Business / Fridgiaire Case Analysis
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Autor: anton 31 October 2010
Words: 442 | Pages: 2
Frigidaire Case Analysis
Introduction of the front loading washing machine was confronted with a number of problems/issues. Besides the obvious technology differences between the front loading and top loading machine the big difference for a consumer is the price. The advantages such as tumble wash, energy efficiency, space saver, and about 8,000 gallons of water saved a year are overshadowed by the high price. There were other perception problem technologically speaking, however these are all minor. The major problem is the price of one unit and the lack of price savings from this energy/water savings over time to compensate for this higher price point. Consumer interest did not significantly increase according to focus groups until the price came down to $599 from the target retail price of $799.
Kenmore in 1996 had 29% of washing machine marked share (exhibit 3). The initial sales for the new front loading washing machine dropped below forecast (exhibits 6 & 7) mainly due to failure to get Sears Kenmore brand in the mix. The expected DOE regulations were delayed indefinitely, therefore decreasing the demand for energy efficient machines.
The management team wanted to provide incentives to consumers, dealers, and Frigidaire. The research showed that close personal attention would be key in gaining market share, as well as highlighting the advantages of the front loading washing machine over the top loading washing machine to not only consumers but to dealers.
Invest more money (allocation of resources) in research to get the price point of the top loader down to $599. This will set the company back a bit, however if more research and development can produce lower production costs this will increase market share significantly.
Accelerate negotiations with Sears (sources of synergy) to take advantage of their section of the market. This will increase the front loading market share as well, based on the fact that Kenmore has the largest percentage in market share as of 1996 (exhibit 3).
Increase marketing efforts (sources of competitive advantage) to the target groups to stir up more interest in the advantages of the front loading washing machine. This will increase demand if you start a buzz about the advantages, focusing on all or one of them. If DOE regulations come into effect the obvious focus should be energy.
I feel the alternative to go with is to allocate more resources to get the price point of the front loader down. This will therefore produce a superior product at a price that can compete with top loading washing machines. With the current marketing campaign getting the word out combined with the decrease in price an increase in market share is inevitable.
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