Swisher Mower Company

SWISHER MOWING AND MACHINE COMPANY

EVALUATING A PRIVATE BRAND OPPORTUNITY

TABLE OF CONTENTS

TABLE OF CONTENTS 2

Background Statement 3

Major Issue / Problem 3

Alternative One 3

Advantages of Alternative One 4

Disadvantages of Alternative One 5

Quantitative Implications 5

Alternative Two 5

Advantages of Alternative Two 5

Disadvantages of Alternative Two 6

Quantitative Implications 6

Alternative Three 6

Advantages of Alternative Three 7

Disadvantages of Alternative Three 7

Quantitative Implications 8

Alternative Four 8

Advantages of Alternative Four 8

Disadvantages of Alternative Four 9

Quantitative Implications 9

Alternative Five 9

Advantages of Alternative Five 9

Disadvantages of Alternative Five 10

Quantitative Implications 10

Recommendations 10

Implementation 10

EXHIBIT A Ð'- SWISHER MOWER COMPANY FACTS 11

EXHIBIT B Ð'- SWISHER'S FINANCIAL STATEMENT 13

EXHIBIT C Ð'- PROPOSAL DETAILS 14

EXHIBIT D Ð'- PROPOSAL CALCULATIONS 15

EXHIBIT E Ð'- AGGRESSIVE ADVERTISING ALTERNATIVE 16

EXHIBIT F Ð'- INCOME STATEMENT WITH ADVERTISING 19

EXHIBIT G Ð'- TRADING UP / LINE EXPANSION 20

EXHIBIT H Ð'- BRAND EXTENSION 21

REFERENCES 22

Background Statement

The Swisher Mower and Machine Company (SMC) was founded in 1945 by Max Swisher. The company prides itself on maintaining a "small company" image and obtaining personal relationships with dealers and customers alike. SMC has a rather small product line:

1.) Ride King Ð'- three-wheeled riding mower that has a zero turning radius. Mid-engine configuration.

2.) Trailmower (T-44) Ð'- trail-type mower that has a cutting width of 44 inches.

3.) Push lawn mower kits Ð'- component parts necessary to assemble push mowers.

4.) Trim-Max Ð'- high-wheel, walk behind product that combines a trimmer, mower, and edger in one unit.

SMC distributes its lawn mowers through farm supply stores, lawn and garden stores, home centers, and hardware stores located primarily in non-metropolitan areas. The Swisher Company sells its line of products through a variety of ways such as wholesale distributors, direct-to-dealer, and private-label. Currently, Swisher's advertising focuses on trade-oriented promotion to wholesalers and dealers. SMC has remained a profitable company since its founding. For a list of detailed facts about SMC see Exhibits A and B.

Major Issue / Problem

The primary issue facing SMC is whether they should offer a product under a private brand arrangement through a major national merchandise chain.

The second issue is whether to accept, modify, or reject the proposal from the merchandise chain.

Alternative One

The initial alternative is to accept the private brand opportunity from a major national retail merchandise chain. Details regarding the proposal can be found in Exhibit C. The retail chain is expected to make an annual order of approximately 8,200 units. The chain will receive the mowers at a price 5% lower than Swisher's manufacturer's list price. The chain has requested small changes in appearance to the mowers such as different seats and type of paint. The Swisher brand name will not be displayed on the mowers, and Swisher will not be allowed to mention its relationship with the chain. A two-year contract was offered, with extensions done on a year-to-year basis thereafter.

This alternative would impose one of the two "Branding Decisions" that commonly face marketing managers. The branding decision in question "relates to supplying an intermediary with its own brand name" (Kerin, 163). The Swisher Company must determine if being the producer of a private brand will increase their profits and benefit their bottom line. In order to do this, it is important to consider a couple of factors when making the decision:

1.) The producer has excess manufacturing capacity.

2.) The variable costs associated with producing a distributor's brand do not exceed the sale price.

If both these situations are true, the possibility arises for Swisher to make a "contribution to overhead and utilize production facilities" (Kerin, 163).

Advantages of Alternative One

The following are the advantages for pursuing alternative one and accepting the private brand proposal from a major national retail merchandise chain:

1) Allow Swisher the opportunity to expand production with excess capacity.

2) Provide Swisher with a competitive advantage.

3) Broaden distribution.

4) Increase sales for parts.

5) Potential sales of the trail mower.

Disadvantages of Alternative One

The following are the disadvantages for pursuing alternative one:

1) Incur costs due to A/R and inventory requirements.

2) Additional