Clique Pens: The Writing Implements Division of U.S. Home Harvard Case Solution & Analysis

Problem Statement

The Clique Pens Writing Division of US Home have experienced a 6% decline in the gross profit margin within 2 years, which made it critical for the president of the company to implement a new plan that could increase gross profits, work with retailers and motivate consumers. The company is confused whether to satisfy the needs of the retailers or the customers.

Situation Analysis

The Clique Pens Writing Division of US Home is one of the well known manufacturers of a full range of pens, pencils, markers and art supplies. In 2010 the company’s gross profit margin was 42%, which  declined to 36% in 2012 due to various discounts, allowances and off-invoice deals. The competition in the industry is very high; therefore, the company needs to implement a strategy that could help them in increasing their gross profits. The increasing challenges of the industry and high power of the retailers forced the president Elise Ferguson of Clique Pens Writing Division of US Home to revise the current strategies, costs, marketing, sales plans and other initiatives to eliminate their excessive costs as well as to increase the shelf space and life for their products. She is currently considering a switch from such discounts for Market Development Funds (MDF), which would be used for the promotion of retail merchandising activities in order to empower the company to have control on the trade promotions. The structure of various trade promotions is very complicated. It became hard for the Ferguson and for the vice presidents of Marketing and Sales departments to choose an effective pricing and promotional strategy. That way it will boost the sales and gross profit margin. Ferguson also needs to avoid the possible conflict between marketing and sales department of the Clique Pens Writing Division of US Home, while finalizing an option for them. Possible options that are available with Ferguson are to reduce spending on the advertisement and promotional activities of the products, secondly to increase trade allowances/discounts or to reduce or increase the prices of their products. However, the marketing and sales department’s VP’s have some valid objections on these options and it becomes difficult for Ferguson to choose and implement any of the options. In the mean time, Ferguson has given 48 hours deadline to the VP’s of the marketing and sale departments to come up with a plan to increase the gross profit of the company as well as to work with retailers and motivate customers.

Industry Analysis

Porter’s Five Forces will help in understanding the industry trends and conditions so that the company can choose and implement an effective plan (Appendix 1).

Bargaining power of Buyers

In the industry of writing implement, the manufacturer has to deal with two types of customers/buyers, i.e., the retailers and the end users. In this industry the bargaining power of the buyer is moderate to high because to sell out their products, a manufacturer needs to offer high trade discounts to retailers to get a shelf space. In this regard, retailer is the primary buyer who can ensure good sales to a company by influencing the buying decision of consumers end. Moreover, the competition is very high therefore; both the retailers and consumers have no switching costs to other products which also increase their power.

Clique Pens The Writing Implements Division of U.S. Home Case Solution

Bargaining Power of Suppliers

The bargaining power of suppliers is low, because every manufacturer has a unique formula to produce and design the final product. Suppliers are only responsible for providing the raw material, which also has a fixed price in the industry and all the businesses that are operating in the writing implement industry are well aware about the prices and competent suppliers.

Industry Rivalry

Industry rivalry is at its peak because there are a number of manufacturers who are competing on prices and trade discounts. The increase in variety of pens and pencils such as ball points, fountain pens, gel pens and a number of other varieties has increased the competition. Writing implements are mainly purchased by businesses and household. In the US, 65% consumers are purchasing three or four pens and pencils, two times a year for their household and other uses, whereas, 100% businesses............

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