Situational AnalysisIn 1975 Ruth M. Owades joined The Avion Group where she became the Director of Marketing. The Avion Group consisted of seven mail order companies, which had all been acquired after achieving good individual success. These companies had flourished within Avion, which had had spectacular growth. While working with these companies she found out that many people who buy by mail have a lot of hobbies & one hobby that kept on coming in her analysis was gardening.
In 1978 seeing an opportunity she offered a proposal to her Chairman to start with a Gardening Catalogue’. The Avion Group after showing keen interest in her proposal in the beginning later became reluctant, as they had never started a company on their own. They raised a lot of questions ; hypothetical issues, which Ruth was unable to answer. Nobody was ready to support her. Ruth was very enthusiastic about the whole project ; really wanted to go on with it.
She did a research on the whole thing making contacts, arranging the finance, office, warehouse etc. ; all other things that would be required. She now faced a situation where she had to decide whether to stick with her job or leave her job ; start the project on her own. A SWOT analysis will provide us with the strengths, weaknesses, opportunities and threats of Ruth M.
Owades which will further help in identifying the key issues. It can be divided into two parts:1. Internal Analysis: Strengths ; Weaknesses2. External Analysis: Opportunities ; ThreatsSWOT AnalysisStrengths1.
Ruth M. Owades was highly motivated ; enthusiastic about the project2. She had good experience in the mail order business ; knew the fundamentals to success3. She had quite a good no.
of contacts4. At Avion she was always involved with cost cutting ; saving5. Her family members are not dependent on her6. She arranged for an office ; managed to bring down the rent to practically nothing7.
She was able to arrange the warehouse with packaging ; shipping facilities at a low cost8. She arranged for the finance9. She got the 51% of the equity where as she only had to invest 25% of the total amount being invested10. Her husbands supportWeaknesses1. She had never started any business before2. Lack of fundsOpportunities1.
Many people have a common hobby that was gardening2. Gardening was very popular in US with various gardening magazines for sale3. 62% of Avion’s mail order customers showed an interest in gardening4. She thought there was a market niche which she wanted to fill5.
No competitors in the related area6. Encouragement from Doane AssociatesThreats1. 90% of the new companies fail2. The economy was soft3. Time was runningProblem DefinitionRuth is now faced with a situation in which she has to decide on one option out of the following two:1. Stick to her job2.
Quit the job & start the projectFrom the above section we know that Ruth M. Owades is in a strong position with a big opportunity. RecommendationThe information from the SWOT analysis section has also been referred to for the followingQ1) Should Ruth M. Owades go on with the project? Why?Ans) Yes, Ruth M. Owades should go on with the project because:Gardening Catalogue’ idea is fresh ; has not been explored by any company till now. Ruth survey or research also showed that gardening is a very popular hobby in US.
It would contain all unusual, aesthetic accessories for the affluent gardener that would appeal to the well-to-do housewife that are otherwise not availableShe had the backing of Doane Associates which was a strong 12 year old companyDoane Associates would handle the whole job from designing of the catalogue to mailing it which would help her in reducing her cost per unitShe had learned quite a lot about the mail order customer ; mail order industryShe arranged her office where she wanted ; that too at a lower costShe arranged a warehouse ; did not have to worry about the storage, rent, staff or utilities when her business would be downThe storage ; shipping would be done by the warehousing companyShe has been able to arrange financeShe has to invest only 25% of the total amount whereas she would have 51% equity share in the companyEven if the business doesn’t do well at 1. 4%response rate at 400,000 mails it would not be unusual as it was common for a mail order company to incur loss in its initial two yearsOnce she is on the track she can also later on decide to sell the company to other companies such as Avion.