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Ajanta Shoes Company Ltd

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Case study for Marketing compant
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  Marketing in IndiaCase Studies: Ajanta Shoes Company Ltd. CASE STUDIES  Ajanta Shoes Company Ltd  In December 199 the e!ecuti es o# Ajanta Shoes Company $ere to decide their pricing strategy #or their  products in the #ace o# #ierce competition in the market. %he company has been in business #or the past thirty years. %i1&1991 the company did not ha e any prob&em o# se&&ing its shoes since the demand e!ceeded the supp&y situation. 'o$e er( a#ter opening up o# the economy the company #aced se ere competition both #rom other &eading shoe manu#acturers in the domestic market and a&so #rom the mu&tinationa& companies that had recent&y entered the market.It $as estimated that the Indian #oot$ear industry $as $orth )(*** crores in a&ue terms. %he industry $as dominated by the unorgani+ed sector to the e!tent o# ,*-. %he organi+ed sector had the insta&&ed capacity to  produce both &eather and non&eather shoes to the tune o# si!ty#i e mi&&ion pairs. %he mu&tinationa&s $hich had recent&y entered the market main&y #ocused on sports shoes segment./ata Shoe Company( the &eader in the market( had di##icu&t times to #ace. %he company #aced sti## competition#rom mu&tinationa&s. %o maintain its &eading position( the company $as gearing up to impro e its popu&ar  brands and a&so &aunch ne$ ones. 0or instance its recent &aunch o# 'ush uppies range and 2ua 3adis &ine o# s&ippers $as considered to be a good success. Its other popu&ar brands inc&udeAmbassador( o$er( 4orth Star( etc. %he company had recent&y re amped its distribution net$ork by appointing a chain o# #ranchisees to impro e its market penetration in rura& and urban areas. %hrough its #ranchising system /ata added 5** ne$ to$ns in addition to 6* to$ns in $hich its products $ere a&ready so&d. %he 1.7** retai& out&ets spread across the country $as the great strength o# the company. %he company sa$ great #uture #or the 8ata brand name. %he pricing strategy o# the company $as to appea& to the midd&ec&ass #ami&ies.Some o# the the other &eading competitors inc&uded Liberty( Action( Lakhani( hoeni!( uma and Lotto  besides mu&tinationa&s &ike /eebok and Adidas. Liberty shoes #o&&o$ed high ua&ityhigh price strategy. A#ter 8ata( it $as the ne!t Indian p&ayer $ho $as ab&e to bring ne$ sty&es and mode&s o# shoes in tune $ith the changing trends in the market p&ace. %he company $as strong in the schoo&shoes segment and a&so in casua&( sporty and a&&purpose shoes. 8ut it cou&d not compete e##ecti e&y $ith hoeni! $ith its %u## brand and Action shoes or #or that matter $ith other mu&tinationa& brands in sports shoes segment. %he company sponsored Miss or&d 199) and came up $ith some Miss or&d ranges o# shoes under its Senorita series. %hecompany had ;6* e!c&usi e sho$rooms and o er (*** mu&tibrand stores across the country. %he prices o# its  products $ere main&y aimed at midd&ec&ass #ami&ies in metropo&itan cities and suburban to$ns.ood&and shoes( Mescos( 3assons and Lumberjack are other competitors $ho aimed at the premium segment.%he mu&tinationa&s $hich ha e entered into the market recent&y a&so aimed at premium segment. /eebok( Adidas and 4ike( #or e!amp&e( $ere trying to estab&ish a niche in the premium market segment. %hese companies be&ie ed that $ith the chang51g times( price $as no &onger considered( to be the on&y #actor by theconsumers but ua&ity( sty&e( #inish and other a&ues became important./eebok products( #or e!amp&e( $ere aimed at Indian youth $ho $ere increasing&y becoming #itness and #ashion conscious. %he company $anted to re o&utioni+e the sports segment $ith inno ati e and creati e  promotiona& strategies &ike organi+ing #itness e!ercise $orkshops( road races( and using ce&ebrities/ahu& Dra id in cricket( Misha <re$a& in suash( etc. Simi&ar&y( Adidas roped in Sachin %endu&kar( Leander aes( Mahesh 8hupathi to endorse its brands. In addition( it opened e!c&usi e out&ets in se&ected cities to create  brand a$areness.  Marketing in IndiaCase Studies: Ajanta Shoes Company Ltd.Ajanta Shoes Company manu#actured di##erent types o# #oot$ear at its #actory in =anpur. %he product mi! o# the company consisted o# men>s #oot$ear( &adies #oot$ear and chi&dren #oot$ear. In each category the company o##ered shoes( sanda&s( and s&ippers. /ecent&y the company a&so started o##ering sports shoes $hich $ere priced s&ight&y higher than those o# other products. %he price range o# products o##ered by company $as #rom /s 7** to /s 17**. %he company>s brand name Amanita $as ery popu&ar among the consumers both in metropo&itan and suburban areas. ?# &ate the company $as making p&ans to penetrate the rura& markets.%he Managing Director o# the company said: @e ha ebeen in business #or the &ast ;* years. Ask any consumer #or the ua&ity and durabi&ity o# our products. ?ur shoes and s&ippers are made o# genuine &eather and yet so&d at &o$er prices. %he ne$ products &aunched by the big companies are( no doubt( trendy but $ou&dnot &ast &ong. eop&e are easi&y s$ayed a$ay by ad ertisement and promotion gimmicks. e be&ie e in o##ering products o# genuine ua&ity. In the &ong run the consumers $i&& #ind out the superiority o# our  products. Indeed our motto is that the product speaks #or itse&#. A satis#ied customer is the best ad ertisement $e can ha e.@%he company had a $ide distribution net$ork comprising o er 76* out&ets &ocated most&y in metropo&itan andsuburban areas. %he Marketing Manager $as proud that some o# their dea&ers ha e been doing business $ith the company generation a#ter generation. %hey $ere &ooked a#ter by the company through se era& incenti es and promotion schemes. 0urther they $ere a&so in ited once a year #or training at the company headuarters #or about a $eek. A#ter the training programme the company organi+ed a big reception in a #i e star hote& $here #ami&ies o# the dea&ers $ere a&so in ited.%he Marketing Manager #e&t that though the company>s products $ere o# e!ce&&ent ua&ity the sa&es had been dec&ining o er the years. 'e said that the reasons #or the dec&ine in sa&es $ere most&y because o# the competition #rom the mu&tinationa& companies. %hese companies ad ertised hea i&y and o##ered arious discounts. 'e #e&t ery bad that some o# them had >a&ready started $ooing the company>s dea&ers to $ork #or them by o##ering se era& inducements. 0urther he said that $hi&e the company>s o&d &oya& customers continuedto do business $ith Ajanta Shoes( the younger generation $as s$ayed by the ad ertisement o# mu&tinationa&s and they pre#erred to buy trendy shoes( though they $ere ery e!pensi e. %he Marketing Manager #e&t that thecompany>s inabi&ity to ad ertise its products on a &arge sca&e $as one o# the reasons $hy the company &ost its share o# the market to its competitors. 0urther the company $as a&$ays &ate in &aunching ne$ #ashions in #oot$ear. %he company hea i&y re&ied on its sa&es persons and dea&ers to get the &atest market trends. %his caused de&ay in &aunching ne$ products. 8y the time the company $as ab&e to get the #eedback #rom its sa&es  personne& in ariab&y the competitors had a&ready introduced se era& ne$ products and taken the major In ie$ o# competiti e situation( dea&ers demanded arious discounts and concessions #or se&&ing the company>s products. %hey #e&t that the company cou&d se&& its products on&y on the basis o# price and they #e&t that i# the company cou&d reduce the price o# its products that $ou&d he&p them to impro e sa&es.%ab&e 1 presents the pro#it and &oss account o# Ajanta Shoes company #or the year 199). %he #actory $as $orking on&y at ;*- o# the capacity because o# &ack o# orders. %he company cou&d increase its production $ithin a short period pro ided enough orders $ere a ai&ab&e.During Apri&( 199)( a#ter going through the reports submitted by the company>s sa&es personne&( the company top e!ecuti es $ere serious&y considering $hether the company shou&d reduce the prices o# some o# its  products in the &ight o# suggestions gi en by most o# its dea&ers. %his $ou&d he&p to impro e the #actory capacity uti&isation a oid &osses $hich the company $as incurring. An independent study made in this regard re ea&ed that i# the company cou&d reduce the prices o# its products by 7*- the sa&es $ou&d increase by 6*-. At a 1*- reduction in price the sa&es $ou&d increase on&y by 7*-.  Marketing in IndiaCase Studies: Ajanta Shoes Company Ltd. Table 1 /s B***Sa&es17(***/a$ Materia&s5,(**8o!es;)*ackaging75*?ther Materia&s,5*?ther ariab&es Costs;)*ages E Sa&aries;()**Ad ertising1(7**romotion;)*Administrati e ? erheads)**%ota& Costs17(;)*ro#its B?r LossB;)* 4onoperating Income17* 4et ro#it 8e#ore %a! BLossB75*%he Marketing Manager( ho$e er( #e&t that price $as not the major #actor. It $as &ack o# a$areness on the  part o# the consumers about the ua&ity o# the company>s products that stood in the $ay o# increasing sa&es. Consumers ha e become more and more brand conscious. %hough Ajanta &aunched se era& popu&ar premium  brands in the past( they cou&d not support them $ith adeuate promotion $ith the resu&t that the competitors snatched a$ay company>s market share by &aunching ne$er brands aiming at the premium segment. ?nce the company ad ertises its products and educate the consumers ho$ the company>s products $ere more durab&e and o# superior ua&ity the sa&es $ou&d increase. 0or this he ad ocated at &east doub&ing ad ertising and  promotion e!penditure.%he Managing Director #e&t that the shoe industry in India had huge potentia&. In a country $ith a popu&ation o# 96* mi&&ion e en i# 76* mi&&ion $ere to constitute potentia& market( the si+e o# the market $as too big. 'e $ondered $hy the company shou&d not go in #or mass market positioning instead o# #o&&o$ing the e!amp&e o# mu&tinationa&s $hich aimed at premium market positioning. hy not introduce a ne$ &ine o# shoes and #oot$ear designs #or the &o$ and medium price rangesF hy to $aste money on ad ertisingF Instead( $ou&d it not be better to reno ate the company>s retai& out&ets and o##er more incenti es to the dea&ers to push the  products to the consumers $ho are interested in buying &o$er and medium price range #oot$earF0urther he $as o# the opinion that the company had to estab&ish a pricing objecti e $hich $as c&ose&y re&ated to the o era&& business strategy. Second&y( he rea&ised that pricing shou&d be treated as part o# o era&& marketing mi! strategy. %hird&y( the company had to e!ercise pricing discip&ine. It $as a&$ays tempting to make short term pricing mo es( either up or do$n( in response to changing market situation but such mo e had to be a&igned $ith the o era&& objecti es o# the company.In the &ight o# the discussions $ith the top e!ecuti es o# the company the Managing Director $as $ondering $hether &o$ering price o# the company>s products $ou&d make any &ong term strategic sense and $hat changes $ere reuired in the company>s o era&& marketing strategy and in the marketing mi! to maintain  pro#it &e e&s and impro e company>s per#ormance. Questions 1.G a&uate the company>s pricing strategy. hat shou&d be the company>s pricing objecti esF7.hat steps the company shou&d take to arrest dec&ine in sa&esF;.hat changes are needed in the company>s marketing mi! strategy to maintain and impro e its market share and pro#it goa&sF
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