I. Central Problem
AGC should find ways on how to revitalize the company from its steady slope into worse conditions. The circumstances of AGC tumbling downhill were already stacked against them; they just weren’t aware that their strategy during good market economy would not work well against harsh conditions, such as the competition boom and the fall of the undergarment market during the Seventies, which occurred simultaneously. Their condition became so bad their equity shriveled up to half of what it used to be.
II. Statement of Objectives
To earn back their customers from the competitors appeal as well as earn new ones To design ways to improve the earnings of the company
To broaden the target market
To use state-of-the-art equipment
III. Areas of Consideration
Competition is stiff
Selling only to one merchandiser (Divisoria)
Limited target audience
Was not ready for market instability
Dependent on company goodwill
Production was not flexible enough to effectively craft high quality items Products were limited (white undershirts)
Prices were not favorable to the company
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IV. Alternative Courses of Action (ACA’s)
1.) Sell some old equipment of the company and buy useful modern equipment.
A. Advantages
Greater possibility that the company can invest more flexible equipment for improvement of production in company.
B. Disadvantages
They will find a hard time disposing the old equipment due to its limited functions and the fact that it’s already old.
2.) The selling of goods should not be limited only to one place.
A. Advantages
Reach out to potential customers who do not frequent to Divisoria. Expand your target market.
B. Disadvantages
Will costs more expenses towards shipping, delivery and marketing.
3.) Advertise products in media and print.
A. Advantages
Create demand for their products.
Procure product and brand awareness to the public.
Name or brand recall.
B. Disadvantages
Incur expenses in marketing and advertising.
4.) Introduce products designed for women.
A. Advantages
Wider audience
More customers
Greater chance for profit
B. Disadvantages
Additional expenditures for research and design
5.) Give benefits to middlemen (merchandisers).
A. Advantages
Increase loyalty from merchandiser.
Create a rapport between companies.
B. Disadvantages
Additional costs
6.) Create products that are trending in the market.
A. Advantages
More sales
Larger target market
Variety of products to choose from
B. Disadvantages
Higher cost in production.
Higher risk of putting capital to waste.
7.) Retain “Blossom” in production.
A. Advantages
Helps the company to gain back profit.
Provide lower class citizens with a selection of products.
B. Disadvantages
Brands Armour & Marca Troca will be further overshadowed.
Less profit (same quality but at a lower price).
V. Final Decision
The final decision is to replace the old notions and infuse the new, while still retaining the quality of the product. Despite the immense hard work put into the company, changes will continue to occur, so a new life for the company would be better suited than if it were to continue its slow downward pace.
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VI. Detailed Action Plans
The first thing that the business needs to do is replace the machines that manufacture their product. The machines are not only inflexible for making garments other than undershirts, but assuming from context; they are old, considering the company up to the liquidation proposition was twenty years old. Although it will need much capital to purchase these machines, in the long haul, it is an investment and it will help them broaden their product lines.
A large chunk in the revision of plans situates in the products. In the past AGC, they only produced white undershirts for men. The next step is the development of their product lines. It may start with research on their current and their aspirant customers and products. Expanding the brands include introducing clothing for women, designing high quality and fashionable clothing, and making them in color. The gamble is high because the company has only ever excelled in manufacturing one consistent product, and expanding the product lines need much capital. Another good call for the company is to revive Blossom.
That brand, with its good quality yet cheap prices caters to those of lower income levels, which is a potential market to sell to despite numerous competitors in the price war. And although brands Armour and Marca Troca would be overlapped by the potential success of Blossom, through expanding the brands would they be able cater to a different taste and therefore cater to a different audience. This way, the brands under AGC will not be directly competing for customers to buy them. Through good marketing and well maintained production, AGC can achieve high profits from expanding their line.
Further action to broaden their target audience would be to advertise AGC. Its namesake and goodwill may definitely draw in crowds, but commercializing it in media and in prints will reach those who have not heard about the company and its brands. This creates demand for the product, and in turn, high sales.
An influx of the new is not always a bad thing; it’s how you respond to
change that counts. AGC still has some fight left and with the proper strategy and taking the right opportunities, AGC can still be able to bounce back and regain what was lost.
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Case Analysis 3-2: Armour Garments Company (AGC)
The Armour Garments Corp. (AGC) was established in 1954 in the Philippines as a manufacturer of high quality undershirts. It had two popular brands, namely: “Armour” and “Marca Troca”. The company started out by copying popular styles and designs from Hongkong. The first ten years was quite profitable. The company grew from 25 workers in 1954 to about 250 workers in 1967. The company sells all of its products to wholesalers in Divisoria who distribute the product all over the country. The products are manufactured in white color only and are generally of superior quality being twice more durable than other brands in the market. Undershirts are worn as a matter of habit to avoid the direct contact of users polo shirts with the body. Product sales are seasonal. Business usually peaks twice a year: in June, with the opening of classes and in December, with the Christmas rush.
In the mid 60’s more and more undershirt factories opened. The company faced serious threats in its operation since the Divisoria middlemen were not loyal to brands. All along, AGC was banking on its institutional pride and goodwill being the pioneer in the industry. While sales of the company did not decrease, it also did not substantially increase with the growth of the population. However, this did not bother management since the cash flow was good. No major investments were made during the period. It was business as usual so to speak. In 1971, the market for the undershirt suddenly took a downturn. It was no longer fashionable to wear undershirts. Moreover, more and more marginal factories sprouted up and were willing to compromise on price and payment terms with the middlemen.
For the first time in its history, the company was astounded. It introduced a new brand “Blossom” which was of exactly the same product quality but priced lower to match competing products. It did not take long before “Blossom” was withdrawn from the market because AGC sold more of “Blossom” and less of “Armour” and “Marca Troca”. Having failed to improve the marketability of its traditional product lines, the company finally decided to diversify and venture into ready-to-wear business. It introduced a polo shirt line. The market response was not favorable. In 1973, the company added a couple of lines like jeans and printed shirts, these two lines also failed.
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