Steel Door Technologies, Inc. (SDT) is experiencing growing pains. This privately held corporation is regionally based and moderately sized. SDT has recorded sales gains in each of the past ten years that exceeded the industry growth rate and have added 50 dealers in the past decade. This growth has catapulted SDT to the brink of becoming a large corporation with an ever increasing geographical footprint. On one hand, SDT has enjoyed a better than average growth rate. However, on the other hand, they have neglected to grow their manufacturing and distribution infrastructure to maintain a competitive position within the larger market place they have grown into. In order to increase its buying position with suppliers, senior executives believe that SDT has to attain a larger critical mass of sales volume. SDT manufactures and sells steel garage doors to the residential and commercial markets. The doors are sold through a distribution chain of 350 dealers located in 11 states that represent 150 different markets. The primary purchase of new doors from SDT is for replacement of old doors and the remainder of the purchases are broken down between new home construction and commercial use. Currently, SDT has 50 exclusive dealers and 300 non-exclusive dealers that represent $9.2 M in sales for 2002 fiscal year. The 50 exclusive dealers represent 70% of the total sales or $6.44M, while the 300 non-exclusive dealer stores make-up the remaining $2.76M. SDT is paying 8 sales representatives to call on the 300 dealer stores twice a month. These stores are generating, on average, only $9200 a year in sales. When this figure is broken down into a per sales call rate, STD is averaging $383 per call. When you subtract the payroll costs of the tech sales rep. of $88 per call rate, this leaves only $295 per call. In comparison the exclusive dealer 50 stores produce an average of $128,800 per dealer. This equals $5,366 per call minus $133 tech payroll cost for exclusive stores leaves $5,233 sales volume per call rate for the exclusive dealers. Therefore the exclusive dealers are averaging 93% more in sales volume than the average independent dealer. Furthermore, based on the 80k annual salary of each independent rep. the selling costs per dollar of sales revenue is 2.5% for exclusive dealers and 24% for independent dealers. Doors are being manufactured, inventoried, and shipped from two distribution centers to the dealer stores. The non-exclusive dealer stores represent multiple door lines and are selling the dominant brand 60% of the time. The market for doors is $2.05B with an estimated 2.4% increase in 2003, there are several large manufactures and many smaller regional manufactures. In the 11 states that SDT has representation, they hold 2.6% of the $348.5M (including replacement parts) of total sales. The environment that SDT operates in is very competitive and according to the survey results few consumers know brand names, therefore they are making purchases by price, quality, and reliability of installer. Due to the lack of customer brand name recognition; SDT needs to focus their marketing strategies on price and installation while maintaining a quality product. Using a benchmark company within the industry, Clopay is selling 400 million at 2000 stores equaling $200,000 per store what the competition is doing.
How can we develop the best distribution strategy plan for SDT to grow market share in the steel garage door industry in 2003 by 36% in the 150 markets that their products are sold and preserve their buying position of raw ingredients to maintain future competitiveness.
1.Offer SDT distribution through franchise establishments. These franchise opportunities would de available in the current markets where SDT currently operates and elsewhere in the neighboring geographical markets. Once these markets have been penetrated, the company...