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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