case study analysis/solution of mountain equipment co-op
DESCRIPTION
This presentation is prepared by students of Universal business School, Karjat, Mumbai. The case details the current scenario of the sports equipment market in Canada vis-à-vis MEC’s strategies.TRANSCRIPT
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MOUNTAIN EQUIPMENT CO-OPT H E P R I VAT E L A B E L S T R AT E G Y
C A S E S T U D Y A N A L Y S I S
Presented By:
Chitwant TahalyaniDr. Swati Gogawat
Kedar Risbud
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CASE SYNOPSIS
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The case details the current scenario of the sports equipment market in Canada vis-à-vis MEC’s strategies.
Mountain Equipment Co-op (MEC) is a well-known Canadian retailer of gear for mountaineering , rock climbing, ski touring, hiking.
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CASE FACTS
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•Owns the mainstream name-brand market•Market leader - 20 % share of industry
FORZANI
•Entry-level mainstream -Hockey, Football, Basketball•10% share of market•Employs young adults, pays minimum wages
WALMART
•Focus on niche sports -Scuba Diving, Running, Biking•Higher-end, higher-priced•Employs active sports participants
INDEPENDENT
STORES
MEC HOLDS ONLY 1.2 % OF THE MARKET
HIGHLY FRAGMENTED MARKET
SPORTING GOODS MARKET VALUED AT
$7.5 BN A YEAR
M A J O R C O M P E T I T O R S
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GRADUATED INTO OFFERING 3 MAJOR USPS
Focus on wilderness-
oriented recreational
activities
Co-operative corporate structure
Economic, Social,
Environmental Sustainability
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15 stores across Canada
Online & physical revenue - $248mn
1,387 employeesRetail wage of $10 to
$11
To break the mold of a
‘knock-off-artist’
Built design team in 2003 for
developing private label
Not mainstream Hiking
CampingClimbingSnow sportsWater sportsGreen buildingCommunity grantsCanada-wide parks
Brands:Arc’teryxBlack DiamondPatagoniaPrana
38 % OF SALES OWING TO PRIVATE LABEL
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PROBLEM DEFINITION
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MEC EXISTS IN A HIGHLY SATURATED AND MATURE MARKET WHERE THERE IS FIERCE COMPETITION BETWEEN COMPETITORS FOR
MARKET SHARE
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PEOPLE MACHINESMETHODS
MATERIALS MANAGEMENTENVIRONMENT
• Shortage of willing employees in Canada
• Cheaper labor available in Asian countries• $19 CAD vs. $0.6 CAD
per hour
Developing private brands
Cost of materialhigher in Canada
• Extended lead times in Canadian factories
• Less responsiveness to market demands
• Moving manufacturing away from Canada
• Pricing competitors’ brands higher in category of own private labels (thermarest)
• High-handed behavior with suppliers
Acquisition of cheaper machines
in overseas markets
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EFFECT
•Private-labeled products eating into other brand sales in its own stores• Seen as infringing on intellectual property owing to copy-
>replace model•Negative public perception owing to cutting of Canadian jobs• Souring of relations with suppliers• Seen as not abiding by its own highly vaunted policies and
only seeking profits
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CASE INFERENCES
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CANADIAN MARKET SHARE BY COMPETITORS
Forzani Total Canadian Tire Walmart MEC Independent Stores
Others0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
40.00%
45.00%
MARKET PLAYERS
MEC IS COMPETING IN HIGHLY FRAGMENTED MARKET
IT ENJOYS ONLY 1.2% OF THE TOTAL MARKET SHARE
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COUNTRY OF ORIGINCanada
30%
Other70%
PRODUCT ORIGIN
Canada Other
MOST OF THE PRODUCTS ARE GETTING MANUFACTURED IN ASIA BECAUSE OF LOW COST, LABOUR, MANUFACTURING COST ETC.
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PRODUCT CATEGORYPRICE RANGE (CAD)
PRIVATE LABELS OTHER BRANDS
WEEKEND & ALPINE BAGS 69 - 144 123 - 198
WOMEN’S HIKING CLOTHING 25 - 55 73 - 79
PRIVATE LABELS ARE CLEARLY SOLD AT A MUCH LOWER PRICE THAN OTHER BRANDS
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BUSINESS MODEL
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UNDERCUT
COPY
MANUFACT-UREPRICE-OUT
REPLACE
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RECOMMENDATIONS
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•MEC must refrain from unethical practices like selling competitor’s brands at higher prices• Improve relations and work practices with local suppliersAbstain from handing out threats of lawsuits
•Build a positive public image and brand equity by standing by their company philosophiesLeveraging social media to connect with their customers and appease them
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T H A N K YO U