Rocky Mountain Coop – Suggested Solution

Rocky Mountain Coop – Suggested Solution

Problem Statement

Frank Gallagher and Milt Zirk have to develop a marketing plan that will minimize the impact on sales and profits that will occur when United Farmers of Alberta (UFA) open their petroleum outlet. They have to consider a number of pricing, place, product and promotion options and make a decision within one week.        3

Background

Rocky Mountain House Co-op (RMHC) is a cooperative retail outlet located at Rocky Mountain House Alberta and managed by Frank Gallagher and Milt Zirk. The co-op has 7332 active members and three divisions: Home Centre, Shopping Centre and Petroleum. United Farmers of Alberta is planning to open a new petroleum outlet in Rocky Mountain House which will have a negative impact on sales.        2

Objectives

Keep current market share and profits

Maintain customer accounts

Provide high quality products and services to customers        3

SWOT Analysis

Strengths

The company provides excellent service.  RMHC currently spends more than its competitors on staff training.

Milt calls on his large customers once a week – good relationship management

They have a record of providing patronage dividends.

“Cash Back” at the end of the year successfully motivates many customers to do business with the company.

The company has an excellent highway location at Rocky Mountain House.

RMHC offers a very wide range of products, making “one stop shopping” possible for customers.

The company has established a large customer base.

The company has a leading position in both Farm and Consumer segments.

Weaknesses

The petroleum division of RMHC has always had a difficult time. Margins are low in this division.

The company does not sell marked gasoline through its cardlock system and does not have the capability of adding this product into the existing system.

The bulk petroleum facility is old and starting to show its age.

RMHC has little knowledge about fertilizer and ag chemical business.

RMHC is similar in structure and philosophy to UFA, customers may not hesitate to try UFA because it is similar.

Less than $6,000 per year is being spent on advertising petroleum products.

Opportunities

Use of fertilizer appears to be growing.

Use of the cardlock system is growing among farm and commercial accounts because of convenience and cost savings.

Customer loyalty in petroleum products is high.

Threats

Sales from the commercial segment depend greatly on three very large customers.