It is considered to be a maturing industry Industry sales in 2004 were estimated to be slightly over $16 billion Divided into 3 segments:

Architectural coatings 22%

43% Original Equipment Manufacturing (OEM) Coatings Special-purpose Coatings

35%

Architectural Coatings
General purpose paints ,varnishes and lacquer used on residential, commercial and institutional structures. Sold through wholesalers and retailers Purchased by do-it-yourself consumers, painting contractors, and

professional painters.

OEM Coatings
Formulated to industrial buyer specifications To be applied to original equipment during manufacturing

Used for durable goods such as automobiles, transportation equipment, appliances, furniture and fixtures, metal containers / building products and industrial machinery

Special-Purpose Coatings
Formulated for special applications / environmental conditions such as extreme temperatures, exposure to chemicals or corrosive conditions. Used for special applications such as bridges, marine applications, and highway and traffic markings

Headquarters: Dallas, Texas Service Area:

Texas, Oklahoma, New Mexico, and Louisiana. 2. Dallas-Fort worth (DFW) area
1.

Competition:
600 paint companies in the

US

2004:
$12 million net sales of

Jones Blair architectural paint and allied products

Distribution:
200 independent paint stores, lumberyards, and

hardware outlets. 40% of outlets are in DFW area

Promotion:
8 sales representatives Salary: $60,000 annually 1% sales commission 3% of net sales Advertising & Sales promotion effort

To prioritize which market segments to pursue & to increase advertising dollars by $350,000 2. Have an overall 20% price cut 3. Add one more sales representative 4. Continue to guard margins and control costs
1.

INTERNAL STRENGTHS Experience Founded in 1928 Strong relationships between sales representatives and retail stores High quality Sell to both professionals and DIYers Cooperative advertising with retailers Motivated, determined and passionate A lot of research available Low Break Even

Only 3% of sales goes to advertising Ads only reach and influence 25% of target COGS is 60% of sales Only 8 sales representatives Narrow market penetration with sales reps No exclusive rights with retailers Highest price in market

Market Growth: 1-2% per year Distributed to 200 of the 1,000 retail outlets in the area 40% of these retailers are in rural areas DIY painters first choose a retail outlet for paint and sundries then choose a paint brand. Pro-painters are frequent buyers and look for paint that is high quality, durable and easy to clean up

600 different competitors Competition is spending more on advertising Competition is less expensive Major in-house retailers have little knowledge DIYers purchase paint once every four years and get whats convenient and inexpensive Contractors want paint for the lowest price. Demand effected by substitutes, long lasting products and VOC regulations

JBCs Market
Market Segment Shares
Do-it-yourself Professional

DFW

$ 1.8M / 33.6 M = 5.4 %

$ 4.2 M / 14.4 M = 29.2 %

$ 6M / 48 M = 12.5 %

Non-DFW

$ 4.2 M / 28.8 M = 14.6 %

$ 1.8 M / 3.2 M = 56.3 %

$ 6M / 32 M = 18.8 %
$ 12M / 80 M = 15 %

$ 6M / 62.4 M = 9.6 %

$ 6M / 17.6 M = 34%

DFW PRO = 29.2 % DFW DIY = 5.4% NON DFW PRO = 56.3 % NON DFW DIY = 14.6%

JBCs Market
Points to Note

Market shares vary greatly among four markets JBC is strong in professional market with a 34% market share Weak (5.4%) in DFW, most probably due to mass merchandisers. JB only represent 12.5 % in the DFW area Relatively weak competition in rural markets. Wal-Mart probably not a major threat Dominates rural professional market with 56.3% share

13 of 19

Direct sales to DFW DIY 350 k in corporate brand advertising

Action: Avoid this alternative. Reasons: 1) DFW DIY market share is a dog 2) 350k advertising is nonsense BE = $350K /0.35 cont margin = 1 M 1 M represents almost 8.3 % increase over current sales. #JBC need to increase its market share by 1.6% of DIY DFW market to recover additional spending.

Price cut 20 % Have to be competitive in DIY market.

Action: Avoid this alternative. Reasons: 1)Currently, JBC Contribution margin is 35% - Price cut 20% will reduce Cont. margin to 15% or 0.15 2) DIY market represents area of dogs & question marks - Have not achieved dominant market position - Do not generate much cash

Hire sales representatives at $ 60 000/ annum each Work on Non- DFW area

Action: Hire sales representatives to work Reasons: 1) The reps have to earn at least $ 171, 428 each just to break even ( $6 0 k / 0.35 ) - How much they worth?
DFW PAINTER= $ 4.2 m / 400 painters = $ 10 500

NON DFW PAINTER = $ 1.8 m / 200 outlets = $ 9 500 DFW OUTLET = $ 1.8m / 80 outlets = $ 22 500 NON DFW OUTLET = $ 4.2 m/ 120 outlets = $ 35 000

- Hire sales reps to work on Non DFW areas - Get 6 per year to break even.

Keep everything the same Continue to guard margins & control costs

Reasons: 1) JBC is a cash cows and stars in both DFW & Non DFW areas for Professional users - Since this market already established themselves, any surplus funds generated from these areas should be channel to question marks and dogs SBU.

Recommendations

Actively pursue non-DFW Do-it-Y and Professional markets Secondary emphasis on DFW-Professional market Seek more retail accounts in non-DFW markets Hire one additional sales rep who is in charge of developing new accounts. If budget permits, hire two. Each can be assigned to Professional and Doit-Y markets respectively

Engage in cooperative advertising with current advertising budget

Maintain prices