Good Example Of Big Sky Mower Inc. Case Study Case Study

Introduction

The Big Sky Mower Inc. is an American based company that has grown over the years under the stewardship of Joe Franklin. With its effective operational mandate, the company has grown into a household brand with a customer-centric approach that has seen it maintain its “small company” image over the years. This has not only boosted loyalty but also record sales for the BSM products such as Mower King, Trail Mower, and Mower Max. The company has further inculcated a diversified distribution and promotion strategy in both Metropolitan and non-Metropolitan Areas. With rife competition from over ten companies, the company has managed to create its niche in the market. In the light of these facts, the newly appointed President and CEO Brock Franklin took much interest in a proposal from national retail merchandize chain inquiring about a private branding arrangement for BSM’s line of riding mowers. The proposal had its own benefits which included broadened distribution, expanded production and increased sales. Despite these positive expectations there were other elements that would affect n the Big Sky Mower’s prospects under Brock Franklin negatively.

Analysis

The proposal which was centered on the private-brand arrangement would see BSM sell its products at a price 5% lower than its manufacturer’s price list. The national retail merchandize company would further acquire other administrative privileges such as acquisition of a house account without the BSM’s representatives calling on them. The proposal would ultimately relinquish the administrative mandate of the company to the extent that it would lose a sizeable control in the accounting in the distribution and inventory taking of the BSM products. The branding of the product would also affect the BSM standing in the market as the proposal would see the national retail merchandize company under its own differentiated packaging and branding. This would ultimately mean that BSM would produce products that in the end would compete with its BSM branded products in the market.
The proposal would enhance the sales of the company on an assured basis but this could also affect the overall costs of production in terms of labor, materials and other overhead costs. Labor alone would introduce a 4% increase in the current manufacturer’s sales price. Direct material costs and overhead costs would translate to a 1% increase each in the manufacturer’s price. The other related costs such as wear and maintenance and property tax would account for an extra 1.5% extra cost. Cumulatively this would lead to 6.5% increased production cost on BSM’s part. In light of this increase coupled by the seasonality of the product and the competitive market, BSM would effectively cannibalize itself is earlier prospects
The private-brand arrangement would bring with it added benefits such as aggressive advertising and massive recruitment of new dealers to complement the current ones. These advantages, however, cannot be enough in reversing the detrimental elements of the proposal. The two-year contract would see BSM footing costs emanating from the sale and after-sale of the product such as warranty work and mower parts. The contract would also see the drop in unit sales of the riding lawn mowers from the projected 1994 figure of 1, 263,000. It would reduce this figure by 300 units annually as the arrangement would also the products in nonmetropolitan markets. The BSM line would also be open to liabilities emanating from the arrangement as it is embracing a new market and new trade terms. The proposal was good on paper and in the short run but it would evidently outrun the BSM Company out of the competitive market at the expense of a national retail merchandize company.