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Omega Paw Swot Analysis

Essay by   •  November 14, 2011  •  Case Study  •  2,286 Words (10 Pages)  •  4,203 Views

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Decision Statement

The decision facing Omega Paw is how and where to expand its marketing initiatives, as well as to determine what channels of distribution to use in order to effectively increase sales.

Internal Analysis

Strengths

The first strength for Omega Paw is their product itself. The "Self-Cleaning Litter Box" is a simple and user-friendly product when compared to its direct competition. The quality is demonstrated by having seven of the first eight distributors pick up the product immediately. Omega Paw also has strength in their production capacity (3,500 units per week) and financial resources that will allow them the ability to achieve their sales targets.

Weaknesses

The president of Omega has only been in the industry for less than two years. If Omega plans to rapidly increase sales to grow the company, this lack of experience may be a point of weakness. It also may have contributed to the decision of selling prototype products that were not perfected, which led to Omegas' reputation becoming 'dented'.

Omega has also shown weakness in their production capabilities. This weakness occurred when demand for their product was much lower than they hope it will be in the future. A disruption in production could further damage their reputation.

External Analysis

Market/Industry Analysis

The cat owners market in North America is growing at an annual rate of 4%, which means that there is an additional 2 million cats entering the market each year. This market should continue to increase into the foreseeable future as cats continue to be a viable pet option for a population that is increasingly living in apartments and condominiums. This market is currently in the growth stage and will continue to be as long as this trend continues. Currently, approximately 34.5 billion dollars is spent annually on cats while cat supplies (which include litter boxes) represent $4.5 billion of this amount.

However, although this industry is large, there are almost no barriers to entry. The potential for any number of competitors to join remains a constant threat.

Consumer Analysis

The consumers in this market are segmented as new cat owners, which represent 5% of the market; existing cat owners make up 80%, and 'gray zone' consumers that make up the final 15%. The first two segments are the consumers Omega should target. These consumers spend time conducting product research and want good quality products. They usually purchase their items at local pet stores or at the veterinarian offices. These consumers ordinarily expect litter boxes to be a one-time purchase. Currently 90% of consumers purchase a basic litter box that can be messy, hard on the back when cleaned, and smelly. With the average cat owner being older and living in smaller areas, these owners should be interested in upgrading their litter box, given there are no switching costs.

These consumers typically care a great deal for their cat, evidenced by the fact that over 50% of cat owners will as far as to buy gifts for their pet. This level of care suggests that these consumers will consider spending more if it is beneficial to their pet.

Competitive Analysis

Omega has three main direct competitors. The first, "Everclean Self Scoop Litter Box" from First Brands Corporation is premiumly priced between $53 and $63 and has North American wide distribution and considerable brand awareness. The major strength of this competitor is their diversity (having products for the home and automotive as well) which resulted in them obtaining annual sales of just over $1 billion as well as gaining experience in manufacturing large quantities. Their size will allow them to compete aggressively in marketing and could allow them to engage in a price war if needed.

The second direct competitor is Smart Inventions, with their "Quick Sand" product. Again, this competitor is much larger than Omega, has spent approximately $6 million in a 6 month period on advertising, and has earned considerable exposure in North America. Their product is competitively priced at $29.

Lastly, "Lift & Sift" is the third direct competitor. They are a smaller company with a product similar to "Quick Sand" and are priced at the same level. However, they have been able to penetrate the mass distribution outlets like Wal-Mart, which could mean they could become an even bigger player in the near future.

Omega also has two main indirect competitors. The largest are producers of the basic litter box which makes up 90% of the market. This product is aimed at the price-conscious consumer, priced between $10 and $15. Historically, this has been the only product on the market, which allowed for the product to gain almost unanimous awareness among cat owners and despite its shortcomings, gained general acceptance.

The second indirect competitor is positioned as the premium provider of litter boxes, priced at $199. "Litter Maid" is an electronic litter box that targets higher-income cat owners who value an odour eliminating product.

Criteria

If any of the alternatives are to be viable for a recommendation, the alternative must satisfy the following in order of importance:

1) High probability of achieving $1.7 million in sales by December 1996, $3 million by December 1997, and $5.7 million by December 1998.

2) Within the financial and production capabilities of the company.

3) Emphasis on short to medium range growth.

4) Enhance the distribution throughout North America.

5) The risks coupled with the alternative should be minimal.

Evaluation of Alternatives

Alternative 1: Conduct a Mail Order/Television Campaign

The first alternative is to conduct a mail order/television campaign that will be tested through a trial run in the United States for two-weeks. If this is successful, additional campaigns can be run throughout North America. The cost of this alternative is $20,000. In order to break-even this campaign needs to account for the sale of 2,193 units (Exhibit 1). This represents a 49% increase in sales compared to an average month (Exhibit 1). The positives of this alternative include outsourcing the details to a company with

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