Camar Automotive Hoist
... Competitive Analysis The automotive lift market in North America consists of sixteen competing firms. Four of the sixteen companies are located in Canada, while the remaining twelve are based in the United States. These companies compete in the in-ground and surface hoist market. In 1999, in-ground lifts constituted 21% of total lift sales, with surface lifts representing the remaining 79%. There are several major brand, product, generic, and total budget competitors that CAH should address. CAH’s two main brand competitors offer similar products which are viewed as direct substitutes as they provide similar features and benefits to customers. AHV Lifts, CAH’s main competitor, offers a complete line of automotive hoists. While they do sell scissor lifts, they primarily focus on the in-ground and two-post surface markets. The company competes mainly on price; AHV’s scissor lifts cost 20% less than Camar’s scissor lift. Currently, they are the only company utilizing a direct sales force, and these strengths have entitled AHV to 40% of the North American market and annual sales of $60 million. AHV also possesses a key weakness. The company’s scissor lift is not comparable with the Camar Lift, as it lacks many of the safety features that Mark Camar has patented. Even though hoist malfunctions are rare, when an accident does happen it can be severe. CAH’s other brand competitor is Mete Lift, a small regional company that operates throughout California and Oregon and sells scissor lift as well. The company prides itself on its reputation and price and is regarded in the industry as having well-manufactured products. Furthermore, Mete Lift’s scissor lift sells for 5% less than the Camar Lift. However, the company’s market share is minute, since they only distribute in two states. Another weakness of Mete Lift’s scissor lift includes a lack of safety features. CAH’s main product competitor is Berne Manufacturing, which competes in the in-ground and two-post surface markets. This company uses a combination of wholesalers and company salespeople to sell its products and competes mainly on price. This approach works well for them, and they are the second largest automotive lift company in the United States, holding 20% of the market in North America. However, the company only sells a limited product line. Generic competitors include companies that manufacture jack stands, flat rollers, transmission jacks, engine hoists, overhead cranes, and long-body jacks. All of these products solve essentially the same customer need as does an automotive hoist, allowing customers to get into a position where they can work underneath an automobile. Lastly, total budget competitors include front-end alignment equipment, air compressors, hand tools, wheel balancing equipment, and brake service equipment. These products compete for the financial resources of an automotive service station, dealership or garage. Overall, the North American automotive lift environment has evolved at a modest rate over past years. Technological advances in this industry develop slowly, however some modifications concerning safety features have occurred. SWOT Analysis The strengths of CAH relate to its experience and reputation in the lift market and the valued qualities of its products. The management of CAH has considerable experience and knowledge regarding hoist design and manufacturing, which signifies corporate stability and will lead to a greater chance of success when entering new markets. CAH is also currently considered a leader in automotive lift safety, suggesting successful performance standards of the company as well as satisfied customers. The lifts manufactured by CAH have a reputation in the industry as the “Cadillac” of lifts supported by great service, which also indicates a precedent of satisfied customers. The management of CAH holds four patents on the Camar Lift, which decreases the possibility of competitors copying CAH’s unique product designs and increases the likelihood of providing customers with a unique product. In addition to quality products, CAH has a knowledgeable marketing manager who has been influential in the current success of the company, indicating a greater chance of success in future marketing/sales operations. CAH also has an established relationship with a U.S. wholesaler, which will provide a solid foundation for opportunities in the U.S. market. Lastly, the company has sufficient financial resources available to proceed with expansion options, greatly increasing the probability of successful results. CAH’s weaknesses include the fact that the company does not currently have the resources and distributor relationships necessary to take advantage of the possible opportunities offered in the US market, which results in lower revenues for the company. Also, CAH currently staffs a small sales force, which will be problematic if the company plans to enter larger markets. If the company opts to expand into the European market, difficulties and obstacles may arise since the management currently has little knowledge of the unfamiliar environment. Lastly, the management of CAH has had difficulties estimating sales levels using any of the foreign investment options, which could lead to risky estimates regarding costs, profits and revenues. Opportunities of CAH include a large U.S. automotive lift market (49,000 lifts sold per year), providing the possibility for a strong revenue source if the company can take advantage of the demand using effective sales and marketing techniques. CAH has only two competitors in the U.S. and Canada that offer scissor lifts, which suggests the possibility that CAH can gain a large market share in this segment. Also, twelve significant U.S. states are within a day’s drive of the company’s factory in Lachine, which will provide efficient logistics if the company decides to take advantage of the large U.S. market opportunities. NAFTA is another opportunity for CAH, considering that the 1999 agreement allows for duty-free exports and imports between the United States and Canada, resulting in lower costs and higher profits for companies participating in trade across the borders. The European Union also creates more efficient access to a large market with no internal barriers if the company decides to participate in a foreign investment option. The last of the company’s opportunities is the possibility of a licensing or joint venture relationship with Bar Maisse to manufacture the Camar Lift in Europe, which if successful will increase sales, revenue and profits. External factors that pose a threat to CAH include the sixteen competing firms in the total North American automotive lift market, creating possible obstacles for the company in gaining higher market shares. Additionally, the automotive lift market is currently dominated by two large U.S. firms who hold 60% of the market, possibly decreasing market share potentials. The next weakness relates to the company’s two competitors existing in the North American scissor lift market that sell their competing lifts between 5% and 20% less than CAH, which presents the possibility of lost sales due to those customers whose purchase decision is based on price. In the U.S. market, the company’s wholesaler may be reluctant to give up territory to CAH, which may present obstacles in the company’s expansion efforts in the U.S. Considering weaknesses relating to the possible European expansion, little information is currently available on industry competition in Europe, affecting the reliability of sales and revenue forecasts. ALTERNATIVES The alternative solutions for CAH’s strategic expansion issue have been evaluated and researched to determine the most effective resolutions to solve the problem. The three alternatives proposed below include Joint Venture, Licensing and U.S. Expansion. The Joint Venture alternative involves forming an equal partnership with the French company Bar Maisse to manufacture and market the Camar Lift in Europe. The Licensing alternative would entail entering a three-year contract with Bar Maisse to provide them with the manufacturing rights to the lift in exchange for a percentage of gross sales. Lastly, the U.S. Expansion alternative consists of CAH opening a sales office in New York to fully take advantage of United States market opportunities through the U.S. wholesaler. Joint Venture There are many significant advantages involved in CAH’s participation in the Joint Venture alternative. First, by establishing a joint venture with Bar Maisse, CAH will have the opportunity to gain global market share and increase profits since no dominant manufacturer of lifts existed in Europe. Data obtained of the target countries (Germany, France, Italy and the United Kingdom) show a total population of 257 million with 169 million vehicles in use. Additionally, Bar Maisse’s experience in the European market decreases CAH’s vulnerability to political risks, trade barriers, and government regulations. Also, Bar Maisse has an existing relationship with European customers, the local government, local authorities and labor unions, creating easier access into the European market. Another advantage includes the combined resources of the two companies and the division of the financial risk associated with expanding into foreign markets. The most significant advantage of the Joint Venture alternative is the profitability aspect. Depending on the market share captured, total profits have been estimated within the range of $256,000 - $1,400,000 per year. (Total profits were calculated from an estimated 1% and 2% share of the total lift market in Germany, France, Italy and the United Kingdom. Please see Appendix for detailed analysis.) When considering the disadvantages of the Joint Venture alternative, it should be noted that over the past years, CAH has developed a reputation of manufacturing a high quality product. The management of CAH has emphasized that regardless of the alternative chosen, the company’s reputation must be maintained above all. By entering a joint venture partnership with Bar Maisse, CAH faces the possibility of a lack of control regarding the quality and marketing of the lifts. Also, entering such an agreement will give Bar Maisse access to confidential information regarding CAH production processes and design that could be used in a manner harmful to CAH. Additionally, while the division of risk is an advantage of joint ventures, this alternative does present the highest fixed cost expenditure of the presented alternatives (see Appendix) for CAH. Another disadvantage is that the joint venture implementation process is not time efficient. The French merger control procedure consists of two phases that can take up to twenty-four weeks to process (Condomines). Furthermore, partners in these types of arrangements do not always agree on how the new entity should be run. Licensing Bar Maisse has proposed entering into a licensing agreement with CAH, where Bar Maisse will manufacture and market the Camar lift in Europe and offer CAH 5% of gross sales. The key advantage of the Licensing alternative is the lack of financial risk involved. This option presents high profits considering the low risk, which makes it a very viable solution. Total profits using this alternative have been estimated within the range of $285,191 - $569,832 per year depending again on the amount of lift market share Bar Maisse will be successful in capturing (see Appendix). Another advantage is that licensing reduces the risk of exposure to government intervent...