YANKEE CANDLE
External Factors Evaluation • Other firms in the industry captivate a variety of market segments by diversifying their product line • Because Yankee Candle has not diversified their product line, the company lacks the ability to attract more than one segment of the available market • Consumers purchase products from companies that are fresh and innovative • Companies that are aware of the consumer’s desire are able to capitalize on opportunities that Yankee Candle is missing out on by not acknowledging the needs of consumers • Competitors have also taken advantage of consumers increasing use of the Internet • Yankee Candle must recognize the Internet as a growing market and find ways to restructure their business model to accommodate this ever-expanding market
External Factors Evaluation External Factors Weight Rating Weighted Score Comments Other firms captivate a 0.15 2 0.3 Products appeal to an variety of market older market segments by diversifying product lines Inability to raise prices 0.1 4 0.4 Average price $20; since product line is reasonably priced for somewhat uniform candle and container There is a strong desire 0.2 1 0.2 Company needs to for a more youthful and extend market, target contemporary feel in younger demographic choice of products Discovering natural and 0.05 4 0.2 Company needs to be sustainable materials will aware as consumers make a firm appear more desire “green” products socially responsible Redesigning website to 0.2 1 0.2 Website is boring and appeal to online shoppers lackluster Companies that are more 0.3 3 0.9 Competitors have aware of contemporary stronger market market and capitalize on presence opportunities Total Score 1.00 2.2
Internal Factors Evaluation • Strong and effective management • Dominant market share in the premium candle industry • Indisputable experience
Internal Factors Evaluation Internal Factors Weight Rating Weighted Comments Score Management is intelligent and disciplined 0.15 4 0.60 Company provides financial incentives to 0.03 4 0.12 management employees who have significant responsibility for sales, operations, and profit Business has around 50% of market share in the 0.15 3 0.45 premium candle segment Leading designer, manufacturer, wholesaler, and 0.10 4 0.40 retailer of premium scented candles in the giftware industry 35+ year history of offering distinctive products and 0.10 4 0.40 marketing them as affordable luxuries and consumable gifts Company is creating other candle companies to sell 0.05 3 0.15 through mass premium channels, such as Costco and Kohl’s Annual “Light a Candle for Your Heart” program to 0.02 3 0.06 Contributed over $150,000 over the support the American Heart Association last 2 years to help address the #1 killer of women in the US Market capitalization of $850 million 0.10 4 0.40 Earned $80 million in cash 0.05 3 0.15 Generated free cash flow of $110 to $120 million 0.05 3 0.15 By utilizing borrowed funds, repurchased $185 0.05 4 0.20 million worth of its stock Given the high cost of oil and the strained refining 0.15 2 0.3 One of Yankee’s main wax providers capacity, the cost of raw wax has skyrocketed put them on 70% allocation after suffering damages from Hurricane Katrina Total Score 1.00 3.38
IE Matrix IFE Scores High (3-4) Medium (2-2.99) Low (1-1.99) High (3-4) EFE Scores Medium (2-2.99) Yankee Candle Low (1-1.99) 1: Invest/Grow 2: Selective investment/Maintain position 3: Harvest/divest
Corporate Strategies • Approximately 70% of Yankee Candle’s customers are 35 or older. • Our consulting firm encourages Yankee Candle to expand the market and capture young adults and recommends three strategies to achieve this goal: (1) Market development strategy, (2) Product development strategy, and (3) Market penetration strategy.
Market Development Strategy • Most effective strategy to capture Yankee Candle’s younger market: Launching a national campaign, utilizing print media, as well as the Internet • Current Yankee Candle ads appear in local print media, such as newspapers • New advertisements will have less text and a more simple and modern look • Lifestyle magazines, like Real Simple or Martha Stewart Living • Internet banner advertisements
Market Development Strategy Current Ad: Too much text Difficult to read Old and outdated New Internet Ad: Simple Yankee Candle come see Eye-catching what’s new Mysterious a passion for fragrance www.yankeecandle.com
Product Development Strategy • Create a new line of candles that appeals to the younger market • Sleek and monochromatic look, so that they can easily blend into a variety of environments • Still recognizable as a Yankee Candle product • Be careful not to abandon current customer
Product Development Strategy
Market Penetration Strategy • Increase product usage for all of Yankee Candle’s customers • Provide incentives for both the new and younger consumer, as well as their loyal customer base • We suggest that the company offers a Yankee Candle Club card • Tracks purchases and offers rewards based on the customer’s purchase history • Show how their product could adapt to many different environments and uses • Candles are the perfect gifts!
Market Penetration Strategy
SWOT Matrix Strengths Weaknesses Use internal strengths to take advantage of Improve internal weaknesses by taking external opportunities advantage of external opportunities Opportunities Yankee Candle has a strong market presence. The company has a dated image and has They have the opportunity to extend their been unsuccessful in marketing to consumers base to a new market, younger consumers By extending their market, Yankee Candle (age 18-35). has the opportunity to update their image and pursue an effective marketing campaign. Develop defensive tactics aimed at Use internal strengths to avoid or reduce reducing internal weaknesses and avoiding the impact of external threats external threats Be certain not to abandon loyal customers Yankee Candle needs to remind consumers Threats while expanding market. Continue to offer of the novelty of candles, that substitute customers the superior product quality and products simply cannot imitate. service they have always received.
SPACE Matrix FS +6 Cost leadership through concentration, Conservative Aggressive concentric diversification, or vertical integration +5 CA: -1.8 +4 IS: 4.2 X-Axis: 2.4 +3 FS: 5.0 ES: -1.4 +2 Y-Axis: 3.6 +1 CA IS -6 -5 -4 -3 -2 -1 +1 +2 +3 +4 +5 +6 -1 -2 -3 -4 -5 Defensive Competitive -6 ES
BCG Matrix +0.2 Stars Question Marks 7 1 2 3 6 Market Growth Rate 0 Cash Cows Dogs 4 Cash Flows 5 8 9 10 -0.2 1.0 0.5 0.0 Relative Market Share Division 1: Retail Sales Division 6: Scentstories Division 2: Internet Sales Division 7: Custom Candles Division 3: Marketing and promotion Division 8: Tarts Wax Potpourri Division 4: Returning Treasures (candles) Division 9: Samplers Votive Division 5: Seasonal Favorites (candles) Division 10: Miscellaneous Products
Grand Strategy Matrix Key Internal Factors Weight Market Development Product Development Market Penetration Strengths AS TAS AS TAS AS TAS Strong and effective management 0.15 --- --- 1 0.15 1 0.15 Dominant market share in industry 0.15 4 0.60 2 0.30 3 0.45 Indisputable experience 0.10 2 0.20 --- --- 1 0.10 Market capitalization of $850 million 0.10 --- --- 2 0.20 1 0.10 Weaknesses The cost of raw wax has sky-rocketed 0.15 --- --- 3 0.45 --- --- Limited product offering 0.20 2 0.40 5 1.00 3 0.60 Ineffective marketing and promotion 0.15 3 0.45 3 0.45 4 0.60 Subtotal 1.65 2.45 2.00
Grand Strategy Matrix Key External Factors Weight Market Development Product Development Market Penetration Opportunities AS TAS AS TAS AS TAS Consumers’ strong desire for more 0.20 2 0.40 5 1.00 2 0.40 youthful and modern products Redesign website that appeals to 0.20 2 0.40 2 0.40 3 0.60 customers; fresh and easy to use Become more socially responsible, ie: 0.05 --- --- 2 0.10 --- --- use sustainable materials Threats Companies already capitalizing on 0.30 4 1.20 4 1.20 3 0.90 younger market segment Companies captivating a variety of 0.15 3 0.45 5 0.75 2 0.30 markets by diversifying products Inability to raise price due to uniform 0.10 --- --- 1 0.10 --- --- product line Subtotal 2.45 3.55 2.20
Grand Strategy Matrix Key Factors Market Development Product Development Market Penetration TAS TAS TAS Internal Factors 1.65 2.45 2.00 External Factors 2.45 3.55 2.55 Total 4.10 6.00 4.55 Priority: Product Development
"If we know where we are and how we got there, we might see where we are trending – and if the outcomes which lie naturally in our course are unacceptable, to make timely change." Abraham Lincoln
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