University of the Thai Chamber of Commerce

II 418-1 International Business Strategy

Case Study Analysis
Student: Izabela Campos ID: 5501502038
Prof. Dr. Jakarin Srimoon 2-2015
Janmar Coatings, Inc.
Case Summary
Janmar Coatings is a painting company in the southwestern U.S. The industry is
divided in three segments: (1) architectural coatings, (2) original equipment manufacturing
(OEM) coatings, and (3) special-purpose coatings. Architectural coatings represent 43 percent
of the total industry dollar sales, and estimated to be $12 billion dollar-plus in U.S. sales.
About 50 percent of architectural coatings dollar sales are brought in by do-it-yourselfer
painters purchases. Professional painters purchases are accounted for about 25 percent of the
dollar sales. The rest is from government, export, and contractor sales. The three main types
of distributors are mass merchandisers and home improvement centers (50%), special paint
stores (36%), and hardware stores and lumberyards (14%).
Problem/ Issues
The current problem Janmar Coatings is facing is how to cost effectively market the
products and what area is the best place to market. The company relies on leadership to help
making decisions regarding the market, and after two senior executive meetings, there was no
resolution. Janmar Coatings, Inc. has to decide where and how to execute corporate marketing
efforts in the southwestern United States. Janmar Coatings is currently covering all 50
counties, and their main focus areas are the 11 counties in the Dallas-Fort Worth area. The
main issue Ronald Burns, the president of Janmar Coatings, is having is trying to come up
with a solution to market his company in the most cost effective way during 2005. After 2
long meetings with his executive team, hes still with no clear direction. He has gathered an
approach from each of his team members, including: VP of Advertising, VP of Sales, VP of
Operations, and VP of Finance, and now has four solutions to consider.
Analysis and Evaluation

Beside suggestions given by the senior executives and the president of Janmar
Coatings, Inc., there are three ways to deploy Janmar products (Paints and sun-dries). First,
since 60% ($80 million) of Janmars architectural coatings products were sold in DFW area,
the company should distribute more of its products to that area in order to maximize sales.
Regarding the non-DFW area, the majority (90%) of that area deals with do-it-yourself
method to paint their houses or rooms, and usually the decision effected by the price of the
product. Therefore, Janmar has two options for the non-DFW area, either to cut the prices of
their products, or to develop a new lower quality category that has the same brand name but
cheaper than the premium category. The competition in Architectural coating segment are
increasing. Companies seeking growth and a higher sales base to support increasing costs are
making acquisition. Major products of paint for the architectural coatings segment include
Sherwin-Williams, Benjamin Moore, the Glidden unit of Imperial Chemicals, PPG Industries,
Valspar Corporation, Grow group and Pratt & Lambert. These producers account upward for
60% of sales in architectural coatings segment.
Course of Action
According to the VP of Advertising, one strategy could be to increase advertising by
$350,000 to household segments for corporate brand awareness. The break-even dollar
volume would equal to $1,000,000. This was calculated by dividing the incremental
expenditure ($350,000) by the contribution margin (0.35). The pros with this is that it can
improve the brand awareness amongst mass merchandisers and other paint brands, as well as
attract do-it-yourselfers in both DFW and non-DFW areas. Eventually, this would lead to an
increase in companys sales. The con would be taking the risky step of this extra expense.
According to the VP of Operations, the second strategy would be to cut the price by
20% of all paint products and use current advertising budget to promote price reduction. The
current total contribution is $4,200,000. We get this number by multiplying 35% and
12,000,000 together. After price reduction (.15/.80 = 18.75), the sales would have to get
$22,400,000. We obtained this number by $4,200,000/.1875. The pros to this strategy are that
you can increase sales in the short term and it becomes more competitive. The cons are that it
is too difficult to reach the new sales amount and lowering the price could affect purchasing
decisions.
According to the VP of Sales, the third strategy would be to hire new sales
representatives. Now, the direct cost to keep one representation is $60,000 annually. To
recover a representative the cost is ($60,000/.35(contribution margin) = $171,428) $171,428.

The best thing about this strategy is that it is the most affordable and reasonable than the other
strategies. You could increase the number of do-it-yourselfers and catch the attention of
professional painters at the same time. It may not be a guarantee, but it is definitely the most
reasonable.
According to the VP of Finance, the last strategy could be to do nothing. The pro in
this case would be that Janmar Coatings would gain more sales due to an increase of do-ityourself household buyers. The con would be that the company would be less competitive
because it becomes less accommodating.
Potential Outcomes
The VP of Advertising has proposed to increase corporate advertising with a large
emphasis on television. The VP of Sales proposed hiring a new field representative to help
generate new accounts. The VP of Operations has proposed a 20% price cut on all Janmar
product sales. The VP of Finance proposed that nothing be done; that the company continue
with their current efforts and keep a 35% contribution margin. After looking at the companys
overall goals and finances, I would agree with the VP of Sales. Based on his suggestion, I
believe it would be a smart time to hire a new sales representative for Janmar. The cost
attributed to company for hiring a new sales representative would be $60,000 per year. And
the amount of sales revenue needed to cover this expense is $170,000. However, if this sales
representative position is correctly used, they will be able to make this margin back rapidly.
Because by concentrating on only developing new retail accounts in the non-DFW area, the
company could generate lots of sales to a brand new buyer market. Janmar has realized that
they need to focus more energy on the Do-it-yourselfers as they say, or DIY.
Recommendations
Janmar Coatings, Inc. should pursue going after the DFW area and increasing their
number of do-it-yourselfers. I would recommend going with the idea of VP of Sales, adding
an additional sales representative that will mainly focus on developing new retail account
leads, is a good idea. An increase in market share will be caused by an increase in retail
outlets, where the do-it-yourselfers go to buy the Janmar Coatings products.