SWOT Analysis for The Beach Carrier: A Feasibility study

The Product

• Likely a good idea to include the SWOT analysis in your assignment. I would like to see your logic for building your strategy. • +/- 5 pages double spaced • Usually 11 font with normal 1” margins. Structure might look like this: • Intro, you would lay out the current state of affairs in the case, what's happening right now • Then your SWOT • Then your analysis providing options that she “might” use, • Then in your conclusion, your chosen alternative and why you selected that option and what you hope to achieve by choosing that option. When you're an entrepreneur, there is no 'guide' or a set of instructions. You need to look at the entire situation that Mary Ricci is presented with and the limited information that is available and you need to decide what you would do if it was your company. As an entrepreneur, no one is going to be there to tell you what to do and this assignment is just like that. I would start by looking at the strengths, weaknesses, opportunities and threats that the case / business environment presents, and determine what you would do in the long and short run, in order to have the business survive and thrive. The strengths and weaknesses will originate inside the company and the opportunities and threats will be found in the external environment. Survival is a key 'moment' in the life of a new or fledgling business. In the short run, what do you need to do to survive and in the long run, thrive? Sorry about the lack of direction, but this is what it is to be an entrepreneur, there is usually no one there to tell you what to do, you just have to decide and then act. The Beach Carrier Robert Hisrich, Thunderbird School of Global Management Mary Ricci has a new product concept, the Beach Carrier, which she is ready to bring to market. Ricci is creative, optimistic, enthusiastic, flexible, and motivated. She is willing to put substantial time into developing and bringing The Beach Carrier to market. Although she lacks capital, Ricci is unwilling to license or sell the pattern to a manufacturer; she is determined to maintain control and ownership of the product throughout the introduction and market penetration phases. Ricci believes there is a significant amount of money to be made and refuses to sell her product concept for a flat fee. THE PRODUCT The Beach Carrier is a bag large enough to carry everything needed for a day at the beach, including a chair. When empty, the bag can be folded down to a 30-centimetre by 30- centimetre square for easy storage. The bag’s 91-centimetre by 91-centimetre size, adjustable padded shoulder strap, and various-sized pockets make it ideal for use in carrying chairs and other items to the beach or other outdoor activities, such as concerts, picnics, and barbecues. The bag can also be used to transport items, such as ski boots, that are difficult to carry. Manufactured in a lightweight, tear-resistant, fade-proof fabric that dries quickly, the bag will be available in a variety of fluorescent and conservative colours. COMPETITION Currently there are two competitive products sold online that Ricci felt would compete with the Beach Carrier. The first one, found at shadeusa.com, is the Caddy Sack and is advertised as a backpack-type product that can hold a beach chair, an umbrella, a boogie board, and even a small collapsing table. There is also an outside pocket for a towel, a snorkel, or fins. It is available in three colours and is priced at $16.95. Ricci purchased one of these and felt that it would not hold all the items at one time, as advertised. The chair had to be very small and room for extra beach accessories was very limited. This item was ideal for someone biking or walking to the beach with gear for only himself or herself. The second item is called the Wonder Wheeler and can be found at 4thebeach.com. It looks similar to a two-wheel shopping cart that might be used to carry purchased groceries while walking home from the store. This product is advertised as having oversized wheels; it weighs less than 10 pounds (five kilograms) and folds up easily. It can hold a significant amount of beach gear such as multiple chairs, an umbrella, a cooler, beach towels, and toys. It has a list price of $59.99, and Ricci felt that even with the advertised oversized wheels it would be cumbersome to manoeuvre on the sand. Its high price was also felt to be a negative for many consumers. Page 534 MARKETING RESEARCH Ricci commissioned a consulting company to perform a feasibility study for the product, which included a demographic profile, cost estimates, packaging recommendations, and a patent search. The patent search revealed the above-mentioned products and a chair that could be folded and carried as a small tote bag that could also hold a few small beach items. None of these were felt to be a threat to Ricci’s product, and she was optimistic that a patent could be obtained. A focus group was used to determine potential consumer response. Results of the focus group indicated that several features of the product should be modified. For example, the material was perceived as durable; however, the fluorescent colour was see-through and considered “trendy,” lessening the perceived quality of the bag. The size also represented an issue, as the bag was perceived as much larger than necessary. MARKET POTENTIAL People who use sunscreen products have been identified as the primary target market for The Beach Carrier. Research indicates that 48 percent of adult Canadians, or over 12 million, use sunscreen and sunscreening products. In the United States, 43.9 percent or over 77 million people, use sunscreen and associated products. Beach bags are replaced every three years. The primary market for suntan and sunscreen products is described in Table 1. The marketing share objectives for the first year of The Beach Carrier’s sales have been determined based on the following assumptions: People who use sunscreen products represent the market for the Beach Carrier. Most men do not buy beach bags; consider women only (57.8 percent of population). Women buy new beach bags every three years on average; that is, one-third will buy a new bag this year. Table 1 The Beach Carrier SEGMENT PERCENTAGE OF TOTAL USERS OF SUNSCREEN PRODUCTS Ages 18–44 66.9 High school graduate 40.2 Employed full time 60.5 No child in household 54.5 Household income of $30,000+ 55.3 Based on these assumptions, the unit sales needed to achieve market share objectives of 1 percent, 2 percent, and 5 percent of the total market during the first year of the Beach Carrier’s sales are shown in Table 2. Ricci is targeting 1 percent of this potential market. Table 2 POPULATION SUNSCREEN USERS REPLACE BAG THIS YEAR Total adults 203,150,133 90,285,814 29,294,319 Females 117,420,776 60,219,277 19,872,361 MARKET SHARE 1% 2% 5% Total adults 297,943 595,886 1,489,716 Females 198,734 397,447 993,618 Page 535 STRATEGY Ricci investigated several methods of marketing The Beach Carrier, including selling it in upscale (i.e., The Bay) or discount (i.e., Walmart) stores, licensing the product concept to a manufacturer, selling the idea for a flat fee, selling the bag to corporations for use as a promotional item, selling it on the Internet, and setting up a mail-order operation. Ricci believes that the mail-order option, while requiring the most effort, will provide higher margins, lower risk, and the overall best fit with Ricci’s strengths and weaknesses, her market penetration objectives, and her limited financial resources. The Internet could also create opportunities but Ricci was unsure of this option. The mail-order sales strategy will be implemented nationally using a regional rollout and following a seasonal demand pattern. With three-month intervals between rollout phases, national market exposure will be achieved within 12 months. Ricci is also exploring how to set up a website with a team of local university students as consultants. PROMOTION The product initially will be promoted in novelty and general interest mail-order catalogues and special interest magazines that appeal to beachgoers and boat owners. PRICING The costs of manufacturing have been estimated at $6.50 per unit for material, zippers, Velcro, and so on. The costs for assembly and packaging have been estimated at $3.50 per unit, bringing the total manufacturing cost to $10.00. After analyzing competitive products and focus-group results, a mail-order price in the $12.99 to $14.99 range has been established. DISTRIBUTION The product will be manufactured at a local factory, drop-shipped to a storage facility, and shipped via UPS or Canada Post to the consumer. Initially, inventory can be carried at no cost in Ricci’s house or garage. This same process could also be used if the website is developed. FINANCING A $30,000 small business loan is the minimum amount Ricci needs to fund her fixed costs for the first phase of the rollout for the mail-order program. Marketing the product through traditional retail channels would require approximately $250,000 for advertising and other selling costs associated with a new product introduction. BREAK-EVEN ANALYSIS Break-even analysis was performed at three mail-order prices, as seen in Table 3. Based on this analysis, Ricci must meet only one-fourth of her target sales goal, or one-quarter of 1 percent of the total market, to break even in the first year. Table 3 UNIT VARIABLE COST PER UNIT PRICE CONTRIBUTION Materials $ 6.50 $12.99 $2.99 Assembly 3.00 $13.99 $3.99 Packaging 0.50 $14.99 $4.99 Total unit VC $ 10.00 FIXED COSTS TOTAL Advertising $100,000 Warehousing 1,199 General S&A 10,000 Total fixed costs $ 111,199 BREAK-EVEN UNITS $12.99 37,190 Percent of total market 0.25 $13.99 27,869 Percent of total market 0.19 $14.99 22,284 Percent of total market 0.15 Source: Hisrich, Entrepreneurship 2ce, p. 310, ISBN: 0070979847. Reprinted with permission.