Swisher Mower and Machine Company
Statement of the Problem
The president and CEO of Swisher Mower and Machine Company (SMC) must decide on whether to engage in a private-brand distribution agreement with a major national chain or to forgo the offer and focus on the company’s advertising, sales and products.
Situation Assessment
U.S. Riding Lawn Mower Industry
The U.S. lawn and garden equipment industry was estimated to have produced $5.5 billion in sales in 1995. Riding lawn mowers are a part of this industry. 74% of those sales were for finished goods, 25% were for engines and 1% was for components.
Sales Trends and Product Configurations
Historical data starting in the 1970’s shows that sales volume of riding lawn mower is cyclical and tied to the conditions of the U.S. economy. Overall, the trend is an upward movement in sales volume with record unit sales in both 1993 and 1994. 1995 and 1996 are projected to continue this upward trend with further increases on unit sales volume. In addition to being cyclical, the riding lawn mower industry is also highly seasonal with about one third of retails sales occurring March-May.
Riding mowers come in three configurations; front-engine lawn tractors, mid-engine riding mowers, and rear-engine riding mowers. All configurations are targeted at consumers with large mowing areas. Industry surveys show that the front-engine configuration is perceived to be more powerful and capable due to the fact that physicals dimensions tend to be larger with front-engine models. This perception has made the front-engine configuration the most popular.
Competition and Retail Distribution
The riding lawn mower industry has 10 major competitors, which all have a national brand name and engage in private-label production. All the companies sell their products through lawn and garden stores and specialty retailers while 3 of the top 10 sell their products at national mass-merchandise stores. Furthermore, several of these companies produce a combination of brand name and private-label riding mowers for mass merchandisers like Wal-Mart, home centers like Lowe’s, and hardware chains like True Value Hardware. With the top 10 competitors producing private-labels, private-label unit sales have been growing and currently stand at 65-75% of the total industry sales. All the major competitors produce several models of riding mowers with a representative price range of $800-$5000. Figure 1 in the Analysis section shows the retail distribution of outdoor power equipment, including riding mowers. The top 3 outlets in order are national retail merchandise chains, OPE/farm equipment & supply stores, and lawn/garden stores.
SMC Background
SMC was started in 1945 by Max Swisher. The operations