BUS106 Marketing Principles

OzCo Boats is a family?owned boat building and repairing business based in Coffs Harbour, New South Wales. Operating since 1961, OzCo designs builds and repairs many kinds of luxury and recreational boats. They operate three distinct business divisions. Their ‘small vessels’ division creates a line of hand-built rowing boats, canoes and sailboats, which are sold to consumers who personally use them for racing, fishing or other recreational purposes. The maximum competition OzCo faces in Australia is in this segment as there are at least three other companies that have grown substantially in the last few decades and pushed OzCo’s market share down. They have been able to achieve this primarily by offering lower-priced alternatives (by importing cheaper inputs, using technology-intensive methods of production or offshoring production completely). OzCo, on the other hand, takes pride in supporting its Australian suppliers and the Australian workforce by keeping manufacturing local. OzCo’s second business division manufactures ‘medium vessels’ that are luxurious and expensive, such as cruisers and catamarans. These boats too are mainly sold to end-users, but a few of OzCo’s customers are tourism and hospitality businesses that lease out the rooms or boats to elite clientele. Historically, this is OzCo’s oldest division and was its primary focus and revenue driver until the year 2000, when the ‘small vessels’ division was launched. Even now, over 50% of OzCo’s revenues come Assessment Information COMMONWEALTH OF AUSTRALIA Copyright Regulations 1969 This material has been reproduced and communicated to you by or on behalf of Kaplan Business School pursuant to Part VB of the Copyright Act 1968 (‘Act’). The material in this communication may be subject to copyright under the Act. Any further reproduction or communication of this material by you may be the subject of copyright protection under the Act. Kaplan Business School is a part of Kaplan Inc., a leading global provider of educational services. Kaplan Business School Pty Ltd ABN 86 098 181 947 is a registered higher education provider CRICOS Provider Code 02426B. from this division and OzCo is the market leader in this category by a huge margin. It has been OzCo’s conscious decision to stay ahead of the technological curve by continually innovating and using newer materials to improve the longevity and reduce the costs of their boats. In Australia, OzCo was the initiator of using fibreglass instead of traditional materials, such as wood and steel, for boat making. Lately, OzCo has been spearheading the move to advanced material such as Kevlar and carbon fibre. Of course, these advancements come at a high cost, which Ozco has been able to pass on to the consumers in this category. ‘Repair and maintenance services’ constitutes their third business division, and it serves businesses as well as final users. Questions have been raised in past business meetings about whether OzCo should focus on boat building, rather than repairing, as the latter is mostly labour intensive and wage rates in the country are quite high. Thus, this doesn’t allow for huge profit margins. While only about 20% of OzCo’s income is generated from this division, the decision was made to continue it as it contributes to increased customer satisfaction. OzCo is the only big manufacturer offering these services in a market that is otherwise unorganised and scattered over numerous small repair businesses. Till 2010, this Australian industry was in its growth stage, with more and more of the population entering upper-middle and upper classes while working a smaller number of hours weekly. More and more people were turning to water-based recreational activities and owning a boat became a prestige symbol. Though this decade did not bring substantial growth for OzCo, until 2015, OzCo was enjoying decent profits. It had managed to build up strong reserves of cash and keep its employees extremely satisfied by paying them well above the industry standards. Thanks to this, OzCo’s employees have been immensely loyal for decades, and OzCo attracts the best talent from the nation. However, the last few years have not been too kind to the Australian economy. Unemployment is on the rise with some manufacturing moving offshore, and many industries are experiencing recession (especially the mining, construction and automobiles industries). The service industries of tourism, hospitality, arts and recreation, and education have been faring better. These sectors have been able to experience growth mostly due to foreign income being spent in Australia. Other sectors such as defence and health, which are largely driven by government spending, have also been stable. The Australian households haven’t been experiencing healthy wage or wealth gains and their purchasing power, on the whole, is decreasing. Though the government is trying out various means to revive the economy, it warns that the next few years will be tough. As a result, consumers’ preferences have continually shifted from luxury and more expensive products to basic and less expensive ones. Due to the gloomy economic outlook, consumers have even tended to postpone purchases of consumer durables, preferring to restore or refurbish them instead. Though some neighbouring emerging economies show the promise of growth, OzCo’s boats are not competitive in those markets due to high production costs and unsuitable foreign exchange rates. The consumers in those countries are price sensitive and local producers there already enjoy the advantages of low costs, established marketing channels and favourable brand reputation.

Step 2: Complete the following tasks:

1. Create a perceptual map for any of OzCo’s products. Apart from showing OzCo’s positioning, use external research to plot two other actual companies’ boats on the same perceptual map. Include a short write up (100 words) explaining your logic.

2. Perform the SWOT analysis for OzCo Boats. List all the relevant points from the case in the correct category. No further explanations are required.

3. Create a BCG matrix for OzCo’s three business divisions and follow it up with a short write up (200 words) explaining your classification. Assessment Information COMMONWEALTH OF AUSTRALIA Copyright Regulations 1969 This material has been reproduced and communicated to you by or on behalf of Kaplan Business School pursuant to Part VB of the Copyright Act 1968 (‘Act’). The material in this communication may be subject to copyright under the Act. Any further reproduction or communication of this material by you may be the subject of copyright protection under the Act. Kaplan Business School is a part of Kaplan Inc., a leading global provider of educational services. Kaplan Business School Pty Ltd ABN 86 098 181 947 is a registered higher education provider CRICOS Provider Code 02426B. 4. Using the Ansoff matrix, discuss the four strategic alternatives that OzCo has. Evaluate the suitability/unsuitability of each and recommend ONE best alternative that you think OzCo Boats should pursue now and explore how they could go about it. Provide reasons for your choice and use credible external research to support your recommendations.