After sluggish sales growth in 1980, MEM Company, Inc. was considering ways to increase sales for the company's line of men's toiletries. Two main options surfaced; either 1) to expand distribution into food stores or 2) to introduce a new line called Cambridge.
The men's toiletries market was divided into three groups based on pricing, namely, exclusive, medium and mass priced category. MEM had competed primarily in the medium priced market. Its principal toiletries were marketed under the English Leather line of which generated 68.3% of total sales revenue. This was substantially more than any other line it owned and it also had a market share only second to its main competitor, Old Spice. MEM faced stiff competition from Old Spice, British Sterling, Jovan and Brut, whose new products, since 1979, were being launched in the medium priced market with hefty advertising expenditures of around $7 million. These new products included Chaps by Ralph Lauren, Oleg Cassini by Jovan and Denim by Lever Brothers.
MEM had traditionally distributed its products through department stores, men's specialty stores and merchandise chains. Despite not expanding into food stores like its competitors, it was already ranked second in terms of market share. Expanding into food stores could help MEM overtake its rivals. Furthermore, MEM executives were receiving increasing number of inquiries from food chains about carrying a few of their faster-moving items. As such, this was clearly a viable alternative.
On the other hand, launching Cambridge could create a chance for MEM to penetrate the exclusive group' closer to a price range of over $10. However, Cambridge would face direct competition from Shulton's Blue Stratos line, which had a similar target market (men aged 18-34) and price range ($10), among other things. Blue Stratos was due for shipment in March 1981.
ANALYSIS ON ALTERNATIVES USING SWOT & PORTER'S 5 FORCES
From our strategy analysis, we feel MEM can bank on its brand name and reputation as a strength, portrayed as the "fragrance of their youth" as compared to their competitors who are seemingly linked to older generations. Moreover, their new perfume's name "Cambridge" has a reportedly classic and dignified feel to it. However, being a medium-priced brand by tradition, we believe it will have a harder time up-selling a more expensive product.
An opportunity lies in distributing their products into the food stores market. It is an untapped avenue for MEM to delve into, in which their competitors have long since gained a foothold. Apart from the food stores, another untapped avenue could be the exclusive market' (for Cambridge) since the mid-ranged market is becoming overly saturated. However, they must bear in mind the threat that Blue Stratos presents through its launch in the same market. Hence there will be stiff competition, even more so with Shulton's large fund backing of $12 million. Initial SWOT conclusions point toward weaknesses and threats overpowering strengths but viable separate opportunities that can be pursued.
Based on Proter's 5 forces model with respect to Cambridge, we believe that the buyer bargaining power is high primarily because of competitive prices amongst different brands, extremely low (or no) buyer switching costs and the fact that there are many competitors in the industry . In addition, there is simply no good substitute for perfumes in any other industry, thus we would judge the threat of substitute goods as low. For barriers to entry, there is some likelihood that the perfume industry could be a luring prospect as there are no clear frontrunners mentioned. However, any interested investors would need to shell out a large sum of money to create sufficient market differentiation through R&D, distributing and advertising before entry. Finally, Cambridge faces competition from external and internal...