Mem Company, Inc.

CASE SUMMARY (PROBLEM STATEMENT)

After sluggish sales growth in 1980, MEM Company, Inc. was considering ways to increase sales for the company's line of men's toiletries. Two main options surfaced; either 1) to expand distribution into food stores or 2) to introduce a new line called Cambridge.

MARKET OVERVIEW

The men's toiletries market was divided into three groups based on pricing, namely, exclusive, medium and mass priced category. MEM had competed primarily in the medium priced market. Its principal toiletries were marketed under the English Leather line of which generated 68.3% of total sales revenue. This was substantially more than any other line it owned and it also had a market share only second to its main competitor, Old Spice. MEM faced stiff competition from Old Spice, British Sterling, Jovan and Brut, whose new products, since 1979, were being launched in the medium priced market with hefty advertising expenditures of around $7 million. These new products included Chaps by Ralph Lauren, Oleg Cassini by Jovan and Denim by Lever Brothers.

ALTERNATIVES OVERVIEW

MEM had traditionally distributed its products through department stores, men's specialty stores and merchandise chains. Despite not expanding into food stores like its competitors, it was already ranked second in terms of market share. Expanding into food stores could help MEM overtake its rivals. Furthermore, MEM executives were receiving increasing number of inquiries from food chains about carrying a few of their faster-moving items. As such, this was clearly a viable alternative.

On the other hand, launching Cambridge could create a chance for MEM to penetrate the 'exclusive group' closer to a price range of over $10. However, Cambridge would face direct competition from Shulton's Blue Stratos line, which had a similar target market (men aged 18-34) and price range ($10), among other things. Blue Stratos was due for shipment in March 1981.

ANALYSIS ON ALTERNATIVES - USING SWOT & PORTER'S 5 FORCES

From our strategy analysis, we feel MEM can bank on its brand name and reputation as a strength, portrayed as the "fragrance of their youth" as compared to their competitors who are seemingly linked to older generations. Moreover, their new perfume's name "Cambridge" has a reportedly classic and dignified feel to it. However, being a medium-priced brand by tradition, we believe it will have a harder time up-selling a more expensive product.

An opportunity lies in distributing their products into the food stores market. It is an untapped avenue for MEM to delve into, in which their competitors have long since gained a foothold. Apart from the food stores, another untapped avenue could be the 'exclusive market' (for Cambridge) since the mid-ranged market is becoming overly saturated. However, they must bear in mind the threat that Blue Stratos presents through its launch in the same market. Hence there will be stiff competition, even more so with Shulton's large fund backing of $12 million. Initial SWOT conclusions point toward weaknesses and threats overpowering strengths but viable separate opportunities that can be pursued.

Based on Proter's 5 forces model with respect to Cambridge, we believe that the buyer bargaining power is high primarily because of competitive prices amongst different brands, extremely low (or no) buyer switching costs and the fact that there are many competitors in the industry . In addition, there is simply no good substitute for perfumes in any other industry, thus we would judge the threat of substitute goods as low. For barriers to entry, there is some likelihood that the perfume industry could be a luring prospect as there are no clear frontrunners mentioned. However, any interested investors would need to shell out a large sum of money to create sufficient market differentiation through R&D, distributing and advertising before entry. Finally, Cambridge faces competition from external and internal forces, namely Blue Stratos and the Racquet Club line. While Cambridge could eat into the share of their rival's Blue Stratos, we feel that if it is launched, it should not be done at the expense of its sister product line, Racquet Club. Initial 5-forces conclusions seem to hinge on a lack of competitive advantage to launch Cambridge in the short run.

RECOMMENDATIONS

After a SWOT and 5-forces analysis, we would recommend that MEM:

1. Delay the initial launch of Cambridge and in the meantime do the following:

2. Divert energies and resources to expansion into food stores

3. Try to advance and maybe extend the product life cycle of Racquet Club and Musk to a more mature stage

4. Phase out 'dogs' - Lime, Windrift and Timberline based on BCG

5. Monitor the sales response for Blue Stratos, if negative, launch Cambridge.

The most important reason for delaying Cambridge's launch would be to help MEM avoid direct competition with Shulton's Blue Stratos, since obviously; people never wear 2 types of colognes at once given that these 2 lines have the exact same target market. Hence, it would make sense to adopt a 'wait and see' strategy. Secondly, since MEM also has a strong opportunity to expand into food stores, we feel it would be a more effective use of resources and manpower in this expansion in the meantime rather than in Cambridge. This expansion into food stores could create greater brand awareness for the MEM name as well as its other lesser profitable lines besides English Leather. Furthermore, from our SWOT analysis, we believe the launch of Cambridge could cannibalize the sales of Racquet club and Musk The main problem with this sales cannibalization is the fact that the potential for these 2 lines has not been fully exhausted yet and they could very well become 'stars' in the near future. As such we recommend several marketing strategies for these other lines. In the meantime, MEM can use this period to monitor or survey the sales response towards Blue Stratos. If response