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Take Home Exam#1 Name: _____________
Answer the Take Home Exam question below. It is the first of 2 THE’s. For course grading purposes the higher grade will be weighted 60% and the lower grade 40%.
You are to submit electronically via CANVAS. The exam is open book, open note and may be attempted on an individual basis or in cooperation with one other fellow student. In the latter circumstance equal contribution is assumed. While you may consult written materials, you are not to discuss your answers with anyone other than your collaborator, if there is one. If you quote substantially from a source it should be cited! Submission of your exam attests to your acceptance of these conditions. Please submit your exam in a unified file, i.e. not a single question in a file. You may submit a scanned copy but .JPEG is not acceptable. MSWord is also welcomed! Include your name on the file itself. Best of luck!
QUESTIONS TO ANSWER (1-3):
The following questions are based on the ABC Door case. In each response explain your reasoning.
How effectively does ABC compete in the non-exclusive dealerships? Use market share analysis!
How effectively does ABC compete in exclusive dealerships? Compare with served market data.
Compare the difference in effectiveness of ABC in exclusive and non-exclusive dealerships. What in-store market share would you expect for ABC in the non-exclusive dealers? Hypothesize as to the reason(s) for the discrepancies from the observed market shares in the 2 distribution modes. (This is a creative process, there is no “right” answer).
ABC SLIDING GLASS DOOR
ABC Glass is a small company which specializes in the manufacture of sliding glass doors. These doors are predominantly installed as a replacement item in existing residential item in existing residential housing although ABC does participate in new residential construction.
Selected Industry Data
Value of US door market (at manufacturer Prices) = $90B
Value of US sliding door market (5% of the above) = $4.5B
Value of the sliding door market in ABC’s served market = $348.5M
Total # of dealers in ABC’s served market = 3002
Market research indicates that less than 10% of prospective glass door buyers (i.e. homeowners) could name any brand of sliding glass doors. The vast majority of glass door buyers had their new doors installed by the dealer. Most buyers obtained at least 2 bids before installing sliding glass doors. The dealer choice dominated brand selection.
The most recent Income Statement for ABC Glass doors is given below:
Net Sales $9,200,000
Gross profit $2,300,000
SGA (fixed) expenses $1,840,000
Net Profit $ 460,000
MSA’s in the ABC served market = 150
# of exclusive markets (dealers) = 50 (50)
Sales in Exclusive Markets = 70% of total = $6.44M
# of non-exclusive markets (dealers) = 100 (300)
Sales in non-Exclusive Markets = 30% of total = $2.76M
The typical breakdown of sliding glass door in-store market shares in non-exclusive dealers is:
60% for the leading brand;
30% for the second brand;
10% for the third brand.
As noted above, ABC distributes its doors to 150 locations (MSA’s) in the western United States. It has 2 distinct patterns that have evolved to represent a distribution strategy.
Pattern#1: “reciprocal exclusivity”. This means that ABC sells through a single dealer in a MSA, and this dealer in turn sells only ABC brand sliding glass doors. ABC has 50 such markets.
Pattern#2: “mutual non-exclusivity”. In this circumstance ABC has 3 independent dealers in each market. Each dealer carries 3 brands of sliding doors. ABC has 100 of such markets.
Note: the above are somewhat simplified but are sufficient for our purpose.
ABC management has set the ambitious sales goal of $12.5M for the upcoming fiscal year (beginning September 1, 2018). This represents a 36% increase in sales from the current year. The forecast growth rate in the sliding door market next year is estimated at 2.4%.
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