SWISHER MOWING AND MACHINE COMPANYEVALUATING A PRIVATE BRAND OPPORTUNITYTABLE OF CONTENTSTABLE OF CONTENTS2Background Statement3Major Issue / Problem3Alternative One3Advantages of Alternative One4Disadvantages of Alternative One5Quantitative Implications5Alternative Two5Advantages of Alternative Two5Disadvantages of Alternative Two6Quantitative Implications6Alternative Three6Advantages of Alternative Three7Disadvantages of Alternative Three7Quantitative Implications8Alternative Four8Advantages of Alternative Four8Disadvantages of Alternative Four9Quantitative Implications9Alternative Five9Advantages of Alternative Five9Disadvantages of Alternative Five10Quantitative Implications10Recommendations10Implementation10EXHIBIT A – SWISHER MOWER COMPANY FACTS11EXHIBIT B – SWISHER’S FINANCIAL STATEMENT13EXHIBIT C – PROPOSAL DETAILS14EXHIBIT D – PROPOSAL CALCULATIONS15EXHIBIT E – AGGRESSIVE ADVERTISING ALTERNATIVE16EXHIBIT F – INCOME STATEMENT WITH ADVERTISING19EXHIBIT G – TRADING UP / LINE EXPANSION20EXHIBIT H – BRAND EXTENSION21REFERENCES22Background StatementThe Swisher Mower and Machine Company (SMC) was founded in 1945 by Max Swisher. The company prides itself on maintaining a “small company” image and obtaining personal relationships with dealers and customers alike. SMC has a rather small product line:1.
)Ride King – three-wheeled riding mower that has a zero turning radius. Mid-engine configuration. 2. )Trailmower (T-44) – trail-type mower that has a cutting width of 44 inches. 3. )Push lawn mower kits – component parts necessary to assemble push mowers.
4. )Trim-Max – high-wheel, walk behind product that combines a trimmer, mower, and edger in one unit. SMC distributes its lawn mowers through farm supply stores, lawn and garden stores, home centers, and hardware stores located primarily in non-metropolitan areas. The Swisher Company sells its line of products through a variety of ways such as wholesale distributors, direct-to-dealer, and private-label. Currently, Swisher’s advertising focuses on trade-oriented promotion to wholesalers and dealers.
SMC has remained a profitable company since its founding. For a list of detailed facts about SMC see Exhibits A and B. Major Issue / ProblemThe primary issue facing SMC is whether they should offer a product under a private brand arrangement through a major national merchandise chain. The second issue is whether to accept, modify, or reject the proposal from the merchandise chain. Alternative OneThe initial alternative is to accept the private brand opportunity from a major national retail merchandise chain.
Details regarding the proposal can be found in Exhibit C. The retail chain is expected to make an annual order of approximately 8,200 units. The chain will receive the mowers at a price 5% lower than Swisher’s manufacturer’s list price. The chain has requested small changes in appearance to the mowers such as different seats and type of paint. The Swisher brand name will not be displayed on the mowers, and Swisher will not be allowed to mention its relationship with the chain.
A two-year contract was offered, with extensions done on a year-to-year basis thereafter. This alternative would impose one of the two “Branding Decisions” that commonly face marketing managers. The branding decision in question “relates to supplying an intermediary with its own brand name” (Kerin, 163). The Swisher Company must determine if being the producer of a private brand will increase their profits and benefit their bottom line. In order to do this, it is important to consider a couple of factors when making the decision:1.
)The producer has excess manufacturing capacity. 2. )The variable costs associated with producing a distributor’s brand do not exceed the sale price. If both these situations are true, the possibility arises for Swisher to make a “contribution to overhead and utilize production facilities” (Kerin, 163). Advantages of Alternative OneThe following are the advantages for pursuing alternative one and accepting the private brand proposal from a major national retail merchandise chain:1)Allow Swisher the opportunity to expand production with excess capacity. 2)Provide Swisher with a competitive advantage.
3)Broaden distribution. 4)Increase sales for parts. 5)Potential sales of the trail mower. Disadvantages of Alternative OneThe following are the disadvantages for pursuing alternative one:1)Incur costs due to A/R and inventory requirements. 2)Additional variable costs (OT-4%, DM-1%, OH-1%, Other-1.
5%). 3)Additional fixed costs. 4)Possible cannibalization of existing sales (300 units). 5)Possibility of becoming too reliant on private brand revenue. Quantitative ImplicationsSee Exhibit D for calculations in regards to Alternative One.
Alternative TwoThe second alternative involves conducting an aggressive advertising campaign. This will allow the Swisher Company to possibly accomplishing several objectives that will in turn boost revenues. First, Swisher will aim to increase its market share across the nation by broadening its scope of advertisement to more states. Second, Swisher is hoping to establish increased brand recognition with the belief being that this will cause both consumers to inquire about their products and