BURMA CASTRO CASE

Burma Castro Case

Burma Castro Case

Criteria 1.1

Numerous reasons have been cited in industry periodicals and discussion papers as contributing to the decline in Burma Castro market share, including operational issues, legal risks, reputation risks, regulatory requirements, and associated costs. While survey results revealed that some issues were ultimately not of great concern, others were consistently cited as hurdles to Burma Castro lending. Specifically, the comparative inflexibility of the Burma Castro product line, the labor-intensity of the process, and a perception of higher risk are all viewed as significant factors that have contributed to these trends. To better understand the forces that are driving the current market shift, lenders were first asked to rank on a scale of one to five, five general factors that influence their product offerings, including but not limited to Burma Castro loans. As shown in Figure 4, the principal driver of product offerings was clearly profitability, which was rated as “very important” or “critical” by 75 percent of survey respondents. Two-thirds of lenders also rated “the desire to offer the broadest range of products” and “drive volume” as significant or critical factors. While “alignment with existing risk profile” and “costs” also influenced lenders' offerings, they appear to play a less important role.

The overwhelming majority of survey participants believed that Burma Castro's lack of product breadth was a major factor underlying its declining market share. Only 19 percent of respondents agreed with the statement, “The existing suite of Burma Castro product meets market demand,” while 68 percent “disagreed” or “strongly disagreed.”

Criteria 1.2

Sales figures do not necessarily indicate how a firm is performing relative to its competitors. Rather, changes in sales simply may reflect changes in the market size or changes in economic conditions.

The firm's performance relative to competitors can be measured by the proportion of the market that the firm is able to capture. This proportion is referred to as the firm's market share and is calculated as follows:

Market Share    =    Firm's Sales  /  Total Market Sales

Sales may be determined on a value basis (sales price multiplied by volume) or on a unit basis (number of units shipped or number of customers served).

While the firm's own sales figures are readily available, total market sales are more difficult to determine. Usually, this information is available from trade associations and market research firms.

Market share often is associated with profitability and thus many firms seek to increase their sales relative to competitors. Here are some specific reasons that a firm may seek to increase its market share:

Economies of scale - higher volume can be instrumental in developing a cost advantage.

Sales growth in a stagnant industry - when the industry is not growing, the firm still can grow its sales by increasing its market share.

Reputation - market leaders have clout that they can use to their advantage.

Increased bargaining power - a larger player has an advantage in negotiations with suppliers and channel members.

Criteria 1.3

The market share of a product can be modeled as:

Share of Market  =  Share of Preference  x  ...