In both options becoming a manufacturer for Party! private label line of party goods or launching of a branded line of party ware Rose company will face some issues and will embraced some opportunities.
In my opinion, there are pros and cons for each alternative:
1. Becoming a manufacturer for Party!
¢The possibility to become the manufacturer for one of the biggest retail chain in the field with 300 stores ¢Access granted to a huge market having in mind that retail chains are more and more developing in to the first choice of customers in terms of shopping ¢The sales of Rose Company made through Party! represent 20% of total sales. ¢ Rose products will have a very good exposure on the shelves of Party!, along with merchandising support and sharply reducing the number of competitors. ¢Eliminating the advertising costs
¢Risk of products cannibalization ¢Losing brand personality Having no decision capacity regarding the design of the products. ¢35% of total sale are coming from independent shops. Moreover, Tom consider that this type of partners were always a great source of good ideas and encouragement and he felt that he owns them a part of his company success. By accepting Partys! proposal Rose company assumes the risk of losing the partnership with independent shops. ¢Rose brand is a strong one in this field. Their products are the best in terms of quality and customers appreciation. If they accept Party! proposal it occur the risk of losing brand awareness among the customers ¢Lack of trust in retail chains policy regarding the amount of payment for the manufactured products. ¢Losing the opportunity to take advantage of a next-generation technology. ¢Lack of pride among the employees
2. Implement the new technology
¢Increase brand power which allow Rose to stay ahead of its rivals. ¢This next generation technology will give the opportunities of reducing the total costs by eliminating the expensive filmmaking process. ¢A market research conducted by the company it reveal that, both customers and distributors have positive remarks about the new concept. ¢Some studies results show that the customers are willing to pay even more for Roses new brand than it was suggested to them. So the company has the possibility to increase the price by 6-7% at their new products in order to cover the expenses with advertising. ¢Keeping the innovative spirit of the company
¢Risk involved by price increasing ¢Customers inconstancy regarding what they say in a market research program vs. what they do in a real life situation
As we can see, both alternatives imply as well opportunities and risks. If I were the decision maker in this case I would surely choose the alternative to implement the new technology that will allow the company to create innovative products.
I would take this decision based on short and medium/long terms factors. On short term, in terms of sales the actual partnership with Party! represent 20% of total sales while the one with independent shops is 35% of total sales. The diminishing of eventual loses, it can be crucial for the business. In addition, as Tom stated, the independent shops represented a success factor in growth of Rose Company over the years.
On a medium/long terms the company has the opportunity to be the pioneer in developing a innovative product with a positive impact among clients and distributors. Is a great opportunity to increase the power of the brand and to put its mark over the entire partyware industry.