CURTIS AUTOMOTIVE HOIST: Case Analysis
...option is for CAH to counter the licensing agreement with a joint venture counterproposal to Bar Maisse, which will provide for a 50-50 proposal with each party sharing the investment costs and profits. The third option is for CAH to establish a manufacturing facility. Estimated costs involved in setting up a plant in Europe is approximately $1,450M with $250M needed for capital equipment, $200M needed for incremental costs to set up the plant and $1MM for inventory and A/R carrying costs. 2. Competition - Little information is available on the competition in Europe. There is no dominant manufacturer but there is one firm in Germany that manufactures a scissor-type lift. Most of its units were sold within the German market. The only other information available was that 22 firms in Italy manufactured vehicle lifts. 3. Market Potential - The market potential in the European market should be good since Germany alone has a domestic fleet of 41 million vehicles in addition to the vehicles in Italy, France and the United Kingdom. Another good indicator is the number of new vehicle registrations, which is quite substantial when considering Germany, France, the United Kingdom and Spain. A survey shows that Germany is favored for both market potential and investment opportunities while France, the United Kingdom and Spain place second, third and fourth respectively. Italy has a large number of vehicles in use and has the fourth largest population. B. Analysis of Contributing Factors: Decision to increase efforts in the United States through the addition of a United States wholesaler and the establishment of a sales office in New York to cover the eastern United States. 1. Form of Market Entry/Investment Options – At the present time, the company uses three types of distributors: a company sales force, Canadian distributors and a U.S. automotive wholesaler. The U. S. wholesales sells a complete line to service stations as well as manufacturing some equipment with the Curtis lift being one of five different types of lifts that the wholesaler sells. Since there are six New England states, three large mid-Atlantic states and three large mideastern states with an aggregate population of roughly 83 million within a day's drive of the factory, a sales office can be set up in New York to service these states if the U.S. wholesaler will relinquish its territory. CAH can magnify sales by increasing their sales force. Sales people can show customers the benefits of the Curtis Lift over competing products, unlike the U.S. wholesaler. If CAH relies solely on the U.S. wholesaler, sales will not grow at its potential growth rate. 2. Competition - At the present time the Curtis life probably accounts for less than 20% of the total life sales of the U.S. wholesaler. However, CAH can work more closely with the U.S. wholesaler to encourage it to 'push' the Curtis lift. 3. Market Potential - There is unrealized potential in the U. S. market with a population of million people and over 146 million registered vehicles. The U.S. market is almost 10 times the size of the Canadian market. There is a niche in the market for a scissor lift leader in the United States. AHV and Berne the two largest manufacturers of Hoists do not focus primarily on the scissor lift industry. Both the AHV and the Mete Lift do not have the safety features of the Curtis lift. The sales of scissor lifts have increased since 1987, proving it to be a growing market. Solution: CAH has a lot of room to expand in the United States. Through the addition of a United States wholesaler and the establishment of a sales office in New York their sales will increase. There is plenty of growth potential in the United States and entering the European market could be a costly investment if they are not totally prepared. Based on the information available in the case, CAH should focus on expansion in the U.S. until they can negotiate a more lucrative partnership in the European market Justification: Sales with Current Marketing Mix % Of sale units sold Personal selling (100% selling price) 25 * 1054 = 263 * 10990 = 2,890,370 Distributors (80% selling price) 15 * 1054 = 158 * 8792 = 1,389,136 U.S. wholesalers (78% selling price) 60 * 1054 = 632 * 8572.2 = 5,417,630 Total Sal...