Loctite Corporation Harvard Case Solution & Analysis

Situation # 1: CUSTOMER ANALYSIS

LOCTITE operates in a highly competitive market with two of its major competitors, namely, PERMABOND & EASTMAN KODAK. LOCTITE wants to enter the market carrying BOND A MATIC 2000 with low cost, which gives high quality features at a low price. At present, the customer market for LOCTITE product line (those that do not require service) is high versus its competitors and LOCTITE is leading the market share with 34.64% for its product SUPERBOND that is complementary to BOND A MATIC 2000. The company at present is focusing on increasing its market share and capitalizing on its strength of increasing sales 20% per annum.

With the introduction of BOND A MATIC 2000 in the market, LOCTITE can increase its market share further. What LOCTITE needs to do is, introduce BAM 2000 such that the target customers perceive it as a convenience product used along with SUPERBOND that has wider acceptance in the market. As BAM 2000 will be a product that will be priced low as compared to the similar products in the industry therefore; it needs to pop out the market and become a standalone product in the market of instant adhesives. Customers perceive LOCTITE as a company that will not compromise on quality, but BOND A MATIC 2000’s price is way below what other prices of LOCTITE’s product line are. Therefore, BOND A MATIC 2000 needs promotion, which will not impact LOCTITE’s image in the mind of consumer. Further, although this industry is not price sensitive, yet the introduction of BOND A MATIC 2000 may distort LOCTITE’s image in the mind of consumer.

Situation # 2: COMPANY ANALYSIS

LOCTITE stands in the market, holding the largest chunk of share for CYANOCRYLATES in industry of 47.5% = (91800-62150)

                      = 29650

                      = 29650/62150

                     = 0.4747 * 100

                     = approximately 47.5%

. At present LOCTITE is regarded as a quality producer of automatic dispensing system. It also accounted for contributing major chunk of IPG (Industry Product Group) sales in the fiscal year 1978. LOCTITE is famous in its industry for bringing up innovations in the way adhesives can become safer to use, as indicated by the innovation of GLUEMATIC PEN and VARIDROPPER. These two innovations helped the company to go beyond the regular standard of one ounce bottles and helped end-users to reduce wastage. With the introduction of these two new innovations, LOCTITE helped IPG to boost its sales growth by seventy percent, which is a competitive landscape achieved.

LOCTITE’s supply chain is one of its major strength with which it has gained momentum in increasing its sales growth. It knows who are its major distributors and can rely on them for elevating its sales of its new innovative products. The new BOND A MATIC 2000, GLUEMATIC PEN and the VARIDROPPER will be carried out by 285 chosen and trusted distributors out of 10,000 nationwide distributors, for which they will be given a 25% margin on sales. Sales people of LOCTITE are also trained to communicate the efficiencies of BOND A MATIC 2000 and its complimentary uses to the prospective customers for which they will be given a healthy commission. Further, people associate LOCTITE with quality and BAM 2000’s low price may hurt this reputation. Therefore, the suggested strategy is to outsource BAM 2000’s sales.  LOCTITE’s 25% sales in 1978 and at a Compound Annual Growth Rate of 25%, IPG may grow its sales from LOCTITE to 40 million from 32 million in one year (as stated in the case). The economic impact as a result of BAM 2000 introduction will be positive on the company. Furthermore, the cannibalizing strategy of LOCTITE within IPG division will not be a problem for the company because it will help the company to cater other market segments too. And this cannibalization will also not have a negative impact on the SUPERBOND market, of which the consumer perception is quality.

Situation # 3: COMPETITOR ANALYSIS

Comparing BOND A MATIC with rest of the adhesive dispensing products, it is priced very low versus other similar product offerings. In addition to this, the similar product line from competitors for BAM 2000 are those, which are automated dispensers where as BAM 2000 is a manual dispenser. At present competitors do not possess enough operational command, which will pose a threat to BAM 2000 launch and expected sales. However, if BOND A MATIC 2000 penetrates successfully in the market then LOCTITE’s name will further strengthen up in the mind of business and individual customers alike. This will help push competition back.

Moreover, BAM 2000’s launch in the market will bring unrest in the industry and LOCTITE’s competitors (EASTMAN & PERMABOND) may gear their efforts up in the development of similar adhesive dispensers for companies. By introducing BAM 2000, LOCTITE will also gain a first mover ..........................................

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