Swisher Motor Case Analysis

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Wayne Swisher, President and Chief Executive Office of Swisher Mower and Machine Company (SMC), was weighing the proposal of a private branding arrangement for SMC’s line of riding mowers. He thought the inquiry presented an opportunity but details should be studied more closely.

Situation Analysis:
Company Background:
Established in 1945 by Max Swisher, SMC grew steadily with unit volume for SMC riding mowers peaking at 10,000 units with sales of $2 million in 1966. In the 1990s, the unit volume remained constant with around 4,250 riding mowers per year. Compared with 1,263,000 unit sales in riding mowers and tractors industry, SMC only occupied around 0.3% market share. Max Swisher, the current CEO, thought maintaining a small company image had also been an important aspect of his business philosophy, which led to the good personal relationships with dealers and customers alike. SMC produced limited but differentiated products. SMC’s flagship product, the Ride King, was credited with the first zero-turning-radius riding mower. SMC also produced a trail-mower called T-44 with a cutting width of 44 inches. Kits, the self-propelled push mower, accounted for 8.2% of SMC’s total sales, though it did not provide a material contribution to the company’s gross profits. The replacement parts for mowers posed a good business for SMC, accounting for 20% of the total sales. The following table showed the detailed comparison of the percentage in total sales and total gross profits across different modes of mower together with replacement parts. 1995 dataRide KingT-44KitsReplacement

Modes of MowerRiding MowerTrail-mowerPush mower/
% of total Sales63.60%8.20%8.20%20%
% of Gross Profits57.80%13.20%029%
SMC planned to broaden SMC product line in 1996 by introducing a high-wheel string trimmer product, Trim-Max, a high-wheel, walk-behind product. With manufacturing plant in Warrensburg, Missouri, SMC owned an annual capacity of 10,000 riding mower units on a single 40-hour-per-week shift with distribution mainly in non-metropolitan areas. About 75% of sales of SMC were made in non-metropolitan areas. SMC sold 30% through wholesalers, 25% through direct-to-dealer, 40% as private-label, and the rest 5% as exports. It sold the Ride King through wholesalers, who located throughout the country, focusing on farm dealers situated in the south central and southeastern US. SMC remained a profitable company since its founding with a net profit return on sales of 10 percent or more annually. The sound financial position minimized the need for any major short-term or long-term financing.

Industry Backgrounds:
Riding lawn mowers are classified as lawn and garden equipment with two basic configurations, the front-engine lawn tractors and rear engine riding mowers. However there are some mid-engine riding mowers on the market, such as those produced by SMC. Front-engine lawn tractors are the most popular design followed by rear-engine and mid-engine models. Rear engined lawn tractors are perceived as stronger and more durable. Competition in riding lawn mower market was fierce with ten manufacturers comprising major competitors in 1995, while SMC only occupied around 0.3%, based on sales units. All these companies made Riding mowers under a nationally branded name and at the same time were engaged in private-label production. It was estimated that private-label mowers account for 65 to 75 percent of total industry sales. Each riding mower manufacturer priced its products at price points. The representative retail prices for national and private-label riding mowers typically ranged from $800 to $5,000. The manufacturer’s price of Ride King of SMC, $ 650, was quite comparative, compared with industry average. Sales trends of riding mowers were cyclical and highly seasonal. With slice decline of sales in 1991, projections for 1995 and 1996 point toward further increases in unit volume. Industry statistics show that over half of...
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