This case concerns the John M. Case Company, which at one time was the leading producer of business calendars in the United States. The company was founded by the grandfather of John M. Case in 1920 and was inherited in 1951. The company had experienced profitable operations every year since 1932, and held approximately a 60-65% market share by 1984. Sales had been increasing annually at about a 7% compound rate, and the return on average invested capital was about 20%. The cost structure of the company was 100% equity, owned solely by Mr. Case. The capital budget was the leftover earnings generated from internal operations minus the amount Mr. Case wished to withdrawal as income (dividends) for the year. Also, the seasonal accumulation of inventories and receivables were financed internally (although they did hold lines of credit worth $2 million at major banks).
Strengths of the company were its market share and production process, which created great economies of scale and allow extremely efficient and low cost production. Even though it was subject to a business with highly seasonal sales, concentrating the sales in the middle six months of the year and giving moderate discounts (for early delivery) could help get around most of the risks. Even though the company focused on high-quality customer service and a high-quality product, there were believed advantages from a marketing viewpoint. Since the product is essential, low-cost, and virtually impervious to malfunction, they had a 95% reorder rate, with only 5% of sales going to new customers. Of those reorderers 98% also ordered other Case products as needed.
Business Calendar Market
The entire commercial desk calendar industry was mainly divided between Case and a company called Watts Corporation, who held a 20-25% market share of the $25-30 million dollar industry. Gaining market share from Watts was not a feasible option...