Question

The firm Johnson-Evinrude Inc (or JE, to keep it short) has been in existence for more than two decades. However it is confronted by a changing technological and market environment.

While it is well known for the manufacture and sale of two stroke boat motors that have enjoyed a positive reputation, it is now facing increasing competition from four stroke boat motors. In terms of market growth the highest growth rates are being experienced for four stroke-high horse power motors; Johnson is testing motors of this type but their products seem to have multiple defects. The same type of motors of Japanese brands are flawless. It is true that in traditional two-stroke high horse power motors Johnson has a high market share –almost 65%, but this type of motor has almost no growth in the industry as a whole.

In the low horse power, 2 stroke market Johnsons share is minor and in the industry it is low horse power four stroke motors that have a rapidly growing market. JE do not have any of their own products in this category. Many Chinese manufacturers make these as generic unbranded products and the Chinese products are of low cost and good quality

JE has also been marketing trolling electric motors. The JE design is very well regarded in industry and with fishing gaining popularity as a sport trolling motors is a growth area. However, Johnson’s share is not as high as it could be because of inexpensive Chinese substitutes. While the Chinese products take advantage of lower manufacturing costs they lack the design sophistication of JE products.

Questions: Discuss the above from the perspective of :

1. Product portfolio management (the BCG or Growth Share Matrix approach)-for this classify the different types of motors in terms of the BCG Matrix – Rate of Growth of the Industry and Market Share of the Firm; Cash Cows, Dogs, Stars, Question Marks; make sure that you do this for every type and category of motor.

2. Try to analyze the portfolio/different motor categories in terms of the diversification or product –market matrix

3. Make suggestions for the overall marketing strategy for JE. You may like to ‘classify’ products (whether current or planned) and then develop your approach for them.

4. Discuss the possible problems that the company may face when it decides to divest from certain categories.

Answer 1

1. According to the current JE scenario, the different types of motors can be listed as below as per the BCG growth matrix-

Cash Cow : Two stocks motors would fall in this category as JE has the largest market share and will obtain huge cash flows from the current installation base.

Dogs: Low horsepower two-stroke engines come in this category as both industry demand growth and JE market share are small.

Stars: Four strokes – High horse power is the star for JE as industry is growing rapidly and the market share of these types of engines is also increasing.

Question Mark: This category includes trolling electric motors as it has potential to expand and needs some growth in order to gain business.

2. The demand is ready for four-stroke high horse power motors and trolling electric motors according to the current scenario.

3. As far as I am concerned, JE will concentrate on the quality level of four-stroke motors in order to match/beat Japanese motors' quality standard. If they have achieved the quality standard, they will approach their current two-stroke motor customers, which is a large number and can implement the same to them. At the same time, customers who use their trolling electric motors should be approached and informed about flaws in cheap Chinese motors.

As an company, JE will invest more money on Dog (four stroke engines) and improve this product before it becomes cash cow through product growth for them. As far as trolling motors are concerned as they love this product's good reputation they should concentrate more on market growth and not drop this product.

4. At this point, if they are preparing to divest from two stroke engines, this may go against them as current customers may lose confidence in both the product and the business. And they will also carry on with two stoke motors.

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