1. Executive Summary
Norton Compasses offers three different models of compasses to the kayak assemblers, and has built a reputation on the quality of its compasses and their technical superiority. Although the demand for the high-end compasses had been growing for several years, the company experienced a loss of $50,000 in the last year and is not operating at full capacity. For the coming year, you have two offers to sell exactly 5000 compasses in the markets where company had no existing sales, and opportunity to grab the growth in the existing market. With the maximum available additional capacity to produce 7,500 compasses, we have determined that we must investigate and reach recommendation as to what opportunity(ies) should the company avail.
To reach a recommended course of action, we come up six criteria – Profitability; Cannibalization; Opening a new market; Risk of future predictions; Management interest; and Simplicity in business. As the strategy adopted by the Norton Compasses at this stage will have significant long term impact on its business scenario, we argued that all the listed criteria should be given equal weights.
After the analysis of the income statement and the information provided by you, we found that Norton compasses can devise its strategy along four dimensions – Maintain current market; accept offer of Litinski Kayaks; accept offer of Evan kayaks; and capture the market growth. Pre-evaluation of different combinations of above dimensions on the basis of previously mentioned six criteria, we narrowed our alternatives to the following three strategies :
· Maintain the present market, accept the order of 5000 compasses from Latinski Kayaks at an average price of $50 per compass and capture the market gr ...