Janmar Coatings Essay

536 Words3 Pages
Janmar Coatings Inc. Janmar Coatings is worried about their projected growth in the Architectural paint market because of slowing demand for paint and high competition in their current market areas. Four ideas have been proposed by top executives within the company in order to remain competitive in the industry and improve bottom line numbers. The VP of Advertising suggested that the DFW do-it-yourself market is where the true profits reside. His research indicates that Janmar should increase their advertising budget by $350,000, focused in the DFW area and with an emphasis on television. He also notes that these television ads will reach consumers in 15 non-DFW counties as well. We believe this is not the best course of action for the company because 75% of the audience reached will not be interested purchasing paint. Also, this advertising budget is not focused towards a market where 40% of our sales dollars are generated. For this advertising campaign to be successful, we would have to recoup the $350,000 dollar investment plus generate new business to justify the investment, which we are not confident will happen. The VP of Operations argued to cut prices by 20% on all paint products in order to be more price-competitive in the market. With an already low contribution margin of 35%, lowering our prices will only bring down profit margins. The President of the company explained that they would need to cut prices by 40% to become competitive with lower priced paints in the market. We don’t believe that Janmar could make up their loss in margin through increasing sales volume. The VP of Finance suggests that we continue on the same track and keep the current 35% contribution margin. We believe this is a mistake because we are currently the highest price paint in the market and with sales projected to be flat in the next few years, our

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