Last edited: 09-May-2007 11:36 | About OER | © The Open Polytechnic of New Zealand
Market conditions for our products - both containers and insulation - are favourable. The domestic economy has not been adversely affected by recent overseas events and business confidence is growing and expected to continue to do so over the next 6 months. Consumer spending is also up on this time last year. The United States economy (our major overseas market for our insulation products) is recovering and consumer demand for uninterrupted electricity supply is expected to influence spending on new generation capacity and maintenance, which had previously been deferred.
During the next 12 months, we are expecting to achieve continued growth in sales of our traditional glass container product lines. This will be accomplished through targeted promotion and distribution initiatives backed by sound market research that will identify who we should be selling to. We will continue to position our container products on design and quality attributes. A gross profit increase on sales of glass containers of $63,000 is aimed for.
During the next 12 months, we expect to achieve an increase in gross profit of $30,000 from sales of our glass insulation products to the domestic market. While we have made solid inroads in the United States with our insulation products, which we have positioned on lower price through our innovative and less expensive manufacturing process, we are in a position where we could overstimulate the market if we continue with our current marketing strategy in this area. This would lead to a situation where we were unable to supply because of limitations on our existing supply of silica and uncertainty regarding the granting of a new resource consent for further silica extraction. As stated in the company's business plan, we will embark on a market diversification strategy in the United States by partnering with Acme Engineering International to direct market and sell our patented manufacturing process, together with Acme's glass insulation products furnace which is tailored to our process. We will endeavour to marginally increase our sales of insulation products to the United States, while marketing and selling the process and production technology. The company is expected to gain gross profit increases of $30,000 from sale of product to the US market, and to gain gross profits of $200,000 from manufacturing process sales and $15,000 from year one royalties.
The Classy Glass Company is a glass container and specialist glass insulation products manufacturer. We are located on the east coast of Northland near a source of silica (sand) that is the major ingredient in our glass manufacturing process. The market for glass containers (vases, glasses, and jars) has grown slowly over the previous two years, but demand for glass insulation products is threatening to outstrip our ability to supply. We are currently selling our glass insulation products directly to consumers. We are selling our glass container products to consumers indirectly (through distribution agents and large retail firms).
While the glass container products are generally in the mature phase of the product life cycle, market research shows that there has been a recent increase in home bottling fruit and preserves and an increase in the number of small companies selling gourmet foods and condiments in small bottles and jars. Research also shows that our glass vase design is the product attribute that consumers comment on most favourably and that an increasing number of quality home product outlets in the major cities are stocking mainly imported glass vase lines. Some florists are also beginning to offer corporate organisations a fresh-flowers-in-vases service. One of our distributors (Glass to Go) reports that they have had some success with selling our vase product line to these florists, emphasising the design and the New Zealand-made attribute.
The glass insulation products are in the growth phase of the product life cycle. We hold a competitive advantage in the market because of our patented process for manufacturing these products. Our patent enables us to manufacture glass insulation products for about 30% less cost than the traditional method of manufacture. While we have gained market dominance in New Zealand with our insulation products, we are fast approaching a production ceiling in our ability to supply overseas markets. Our ability to supply is limited by both our factory's current production capacity and the reserves of silica that we have resource consent to acquire. Our strategic plan has therefore laid down that we will continue to supply existing overseas markets, but our overseas marketing effort will switch to jointly marketing the insulating products' manufacturing furnace and our patented process with our new joint venture partner, Acme Engineering International Ltd.
Business confidence has recently started to rise again. Retail sales generally have paralleled this confidence and are up on comparable sales for the previous year. The electricity distribution industry and wholesalers have reaped windfalls from the supply situation of last winter and distributors are looking to spend on deferred and scheduled maintenance. Some new generating capacity will come online this coming year, and this will create demand for insulating products in the distribution network.
Our current source of silica for which we have resource consent is estimated to supply our current level of manufacturing for another 10 years. However, demand for our products is expected to increase and a new resource consent application will take five to seven years (with no guarantee of success). We need to begin the resource consent process immediately. Increased opposition to a new application can be expected from both the green movement and some elements of the local iwi. Supplies of other chemical ingredients for our manufacturing processes are generally secure and readily available from local (New Zealand) suppliers.
Our sales of glass container products are slightly up on the same time last year. Our research has indicated a number of opportunities (see Introduction) which we need to pursue to ensure growth is maintained. As mentioned earlier, we need to be careful that we don't overstimulate the overseas market for our glass insulation products. There are favourable early indications for the concept of selling our patented manufacturing process coupled with new technology manufactured by Acme Engineering to glass insulation product manufacturers in the United States.
The main competition for our glass container products (all lines) comes from:
The New Zealand manufacturers' strengths are:
Their weaknesses are:
The strengths of the imported lines of glassware lie in their high design component. They can command high prices by brand name and for style and elegance. Their weaknesses are their non-New Zealand origins and their small budgets for promotion (distributors are small and the market is perceived as small in size by the big European manufacturers).
The target markets for The Classy Glass Company's products are:
| Goal 1: | To increase sales of all our existing glass container product lines (vases, bowls, jars and bottles) through a mixture of market penetration and market extension. |
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| Objective: | To increase gross profit for the 12 months ending March 200X from the target markets as follows: |
| Target Market | Vases, Bowls | Jars, Bottles |
|---|---|---|
| Fashion glassware buyers |
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| Florists |
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| Home preserve bottlers |
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| Condiment companies |
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| Goal 2: | To increase gross profit for the 12 months ending March 200X from sales of glass insulation products to the domestic New Zealand market from $255,000 to $285,000 |
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| Objective: | To increase gross profit for the 12 months ending March 200X from the target markets as follows: |
| Goal 3: | To increase sales of our existing glass insulation products to the United States market (product distributors and network maintenance companies) through market penetration. |
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| Objective: | To increase gross profit for the 12 months ending March 200X from sales of glass insulation products to the United States market from $150,000 to $180,000 |
| Goal 4: | To develop sales of our glass insulation products manufacturing process in conjunction with Acme Engineering International to the United States glass insulation products manufacturing market through diversification. |
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| Objective: | To achieve a gross profit for the 12 months ending March 200X from sales of the glass insulation products manufacturing process to the United States market, made up of:
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Our marketing strategies for achieving our marketing goals are based on tailoring the marketing mix specifically for each goal. The strategies and tactics for each goal and the elements of the marketing mix that we will use to achieve these strategies are:
| Goal | Strategy | Tactics |
|---|---|---|
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Continue with existing product lines. Increase promotion and improve distribution to target markets. Prices to remain the same as last year except for scheduled clearance promotion specials. |
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Continue with existing product lines. Begin targeted promotions, and carry out direct marketing. Prices to remain as per bulk purchase schedule. |
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Continue with existing product lines. Carry out direct marketing. Prices to remain as per US bulk purchase schedule |
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In conjunction with Acme Engineering International, carry out direct marketing of our patented glass insulation products manufacturing process and associated furnace. |
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| Goal | Tactics | $ | |
|---|---|---|---|
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a. | Conduct vases and bowls advertising campaign in NZ House and Garden and Cuisine. | $15,000 |
| b. | Conduct jars and bottles 'preserves' advertising campaign in NZ Womens Weekly and New Idea. | $12,000 | |
| c. | Establish promotional website for glass container products. | $30,000 | |
| d. | Identify, through market research, florists offering services to corporate organisations. | Nil1 | |
| e. | Set up agreement with Glass to Go to target these florists with a promotional package for vases and bowls. | Nil | |
| f. | Identify, through market research, small condiment makers offering quality product or differentiating on container design. | Nil | |
| g. | Set up agreements with distribution agencies to target these companies with a promotional package for jars and bottles. | Nil | |
| h. | Identify, through market research, up-market home product stores. | Nil | |
| i. | Set up agreement with distribution agencies to target these stores with a promotional package for vases and bowls. | Nil | |
| Subtotal | $57,000 | ||
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a. | Identify, through market research, areas in New Zealand where increased or additional electricity generation capacity is planned, or increased distribution capacity. | Nil |
| b. | Target associated distribution (line) companies and conduct a direct marketing/sales campaign for glass insulation products. | $5,0002 | |
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a. | Repeat last year's direct marketing/sales campaign of glass insulation products, with visits to existing US product distributors and network maintenance companies. | __3 |
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a. | Identify, through market research, United States glass insulation products manufacturers on a state by state basis. | Nil |
| b. | Establish price structure framework for patented process, furnace, and royalties. | Nil | |
| c. | Develop promotional package including video, samples, and literature. | $25,000 | |
| d. | Begin direct marketing campaign with identified manufacturers. | %53,0004 | |
| Subtotal | $83,000 | ||
| Total | $140,000 | ||
1 Nil items are a component of the Marketing Manager's Salary.
2 Includes reprint of product display materials.
3 To be included under budget for goal 4, tactic d.
4 Includes travel, US accommodation, entertainment.
Last edited: 09-May-2007 11:36 | About OER | © The Open Polytechnic of New Zealand