External Factors Evaluation

Transcription

1 YANKEE CANDLE

2 External Factors Evaluation Other firms in the industry captivate a variety of market segments by diversifying their product line Because Yankee Candle has not diversified their product line, the company lacks the ability to attract more than one segment of the available market Consumers purchase products from companies that are fresh and innovative Companies that are aware of the consumer s desire are able to capitalize on opportunities that Yankee Candle is missing out on by not acknowledging the needs of consumers Competitors have also taken advantage of consumers increasing use of the Internet Yankee Candle must recognize the Internet as a growing market and find ways to restructure their business model to accommodate this ever-expanding market

3 External Factors Evaluation External Factors Weight Rating Weighted Score Comments Other firms captivate a variety of market segments by diversifying product lines Products appeal to an older market Inability to raise prices since product line is somewhat uniform Average price $20; reasonably priced for candle and container There is a strong desire for a more youthful and contemporary feel in choice of products Company needs to extend market, target younger demographic Discovering natural and sustainable materials will make a firm appear more socially responsible Company needs to be aware as consumers desire green products Redesigning website to appeal to online shoppers Website is boring and lackluster Companies that are more aware of contemporary market and capitalize on opportunities Competitors have stronger market presence Total Score

4 Internal Factors Evaluation Strong and effective management Indisputable experience Dominant market share in the premium candle industry

5 Internal Factors Evaluation Internal Factors Weight Rating Weighted Score Comments Management is intelligent and disciplined Company provides financial incentives to management employees who have significant responsibility for sales, operations, and profit Business has around 50% of market share in the premium candle segment Leading designer, manufacturer, wholesaler, and retailer of premium scented candles in the giftware industry year history of offering distinctive products and marketing them as affordable luxuries and consumable gifts Company is creating other candle companies to sell through mass premium channels, such as Costco and Kohl s Annual Light a Candle for Your Heart program to support the American Heart Association Contributed over $150,000 over the last 2 years to help address the #1 killer of women in the US Market capitalization of $850 million Earned $80 million in cash Generated free cash flow of $110 to $120 million By utilizing borrowed funds, repurchased $185 million worth of its stock Given the high cost of oil and the strained refining capacity, the cost of raw wax has skyrocketed One of Yankee s main wax providers put them on 70% allocation after suffering damages from Hurricane Katrina Total Score

6 IE Matrix IFE Scores High (3-4) Medium (2-2.99) Low (1-1.99) High (3-4) EFE Scores Medium (2-2.99) Yankee Candle Low (1-1.99) 1: Invest/Grow 2: Selective investment/maintain position 3: Harvest/divest

7 Corporate Strategies Approximately 70% of Yankee Candle s customers are 35 or older. Our consulting firm encourages Yankee Candle to expand the market and capture young adults and recommends three strategies to achieve this goal: (1) Market development strategy, (2) Product development strategy, and (3) Market penetration strategy.

8 Market Development Strategy Most effective strategy to capture Yankee Candle s younger market: Launching a national campaign, utilizing print media, as well as the Internet Current Yankee Candle ads appear in local print media, such as newspapers New advertisements will have less text and a more simple and modern look Lifestyle magazines, like Real Simple or Martha Stewart Living Internet banner advertisements

9 Market Development Strategy Current Ad: Too much text Difficult to read Old and outdated New Internet Ad: Yankee Candle a passion for fragrance come see what s new Simple Eye-catching Mysterious

10 Product Development Strategy Create a new line of candles that appeals to the younger market Sleek and monochromatic look, so that they can easily blend into a variety of environments Still recognizable as a Yankee Candle product Be careful not to abandon current customer

11 Product Development Strategy

12 Market Penetration Strategy Increase product usage for all of Yankee Candle s customers Provide incentives for both the new and younger consumer, as well as their loyal customer base We suggest that the company offers a Yankee Candle Club card Tracks purchases and offers rewards based on the customer s purchase history Show how their product could adapt to many different environments and uses Candles are the perfect gifts!

13 Market Penetration Strategy

14 SWOT Matrix Strengths Use internal strengths to take advantage of external opportunities Weaknesses Improve internal weaknesses by taking advantage of external opportunities Opportunities Yankee Candle has a strong market presence. They have the opportunity to extend their base to a new market, younger consumers (age 18-35). The company has a dated image and has been unsuccessful in marketing to consumers By extending their market, Yankee Candle has the opportunity to update their image and pursue an effective marketing campaign. Use internal strengths to avoid or reduce the impact of external threats Develop defensive tactics aimed at reducing internal weaknesses and avoiding external threats Threats Be certain not to abandon loyal customers while expanding market. Continue to offer customers the superior product quality and service they have always received. Yankee Candle needs to remind consumers of the novelty of candles, that substitute products simply cannot imitate.

15 SPACE Matrix FS Conservative Aggressive Cost leadership through concentration, concentric diversification, or vertical integration CA: -1.8 IS: 4.2 X-Axis: 2.4 FS: 5.0 ES: -1.4 Y-Axis: CA IS Defensive -5-6 Competitive ES

16 BCG Matrix +0.2 Stars Question Marks Market Growth Rate 0 Cash Cows 3 6 Dogs 4 5 Cash Flows Relative Market Share Division 1: Retail Sales Division 2: Internet Sales Division 3: Marketing and promotion Division 4: Returning Treasures (candles) Division 5: Seasonal Favorites (candles) Division 6: Scentstories Division 7: Custom Candles Division 8: Tarts Wax Potpourri Division 9: Samplers Votive Division 10: Miscellaneous Products

17 Grand Strategy Matrix Key Internal Factors Weight Market Development Product Development Market Penetration Strengths AS TAS AS TAS AS TAS Strong and effective management Dominant market share in industry Indisputable experience Market capitalization of $850 million Weaknesses The cost of raw wax has sky-rocketed Limited product offering Ineffective marketing and promotion Subtotal

18 Grand Strategy Matrix Key External Factors Weight Market Development Product Development Market Penetration Opportunities AS TAS AS TAS AS TAS Consumers strong desire for more youthful and modern products Redesign website that appeals to customers; fresh and easy to use Become more socially responsible, ie: use sustainable materials Threats Companies already capitalizing on younger market segment Companies captivating a variety of markets by diversifying products Inability to raise price due to uniform product line Subtotal

19 Grand Strategy Matrix Key Factors Market Development Product Development Market Penetration TAS TAS TAS Internal Factors External Factors Total Priority: Product Development

20 "If we know where we are and how we got there, we might see where we are trending and if the outcomes which lie naturally in our course are unacceptable, to make timely change." Abraham Lincoln