Peak Garage Door Inc.'s distribution strategy and sales growth objectives

Peak Garage Door, Inc.

Peak Garage Door Inc.

Peak Garage Door Inc. activates in the retail business, manufacturing and placing onto the market garage doors. Their current customer palette only includes regional individuals and organizations. The sales projections for 2003 were at an estimated $9.2 million. The figures grow for 2004 by 36%, at an estimated projection of $12.5 million. The organization is a relatively small one, but present in 150 markets in 11 states. Achieving the goal for 2004 implies additional efforts, which should be clearly analyzed.

Peak Garage Door Inc. has set a goal of increasing their sales by 36% for 2004 as compared to 2003. The question revolves around the appropriateness of the current distribution strategy and the measures that must be taken to ensure that the distribution is aligned with the organizational objective.

Situation Analysis

Before answering the above posed question, one should first look at the situational analysis of Peak Garage Door. The best approach to achieving a clear and unbiased analysis of the garage door manufacturer is that of conducting a SWOT analysis. This reveals both the internal strengths and weaknesses, as well as the external threats and opportunities. These are briefly presented in the table below:

Strengths

Weaknesses

The garage door manufacturer possesses exclusivity contracts with 50 vendors

They are present onto 150 markets in 11 states

The company offers complementary products; the dealers offer complementary services

They have integrated technological advancements and increased the quality of the products

They have been able to serve the increased demand for steel garage doors

They have registered sustainable growth in sales over the past decade

Peak Garage Door only sells their products through intermediaries

They only operate regionally and their presence is limited to the western and Rocky Mountain states

The regions where they are present do not number more than 250,000 inhabitants each

Unknown brand

They only possess 2.5% of the entire market share

Opportunities

4. Alternatives

The management at Peak Garage Door has come up with four possible alternatives. One of them is that of not interfering. The remaining three are succinctly presented below:

Increase the number of vendors in the already existent markets

Pro

The 350 dealers currently selling Peak Garage doors are likely unable to support the growth goal established for 2004 even when considering the 2.4% increase foreseen for the overall industry

The strategy stands increased chances of retrieving fruitful results on the long-term

Con

They would be independent dealers and their chances of success would be reduced even more so when 70% of corporate revenues are generated by the 50 exclusive dealers

High implementation costs of an estimated $80,000 per annum

Franchising Contracts

Pro

Reduced risks as these would be shared with the dealers

Increased interest from vendors and better motivation to sell the Peak Garage Door products

Con

The 27 dealers in favor of franchising requested that the company not collaborate with other vendors in the region

Expansion opportunities in the regions operated by franchise partners would be limited to inexistent

Reduction in existent dealers

Pro

70% of all sales are generated by the exclusive dealers

Costs would be reduced

Con diminished distribution channel would be incapable to support the growth projections for 2004

Reduction in vendors could result in decreased sales as fewer regional customers would have access to the company's products

5. Recommended Alternative

At a first glance, it would seem that the second alternative is the most appropriate one. By signing franchising contracts with 27 vendors, Peak Garage Door Inc. would benefit from the intensified efforts of those vendors, materialized in increased sales. Foremost, aside from some contracts that would have to be annulled in the respective areas, the remaining deals would not be negatively affected.

6. Analysis

However at a first glance the management could decide in favor of franchising operations, the final decision must be based on further analysis. The most relevant quantitative method of financial analysis in this instance would be the Monte Carlo Simulation. This technique considers various possible outcomes to an implemented solution, based on several changing variables.

7. Conclusions

Peak Garage Door Inc. is a regional manufacturer of garage doors. They sell their products through 350 vendors in 150 markets in 11 states. Their current strategy revolves around increasing the sales volume and revenues by 36% for the following year. In achieving their desiderate, they could sign franchising contracts with part of their vendors. The final decision however must be based on further analysis.

Reference:

Kering, R.A., 2004, Peak Garage Door, Inc.