Jones Blair Case

BACKGROUND and PROBLEM DEFINITION

The Jones Blair Company, a privately owned corporation, is in the business of Architectural paint. Its main service area is the 11 counties of Dallas Fort Worth (DFW) area. The problem that they are facing right now is how to market themselves across various segments.

MARKET and INDUSTRY ANALYSIS

Currently there are 4 major segments i.e. DFW area, Non DFW area, Do-it-yourself painters and professional painters that form the major chunk of the architectural coating industry. Do-it-yourself painters and professional painters account for 50 and 25 percent of Architectural coatings dollar sales respectively. Although, Jones Blair Company sales are evenly distributed between DFA and Non DFA area, 60 percent of its outlets are in Non DFA area. Besides that, competition is increasing in DFA area with national players entering that area. If we don’t consider contractor sales, the total estimated dollar volume of architectural coatings and sundries was $80 million in 2004 with DFA area accounting for about 60 percent of it. The Do-it-yourself customers accounted for 70 percent in DFA area and about 90 percent in Non-DFA area.

ALTERNATIVE COURSE OF ACTION

Looking and analyzing at the four alternatives that were suggested by the vice presidents:-

ADVERTISING

Already we are spending $360,000 (3% of $12 million) and if we advertise then we will incur an extra cost of $350,000. To maintain the profit, we will have to increase the sales by $0.875 million ( $350,000/0.4 ).

PRICE CUT

We spend 60% of sales on cost of goods and freight expenses. So our gross margin is 40%. 40/100 ($12 million)=$4.8