Introduction:

Jones-Blair Company, primarily based in the Dallas-Fort worth (DFW) area, is an established company in the $13 billion US paint industry. A large portion of the maturing paint industry, $10 billion, is established from architectural coatings and the annual growth rate is expected to equal that of general inflation in the coming years. As the growth rate is slowing, the number of paint companies is shrinking at a rate of 2 to 3 percent per year. This decline is due in large part to the slow sales growth, but is also fueled by the necessity for continued expenditures in research & development and recent compliance standards set forth by the EPA. In the coming years, the Jones-Blair Company faces these challenges, as well as those presented by mass merchandisers competing with Jones in current business sectors, as they attempt to exponentially increase company sales growth. In order to reach these business goals at a time when growth is nonexistent, Jones-Blair must take immediate action and increase their sales team and refocus their sales energies. Mass merchandisers pose a serious threat to the future achieved sales levels of Jones-Blair Company. Of the three primary groups of customers, do it yourself paint contractors

Problem:

Jones. Blair Company’s main objective is to increase sales volume as to increase market share. So the senior management executives are gathered to discuss achieving those objectives, but the major point of disagreement among them was where? And how? To deploy corporate marketing efforts among the various trade paint markets served by the company.

Constraints:

There are many constraints that keep the company far from achieving their objectives and leads to a slow sales growth and the number of paint companies is presently declining at a rate of 2 to 3 % per year as follows:

• High competition due to readily available technology and difference in paint formulations associated with regional climatic needs.
• Usage of alternative materials such as aluminum and vinyl siding, interior wall coverings and wood paneling affects the needs for painting by decreasing it.
• Developing a higher quality product that reduces the amount of paint necessary per application and the frequency of repainting.
• Producers of coating had developed more durable goods.
• Manufacturing cost and raw materials is very high (cost of goods sold is 60% out of the net sales) and it’s not decreasing in the future.
• Environmental constraints adopted by the EPA which proposed a three-step plan for the reduction of VOCs in architectural and industrial maintenance coatings which leads to low profit margins in the paint industry.

Note that the only good thing that happens in the paint industry is the increasing demand for paint sundries due to a trend toward do-it yourself painting by household consumers.

Alternatives:

A: the vice president of advertising introduces the first alternative which is:

• We must direct our efforts toward bolstering our presence in the DFW do it -yourselves market because DFW was estimated to account for 60% the dollar volume of architectural paint and allied product sales.
• We need an awareness level of at least 30% among do it -yourselves to materially affect our sales. So an increase of $ 350000 in corporate brand advertising beyond what we are now spending with an emphasis on television will be necessary.

B: The vice president of operations introduces the second alternative which is:

• Advertising is not the way to go.
• The DFW area alone is too narrow a focus.
• We have to be competitive in household paint market.
• The customer appears price-sensitive, so cutting our price by 20% on all paint products will achieve parity with national paint brands.

C: The vice president of sales introduces the third alternative which is:

• Putting our effort into non-DFW area where half of our sales and most of our dealers exist.
• One additional sales representative must be added whose sole responsibility is to develop new retail account and the direct cost to keep on representative in the field is $ 60000 per year.

D: The vice president of finance introduces the fourth alternative which is:

• Pursuing our current approach.
• Guarding our margins and controlling costs.
• Recoup non capital expenditures with in a one-year time horizon.

3-Issues:

• The first issue given by vice president of advertising and this issue has advantages and disadvantages which are:

• Strengthen their presence in Dallas and their brand name through advertising especially by TV spots, which will reach also rural consumers as well.
• The advertising campaign will cost an incremental of $ 350000 while our earnings before taxes are $ 1140000.
• The main disadvantage of this issue is that the vice president of advertising didn’t take into consideration that the main factor that affects our sales volume is our high prices and advertising will not give us a lot because 75% of the audiences are not buying paints.

• The second issue was given by vice president of operations and his issue also has advantages and disadvantages which are:

The direct advantage of this issue is increasing in dollar sales if they cut their prices by 20% which means gaining a bigger market share.The disadvantage of this issue is that 20% cutting in prices is not enough to capture contracts attention because they have to cut their prices by 40% in order to do so. The second disadvantage is that the contribution margin will decrease less than 35%as usual.

• The third issue was given by vice president of sales:

The main disadvantage is the cost of each representative, which is 60000$each per year. This issue also disregards the effect of high prices on our market share, which is the main problem.The advantage of this issue is to create new retail accounts and to increase our sales volume through employing new representatives.

• The forth issue was given by vice president of finance who advised to stay stable and don’t do any marketing efforts.

The advantage of this issue is guarding their profit margin and contribution margin as of controlling costs.There are so many disadvantages for this act which are:

i. Losing some of their present market share because their prices are higher.

ii. He didn’t mention any solution for their main marketing problem.

iii. Cannot attract contractors because our prices are still higher than our competitors.

iv. This issue is concentrating on profits and disregards market share.

Conclusion:

After analyzing the four issues I can came with conclusion that:

Cutting the prices by 20% even 40% is not the answer because it might be effective for a short while because our competitors will do the same so they’re forced to do that or they will be out of the market. Also the increase of the advertising costs will not solve the problem because 75% of the audience is not buying paint. The only solution is through geographic segmentation by concentrating on the rural markets which is growing in an ascending trend and hiring more representatives especially in places that we have a deficiency in satisfying the customer’s needs. The representatives will help us developing new retail accounts and presentations or call on professional painters. Note that the cost of adding new representative is low which $ 60000 per year is.