Dexter Scott 1Dexter Scott T-R 11:00 November, 3rd 2015

Jolson Automotive Hoists

I. Situation Analysis

A. Industry

16 companies within in the North American market (12 U.S. and 4 Canadian

organizations)

The United States had a population of 264 million and 146 million registered

vehicles

Canada had a population of 30 million with14 million cars were on the road

Purchasing segments are made up of outlets that service or repair automobiles

Segments include new and used car dealers, specialty shops, independent garages,

and service/repair chains

The hoist purchasing segment is part of an industry referred to as the automobile

after-market

The after-market industry was worth 54$ billion in 1999

Annual unit sales of hoists in North America were estimated to be 49,000

The price of a hoist ranges from $3,000 to $15,000

An estimated 4000 new car dealerships were operating in Canada

New car dealers purchased 30 percent ( 14,700 units ) of total hoists yearly

See ex. 1

A hoist is made to last between 10 and 13 years

Hoists come in surface, and in-ground versions

Scott 2

In-ground lifts accounted for 21% of total industry sales (10,290 units)

See ex. 2

Surface lifts were 79% of total lift sales (38,710 units)

See ex. 3

AHV Lifts was the market leader with a 40% market share and annual sales of

$60 million

See ex. 4

Berne Manufacturing had the second largest market share with 20% and sales of

$30 million

See ex. 4

Regional firms offering a limited line of hoists make up the remaining $60 million

and 40% of the market

See ex. 4

AHV and Berne sell in-ground and surface hoist, but focus mainly on the in-

ground market and two-post surface markets

Both companies employ a cost leadership business level strategy by focusing on

price competiveness

AHV was the only firm with a direct sales force

Priced at $8,792, AHV marketed a scissor hoist that was 20% less than the

Jolson Lift

See ex. 5

Scott 3

Mete Lift, a regional firm serving California and Oregon, sold a scissor lift that

was similar to Jolson’s design for $10,440.50, 5% less than Jolson’s $10,990

retail price

See ex. 6

Europe becoming a single market in 1993 made it an attractive option for growth

potential

Germany, France, the U.K., and Italy are known as Europe’s “Big Four”

industrialized nations and collectively had 140.5 million vehicles in use for 1997

See ex. 7

The “Big Four” produced 9.7 million new vehicle registrations in 1997

See ex. 8

1 million new vehicle registrations are added to the equation when including

Spain’s 1997 figures

No dominant manufacturing firm in Europe

Only 1 firm in Germany made scissor lifts

22 firms in Italy manufacture lifts

B. Company

Country of origin is Canada

The firm is a manufacturer of automotive hoists

Main product offering is a surface scissor style lift branded as the Jolson Lift

Scott 4

Mark Jolson obtained patents for its lifting mechanism and for its safety locking

mechanism

The lift was known for its quality, simplistic installation, and five year warranty

Industry insiders view the Jolson Lift to be superior in design and safety

Jolson’s business level strategy is based upon product differentiation and core

competencies

The firm began selling in the Quebec and Ontario markets of Canada

Jolson mainly competed in specialty shops that focus on wheel alignments

Jolson garnered sales of $172,500 in 1991 by selling 23 hoists

In 1994 Jolson started using distributors to expand their geographic reach

In 1996, Jolson reached a wholesale agreement to enter the U.S. market

1999 saw company sales grow to $9,708,000 by selling 1,054 hoists

Jolson’s total market share was 2.15%

See ex. 9

Jolson’s sales to wheel alignment service center chains and independent garages

were $8,251,800, which was 85% of total company sales

See ex. 10

15% of sales, $1,456,200, were from patrons that used the Jolson Lift for broad

repairs See ex.10

83 million people in three U.S. regions were within a day’s drive of Jolson’s

manufacturing plant

Scott 5

A company direct sales force (including marketing manager, Pierre Gagnon),

Canadian distributors, and an American automotive wholesaler were used to form

the firm’s distribution system

Retail margin yields through Jolson’s three types of distribution:

o Company sales force: 100% and $10,990

o Canadian distributor: 80% and $8,792

o U.S. wholesaler: 78% and $8,572

See ex. 11

Jolson Lifts sell for $10,990 retail and receives a dollar margin of $9,210

C. Trends

Jolson has a 25% compound annual growth rate for sales revenue between 1997

and 1999. See ex. 12

Total auto lift industry unit sales peaked at 50,187 in 1998 and declined slightly to

49,272 in 1999.

1997 1998 199947000

47500

48000

48500

49000

49500

50000

50500

48234

50187

49272

Annual Total North American Units

Scott 6

The Free Trade Agreement of 1989 between the U.S. and Canada phased out

tariffs over ten years, and this deregulatory policy continues to promote industry

growth

Exports and imports of goods between the U.S. and Canada were relieved of

duties in 1999

The Canadian dollar has fluctuated between $0.65 and $.70 in comparison to the

U.S. dollar, and this trend is forecasted to continue

Physical, technical, and fiscal barriers in the European Union were being

eliminated for firms operating within

People, goods, services, and capital began to be able to move freely across the

nations of the E.U.

North American and Japanese firms sought to increase international shares and

profits in the E.U.’s 15 nation, 374 million populated total market

II. Problem

Company president, Mark Jolson, wants to keep Jolson Automotive Hoists, Inc. on a fast

growth regiment. He is looking to increase sales and possibly modify J.A.H.’s

competitive market strategy.

Should the Jolson organization formulate a strategy to enter the European arena through

licensing?

Should Jolson increase efforts to enhance their success in sales throughout the North

American market?

Scott 7

III. Alternatives

A. Do nothing and continue with current policies and strategies (Status Quo)

1. Advantages

a. Annual sales for Jolson are steadily increasing with current policies

b. No extra investment risks involved

c. No extra costs incurred

d. Jolson can keep Gagnon positioned where he has been most effective

2. Disadvantages

a. Slow growth style sales strategy versus the “fast growth track” aspirations of

Mark Jolson

b. Takes away from increasing brand awareness

c. Missed opportunity to gain significant market share from competitors

d. Not taking advantage of opportunities to increase sales revenue by expanding

the company’s target market size

B. Expand efforts in the U.S. by opening an office in New York

1. Advantages

a. New York is close to Jolson’s home country and can be monitored effectively

b. Jolson could serve 12 states with an aggregate population size of 83 million

c. Total registered vehicles in U.S. was 10 times more than Canada.

d. 1999 U.S. sales 60% and $5,284,800 vs. Canada’s 40% and $3,883,200

See ex. 13

Scott 8

2. Disadvantages

a. Jolson’s U.S. wholesaler may not want to compromise any of its territory

b. Company may be viewed unfavorably for being a new entrant from another

country

c. Strategy steers efforts away from Europe’s “Big Four” population of 256.9

million to pursue an American segment of 83 million

d. Staffing a salesforce at the New York office would increase labor costs

C. Enter the European market through direct investment

1. Advantages

a. No dominant manufacturer of automotive lifts

b. Jolson would retain all profits

c. The move would enhance the business’ image as a global brand

d. The E.U’s “Big Four” nations offer great market potential with an estimated

population of 256.9 million people and 140.5 million vehicles in use

2. Disadvantages

a. Adapting to uncontrollable elements in culture and political environments

b. Exchange rate accounting made more complex from factoring in the Euro

c. Estimated cost of $2.06 million for foreign direct investment

See ex. 14

d. May have to replace Gagnon if he is sent to Europe to manage operations

Scott 9

D. Licensing in the European market

1. Advantages

a. Company can outsource direct investment activities by having a local

European manufacturing firm build the hoists

b. Jolson would be in an agreement with market friendly European wheel

alignment equipment producer, Bar Maisse.

c. Bar Maisse’s already having local distribution channels meant that Jolson

would not have to create their own

d. Jolson would receive a 5% royalty from Bar Maisse

2. Disadvantages

a. Core competencies of manufacturing and design become vulnerable to the

quality of a licensing partner’s output

b. Bar Maisse may seek to acquire controlling interest in operations

c. Jolson would miss out on 95% of earnings

d. Success depends on the expertise of Bar Maisse

E. Enter European market through joint venture

1. Advantages

a. Risks of conducting transcontinental business are offset

b. Jolson would be better positioned to learn about the European market

c. Enables marketing the lift through Bar Maisse’s distribution network

d. Potential to make more money with a locally established partner

Scott 10

2. Disadvantages

a. Bar Maisse may seek to control the operation

b. Depending on the efforts and abilities of Bar Maisse complicates sales

estimates

c. Jolson may have to compromise key components of quality assurance

d. Profits are cut in half

IV. Recommendation

Jolson Automotive Hoist, Inc. should Jolson increase efforts to enhance their success in

sales throughout the North American market. This can be accomplished by opening a

New York office and working with their U.S. wholesaler to get it to promote the Jolson

Lift.

Opening an American office will offer the company greater presence in a market where

J.A.H. earns 60% of its profit.

The firm could exploit the market potential of an area with 83 million people in the New

England, mid-Atlantic, and mid-Eastern regions of the United States.

The mid-Atlantic (38 million) and mid-Eastern (32 million) segments each have a

population higher than the size of Canada’s total population of 30 million.

Staff from the New York office

The firm would not need to build a factory to begin operating from America.

Operations could be conducted more expeditiously since distribution channels are already

in place

Appendices

Ex. 1

49,000 hoists sold annually * 30% new car dealer purchases = 14,700 hoists purchased by new car dealers

Ex. 2

49,000 hoists sold annually * 21% total industry sales = 10,290 in-ground lifts sold

Ex. 3

49,000 hoist sold annually * 79% total industry sales = 38,710 surface lifts sold

Ex. 4

$60 million AHV sales / AHV 40% mkt share = $150 million total market sales

20% Berne mkt share * $150 million total mkt sales = $30 million Berne sales

40% regional firms’ mkt share * $150 million total mkt sales = $60 million regional firm sales

Company Market Share SalesAHV Lifts 40% $60 millionBerne Manufacturing 20% $30 millionRegional firms 40% $60 millionTotal 100% $150 million

Ex. 5

$10,990 Jolson Lift price – 20% less = AHV Lifts price of $8,792

Ex. 6

$10,990 Jolson Lift price – 5% less = Mete Lift’s price of $10,440.50

Ex. 7

Big Four Countries

Passenger Vehicle in Use Small Commercial Vehicle in Use

Total Vehicles in Use

Germany 41,400 2,800 44,200,000France 28,000 4,900 32,900,000Italy 33,200 2,700 27,500,000United Kingdom 23,500 4,000 35,900,0001997 Total 126,100 14,400 140,500,000

Appendices

Ex. 8

Country New Vehicle Registration 1997Germany 3.5 millionFrance 2.2 millionItaly 1.8 millionUnited Kingdom 2.2 millionTotal 9.7 million

Ex. 9

1054 Jolson units sold / 49,000 total industry units sold = 2.15% mkt share for Jolson

Ex. 10

$9,708,000 Jolson total 1999 sales * 85% of total sales to chains and independent garages

= $8,251,800 in 1999 sales to wheel alignment service center chains and independent garages

$9,708,000 Jolson total 1999 sales * 15% of total sales to patron that use the Jolson Lift for

broad repairs = $1,456,200 in 1999 sales from patrons that used the Jolson Lift for broad repairs

Ex. 11

Company sales force provides 100% of $10,990 retail price

Canadian Distributor vehicle yields 80% of $10,990 retail price

80% of retail price * $10,990 retail price = $8,792 in earnings

U.S. wholesaler vehicle yields 78% of $10,990 retail price

78% of retail price * $10,990 retail price = $8,572 in earnings

Ex. 12

1999 Ending value = $9.708 million in sales

1997 beginning value = $6.218 million in sales

# of years = 2

CAGR = 25% for sales

Appendices

Ex. 13

$9,708,000 total company sales 1999

60% U.S. sales * $9,708,000 total company sales 1999

= $5,824,800 company sales from the U.S.

40% Canada sales * $9,708,000 total company sales 1999

= $3,883,200

Ex. 14

Estimate for direct investment

Capital equipment: $250,000

Incremental costs: $200,000

Carrying costs: $1,000,000

Rent expenses: $80,000

Marketing expenses: $530,000

Total $2,060,000

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