’s reputation will be maintained, as it will continue to provide a quality product according to Camar’s own company standards. Camar will have full control over operations, personal selling and customer relationships with this option. The most likely profit for this alternative is $952,728. 20Cdn (Appendix 6). Although the above figure is positive, Camar will face difficulty establishing the company within a foreign market, as this is a risky investment which could in turn be detrimental to Camar’s survival.
Publicizing the company’s reputation throughout Europe will require the use of a significant amount limited resources. 2. Enter European Market by Licensing: Advantages: Phillipe Beaupre has shown interest in Camar Hoist; Bar Maisse is willing to manufacture and market the Lift in Europe. This option will not require any start up costs for Camar. Furthermore, Bar Maisse has an excellent reputation in France, thus licensing is less risky than direct investment. Also, Camar will not be required to invest any money in marketing. Disadvantages: This option involves many disadvantages.
Success will depend on the efforts brought forth by Bar Maisse. Camar will have no control over Bar Maisse’s production of the Camar Lift. As a result, Camar’s quality control standards, which directly affect Camar’s reputation, will be in jeopardy. Moreover, if sales through the licensee are successful, Camar will be forfeiting the majority of these profits. Additionally, when the license contract expires, Camar could potentially find itself with a new competitor. Assessment: This option adheres with few decision criterions. Profits will increase due to the 5% royalty agreement between the two companies.
The most likely profit for this alternative is $1,058,376. 84 Cdn (Appendix 6). In addition, there will be potential for increasing the market share in Europe. However, Camar’s reduced control over production will jeopardize the quality of the product. Product sales will be conducted through, and associated with, Bar Maisse’s company, thus diminishing the establishment of the Camar brand name and reputation in the European market. Finally, with all European clients making purchases through Bar Maisse, no customer relationships will be established directly with Camar. 3. Immediate Expansion into the U.
S. market, and Enter into Europe in Long Term: Due to limited resources, Camar will initially focus on a specific area in the U. S. market relatively close to its Canadian manufacturing plant. Therefore, Camar will establish a sales-force only in eastern U. S. while maintaining its wholesaler in the remaining states. Additionally, in the long-term Camar will focus on expanding into the European market by entering a joint venture with Bar Maisse. Advantages: A major advantage of this alternative is the opportunity to increase market share as the nine states combine to account for 31% of the U. S. opulation; amounting to 83 million people. Since Canada is part of the NAFTA agreement, Camar will take full advantage of duty free exporting. Another major advantage of this option is that a significant amount of primary market research about the U. S already exists. Finally, Camar’s patent is secured for 14 years, as stated in patent regulations . The European joint venture will be advantageous to Camar as Bar Maisse has extensive knowledge about market segments, as well as an already established supply chain. Also, the European Union reduces barriers to trade among its members, allowing for increased cross-border trades.
Bar Maisse has already established a positive reputation and a strong client base, which in turn will drive sales for Camar. Disadvantages: The U. S. is dominated by two major competitors thus creating an duopolistic environment, making it difficult to compete for market share. However, the European joint venture is prone to disagreements about investments, marketing, policies, production and other operations between both owners. There is more start-up capital needed than if licensing was undertaken. Furthermore, Bar Maisse’s 50% ownership will force Camar to experience a decrease in autonomy and control over its operations.
Finally, Camar will bear 50% of any incurred losses. Assessment: The initial expansion into the eastern states will allow the company to maintain control over its product and operations, thus Camar will be able to maintain control and continue to focus on providing a quality product. Due to the superiority of the product and the use of cerain sales tactics, more customers will be attracted to Camar Lifts, thus resulting in increased profits and potentially a larger market share. Since Camar will be directly selling to U. S. clients in the nine states, middleman costs in these states will be eliminated.
This elimination of the middleman’s 22% margin will significantly increase Camar’s profit margin within the nine states. The Company will use its sales force to maintain positive and strong customer relationships. All these factors combined will provide valued customer satisfaction, leading to a broader acknowledgement of the company as a reputable business. The most likely profit for expanding in the U. S. is $402,686. 58 Cdn (Appendix 2). In the long term, the joint venture will allow Camar to acquire larger profits due to broader geographical coverage, as well as sharing an equal percentage of profits.
The most likely profit for entering a joint venture is $1,931,182. 56 Cdn (Appendix 6). However, due to the 50/50 proposal, Camar can only obtain partial control of the operation. In turn, product quality cannot be guaranteed and product reputation will not be attributed solely to Camar. Recommendation: Through the analysis of the alternatives discussed, it is recommended that Camar choose alternative three. Given that the U. S. market is ten times the size of the Canadian market, Camar would most strongly benefit from initially expanding its sales force into the U.
S. market, specifically the nine eastern states. This will allow for maintaining a strong company reputation while continuing the production of a quality product. The sales force will stress the brand of the product, causing the customer to recognize the importance of brand differences. Although the recommendation focuses on the U. S. market, Camar will not alienate itself from Europe. In order for Camar successfully establish a global presence in the long-run, initial market research of the European market must be conducted.
Extensive research of the European market is necessary element to the marketing mix due to insufficient information available regarding competition within Europe. A thorough plan of action to achieve these tasks within one year will be discussed in the implementation below. Implementation: Short-term: Phillipe Beaupre will be informed of Camar’s intentions to conduct research about the European market. The joint venture option is the most attractive alternative when considering expanding into the European market as it best meets the decision criterions.
Immediately, Camar must discontinue the use of its wholesaler within the nine states, as the company will be operating in this area through its New York sales force. This will allow the company’s sales force to strongly promote the quality and brand of the product. In order to maintain a strong relationship vitthe wholesaler, Camar will offer the incentive of a 32%”margin. This will entice the wholesaler to continue pushing the Camar Lift throughout the remaining states. This represents a margin increase of 10%, which will compensate the wholesaler for the loss of profits within the nine eastern states.
The most likely profit for this alternative is $402,686. 58 Cdn (Appendix 2). Secondly, Camar will rent a facility in New York to provide the sales force with a ‘home-base’. This location will act as a person-to-person meeting place for the sales force and sales support staff. Once the office is established, the recruiting and training of the sales force will begin. The training will emphasize Camar Automotive Hoist brand superiority, and focus on the added value the List gives to the customer. In the short-term, the execution of the promotional strategy will begin.
With the Lift positioned in a mature industry, the stress on brand differentiation will be essential to the success of advancing the company’s reputation. In order to achieve brand differentiation, the customer’s buying behaviour must shift from a dissonance reducing buying behavior to a complex buying behaviour. This will be achieved through marketing efforts which repetitively outline Camar’s brand superiority, such as durability and the need for infrequent purchases. In doing so, consumers will perceive significant brand differences and be highly involved in the buying process.
Medium-term: Camar will invest $20,000 Cdn (Appendix 2) into researching the European market through the use of a European marketing agency. Camar will expand into Europe in the long term, in a year’s time. Throughout the entire market research process, a relationship will be maintained with Bar Maisse. The company will sustain contact with Phillipe by stating that the research will provide information on how to best enter the European market and in-depth information about competitors. This will enable Camar to target its market more effectively, thus potentially increase sales volumes more so than without market research.
Long-term: Camar will continue its promotional strategy in North America, and continue to observe technological improvements and innovations in the industry. Furthermore, the research conducted in the European market will alleviate the risk of inaccurately targeting the market. Camar will enter a joint venture with Bar Maisse. Bar Maisse will provide manufacturing and marketing strategies as previously agreed upon. The marketing manager of Camar, Pierre Gagnon, will be located at the headquarters in France. He will be in charge of overlooking operations of the joint venture.
Additionally, local sales representatives will be hired in each European country, as they have extensive cultural knowledge and language skills. Marketing Mix: Target Market: The target market will consist of dealerships, auto service stations and garages, and businesses that specialize in automotive repair. A geographic segmentation of nine eastern states in the U. S. will be targeted. Also, once the joint venture with Bar Maisse is established, a rollout strategy will be implemented beginning with France, Italy, Germany, Spain, UK will be included in the target market.
The business buyer of a Camar Hoist is one who values the quality of both product and service, thus is willing to pay a premium price for the product. Positioning: The Camar Lift will be positioned as a superior product. To avoid confused positioning in the overall market, the position held in the U. S. and European automotive markets will be consistent with its position held in the Canadian automotive market. Thus, Camar will uphold the original price of $10,990 Cdn. Camar will position itself as a more for more product offering.
The price is slightly higher than the average hoist, yet provides the customer with superior quality, and leading edge safety. The company’s extensive personal selling force will allow Camar to obtain a competitive advantage; Camar’s personal sales force will be able to serve its customers and prospect buyers by providing information and addressing any expressed concerns. Camar will be positioned as a product – “For mechanics who require high end quality tools and who desire flexibility and low maintenance, Camar is a superior product with outstanding designs, quality, workmanship, and a five year warranty.
Unlike traditional automotive hoist manufactures, Camar is a leader in automotive lift safety”. Product: The Camar Hoist is called the “Camar Lift” which is composed of the scissor and safety lock. This product comes with superior safety mechanisms, a five year warranty, installation service and a dedicated sales staff. Camar customizes the Camar Lift so that the product adheres to each business’ varied tasks such as rust proofing, muffler repairs, and mechanical repairs. Due to the standardization of automobiles internationally, the Lift will be manufactured according to standardized criteria.
Price: The Camar Lift is consistently priced at an equivalent $10,990 Cdn. The Lift is priced 5% and 20% higher than the two leading competitors in the U. S. Camar’s quality and service justifies the implementation of a more for more strategy. Place: The central location of the sales force will be in the New York region. The nine sales people will be spread out evenly among the nine states. They will reside in their home states, however, on occasion all nine employees will meet in the New York region sales office to conduct meetings and discuss sales tactics.
Camar’s headquarters in Europe will be located in Bar Maisse’s facility. Promotions: The promotional budget in the U. S. will allot to $640,000 Cdn (Appendix 2) by using the objective and task method. The promotional budget for the European market will amount to $500,000 Cdn contributed by Camar, and Bar Maisse will be responsible for the remaining $500,000 Cdn (Appendix 3). This method takes into account the tasks that are necessary to achieve Camar’s objectives and estimates the costs of performing these tasks. The budgets have taken into account promotional objectives for both North America and the European market.
These objectives will consist of trade shows, automotive competitions, magazine advertising, an informative website, and implementation of a personal sales force. During the trade shows, Camar will exhibit its hoist. Salespeople will be representing the company, answering questions, and providing purchase information. The salespeople will emphasize the superior quality and safety features of the Camar Lift to prospective clients. In addition, Camar will be a partial sponsor during automotive competitions. The company will have a hoist exhibit accompanied by Camar representatives.
During the automotive competitions, there will be mention of Camar’s name through announcements and billboards which will display the company’s logo for the purpose of heightening brand awareness. The trade and automotive shows are an effective medium as buyers of hoists participate extensively in both venues. Furthermore, Camar will have a monthly advertisement in an automotive repair magazine. The primary readers of these magazines fall into Camar’s target market. In addition, Camar will launch an informative website.
This website will include the current catalogue, frequently asked questions, contact information, the mission statement, and information about the company. The emphasis on superior quality and safety will be included in the information section of the website. The website will be a strictly informational forum where the inquirer will not be able to make purchase due to the complex nature of the purchase. Camar will have a territorial sales force structure. There will be a sales agent located in each of the nine states and each European country.
They will follow the personal selling process, including prospecting and qualifying. This can be accomplished through the use of tools such as the telephone book, business directories, as well as cold calling. The sales force is responsible for answering questions and verifying the capabilities to customize the Lift to buyers’ specific needs. The representatives will be responsible for assisting each customer with attaining proper financing for the purchase. The sales force will be compensated with a base salary of $50,000 Cdn and a commission rate of three percent (Appendix 2).