Architectural Painting Coatings Industry & Jones Blairs Trade Area

Questions: 1. How might one characterize the architectural painting coatings industry and Jones Blair's trade area? 2. How might one segment Jones Blair's market area? 3. Which segment(s) represent opportunities for Jones Blair? 4. What is Jones Blair's competitive position in its market area? Answers: Executive Summary This is a comprehensive case analysis of Jones Blair Company. Jones Blair is a manufacturer of paint coatings located in southwest of US. The headquarters of the company is located in Texas, Dallas and most of the operations of the company take place within the 11 county Dallas-Fort Worth areas and the business is extended to New Mexico, Oklahoma and Louisiana too. The paint industry of US is at the maturing stage and the growth rate has been sluggish in recent past. The sales volume of Jones Blair has reached a plateau as their products are of premium price; however, they have managed to increase their sales on an annual basis. Do it yourself comprises of the 50% if the industry and 25% the industry is dominated by professional painters. Rest of the market is covered by specialised paints materials. There are seven major players who hold about 60% of the market share of the architectural coating segments and 50% of which is sold under controlled and private stores and brand names. To maintain the reputation of their business and work, professional painters seek quality and durable products and dont mind shelling out few extra bucks to maintain the quality. Do it yourself painters and contractors seek paints at lower prices. 1.0. Introduction This is a comprehensive case analysis of Jones Blair Company, a paint manufacturer, which is located in Dallas-Fort Worth area. There are four major questions that need to be answered based on the case study. Before, answering those questions, it is necessary to first understand about the condition of paint industry in US. This report will discuss a brief background of the company to be better equipped with the knowledge about the company and its status in the market. This will be followed by the industry analysis, internal analysis of Jones Blair, the characteristics of its target market and the marketing mix of the company. In light of all the above discussion, the answer to those specific questions of the case study will be provided. 2.0. Background of the Company- Jones Blair Jones Blair is a manufacturer of paint coatings located in southwest of US. The headquarters of the company is located in Texas, Dallas and most of the operations of the company take place within the 11 county Dallas-Fort Worth areas and the business is extended to New Mexico, Oklahoma and Louisiana too (Adams). It is a private company engaged in the production and marketing of architectural paints and original equipment manufacturing coatings and special purpose coatings. The company serves the need of high end customers. Jones Blair seeks to achieve high quality paint coats by continuously investing into its research and development department which can lead to development of innovative products. This is one reason that the products of the company are one of the highly priced products in the marketplace. Jones Blair mainly offers its products to two kinds of customers. They are the professional painters who look for an optimum point of purchase service, durability and easiness of the application of the paints (this kind of customers accounts for 25% of sales for Jones Blair) and the other is the do it yourself customers which consists of 50% of sales of the company. Jones Blair has a good distribution channel and it sells its products through many hardware outlets, lumberyards and approximately 200 independent paint stores. 40% of its stores are located in the 11 county DFW regions while others are scattered in the diverse 39 nations of the service vicinity (Cesaroni, Gambardella and Garcia-Fontes). Retail stores that falls at the exterior of DFW region and who purchase the sundry and paint of more than $50,000 per annum, maintains the stock of Jones Blair products only. In the DFW area, 14 outlets maintains an exclusive line of Jones Blairs products and many retailers stocks the pro ducts of only two three other high priced brands in their stores. The paint industry of US is at the maturing stage and the growth rate has been sluggish in recent past ('US Paint Coatings Market Analysis (2004-2009)'). The sales volume of Jones Blair has reached a plateau as their products are of premium price; however, they have managed to increase their sales on an annual basis. Presently, the company has employed eight sales representatives who monitors the inventory in every outlet, assists in the visual merchandising of the stores, are responsible for receiving and recording the orders received and is actively engaged in the advertising and coordinating all the promotional activities. Jones Blair has maintained its talented representatives by following an appropriate reward scheme ('DOE Project Awards For Giner, US Hybrid, Vision Industries'). They are paid a commission of 1% on sales in addition to their salaries. The company needs to identify the various marketing strategies to market their architectural products and they also need to iden tify its target market for the architectural products. The company has already spent about 3% of its net sales on the advertising and promotion of its products. Around 55% of this amount is depleted on cooperative advertising such as newspaper advertisement, distributing catalogues via retail stores etc. Rest of the funds are allocated to corporate advertising, magazines, in-store displays, website development and maintenance etc. With the help of the case, internal and external analysis will be done to identify which markets Jones Blair can target for its architectural products and also how they can reach out to its target market. 3.0. Industry Analysis Conducting an analysis of the industry helps an organisation to get accurate information on economic condition of the market and what is the level of competition and availability of required resources to conduct the business. The four Ps of marketing for Jones Blair has already been discussed in the background of the company. Porters Five Force Model will be used to analyse the industry for Jones Blair. 3.1. Porters Five Force Model Rivalry among Competitors: due to economies of scale there is intense competition among rival firms in the paint industry of US. Since there are many players available in this industry, the switching costs become low for consumers as many companies are offering similar products at good price differentials. The US paint industry is characterised by oligopoly as there are seven major brands which controls most of the sales within the industry ('Global Paint Coatings Industry Market Analysis'). As mentioned earlier the paint industry is in the maturing stage of PLC which has lead to the entry of many small players in the industry. The main competitor of Jones Blair in the US market is Benjamin Moore, Behr, Valspar, Sherwin-Williams. Threat of new entrants: the threat of new entrant in the paint industry in US ranges from low to medium. Entry barriers are low for small scale companies but substantial market entry barriers do exists for the larger companies. However, the saturated market has become unattractive for new entrants. Barriers like EPA regulations act as an entry barrier. Threat of substitute products: There is no real substitute for paints; therefore the threat of substitute products is low. Other products which might have the potential to replace paints are very expensive thus the paint market is not very much threatened by the substitute products (Khezri, Shariat and Tabibian). There are various varieties of paints available in the market and other potential substitutes are aluminium sliding, vinyl window and composite decking. Bargaining power of the consumers: the consumers bargaining power is high in the paint industry in US. This is because a number of players are available targeting at the same consumer base, with similar products and at lower costs. This makes the switching cost for the buyer low which allows them to influence the market. The consumers can also negotiate for price when they need large amount of paints. Bargaining power of the suppliers: Suppliers of the paint industry in US has medium power. Since the revenue of a paint retail store is solely dependent on the supply of the paints, it increases the power of the supplier. However, the big stores such as Home Depot cater to various industries such as appliances, decorating and landscape thereby reducing the power of suppliers. The paints products are being standardised highly, which reduces the dependency of specific suppliers thereby reducing the bargaining power of suppliers in this industry. 3.2. Industry Trends Paint industry in US is in the mature stage therefore, the sales are high but the prospects of further growth is stagnating. Do it yourself comprises of the 50% if the industry and 25% the industry is dominated by professional painters. Rest of the market is covered by specialised paints materials. There are seven major players who hold about 60% of the market share of the architectural coating segments and 50% of which is sold under controlled and private stores and brand names ('Kusumgar, Nerlfi Growney Announce Fifth US Paint Amp; Coatings Industry Study'). To maintain the reputation of their business and work, professional painters seek quality and durable products and dont mind shelling out few extra bucks to maintain the quality. Do it yourself painters and contractors seek paints at lower prices. 36% of the stores are specialty outlets. In DFW region, Jones Blair holds 50% market share for do it yourself painters and is a mass producer who adequately supply its products throu gh 200 stores in the DFW area. Since large market look out for cheaper products, they dont fall in the target market category for Jones Blair. In the urban areas the percentage of professional painter is high .i.e. near about 70%. 4.0. Internal Analysis (SWOT) SWOT analysis will help the firm to assess its internal potential and resources which can help Jones Blair to identify the most suitable strategies that can be adopted by them. Strengths of Jones Blair: They have high quality products as compared to most of the products available in the market Highly talented workforce and sales representative who have build strong relationship with customers and can provide accurate details about the product. They have adopted excellent marketing strategies which include personal selling; their experience (established since 1928) has given them an upper hand. Strong Research and development department Enjoys a contribution of 35% and specialised in do it yourself paint applications Huge market base of professional painters who seek durable and premium products Huge local market share Weaknesses: Very few number of sales representatives Small geographical reach No advertising on television media and low promotional budget Higher price of products than competitors and major chunk of consumers base their decision on price rather than on quality Mainly offers architectural paints They have high costs of goods sold Opportunities: Huge market untapped in the DFW area The paint industry in US makes an annual turnover of $16 million The number of paint companies are reducing every year due to high saturation of the industry in US There are few companies who offers high quality andspecialised products Rural do it yourself market holds huge potential Can expand operations outside DFW area. The industry is growing at a very slow rate of 1-2% each year Threats: Intense competition with major competitors having many stores in the DFW region High bargaining power of consumer and priority to price while making a purchase decision There are other option which does act as a substitute to paints High quality and durable paints reduces the repainting thereby taking away the customers for long Most of the competitors compete on price. The regulations and EPA has increased in the US paint industry 4.1. Strategy used by Jones Blair Jones Blair is using a differentiated strategy as they are serving two totally different kinds of customers. Professional painters mostly buy the products in large quantities and willing to pay premium charges for quality products whereas, the do it yourself buyers are more concerned about the price of the product and purchases in small quantities. There are line and brand extension opportunities to grow in the paint industry ('NPCA's New US Paint Coatings Industry Market Analysis (2006-2011): Bigger Report, New Insight, Same Dependability'). Jones Blair might opt for entering into kinds paints, spray, art and crafts paints and can introduce new textures to increase the market share. In the US paint industry, the company holds 12.5% of market share in the DFW area and about 18.8% of market share in the non DFW region. In the service area, the company holds a market share of 15%. In the professional painter non DFW market, the company will use the defensive strategy as they are the v alued and premium customers of Jones Blair and will follow the offensive strategy for the DWF markets as competition target the do it yourself customers in these area. 5.0. Specific answers to the questions in the case After discussing the industry and internal analysis and identifying the strategies used by the company and the industry trend, it will now be appropriate to answer specifically to the direct questions from the case study. 5.1. Characteristics of architectural paint coating industry in US The paint industry in US is maturing and the industry is separated in three sectors namely, architectural paints, special purpose coating and OEM coats. The architectural coating market has reached the mature stage which is characterised by sluggish growth. One of the reasons for such slow growth is the quality and durability of the paint (Odior). Once such high quality product is applied by the user, they dont need to change or re-apply it for a long period of time. Also they require reduced amount of paint. Another reason for slow growth is that there are substitute products available and also professionals have discovered effective ways for the application of paints. The sales of sundries will increase as half of the population fall under the do it yourself category (Ryan). Since the market is saturated the number of companies is decreasing and the market has become unattractive for new entrants. Major competitors of Jones Blair in the architectural paints sector are Benjamin Moor e, PPG industries etc. There are increased EPA regulations in the industry. Jones Blair has adequate distribution channel. 5.2. Segmentation of Jones Blairs market area The market of Jones Blair is separated into two geographic regions namely, urban DFW and rural DFW. Bothe of these markets are further divided into two sub segments namely, do it yourself painters who place emphasis on price while making a purchase decision and professional painters who focus on quality and durability of the product and willing to pay high price for it (Silva and Jones). Jones Blair is a leader in the rural professional painter market as the competitors are weak in this region. 5.3. Segment that have opportunity of Jones Blair Urban profession painters segment holds opportunity for Jones Blair as they order in bulk and they are ready to pay premium charges for quality and durable products as it will influence their professional image in the market (Stevenson et al.). Also the professional painters works for a wide variety of clients ranging from residents to real estate managers thus they bring in repeat orders frequently. Jones Blair is already a leader in the rural professional painter market. 5.4. Competitive position of Jones Blair in the market Jones Blair has a string brand image in the market due to its premium products and long presence has inculcated trust among its consumers. Also they serve the high end customers who are willing to pay extra for quality and durable products ('Study Forecasts Growth For US Paint And Coatings'). They have been investing in the research and development to continuously upgrade their products and using various strategies to appeal to the market. They mainly cater to the do it yourself a consumer who want good service at low prices and also serves the professional painters who seek premium products and dont mind paying extra for it. In total, Jones Blair holds about 12.5% market share in the paint industry in US. Conclusion Thus, all the questions of the case have been answered specifically in light of the industry and internal analysis. 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