Curtis Automotive Hoist - Market Opportunities in the European Union
...n the U.S. market and the possibility of modifying their channel strategy without upsetting current distributors. Mr. Curtis and Mr. Gagnon must carefully formulate their product-market strategy, comparing market penetration (North America) to market development (Europe). Understanding their strengths and weaknesses in the context of domestic and international business will be difficult due to limited knowledge of Europe and channel uncertainty in the U.S. List of alternatives: 1. Penetrate the U.S. market further. • Work more closely with existing distributors to push the Curtis product. • Establish a direct sales presence by opening a sales office in New York. 2. Enter the European Union (EU). • Enter into a licensing agreement with Bar Maisse • Enter into a joint venture with Bar Maisse • Enter with direct investment or local manufacturing Analysis of the alternatives: 1. Penetrate the U.S. market further. Working more closely with existing distributors to push the Curtis product is an attractive option because it does not disrupt existing channels, capitalizes on market share opportunities in the U.S. (table 3) and does not require a major capital investment in a new manufacturing facility (assuming sufficient capacity at existing facilities). The available market share is the U.S. is substantial and if tapped successfully, could provide years of high growth. This requires cooperation from the U.S. wholesalers whose major objective to this point has been to sell a hoist, not necessarily the Curtis Lift. Whether a new “push” would require more attractive margins or other wholesaler incentives is not known at this point and consequently considered a risk. Establishing a direct sales presence introduces more risk due to potential channel conflict and potentially a short term loss of sales if wholesalers withdraw. Long term, it is attractive due to more direct marketing, personal selling, and higher margins (table 2). 2. Enter the European Union (EU). Entering into a licensing agreement with Bar Maisse is the easier of the EU options. CAH has checked references on Bar Maisse and can be reasonably reassured that they will be a good business partner and probably manufacture a quality lift. Additionally, Bar Maisse provides the expertise in the EU market that Curtis lacks and has a complementary product line. There is very little financial risk with this option with CAH income being royalty fees. Basically, once the agreement is signed, they just “wait for the checks to arrive”. The primary downside to the Bar Maisse licensing proposal is that it offers the lowest financial return among the alternatives. CAH gains no knowledge of European market and would have no growth opportunities other than through Bar Maisse growth. The threat of Bar Maisse ending agreement and producing a similar hoist must also be considered. Entering into a joint venture with Bar Maisse is the second EU option. Since CAH employees, including Mr. Gagnon, would relocate to France CAH would gain EU market knowledge. Again, the companies share complementary product lines and would not cannibalize each others business. The financial rewards are presumably better since CAH will have a direct investment and management influence in production matters and marketing strategy. The risks to this approach as compared to the licensing agreement approach are that an investment is required and uncertainty with Bar Maisse corporate culture. It is possible that CAH could incur start up costs only to find that their culture, business ethics, or the nuances of their organization structure are incompatible with Bar Maisse. Mr. Curtis has stated that he would rely on Mr. Gagnon to head up the joint venture option and with Mr. Gagnon in France; he would lose his valuable services for other endeavors. Entering with a direct investment (local manufacturing) is the third EU option. This option provides the greatest amount of control over all aspects of the business for CAH. The longer CAH stays in Europe, the greater their knowledge of the market. Since Bar Maisse would be completely out of the picture, all profits would go to CAH. This option would require the greatest investment including investment in plant and equipment, labor, regulatory startup costs (impact fees, property taxes, potential business licensing). As with the joint venture option, Mr. Curtis would lose Mr. Gagnon’s valuable services for other endeavors. Finally, this option places all financial risk CAH rather than being shared. Recommendations 1. Penetrating the U.S. market is a better alternative if Curtis can convince the wholesaler to help them achieve a greater share of the U.S. market. There are no startup costs and the cost structures, marketing strate...