Jones Bliar

SUMMARY

1) How might the architectural paint industry be characterized? 2

a) The US paint industry 2

b) Architectural paint industry 2

2) How might the JB market area be characterized? 2

3) How can this market be segmented? 2

4) Which market to pursue? 2

a) Non-DFW Household, a high potential for growth 2

b) Urban professional, wants high quality paints 2

c) Non-DFW Professional, already dominant 2

d) Urban Household, very price- sensitive 2

5) What competitive position does Jones Blair have in its market? 2

6) What strategy should JB adopt to reach the segment sought? 2

a) Spend additional $350,000 on corporate advertising 2

Pros 2

Cons 2

b) Cut price by 20% 2

Pros 2

Cons 2

c) Hire one additional sales representative 2

Pros 2

Cons 2

d) Do Nothing (Status Quo) 2

Pros 2

Cons 2

7) Recommendations 2

SLIDES 2

1) How might the architectural paint industry be characterized?

a) The US paint industry

The US paint industry is considered to be a maturing industry. Industry sales in 1995 were estimated to be slightly over $13 billion.

The US paint market is divided into three segments: architectural coatings (43%), original equipment manufacturing (OEM) coatings (35%)and special purpose coatings (22%).

The architectural coatings are general purpose paints, varnishes, and lacquers used on residential, commercial, and institutional structures. They are sold through wholesalers and retailers.

OEM coatings are formulated to industrial buyer specifications and they are used for durable goods such as automobiles, transportation equipment, building products industrial machinery and equipment etc.

Special purpose coatings are formulated for special applications or environmental conditions (extreme temperatures, exposure to chemicals). They are used for automotive and machinery refinishing, industrial construction such as factories, railroads, utilities, bridges marine application, highway and traffic machines and roof paints.

b) Architectural paint industry

In 1995, the U.S. sales for architectural paint coating accounts for about $5.5 billion (without sundries). The architectural coatings are mature market. A slow growth rate is the main characteristic of a mature market.

The sluggish growth rate measured in dollars can be traced back to a slowing growth rate in volume. This is because of a growing of materials that don’t require paint or require little paint such as plastic and aluminum. These are substitute products that can increase consumers’ sensibility to changes in price.

This is also because of the increasing quality of paints. Less paint is needed for each application and the time between applications is longer. Lastly, industrial clients have developed more efficient and effective ways of applying paint. Again, less paint is needed and the time between applications can be extended.

The demand for painting accessories such as brushes and rollers is predicted to increase. The sales of sundries account for about $4.5 billion, which is significant. This is due to the popularity of do-it-yourself projects.

In addition, the trend is towards fewer companies sharing the market. This is the result of companies closing down and smaller companies being taken over. Many small companies, however, have been able to survive because technology is readily available and because of the necessity to adapt paints mixtures to different regional climates.

Major producers of paint for the architectural coatings segment include Sherwin-Williams, Benjamin Moore, PPG Industries etc. These producers account for upwards of 60% of sales in the architectural coatings segment. Sherwin-Williams is the largest paint producer: the Coca-Cola of the paint industry.

The US paint manufactures are under growth pressure to reduce emissions of volatile organic compounds (VOCs) from pints and to limit the consumption of solvents. Compliance with Environmental Protection Agency (EPA) regulations has further eroded historically low profit margins in the paint industry.

Slow sales growth the necessity for ongoing research and development and recent compliance with governmental regulations have fuelled merger and acquisition activity in the U.S. paint industry since 1990.

There are three types of distributors:

mass merchandisers and home improvement centers (50%),

hardware store and lumberyards (14%)

and special paint stores (36%).

50% of architectural coatings dollar sales are accounted for by do-it yourself painters. Professional painter purchases account for 25% of dollar sales. The rest goes to the government, exportation, and various commercial uses. Promotion should be directed with this in mind

Do-it-yourselfers first chose a retail outlet then chose a paint brand. They try to get the best price and also need some information about application, color matching, surface preparation and durability.

Professional painters seek out quality product (durable washable etc)

2) How might the JB market area be characterized?

Jones Blair sells paint products in over 50 countries in the four southern states in the US: Texas, Oklahoma, New Mexico, and Louisiana. 11 countries in Dallas-Fort Worth (DFW) area is their most important market.

Competition in this market has increased with the coming of department stores like Sears, K-Mart, and Wal-Mart, as well