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Shoes for Moos Inc.

Case Analysis MKT 4210 A02 Professor Malcolm Smith #6842183

Problem Statement Jim Wells, the creator of Shoes for Moos, a specially designed type of footwear for cows to aid the cure of foot and hoof infections. With little capital and experience in the industry, Jim must decide whether to proceed and invest in this new venture. He must analyze the competitors; determine his selling price, and potential target market. With all of these factors established, Wells must decide how to promote his new product and choose a strategic distribution plan.

Situation Analysis Entrepreneur Jim Wells saw a need for a type of footwear exclusively designed for cattle, including dairy, beef, and research and show cows. Cows, such as dairy cows often suffered from terrible hoof infections, to the point of hindering their milk production due to the use of antibiotics. In some cases, Beef cows had to be put down due to their poor foot conditions. Jim then designed rubber shoes to minimize and deter these frequent infections, but has yet to settle on a proper marketing strategy, and distribution plan. In addition, although this bovine shoe appears to be a first mover in the market, Jim must have it priced strategically so it is of value but reflects its superior quality. Jim has done sufficient research already, but now must decide if he should invest in the product or not.

Internal Environment

Jim Wells product Shoes for Moos provides support during the healing stage of an infected cows foot also acting as a deterrent from initial infection; a feature unique among the competition. Jim has little knowledge of the cattle industry regarding bovine footwear, but he does have the appropriate resources to ensure his product is attractive and of value to consumers. With the help of Murrel Bauman, a local veterinarian, and Kaufman footwear, they were able to create a high quality and durable shoe ideal for cows hooves. The rubber exterior helps block moisture and dirt from getting into crevasses or open wounds on a cows foot. The Moo shoes also sit securely on the cows feet, allowing them to roam without risk of the shoe tearing or falling apart. Since these shoes also act as a deterrent of foot problems, they will lessen the days of milk production lost each year due to foot contamination. In the case of dairy cows, Exhibit 1 shows the average milk production per cow per day, as well as the total milk production in a cows milking life span. Using the information from both Exhibit 2 and Exhibit 3 the information given shows how an individual cow can drastically affect a farmers daily revenue. The case states an ill cow can not only decrease its milk production, but stop it altogether. In a severe cases, some cows require antibiotics, costing anywhere from $15.00-$30.00 and a loss of at least a weeks worth of production. Using the information from Exhibit 3, it can be calculated a farmer loses $87.50 a week plus the additional cost of antibiotics already exceeds $100.00. Using Shoes for Moos, these losses can be cut dramatically. These shoes offer solutions for farmers and cows, but the product is not completely sound. Although durable, Jim specifically designed his shoes to help cure infected hooves, most common during the spring and early winter months. Jim did not consider how the shoes would hold up if worn year-round. Hoof infections frequently occur during the wet and cold seasons, so the product faces a seasonal demand. This can hurt the company financially if Wells fails to implement proper pricing and promotional strategies, in order to be profitable at year end. In addition, Wells has not created a company vision and mission statement and a marketing strategy for his product.

External Environment Wells must analyze his competitors, customer base, and potential and current markets in order to be successful. Two notable competitors exist in the industry, one being a Hoof Shoe sold individually. Wells product is adjustable, but this shoe offers six varieties, with three different sizes and two frames

to choose from, flat or elevated. These shoes specifically addressed hoof structural problems and are advertised using direct mail. They have an attractive price of $21.80 US, but they allow moisture to get into the wound, worsening infection. The other product is much more sophisticated as it uses hydrotherapy, complete with suspenders, hoses and a compressor, to massage strained foot muscles in the animal, but is not aimed at reducing hoof infection. However, the product targets horses more so than cows, since the cows cannot wear the device and walk around. Cows must be isolated in a separate pen, which reduces their grazing time required to obtain essential nutrients for milk production. These boots become inefficient for cows to use and are priced very high at $400 US per pair. Wells shoes are far superior in value and are a greater solution to the ailments that face cattle. Jim has many opportunities to make his Moo shoes a major success in the farming community as he is a potential first mover in the market if he positions his product right. The number of dairy farms across Canada is decreasing, but their size is growing dramatically. With a higher concentration of livestock in a smaller area, foot and hoof problems will become more frequent, increasing demand. There are over 1.1 million dairy cows living in Canada, with just over 70% of them living in Ontario and Quebec. If Wells could properly target much of the 16,700 dairy farms in Ontario and Quebec, he would generate very high revenues, enabling further promotion across the country and abroad. Wells should also attribute 20% of sales to the growing numbers of beef cattle who also face hoof infections. This may be an opportunity, but it also poses a threat. He must properly position his Moo shoes so they are readily available and valuable to customers. Wells can target veterinarians, dairy cow farmers, beef farmers, research and show farmers, or all of the above. If he chooses to target all of these consumers, his promotional strategy will be too broad and may not grasp as many customers. Also, Wells must price appropriately to reflect the superior quality and value of the shoes while maintaining a strong contribution margin.

Criteria Wells decision to invest in the project or not will come from market analysis, competitor analysis, and consumer analysis. This can be further broken down into meeting the following criteria, maintaining at least a 40% contribution margin, ensuring a shoe price between $39.99 and $59.99 in order to be competitive, and retaining a reputable brand image through promotion.

Exhibit 4 details the small costs associated with using the Foundation for the Mentally Handicapped to mail and ship all shoes to customers. Looking at the two main distribution options, being through direct mail or designated dealers, Exhibit 5 shows the contribution margin of an estimated selling price of a direct mail distribution system, while Exhibit 6 in turn shows the contribution margin of a dealer distribution strategy. Since the dealer requires a 40% mark-up, it causes the price to exceed beyond the selling price of $59.99. Wells did state the shoes could be priced up to $79.99 but to remain competitive in this market a moderate price of less than $59.99 is more realistic. Based on Exhibit 5 and Exhibit 6, the distribution strategy through dealers, is not attractive in Wells favor. For further financial analysis, Exhibit 7 shows the minimum and maximum costs spent on Trade Shows per year within Wells recommendation of attending five trade shows. If minimal costs were spent, Wells would spend approximately $6035.00 on trade show related expenses per year. Another attractive use of promotional expenditures is targeted magazine advertising. Exhibit 8 breaks down the given costs of two major provincial magazines, each in Ontario and Quebec, also identifying other magazine costs, should Wells further expand his print promotions. With the analysis of these marketing expenses, Exhibit 9 calculates Wells contribution margin, along with its break-even point if he chooses to use a direct mail distribution system. Focusing on the break-even level, it is far more attractive than the given breakeven point on Exhibit 10, which outlines Wells financials and break-even point for a dealer distribution strategy. Due to the high fixed costs associated with this strategy, Wells break-even point is more than ten times larger than his break-even point using a direct mail approach. Although a dealer approach may reach more customers, it may not be the ideal plan for Wells initial investment into this potential company. A third important criterion to consider is a strong brand image. With a decreasing number of dairy farms across Canada, it has become more difficult to reach the declining target consumer. These Moo shoes are very innovative and are considered a first mover in the industry, simultaneously creating some consumer uncertainty since they have little to compare the product to. Wells must use proper promotional plans to capture superior quality of his shoes, the value-added, satisfaction guaranteed and form it into a message consumers can become attracted too. Using magazine advertisements allow a high frequency of ads reach relevant customer segments. Trade shows are also promotional executions that already attract a specific customer base. With Jim Wells participating in farm tradeshows, he will be surrounded by hundreds of potential customers that fit his target market. Colored flyers are another option for displaying a brands image. Flyers are considered inexpensive and can reach a high volume of

consumers. However, the brands product is not fully justified on paper since it is only a twodimensional picture. Wells is considering in providing a money-back guarantee to further strengthen brand image incorporating a value-added attribute for consumers.

Alternatives 1. Use direct mail through the use of the Mentally Handicapped Foundation to ship to customers, while marketing the product with the use of magazine advertisements and trade show attendance and participation. PROS: This approach is cost-effective and allows Wells to establish one-on-one customer relationships. Jim also has full control of the operation, and can absorb the cost of shipping as part of the selling price to advertise a single price to potential customers. This strategy allows Wells to easily manage his store since Kaufman Footwear handles the inventory levels, and the Foundation would take care of all the shipping and postage. With an attractive contribution margin giving a higher return, consumers would pay a lower price for receiving the product at home, allowing convenience to be another competitive advantage. CONS: Jim must ensure he sets up a speedy delivery service so the product reaches the customer before the hoof or hooves have healed themselves. Although magazine and trade show promotion reaches a larger audience, both venues face high competition and often become lost in the clutter of different brands, products, and services. Customers would have trouble judging product quality, causing Wells to add in a product guarantee. 2. Establish direct sales to dealers in Ontario and Quebec to advertise and sell product. Further brand promotion done through accessible flyers in stores, and magazine advertisements. PROS:

By using this strategy Shoes for Moos can gain wide exposure in a short amount of time with dealers actively promoting product in-store. With mandatory inventory order sizes, able to sell his product in large quantities. A small cost of $0.10 per serve Wells a great return if he secures many of the CONS: This plan of action requires dealers to have a 40% margin on sales, drastically raising the price of the shoes, surpassing a competitive price of $59.99, shown in Exhibit 10. This increase in selling price radically increases the break-even point with the combined promotion plans, and poses a lower contribution margin. The majority of the expenses Wells would incur can be attributed to the necessary hire of a salesperson for a cost of per year. 3. Do not invest in the new business and sell intellectual property and rights to Kaufman Footwear PROS: This alternative would save Wells large amounts of capital and allow him to focus on his current business at his store. Instead of spending additional hours on his Shoes for Moos potentially make money buy selling to a buyer with more experience and industry. The number of farms is dissipating, showing a declining market in the near future. Exhibit 11 shows the fixed start-up costs to be of business using a large majority of Wells and his brotherCONS: As a first mover of this type of product in the marketplace, Jim has opportunity to become extremely profitable in his new venture. By starting it up, he also has the option of growing it and then selling it for an even larger price than its original worth. Further examining Exhibit 11 shows the expenses still give Wells room to spend more dollars on distribution and advertising. venture, he can $100,000.00 Wells would be

mailing list has the potential to

surrounding 500 outlets in Ontario and Quebec.

knowledge of the with little room to grow

incurred during the first month

in-laws $25,000.00.

Recommendation By analyzing the potential market, given financials, and product, Alternative 1 is the most attractive for Jim. Using the fixed costs given in Exhibit 9 amounting to $7,870.00 and Exhibit 11s total expenses of $14,536.58, it brings it to a total of $22,406.88, still less of Wells investment budget. Furthermore this decision has the greatest return on investment, and it is the most manageable alternative for Wells since he already runs his own clothing store. To hold a competitive position in the market, Wells must purchase the patent and mould for his product to give competitors a larger barrier to entry. This alternative also allows Wells to create long-term relationships with customers, giving him more control on advertising. Plan of Action In the first three months of business, Wells must create a company mission and vision, as well as finalize promotional material design. To ensure the product reaches the customer before the infection has gotten better or worsened, Wells must coordinate with the Foundation for the Mentally Handicapped a delivery process that takes no longer than six business days to reach a Canadian customers door. To further please his customers, his product should have a priority mailing option that brings the product to the consumers door in less than three business days. Throughout the year Wells attendance in trade shows will help him better understand the industry and further learn about his future competitors. With growing sales Wells will be able to expand his marketing budget and have the capital to hire an employee to further grow the business in the next three years. Shoes for Moos has the potential to be largely successful in the market for it addresses and is the solution to the growing dilemma of treating cows hooves without hindering milk production.