Mr

Swisher Mower Company

Executive Summary:

Wayne Swisher recently became the owner of Swisher Mower Company which his father, Max, founded 51 years ago in 1946. Swisher's major revenue source is the riding mower and the parts market for their riding mowers, additionally, they also generate revenue from the Trail Mower as well as sell push lawn mower kits which do not add to the bottom line. In the last 20 years sales for Swisher riding mowers have been constant while the industry has significantly grown. Mr. Swisher was recently approached by a national retail chain to sell his mowers under a private label which would nearly double sales. However, if Swisher does accept the private labeling offer it would be at a 5% discounted selling price. Alternatively, or simultaneously, Swisher could more aggressively go after the larger market share. Additionally, they are close to a new product launch for Trim-Max which is a mower, edger, and trimmer in one unit.

Problem Statement:

Swisher sales have been stagnant for the last 20 years even though they are still making an average annual profit of 10%. Mr. Swisher is deciding whether or not to double sales volume by accepting a private label offer from a large retail chain. By accepting the offer they would reduce their selling price by 5% and potentially cannibalize some of their own sales. Additionally, Swisher Mower has always had a strong relationship with wholesalers and independent dealers and accepting the offer could potentially lead to a loss of some of their current sales base.

If Mr. Swisher declines the offer then another manufacturer would probably accept the offer which would increase competition and potentially squeeze the profit out of Swisher Mower Company. By declining the offer Swisher Mower would have to aggressively go after increased market share on their own and try to encourage existing dealers to increase sales in order to maintain their margins.

Industry Analysis

The Lawn and Garden Industry has estimated sales of $95 Billion in 1995 and has nearly doubled in the last 20 years from 640 thousand sales in 1975 to 1,263 thousand sales in 1995. The Lawn and Garden industry consists of numerous products including: walk behind rotary mowers, riding mowers and tractors, garden tillers, snow throwers, and other outdoor power equipment. The riding lawn mower industry is cyclical with 1/3 of all sales happening between the months of March and May and 50% of manufacturer shipments occurring between the months of January and April.

The riding lawn mower is usually designed in one of two ways: 1) as a front-engine lawn tractor or 2) as a rear-engine riding mower. Front-engine lawn tractors are the most popular design with consumers as they are normally bigger than rear-engine mowers and thus are perceived as having more power and being more durable. Normally these riding lawn mowers are targeted at consumers with large mowing areas of an acre or more.

There are 10 major competitors in the riding lawn mower market in 1995: American Yard Products, Ariens, Honda, John Deere, Kubota, MTD, Murray of Ohio, Snapper, Toro, and Garden Way/Troy-Bilt. Eight of the ten sell their mowers through lawn and garden stores and specialty retailers while three of ten sell to national mass-merchandise stores. All of these companies manufacture riding mowers under their own brand name and engage in private-label production. Several also produce private labels for mass merchandisers, home centers, and hardware stores like Sears, Lowe's, and True Value Hardware. 65%-70% of all riding mower sales are private label sales.

Figure 1 Retail Distribution of Outdoor Power Equipment

Company Analysis

Swisher Mower was started in 1945 by Max Swisher out of his garage when he developed a self-propelled push mower and started selling it to his neighbor. In 1950 he integrated his drive mechanism into a riding mower and began selling these under the Ride King name in 1956. In 1966, unit volume for SMC Ride King peaked at 10,000 units and since the mid 1970's has been averaging around 4200 units. Wayne Fisher has recently taken over as President and Chief Executive Office of Swisher Mower. Wayne holds an MBA and worked in sales and marketing at a large Fortune 500 Company for 3 years before assuming the CEO position at Swisher Mower.

Swisher produces three types of mowers with the Flagship product being the Ride King riding mower. The Ride King is a three wheel mower with a zero turning radius. The design is unique in that the single steerable front wheel is also the drive unit. This feature allows it to be put in reverse without changing gears. This was a unique design that has still not imitated by any competitors. The Ride King is known for high-quality design with ease of use by the customer. Often these mowers will last 25 years and if parts are needed most mowers have interchangeable parts with older mowers. The Ride King accounted for 63.6% of total sales and 57.8% of profit in 1995.

Swisher also produces a Trail Mower called the T-44 which attaches to a riding mower or all-terrain vehicle by a hitch and provides an extra 44 inches of mowing cut behind the tractor. The T-44 accounted for 8.2 percent of total sales and 13.2% of profit in 1995.

Swisher stopped selling its self-propelled mower in the early 1960's but has offered a push mower kit that comes in 3 packages. Push mower kits accounted for 8.2% of sales but did not contribute to gross profit.

The remaining 20% of sales comes from the replacement part business. Swisher must provide service to its existing customers for replacement parts as there is little standardization in the mower industry. The Trim-Max 3 in 1 mower, edger, and trimmer is potentially ready to be introduced to the public in 1996. This high wheeled mower can

be marketed to both the existing non-metropolitan market and the potential metropolitan market.

The Swisher philosophy was always one of a small company with a customer friendly attitude towards its wholesalers and independent dealers that it does business with. Swisher mowers are distributed through farm supply stores, lawn and garden stores, home centers, and hardware stores primarily located in non-metropolitan areas. 75% of sales are accounted for in non-metropolitan areas. Swisher employs 3 routes of distribution: through wholesale distributors who in turn sell to independent dealers, directly to dealers, and through private labeling arrangements with 2 networks, Midstates and