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Marketing and Decisions with Competition

Mr Matisse is the owner of Matisse Co. feels his business is threatened by a tough new competitor. And now Mr Matisse must make a decision about an offer that may save his business. Mr Matisse has been a sales rep for 20 years for a lumber mill. He finally started his own lumber business. He works with 5 large lumber mills on the West Coast. He isn't the only person selling for the mills- but he is the only person in his area. Being in the business for 20 years he is very well known and liked. His mark up is around 4-6% the standard markup depending on grade and the mix. The going price is publicized in trade publication and are listed on the internet. In the past few years a number of lumber yards has gone out of business. The main problem is competition from several home improvements chains. These chains buy lumber in large quantiles direct from the mill, and their low prices and one stop shopping are taking customer away from the traditional lumberyards. Then all of a sudden Mr Matisse is faced with a new competitor in town doing the same business as himself , covering the same area , but representing different lumber mills. The new salesman charges the same price but he will undersell Mr Matisse to make that sell. These two factors has hurt Mr Matisse business badly. A large Timber Mfg. Co. heard about Mr Matisse and his sales background and offered him a position in his Timber Co. which involves windows, raised panel doors, and accessories. The new Co. does not sell to the big chains and instead distributes its quality line only through independent lumberyards. The Timber Co. knows that Mr Matisse is well acquainted with the local lumberyards and wants him to become Timber Co. exclusive distributor of residential window and accessories in his area. The sales commission on residential windows would be about 5 % of sales. The Timber Co. would do the billing and collecting. By just getting 20-30 % of his lumberyards' residential window business, Mr Matisse could earn about half of his current income. Mr Matisse is excited about the opportunity because of the retrofit market is growing. He is concerned about his financial survival. What should Mr Matisse do?

1. Take the Timer Co. offer and sell both lumber products and windows.
2. Take the offer and drop lumber sales.
3. Stay strictly with the lumber and forget the offer.

Solution Preview

"In the emerging economy, a firm's only advantage is its ability to leverage and utilize its knowledge."
...Larry Prusak, Executive Director - The Institute for Knowledge Management

We are living in an economy of kaleidoscopic change where the only element, which is constant, is change. The industry environment is being influenced by unexpected, multiple changes reducing the period for which organizations can hold on to a competitive advantage. Every sector of industry in every corner of the globe has been affected by this change. There are fundamental questions that all businesses must ask ...

Solution Summary

This solution gives Mr.Matisse recommendations on how to deal with the new tough competitors by explaining which course of action he should take. All references used are included.