The Microfridge Case

Ishpreet Singh Karan Jaidka Kshitij Agrawal Kshitij Ahuja Manav Gupta Vikas Jain 12P139 12P141 12P142 12P143 12P146 12P178

Group 1 Strategic Management II PGPM 2012-14

About the Product

A unique combination of a refrigerator, freezer, and microwave unit, fulfilling all 3 functions Targeted at A Home away from Home segment

Benefits of the Microfridge

Helped to solve the electricity problem in schools. Saved costs. Students using Microfridge could cook safely in their rooms Students would purchase food from convenience stores on campus for their Microfridge units The concerns of students parents were addressed Convenient, easy to use, attractive, durable and easy to clean Very useful for military bases and hotels/motels

The Target Market Home away from Home

Military bases

Motels/Hotels 3 million in the US out of which 2 million had no restaurant space Microfridge ideal for budget hotels and small town motels

Other Markets Small Individual apartments 1 million in the US, numbers expected to grow

Colleges

Motels/Hotels

Institutional Living Situations

Revenue (1994) 2% 18% Colleges Military

Colleges
Campus wide installation Campus rental program The rental price was $110 and students were charged $130 as rent Selling and Renting

Company Rental Program

25%

55%

Motels
Assisted Living Apartments

Run by Microfridge All operations carried out by Microfridge Yearly rental fee was $160

Porters 5 Forces Model

Threat of new entrants: Medium

Threat of substitutes: Medium

No product difference Patent Sharing Non compete Agreement Getting expired in 3 years No strategic advantage in distribution network Profitable industry with high Market potential Price differential between stand alone components(fridge and oven) and Microfridge Refrigerator leasing companies with regional presence Low innovation level Few alternatives High Switching Cost

Bargaining power of customers: Low

Bargaining power of supplier: Low

Intensity of competitive Rivalry: Low

Low product differential No switching cost for Microfridge

No competitor due to patent protection

The Competitive Scenario

Limited degree of competition with retailers selling microwaves and refrigerators and leasing companies Microfridge acquired Campus Equipment Company

It replaced 6,000 refrigerators with Microfridge units

Companies needed similar products and structures to compete Microfridge was on the look out for alternate suppliers to reduce dependency on Samyan

Daewoo agreed to charge $83 per unit, compared to Samyans $100

Problems with using two suppliers

Decision taken by Microfridge

Samyan would not accept delivery of microwaves made by others Microfridge could either set up a new distribution channel or stick with the highpriced Samyan Attaching the refrigerator and microwave was an issue The Samyan bracket did not work with the Daewoo microwave Samyan reluctantly altered their bracket for compatibility

Shipped roughly half the units with Daewoo microwaves and the remainder with Samyan Usage of four regional warehouses Daewoo microwaves: Shipped to a warehouse closest to the customer Samyan microwaves (Rented): Went to a warehouse Samyan microwaves (Selling): Went directly to the customer

The Plan for the Near Future

Though

the company was on track, Bennett was not content at the current growth Taking advantage of its structure, the company would focus on new products in the home away from home category In order to be able to withstand competition, Microfridge would increase sales rapidly

To receive USD 4 million in additional equity The funds would be used to purchase Microfridge units (rental) and to repay old debt

Aim

to increase entry barriers in the market

Recommendations
Product

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Category

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New product for home away from home Focused innovation

Market

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Explore New Geographies Acquisitions for regional penetration