Jones

Industry analysis
• Paint industry is divided into three segments
o architectural coating
 account for 43% of industry sales
o original equipment manufacturing coating
 Used for things such as automobiles, account for 35% of industry sales
o special purpose coating
 Used for special chemical coatings for different kinds of machinery finishing, account for 22% of industry sales.
• Paint industry is at a maturing stage, sales in 2004 were estimated to be about 16 billion
• Architectural paint coatings and sundries (brushes, rollers, etc.) sales in 2004 were at estimated $12 billion-plus.
• Architectural paint is a mature market with sales growth projected of 1 to 2 percent per year.
• Demand for architectural paint is correlated with the number of houses redecorated, maintained and repaired as well as sales of new homes.
• Increase in production is also affected by more do-it-yourself painters.
• Major players in the architectural paint industry are Sherwin Williams, Benjamin Moore, PPG Industries, and many others.
• These major competitors account for about 60% of architectural paint sales
• About 50 percent of architectural paint is sold under private store brands. Sears, Lowes, Wal-Mart and Home Depot are major players of private brands
• Specialty paint stores account for about 36 percent of paint and sundry sales
• lumberyards account for about 14%

Company analysis
• Jones-Blair markets paint and sundries in over 50 counties in Texas, Oklahoma, New Mexico and Louisiana
• The Dallas-Fort Worth (DFW) metropolitan area is the major business area
• sales in 2004 was $80 million(excluding contractor sales)
• The DFW area was estimated to account for 60 percent
• Do it yourself buyers were believed to account for 70 percent of non-contractor related volume in DFW area
• Architectural paint sales volume in 2004 was $12 million
• dollar sales increase at a rate of about 4% annually
• Now the highest priced paint in the DFW area
• COGS accounts for 60% of net sales
• Advertising accounts for 3% of net sales
Trend analysis
• “Do it yourself” painters account for about 50 percent of architectural paint sold
• Professional painters account for about 25 percent of architectural paint sold
• The rest are resulted from government, export and contractor sales
• Average purchase of paint at a time is $74 and sundries at about $12
• 50% of do it yourself paint market in the DFW is controlled by mass merchandisers
• Paint is start to seem more like a commodity and people are looking for the cheapest alternative
• professional painters on the other hand look for high quality paint and cost normally is not the first thing on their mind
• Brand reputation is 4th on a consumer’s mind according to research done by Home Improvement Research Institute, price is 2nd, while durable/reliable is ranked 1st

Problem definition
- Where and how can Jones-Blair-company deploy corporate market strategies among the various architectural paint markets served by the company?

Identification of relevant alternatives

• Bolstering presence in the DFW do-it-yourself market
a. In the paint industry, awareness directly correlates with sales according to Exhibit 5 in the case
b. We need to increase our presence level to at least 30 percent among do-it-yourselfers
i. This will increase our selling power in the DFW area from 15% to about 25% (see appendix 1.4)
ii. This should increase our sales to about $7,200,00 from the DFW area alone for 2005 (see appendix 1.8c)
c. An increase of 350,000 in brand advertising in addition to what is being spent will be needed
i. This would bring the total of 2005 advertising budget to $384,200 (see appendix 1.2)
d. Without increase in ad spending we would receive $12,480,000 in total sales (see appendix 1.7)
e. With increase in awareness we should receive 19,680,000$ (see appendix 1.8d)

Advantages
1. We increase our awareness in the market
2. We should potentially increase our sales in the market
3. The cost is less than what we sell if our awareness increases
4. We will be on par with national paints in terms of awareness

Disadvantages
1. Cost a lot more from the original budget
2. Can lead to fiercer competition(bigger companies start spending more ad dollars)
3. If awareness doesn’t increase then the extra cost would be a much bigger percentage of our net sales

• Cut prices on all the products by 20%
a. This should help retain more price sensitive consumers
b. we need to cut everything by 20%
c. If we do the price cut our total sales end up being $9,824,000 (see appendix 2.1)
d. This would mean that we would have to increase our sales by $2,456,000 to reach what our sales would be without the price cut (see appendix 2.2)
e. The problem with the price cut is our prices would still be higher than other manufacturers and the do-it-yourself painters normally go for cheaper brands
Advantage
1. we would be able to compete closer with cheaper brands
2. If our sales increase then we can make up for the sales loss
3. Should be able to grab more do-it-yourselfers with the price decrease

Disadvantages
1. A huge price decrease leads to a huge loss of sales
2. If more product isn’t sold then we would have negative profit from last year
3. We are still more expensive than any other brand, meaning we’d get less do-it-yourselfers who are very price conscious

• Focus more on the non DFW segment
a. Currently we account for 16% of the segment which makes up $5,120,000 in overall sales (see appendix 2.3)
b. After sales commissions this comes to $5,068,800 (see appendix 2.5)

Advantages
1. we have a low market share which gives us potential to grow exponentially

Disadvantages
1. Market is pretty saturated and would be very hard to increase any market share

• We do nothing different
a. Our sales in 2005 would be $12,480,000 if all else stays equal (see appendix 1.7)

Advantages
1. we would get our 4 percent increase without having to increase volume
2. Very safe and conservative route

Disadvantages
1. lose out on potential market share

Recommendation
- I recommend we go with the increase in advertising budget, the awareness increase of 30% leads to a much higher percentage of consumers buying out product. A 30% increase of awareness almost doubles our selling power in the DFW area.

Jones 7.9 of 10 on the basis of 714 Review.