Jonesblare Case Analysis

Case Analysis

Jones Blair Company

By: Kevin Manthey

Points Covered

1) Characterization

2) Market Segments of Jones Blair's Market Area

3) Segments that Represent Opportunities for Jones Blair

4) Jones Blair's Competitive Position in its Markets

5) Segments Jones Blair Should Pursue

6) Strategy for Each Segment

1) CHARACTERIZATION

Architectural Paint Coatings Industry

* This is a mature market with long-term sales growth projected between 1 to 2 percent annually. The industry of paint products as a whole is still maturing, whereas the category of architectural paint is itself a mature industry.

* The current demand for products and services from this industry is affected by two factors; (1) currently alternative materials like aluminum and vinyl siding, interior wall coverings and wood paneling, and (2) also paint companies had developed higher quality products that reduced the amount of paint necessary per application and the frequency of repainting.

o The counter to these factors has been the increase demand by do-it-yourself (DIY) consumers and the places they buy paint and paint products from. These DIY(s) are looking for cost efficient solutions to their needs. More times than not, it's the price will win over value of the product.

* Architectural coatings are commonly called shelf-goods account for 43% of the industry dollar sales, making it the biggest portion of the paint industry.

Jones Blair (JB) Market

* Currently JB Company markets its paint and sundry items over 50 counties surrounding the Dallas-Fort-Worth (DFW) Texas area. The company also operates a very large Original Equipment Manufacturing (OEM) coatings division that sells its products world-wide. This market is outside the scope of this analysis but was worth mentioning because it does contribute to JB's bottom-line.

* In the counties that JB sells its architectural products, it is consistently one of the highest priced products. Despite being on the pricy side, it still manages to capture 15% of the sales volume in its market area. Of that 12 million in annual sales are split 50-50 between the immediate DFW and non-DFW counties. However its retail accounts find their largest portion of 60% in non-DFW areas.

2) MARKET SEGMENTS OF JB'S MARKET AREA

JB's customers are segregated between two areas and are split between two types, making four segments that JB has a solid foot in.

To segment JB's market area the following must be considered; buyer types, buyer needs, and the means to satisfy buyer needs. The buyer types JB finds most wanting its products are DIY's and Professional Painters. In the DFW area Pro-Painters are the majority of customers likely to buy JB's products, where in non-DFW areas it is DIY(s) that are the majority. So between the two areas, DFW and non-DFW there are customers in each creating two segments per area, totaling four segments that JB is vested in.

These two customers also differ in where they buy their products. The retail outlets vary from Home-Improvement Centers like Home Depot or Lowes, hardware stores like Ace or True Value Hardware, lumbar yards, or specialty paint stores like Sherwin Williams or DuPont.

In the DFW area most DIY(s) find themselves preferring the Home-Improvement Centers like Home Depot, where there are more choices in products and prices. Pro-Painters on the other hand prefer the specialty stores where unit-size in products vary.

3) SEGMENTS THAT REPRESENT OPPORTUNITIES FOR JB

There are three product categories that make-up architectural coatings; general-purpose paints (interior and exterior), varnishes and lacquers. These products are used on residential, commercial or institutional buildings. They are generally purchased by one of three types of customers; DIY(s), Pro-Painters, or Contract Painters. Currently JB doesn't market or provide a bidding service to access contract painters. These customers buy their products from one of two types of providers; wholesale outlets (warehouse type generally preferred by contractors) or retail outlets (for DIY or Pro-Painters).

In the industry as a whole, DIY(s) account for 50% of architectural coatings dollar sales and Pro-painters hold 25%. Of the annual architectural coatings sales, 60% are interior, 38% are exterior, lacquers and varnishes make up the remainder.

Being DIY is the largest consumer base, it represents the biggest opportunity for JB. However JB must consider the following when trying to influence these DIY(s) to buy their products; (1) competitive activities; (2) buyer requirements (3) market demand and supplier sources; (4) social, political, economic, and technological forces; and (5) organizational capabilities.

Competitive Activity

 For JB there is currently 1,000 retail outlets in the 50 county service area, 450 of them in the DFW area. This number has been decreasing since 1990 when there were 1,200 outlets with 600 in the DFW area. The numbers of paint companies are presently declining at a rate of 2 to 3 percent each year.

 Approximately 50% of the DIY market is controlled by the mass merchandiser in the DFW area. Price seems to be the attraction.

 Major producers of paint for architectural coatings segment include Sherwin-Williams, Benjamin Moore, the Glidden unit of Imperial Chemicals, to name a few and they account for upwards of 60 percent of sales in architectural coatings segment. Because of their size they are able to market their products both under their own brand name and for retailers under private or store brand names, like Home Depot, Kmart, or Sears.

 Specialty paint stores account for almost 36 percent of paint and sundry sales, whereas hardware and lumberyards get the other 14 percent.

Buyer Requirements

* DIY's take a four step process when deciding buying products for home improvement. (1) Decide on the project or product; (2) Gather Information; (3) Decide on Store; and (4) Decide on the product.