The most pressing issue facing Casablanca kids is a declining net income which has resulted from supply chain and production issues. Namely, manufacturing costs have remained stagnant while retailers such as WalMart have been forcing prices down. Casablanca Kids is confronted with the interesting opportunity of redesigning their distribution channels. Effective distribution channel restructuring will allow the company to overcome their issue of declining net sales and therefore lead to a sustainable business. By developing a solution in a timely manner, the company has real potential to thrive.
The company’s main objective is to increase brand recognition in the domestic market as well as in the international market. 50% of the sales volume was due to three artists, famously known in the domestic market. In order for them to expand in the international market, they need to expose these singers in the international market and also bring in new artist who are known in the international market. Casablanca Kids needs to increase revenue while decreasing operating cost effectively. They need to develop the presence of their artists in both domestic and international markets. This criterion speaks to long term growth in revenue. While Ricki is deciding on how to increase the brand recognition, she needs to be mindful of the stakeholder’s interests. Casablanca Kids need to maintain good working relationship with the stakeholders and make sure that the decision benefits the stakeholders.
Casablanca Kids is a private Canadian-based children’s music label. Casablanca Kids’ competitive advantage is derived from the well-established artists signed by the label. Most of these established artists have more than 20 years of experience in the industry. Casablanca Kids has two types of product offerings which are distinguished as mid-range CDs and budget CDs. These two classes of product differ in the author, quality, price and promotional strategies. Casablanca Kids has won numerous consumer choice awards as a testament of their quality. It is assumed that popular artists like Sharon, Lois and Bram are put in the mid-range CD line.
Casablanca Kids enjoys a supply chain that is inclusive to many types of retailers that can deliver their products to end consumers. 25% of the label’s sales were from direct sales to small retail chains and independent retailers. The other 75% of their product is pushed through the supply chain through the use of large distributors, primarily EMI and Universal. These distributors sell product directly to mass merchants, book chains, record chains, and non-traditional outlets. Both budget CDs and the mid-range CDS follow this distribution channel. Mass merchants accounted for 50-60% of total retail sales in this distribution channel. Casablanca Kids has been relying on push strategy, trying to push their products to the kids through the distribution channel. With a product like theirs, Casablanca Kids should be using marketing initiatives to create a demand for their product, and have kids ask for their products in the stores. They should change their marketing plan and employ pull strategy for their CDs.
Casablanca Kids’ offers products at two price points: mid-range CDs and budget CDs. Typically, mid-range CDs are priced at $9.99 and can therefore compete in the mass-merchandise markets, while budget CDs are normally priced at $5.99. Industry standards provide that products must be 100% refundable to the manufacturer. Big box retailers will return merchandise that does not sell within a couple of weeks. This puts a burden on the manufacturers as they must bare a refurbishing fee charged by the distributors.
Currently, Casablanca Kids has very few promotional activities ongoing. In terms of marketing to the retailers, Casablanca Kids provides catalogues and “sell sheets”...