Arctic Power A Case Analysis

.. .6 3.5 3.3 3.2 Removing tough stains 3.0 3.1 2.8 3.3 3.0 2.7 2.7 Being a good value for the price 3.1 3.1 3.3 3.1 2.8 3.0 2.4 Cleaning well in cold water 2.4 2.3 2.6 2.5 2.4 2.3 1.9 Competitive Analysis CPC’s competitors consist of two large consumer packaged goods companies: Procter and Gamble–with annual sales exceeding $1 billion, and Lever Detergents–with annual sales in excess of $400 million. Both are subsidiaries of multi-national firms. Each firm has talented and experience marketers, but they compete in a low-growth market where increased sales could be achieved only by taking market share from competitive brands. While Tide and Arctic Power are equivalent brands in terms of cleaning power, Tide outsold Arctic Power by a 5 to 1 ratio in 1986.

The market share for Tide has remained level (at approximately 34%) during the same time Arctic Power has enjoyed a market share increase from 4% to 6.5%. Due to Tide’s dominance in the detergent market, it will play an important role in any major change in Arctic Power’s strategy. Strengths: Deep pockets Solid market share Talented and experienced marketers Weaknesses: Low-growth market Industry Analysis The laundry detergent market in Canada can be described as mature, with unit sales increasing by approximately 1% annually and dollar sales increasing by about 5% annually. Environmental Analysis Regular cold water washing has increased nationally from 20% in 1981 to 29% in 1986. Another 25% of consumers could be described as occasional users of cold water for washing. Hence, 54% of Canadians wash in cold water. INTERNAL ANALYSIS Strengths Arctic Power has the skill and resources of an international conglomerate (Colgate-Palmolive) to assist it in achieving its goals.

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This gives them plenty of stability and credibility with their customers, suppliers, and retailers. This also allows for them to have the advantages of economies of scale where they can negotiate favorable prices from suppliers and have display prominence from retailers. Colgate Palmolive has solid financial stability allowing it to obtain credit on favorable terms. Weaknesses Arctic Power is a quality product victimized by poor product positioning and marketing. While Arctic Power has the same amount of active ingredients as Tide, making it expensive to produce, it is viewed as a mid-level laundry detergent, or a cold water specialty product by Canadian consumers.

Consumers are reluctant to purchase an expensive detergent they feel is lacking in quality. While Colgate-Palmolive is a large corporation, Arctic Power does not have a large enough market share to enable it to have the resources to compete nationally with the detergents having the largest market shares as its own brand. While Arctic Power expanded its market share during the campaign in western Canada, the costs of customer and trade promotions left it in an even more precarious financial situation. Arctic Power would be best served as being part of a concerted trade promotion strategy by Colgate-Palmolive supporting all Colgate-Palmolive brands. Key Success Factors In order to compete in the Canadian laundry detergent market, a company must have: Sufficient manufacturing capacity to take advantage of economies of scale. Sufficient financial resources to promote and sell your product on a regional or national basis.

A loyal customer base. A distinctive quality to set it apart from its competitors. Arctic Power clearly has the capability to compete and survive in the Canadian laundry detergent market, what must it do to thrive in the Canadian market? OUR STRATEGY FOR ARCTIC POWER It is the view of Spiel and Dimick, LTD, 1) Arctic Power must focus its strategy on becoming THE cold water laundry detergent; 2) align the products price and production costs to match the perceptions of the Canadian market; and 3) if possible, avoid competing head to head with Tide. To arrive at our specific suggestions, we identified our strategic issues using the following criteria: Does the option take into account current overall market trends? Does the option consider trends in cold water washing? Are we utilizing the use of ingredients in such a way that we can maximize market share and profitability? As a result, we established the following strategic issues to be addressed: How is our brand perceived in relation to other brands of laundry detergents? How to increase awareness of the benefits of cold water washing? How to overcome our weak market position in the critical Ontario market? How to adjust our costs and prices to remain competitive and profitable, even when our competitors respond vigorously with promotion efforts of their own? Options We considered the following plans of action: Continue with our current strategy of expanding in western Canada while maintaining our base in eastern Canada. Duplicating our campaign in western Canada on a national basis as a premium detergent.

Target the cold water and second detergent market, while reducing the number of ingredients used and our prices. We evaluated each option by asking some strategic questions: Does the plan adopted make Arctic Power a stronger, more profitable brand than it was previously? Are the revenues from expansion in new markets greater than the promotion and other costs associated with such expansion? Does the option help the “bottom line?” We rejected continuing on Arctic Power’s current course because the costs associated with expanding into western Canada were far greater than the increase in revenues. Furthermore, our competitors, particularly Tide, responded strongly to our efforts with promotions of their own, causing Arctic Power to further reduce prices and profitability. In the unlikely event that Arctic Power could reduce its promotional efforts to the levels before the expansion into western Canada, it would take four years for the revenues from the increased sales to offset the increased promotion costs. If continuing on Arctic Power’s present course is a bad idea, then a national campaign as a premium detergent is an even worse idea.

A national effort would provoke an all-out war with Tide, and Arctic Power does not have the resources to go head to head with Tide on a national basis. Such a course could even doom Arctic Power as an entity. Our Choice We decided the best course of action for Arctic Power was to target the growing cold water market and to become Canada’s leading choice as a second detergent. While the option we chose is not as glamorous as competing to be Canada’s number one premium laundry detergent, it is the most sustainable. An added benefit is we can lower the number of active ingredients used, allowing Arctic Power to: Lower production costs and prices. Retain profitability in the face of competitors’ promotions.

Reduce Arctic Power’s use of consumer promotions due to their overall price reduction strategy. Our marketing strategy would consist of a national television advertising campaign to emphasize the benefits of cold water washing and to promote Arctic Power’s position as the leading cold water washing detergent. We would immediately implement our cost reduction strategy while phasing in our price reductions through the use of “discount” coupons. This would allow Arctic Power to increase its margins while the brand is being repositioned. Once our price reduction strategy is complete, there will be less need for consumer discount coupons as our prices will already be lower.

Arctic Power’s lower cost/price structure would allow it greater flexibility to respond to competitors’ promotion strategies. Budget Despite facing cutthroat competition that has seen the cost of goods sold rise 15% during the past three years and prices rise only 5%, Arctic Power should be able to continue to have an 18% contribution margin for its sales dollars. Our primary budget strategy would be to reduce costs and promotion expenses, while increasing the use of cheaper television and radio advertising. This would allow Arctic Power to increase brand awareness as well as promote the benefits of cold water washing. Arctic Power will also look to new cost saving technologies and other measures to assure profitability over the long run. 14 YEARS LATER: THE CONCLUSION The year is 2001.

Through the efforts of Smith and Jones, LTD’s marketing strategy, Arctic Power is the leading cold water laundry detergent in Canada and has expanded internationally. The 1987 Arctic Power campaign will be widely studied by MBA students from Palm Desert, California to Palm Beach, Florida as one of the great marketing success stories. Spiel and Dimick, LTD, will later go on to help some nerdy Bill Gates kid market this unique idea of his called Windows while assisting Al Gore in his new invention, the Internet. Business Essays.


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