Decision to be made
Stone Age Marketing Consultants must assess the viability of HydroCan and its product, StaGreen, and determine which market to target and how to position StaGreen in that market, while developing a viable marketing strategy for the launch year. Situation Analysis
HydroCan is a start-up company that is obtaining patents in both the United States and Canada for a new type of lawn care, and is in need of marketing advice concerning its new product, StaGreen. HydroCan has approached Stone Age Marketing Consultants to help determine which segment to target, how to position its new product, and what type of launch strategy it should use. Considering the launch must take place in February, just prior to the peak selling season, there is no time to acquire additional market research meaning the decision has to be made based on the information at hand. Current Financial Situation
Choosing to go with selling the StaGreen product to the consumer market, HydroCan is capable of producing 216,000 bags a year. At $22.50 a bag the company has a sales potential of $4,860,000. Considering a 52% variable cost per bag gives an overall gross revenue potential of $2,332,800. The total fixed costs to run the yearly operations total $813,200, and other costs, including partner and sales employee salaries total $1,681,000. This brings the total expenses to $2,494,200, surpassing the amount of potential sales available in this market, creating a net loss of $161,400. Considering these numbers, HydroCan will need to produce 230,944 bags of StaGreen to break even, which will be 14,944 more bags than current production will allow.
Choosing to go with selling the StaGreen product to the commercial market, Hydrocan is capable of producing 43,200 bags a year. At $150 a bag the company has a sales potential of $6,480,000. Considering a 40% variable cost per bag gives an overall gross revenue potential of $3,888,000.The total fixed costs to run the yearly operations total $813,200, and other costs, including partner and sales employee salaries total $1,275,200. This brings the total expenses to $2,088,200, which is less than a third of overall potential sales. StaGreen will receive a net profit of $1,799,800. Strengths
* HydroCan has a superior product that will save the end user time and money due to the reduced need for fertilizer products and reduced need for manual watering. * StaGreen would maintain level production year round.
* Stone Age Marketing Consultants are performing additional market analysis - analyzing the markets, costs, prices, and communication options to ensure a comprehensive strategy for the launch of StaGreen. * HydroCan has the option to market StaGreen within the consumer market, commercial market, or a combination of both markets. * HydroCan is in the process of obtaining the patent for this new type of lawn-care product and can use this advantage when analyzing the market. Weaknesses
* HydroCan is a start-up company incorporated nearly one year ago meaning financial resources are extremely limited right now. * HydroCan only has five people employed by the company, with 4 being engineers and one being a financial accountant. * The marketing budget of $555,000 is low for launching a new product. * The company leases their production facilities and some of their equipment which equates to capacity constraints and lost capital every month. * Sales are seasonal, and are highly concentrated in the months of April through September meaning that distribution costs will be relatively high. * HydroCan cannot increase its production capacity for at least two years, and if the company hopes to acquire expansion capital to increase total capacity, it needs to show a profit as early as possible. * Two of the founding partners are strongly divided on which market to target, and both are extremely biased toward their position. * HydroCan is taking on...
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