Duncan Industries

Problem Statement

Where and how should Duncan Industries (DI) increase market share and still maintain rapid growth and a commitment to quality manufacturing.

Situation Analysis

Industry

Summary

This is an after-market industry that sold approximately 49,000 hoists each year in North America. There are two basic types of hoists: in-ground and surface which are both service-specific. Typical consumers were automotive outlets that serviced or repaired cars, such as new and used-car dealers, and specialty shops. Additional consumers consist of chains such as Goodyear, Firestone and independent garages. The wheel-alignment market comprises 85% of sales with the remaining 15% from general mechanical repairs.

Growth

This is a large and diverse industry with the majority of firms operating on a regional basis. Canada has annual sales of $54 billion per year and the U.S. market is 10 times that size indicating opportunity for potential growth. This could be interpreted as $540 billion in potential sales in the U.S. market. The indication of growth is furthered by the fact that there are 14 million vehicles in Canada and 146 million vehicles on the road in the U.S.. In Canada alone there are 4,000 new car dealers and over 720 specialty shops and chains. There is a realistic threat of new entry on a regional basis. However, innovation is key in order to establish market share.

Average costs of hoists range from $3,000 to $15,000 and have a typical lifespan of 10-13 years. An automotive hoist is viewed as a capital expense for most businesses. For new service centers or car dealership, the buying decision is based on available hoists and brand suitability. Independent garages analyze product availability versus brand suitability. Therefore, it is essential to have an effective marketing strategy to establish potential growth in this industry.

Competition

There is limited competition in the North American market, with only 16 companies: 4 Canadian and 12 U.S. In-ground lifts comprise of approximately 21% of total lift sales in 1999. Surface lifts are mobile and easier to install, and comprise of 78% of total lift sales in 1999.

Size

Two major firms, AHV and Berne Manufacturing, comprise 60% of the market. AHV is the largest firm with approximately 40% market share and annual sales of $60 million. AHV is a cost-effective organization that focuses on both in-ground and surface markets. It offers a complete line of standard hoists with limited features. Berne Manufacturing comprises approximately 20% of market share and also manufactures in both segments of the industry. It is also a cost-effective company producing a complete line of lifts. This overall dominance of market share can be contributed to the fact that both companies use an effective sales force. The benefit of the sales force is customer familiarity and brand awareness.

Demand

Hoists are a vital component of the after-market industry. Each individual outlet has specific demands: specialty shops focus on one type of repair and non-specialty shops handle a variety of repairs. Service centers and dealers will often buy more than one type of hoist depending on need. This industry has a high demand for innovative and quality products that emphasize reliable features such as safety locks. As predicated hoists have a typical lifespan of 10-13 year and therefore it is necessary to choose the right product.

Consumer profile

This is a large and diverse global industry. This consumer consists of after-market automotive outlets that service or repair cars such as car dealerships, specialty shops and chains, and independent garages. All value safety and quality workmanship as important factors in its buying decision criteria. This consumer will either focus on one type of repair or a variety of repairs. A particular segmented target market is the outlet that specializes in wheel-alignment business. This consumer demands a hoist that meets a wide variety of needs.

Price is also a key factor in the purchasing of a hoist. A hoist will range from $3,000 to $15,000 and has a typical lifespan of 10-13 years. Consumers such as independent garage owners will most likely research a product before purchasing. This target segment makes up 15% of overall industry sales. Automotive outlets such as car dealerships often buy a particular hoist based on recommendation or approval from its parent company. A successful marketing strategy will primary focus on this target segment as it makes up 85% of overall industry sales.

Duncan Industries

The following is a SWOT analysis of Duncan Industries:

Strengths

DI has a reputation of being the "Mercedes" of hoist manufacturers. The Duncan Lift is considered superior because of its design, quality workmanship, safety features, ease of installation, and five-year warranty. It is fully hydraulic and requires minimal maintenance. It also includes innovative technology that has high mechanic accuracy and can be installed in less than a day. An additional innovation is the safety locking mechanism that only DI holds the patents to. This combination of quality workmanship, innovation, and focus on the wheel-alignment segment separates DI from its competition.

DI uses extensive personal selling methods with a company sale forces, Canadian distributors and a US automotive wholesaler. The company sales force under the leadership of Pierre is a major player for DI. It generated about 25% of unit sales each year. Personal selling shows off the product benefits to consumers and DI annual sales are increasing by an average of approximately 21% per year.

The DI marketing strategy is primarily based on acquiring large chains and manufacturers including the three main automobile manufacturers of General Motors, Ford and Chrysler. Once DI attained the major accounts it would then sell to individual dealers and operators. This distribution system has been successful to date exemplified by the fact they have never been rejected by any major accounts.

Weakness

The US wholesaler provides DI with extensive distribution in the US and services its major accounts. However, the Duncan Lift is