Case 1: Shoes for MOOs, Inc.
Shoes for MOOs is a potential joint-venture between Jim Wells and his brother-in-law to design and distribute footwear for injured cows. The question facing Jim Wells and his potential investment partner is simple, either do or do not.
Some of the factors that have a large effect on the decision are the two competitors in the current market, how distribution and promotion will be taken care of, and finally what the pricing strategy will be effective based on the previous factors. One competitor is a cheap, fairly ineffective, shoe priced at 21.80 available through direct mail catalogs; also there is a strictly clinical use $400 hydrotherapy shoe. The first distribution option is direct mail, which has a positive of establishing one on one customer relationships, gives Jim full control, and is fairly cheap ($2.67 per shoe for all materials and postage). For this option, promotion would likely be mainly based on trade shows and magazine ads. The other distribution channel is direct sales to dealers in the Area, which are approximately 500. With this strategy, Shoes for MOOs would gain wide exposure quickly, but with dealers requiring a 40% margin on sales it would drastically raise the price, which Jim though would have to be between $40 and $80.
Based on both distribution channel options and mixes of promotion, it is not feasible to start the business. The market does not have much room for growth; it has shown that the number of farms is declining, and with there being a cheaper albeit less effective product most farmers have already made their own solutions, and for the price to make an economic profit, the cost-benefit of buying the new shoes would not be worth it. According to the break-even analysis, Jim should invest other places. With fixed costs being $19 per shoe to manufacture, and either a 40% margin on sales with direct sales and/or the promotion at trade shows, being $100-$1235 each and a minimum of 5, only...
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