MGT252H1F Professor A. Ching Marketing Project L0101, Mon. 2-4PM
Taige Zhang, 993965713 Add ur name and stud #
Excutive Summary
Situtation Analysis SWOT Analysis Strengths:
The solar energy heater has the following several strengths, which can actually attract consumers‟ eyes: first, it is reliable for 25 years. With its enough long life-span and perfectly stable function, the heater can definitely satisfy consumers‟ expectation to good life. Secondly, the heater can save consumers‟ money in long term along with return on investment. On average, the worthiness can be acquired with unbelievable low payment; Third, the product is a no-pollution design, adopting the recommended green energy and technology and offering people healthy living conditions; Forth, The product can work under various even tough weather conditions, such as chilly winter. If there is the sun, there is hot water in your house. You never need worry such supply and demand for that old energy as gas and electricity. Fifth, it is an easy installation and use. Even a new knew how to setup and control it. Sixth, with new introduction of battery use, the product can automatically melt the covering snow and ice. Comparing with other solar heater in winter, this one can work longer, more consistent, and effectively with no problems. Seventh, consumer can get perfect service from the beginning to the end. The customer service call is 24-hour available. Also, consumers get 5 year guarantee. During the life-span of the heater, the purchased product can get the support of innovating technology, with the update of both hardware. Lastly and importantly, with no risk of fire and electricity, it is a safe product.
Weakness:
One of the major weaknesses for the Solar Water Heater is that it has a high cost, comparing to natural gas / electric water heater. For example, a 40-gallon natural gas water heater generally costs around $500* whereas our solar water heater is priced at $2500. Therefore, similar to any other big-ticket item, its high price discourages potential buyer due to time-consuming buying-decision process. People become more cautious and indecisive when it comes to spending a lump sum of money on one single item. They would want to collect as more information on the product as possible, and perform an analysis and comparison. On top of that, another disadvantage is that the JR-SWH system can only be installed when the roof is not covered with snow. This means that business will decrease drastically during winter season. And with slow inventory turnover, the storage cost increases. Another problem in the solar panel is that it has to be installed at the south-west corner of the house at an angle of 45 degree and has to be installed on the roof which is not shaded by trees. * http://www.epinions.com/Water_Heaters-Gas
Opportunities: Natural gas prices have been going up and in the last 5 years it has gone up by 69%
and shows no sign of coming down. The demand in North America for natural gas is rising at 3% per year compared to the increase in supply which is 1% per year; production in Canada has been declining and in 2003 alone it dropped 5.3%.. Gas prices are not expected to come down for many years which will force consumers to look for different cheap energy sources.
The increase in natural gas prices and the boom in the housing market of Ontario in
previous years provide JR-SWH no better time to enter the market and become a successful product. The housing market has been rising for a couple of years and has been going steadily through 2005 and is expected to go steadily in the future as well.
According to CHMC up to 38,000 new homes are expected to be sold in GTA and 72000 housing starts provincially in 2005. The rise in the housing market is due to low mortgage rates, increase in migration and strong job growth, which are expected to last long time.
Nowadays Canadians are becoming more environmental conscious are turning towards environmental friendly products. They are taking part in environment protection programs, such as the “1 Tonne Challenge”. The government at the same time is also encouraging its citizens by providing them with incentives, such as giving rebates for the purchase of environmental friendly energy producing products. It is also estimated that water heating produces up to 11.1% of GHGs. Thus the JR-SWH will be an excellent option for the citizens who are trying to save the environment.
The simple design of JR-SWH makes it expandable i.e. it can also be used
commercially specially restaurants. Restaurant industry is an unexplored area where solar water heating industry has yet not entered. The simple structure of JR-series enables it to be expandable and hence can be used by commercial users as well. (All the facts stated are provided at the last page of the proposal, along with links )
Threats:
Competition from large firms and native firms with government backing. Large companies post a threat because of their access to more capital which can be used in highly competitive pricing, and superior R&D. Native Canadian firms will be given the competitive edge with government subsidies and protection. For example, the Canadian company, EnerWorks based in London acquired a government support of $750,000 in 2001. This led to both an increase in expose and capital for them. On the other hand, our company will have to face stringent government regulations such as import quotas and
custom taxes. In addition, native firms do not have to deal with these regulations and benefit from being the patriotic brand. In addition, our brand has not been largely tested by the target consumer. The initial response to our product will significantly determine the viability of the product. The threat lies in customer satisfaction which may be adverse should they be dissatisfied with price or product itself. In addition, their feelings about the company itself will depend on our ability to provide excellent customer service or demonstrate professionalism. Another possible source of risk lies in the consumer preference on of domestic over foreign products. We have not conducted enough marketing research to assess whether our target market values quality of the product which is emotionally inferred by consumers based on where the product was made, or simply, a lower price.
Opportunities Natural gas prices have been going up and in the last 5 years it has gone up by 69%
and shows no sign of coming down. The rise in the prices of gas is due to the fact that new gas deposits that are being drilled are in very less amount and to make matters worse the older wells are depleting very rapidly. Production in Canada has been declining and in 2003 alone it dropped 5.3%. The demand in North America for natural gas is rising at 3% per year compared to the increase in supply which is 1% per year; thus resulting in a tight squeeze. As this squeeze is going on the Government of Canada is closing down all the coal burning electricity generators and building not water, nuclear or wind generators but natural gas generators, thus tightening the gas supply for residential area and thus hiking the price above their present rates. Gas prices are not expected to come down for many years which will
force consumers to look for different alternatives and then solar water heater will come into action.
The increase in natural gas prices and the boom in the housing market of Ontario in previous years provide JR-series no better time to enter the market and become a successful product. The housing market has been rising for a couple of years and has been going steadily through 2005 and is expected to go steadily in the future as well. According to CHMC up to 38,000 new homes are expected to be sold in GTA and 72000 housing starts provincially in 2005. The rise in the housing market is due to low mortgage rates, increase in migration and also job growth.
The simple design of JR-series makes it expandable i.e. it can also be used
commercially specially restaurants. Restaurant industry is an unexplored area where solar water heating industry has yet not entered. The simple structure of JR-series enables it to be used any place and the heated water from JR-series can be used for dishwashing, hence providing savings for the owners and saving the environment at the same time.
Nowadays Canadians are becoming more environmental conscious and are taking part in environment protection programs, such as the “1 Tonne Challenge” and are turning towards environmental friendly products. The government at the same time is also encouraging its citizens by providing them with incentives, such as giving rebates for the purchase of environmental friendly energy producing products. It is also estimated that water heating produces up to 11.1% of GHGs. Thus the JR-series will be an excellent option for the citizens who are trying to save the environment.
Threats
Competition from large firms and native firms with government backing. Large companies post a threat because of their access to more capital which can be used in highly competitive pricing, and superior R&D. Native Canadian firms will be given the competitive edge with government subsidies and protection. For example, the Canadian company, EnerWorks based in London acquired a government support of $750,000 in 2001. This led to both an increase in expose and capital for them. On the other hand, our company will have to face stringent government regulations such as import quotas and custom taxes. In addition, native firms do not have to deal with these regulations and benefit from being the patriotic brand. In addition, our brand has not been largely tested by the target consumer. The initial response to our product will significantly determine the viability of the product. The threat lies in customer satisfaction which may be adverse should they be dissatisfied with price or product itself. In addition, their feelings about the company itself will depend on our ability to provide excellent customer service or demonstrate professionalism. Another possible source of risk lies in the consumer preference on of domestic over foreign products. We have not conducted enough marketing research to assess whether our target market values quality of the product which is emotionally inferred by consumers based on where the product was made, or simply, a lower price.
Strengths
1. Reliable-25 years+ Convenient 2. 24-hr customer service 3. It can work under tough weather conditions 4. Saves money in long term along with return on investment 5. Safe 6. No Pollution Easy Installation Weakness High one time installation cost Weather- In winter it‟s hard to heat the water due to the cloudy weather Small tank capacity Has to be placed in a particular direction which should not be shaded by trees or buildings. 7. Opportunities 1. Gas prices are increasing 2. Housing industry is booming 3. People are becoming more conscious about the environment “1 Tonne Challenge” 4. Less competition 5. Expansion in other provinces 6. Rebates in from the govt. to people who buy solar water heater 7. Expanding in Restaurants industry (Dishwashing) 8. Support from green party in support of the product 9. Update the product into more energy conserving product
Future: Subsidy by govt. Free trade b/w china and Canada will help in reducing taxes which will eventually help the consumers Awareness among people will help in increase in market share
FACT:
The average solar heating system will offset enough energy requirements to pay for itself in 2 - 5 years, and over its entire lifetime accumulates a return on investment in excess of 15% or even 20%. That's better than any return-investment we know of. And whoever heard of an RI that offset carbon dioxide emissions, thus benefiting everyone, not just the investor?
http://www.enerwest.ca/ MSC http://www.weatheroffice.ec.gc.ca/saisons/image_e.html?img=sfe1t_s
Research
Gas Price: Demand for natural gas in North America is increasing at about 3%/year where as supply is increasing at 1%/year Production of natural gas is declining in 2003 alone it dropped 5.3% (http://www.energyshop.com/es/contactus/big_chill_ahead.cfm) Production from many older gas wells is declining quite rapidly New natural gas power generators are being built in Ontario. Some industries are shifting to natural gas with hike in the gas prices. (Sources: http://www.energyshop.com/es/homes/gas/gaspriceforecast.cfm http://www.energyshop.com/es/homes/gas/usea.cfm) Housing Market of Ontario: o CHMC forecasts that as much as 38,000 homes will be sold in Greater Toronto Area. in 2005a o Ontario's housing market is expected to stay healthy, driven by low mortgage rates, strong in-migration and job growth a o Provincially, 79,000 housing starts are expected in 2005a o According to RBC’s housing report ‘Ontario's housing becoming more affordable.‟ b Less Competition: 13 retailers of solar water heater in Canada
a
http://www.realestatenewstoronto.com/toronto_realestatemarket.php
b
http://cgi.money.canoe.ca/press_release/cnw.html?lang=en&id=20050831050000CU
http://energy.sourceguides.com/businesses/byGeo/byC/Canada/byP/solar/sWH/byB/d ist/dist.shtml Only 1 solar vacuum water heater manufacturer in Ontario based in Toronto called ‘SOLARnetix INC.’ Only two solar vacuum water heater in Canada ‘SOLARnetix INC.’ and ‘Thermomax industries’. (http://www.solarthermal.com/) Enviornment: Government and citizens of Canada are taking part in ‘1 Tonne challenge’ Govt. of Canada is encouraging its citizens by providing rebates on purchase of solar water heaters. (http://www.trd.fin.gov.on.ca/userfiles/page_attachments/Library/3/Rsie_In30.ht m) 11% of green house gases are produced due to water heating. (http://www.climatechange.gc.ca/onetonne/english/about.asp) Sources a http://www.realestatenewstoronto.com/toronto_realestatemarket.php
Mission: To provide cost-effective and environmental friendly energy solution to customers
Objectives
1. Increase market share to 45% within 3 years of operation: The primary objective of our business is to increase market share in Ontario to 45%. At this time, we are still focusing on testing our product and pushing it into a comparatively new market. Currently, we don‟t have enough market shares to generate large profit. Thus, we set our primary goal to gain at least 45% market share next 3 years. Our management and marketing team believes this number is reasonable since our competitors are relatively small and also at same marketing phase as we are. 2. Increase Awareness Our company also focuses on building brand image to gain more market share. This may have certain overlap with our primary goal; however, increasing awareness has
great effect on both of our short-run and long-run marketing performance. In addition, increasing awareness emphasizes our long-term objective which could help us attract customers and build emotional connection. This is necessary for a product in introduction stage like JR Solar Water Heater. Increasing awareness could be an expensive and time costly process. Massive ads would be required to put on TV, Radio, and Internet, and malls. That‟s why our management team wants to treat it as a long term objective until the market implementation result tells us our primary objective is achieved. 3. Increase Profit by 20% next year If we increase market share and awareness, theoretically, our profit will increase. However, operating profit is generally defined as revenue less cost of goods sold and operation expenses. The more sales and less expense a company is be able to get, the more profit can be generated from operating activities. Our profit is based on our increase sales less our predictive cost/expense. This is believed as a reasonable prediction. Firstly, our sales objective is assumed as 45% more than this year, and our cost of goods sold can be further reduced by settling on the purchasing discount agreement with our supplier. There will be certain portion of tax reduction if we can import a large number of products. Our expense will be mainly on massive ads, selling expense, and more administrative expense.
TAIGE: Hey uhm isn‟t profit currently zero. So if you have a profit of 1 dollar, you‟ll have infiniti profit increase? So I don‟t think 20% as currently worded works.
Strategy and Tactics *Taige
Our approach to increasing awarness, market share, and profit involves improving accessibility of the products to potential consumers (place), creating more efficient advertising and promotional campaigns (promotion), decreasing the cost of importing the
product (price), getting involved in community (promotion), and providing better customer satisfaction with better customer service (product).
Product
Price
The MSRP for SWH is $1,999.99. The actual price of the product will vary depending on the competition prices, market environment, and target market response. The long term pricing strategy of the company is to maximize profit from its target market. But since this is the first year of the company in operation, the short term pricing policy of the management is market-oriented i.e. to increase sales volume, increase market share and achieve a position in the market and in the minds of the consumer. The market oriented policy is applied because in the beginning years of operation a company can withstand small profit and even a loss. At the same time, management has realized that since there not many companies in Ontario in the SWH market and wants to discourage any new entry into the market by keeping the price low, and offering the great customer service to ensure loyal customers. The short term objective of the management is to increase market share in Ontario from zero to 45% within 3 years. The company also wants to use this policy to position itself as a leader in SWH industry that provides high quality product and customer service at reasonable price. A discount has been proposed in its beginning years to increase sales and establish healthy customer relationship. It is using two different approaches for its residential customers and commercial customers. [TAIGE please make less confusing and more concise: Since residential users are expected to buy a maximum of two SWH and will not be able to pay the full amount, the management has decided to give them cash discount of upto 20%, if the bill is paid within 1-month of purchase, or the total amount due within 5 months, without any interest, if the customer wants to pay in installments, then interest of 15% on each piece is accrued. To cover their commercial users‟ management keeping in mind that a commercial user will require at least 2 SWH, so it has decided to give them quantity discount on their purchases. The quantity discount is a non-cumulative quantity discount. The amount of discount to be given is not yet decided.] Emphasize will also be placed on government rebates given for purchase of our product. This will have two direct benefits. The first being a strong selling point to price sensitive customers, and a way to keep our prices up.
Promotion
WHOEVER DOES THIS INCORPORATE Another tactic is to sponsor community events especially those with potential customer base. Sponsorship will stimulatingly build our company‟s humanitarian image, increase company and product awareness, and reach potential customers.
Distribution
The strategy for the distribution of SWH is to make it as accessible to customers as possible and segmenting the market by geography, behavior, and psychology. The main stress in the intial year is given to the major cities of Ontario such as GTA, Ottawa, Kingston, Mississauga, Hamilton, and Oshawa. In these cities, the tactic is to make the product available within 30-40 km of residential areas especially near hardware and home decoration stores such as „Home Depot, Canadian Tire, IKEA‟. The reason for this strategy is that these cities big cities will provide a large number of potential customers and great diversity of shopping preferences. [[[all; all the competitors of SWH sell it privately at one or two locations i.e. either mainly where their head office is located or their warehouses. ???????????? The Frank wants to change this by going near to their customers as they can. ]] In addition, we see to establish short term locations such as temporary booth in malls to reach additional customers. Besides phsycial locations, a 24 hour online store has been suggested to improve our company‟s distribution channel. This will allow us to reach distant, and otherwise unreachable customers and provide them with accessibility to peruse and purchase our product. Furthermore, SWH will enter exhibitions especially those that deal with environmental subjects, and submitting our product to Shopping Channels to garner product awareness and even sales through these channels of distribution. More specifically, we can target the environmentalists and environment-concerned market by promoting product during environment exhibitions, target the stay at home buyers with Shopping Channels.
Additional Tactics: In addition to the standard tactics primarily associated with product, price, promotion, and distribution, we have developed another tactic to further increase customer satisfaction via a 24-hr customer service telephone number and 1 month return-policy. Another proposed tactic is to negotiate a favorable importing agreement with supplier and government which will decrease the cost of the goods sold and give us a edge to reach the target 20% higher profit***for now.
Evaluation who?
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Target market: Multiple segment strategy I. families with 4-6 people II. middle-upper middle class III. double unit house, IV. people with net income in the range of 36,000-60,000 and also environmental conscious usually own a house or rent it mass advertising Restaurants with high cost of heating water Hotels/Motels Factories Product Differentiation