MARKETING

Cardon Carpet Mills, Inc. Case

[Name of the Course]Table of Content

Introduction of the Company1

Company's position in the Industry1

Introduction of U.S. Carpet Industry1

Economics of Wholesale vs. Company's Distribution System2

Can company afford “going direct?”2

Analyzing Direct distribution2

Benefits of Direct Distribution2

Threats of Direct Distribution3

Analyzing Indirect distribution3

Benefits of Indirect Distribution3

Threats of Indirect Distribution4

Cost of Intermediaries4

Who has to absorb this cost?4

Impact on Trade Relations while taking Marketing Channel Modification Decisions4

Monetization of Marketing Channel Functions5

Conclusion5

References7

Cardon Carpet Mills, Inc. Case

Introduction of the Company

From medium to high price tags Cardon Carpet Mills, Inc. manufactures all kind of floor carpets and rugs, for in the house and office use. As it is under discussion, the company operates under two different brand names, Masterton and Chesterton. Cardon Carpet Mills, Inc. only operates within U.S.A. and has no export values. The company has structured its supply chain through seven wholesalers, followed by around 4000 retailers who cater the entire U.S.A.

To overlook the process of sales, wholesale, promotion and advertisement the company have two regional sales co-ordinators, who work as intermediaries between the company and the wholesalers to coordinate, in terms of sales and distribution processes.

Cardon Carpet Mills, Inc. advertises its products through traditional modes of Advertising, which are generally newspapers and magazines, promotes the product quality of their rugs and carpets. Moreover, company has recently started practicing the corporate level advertisement, which created a close contact between the retailer and the manufacturer.

The Carpet industry of United States spends around $50 billion annually. It is the largest segment in floor covering industry in U.S.A, followed by vinyl, wood floors, ceramic tiles and laminated floorings. This company manufactures all kind of medium to high end floor covering product, for the consumer market. Masterton and Chesterton are the two brand names under which the company markets its products. The company owners were quite happy on the company's performance in 1999. The business had achieved a sales growth of 3.6% and net margin gained 4% annually. Followed by the increasing growth of the company, the president of the company, Robert Meadows decided to develop distribution channels and wholesales operations for the company. There the president ordered his personal assistant to formulate a position paper for Mr. Robert Meadows; Nevertheless, wholesales disagreed with the proposal and Goldman got a negative feedback from the company.

Company's position in the Industry

Introduction of U.S. Carpet Industry

In 1999, the carpet industry of United States increased its sales by 7% and set a new record of around $11.5 billion of annual sales. The sales got distributed between business to business, which includes contracted sales to different offices and institution, and business to consumer sales, which includes retail sales for in-house usages. The in-house sales of the company carry the most percentage, which is 74% and its business sales in 26%.

However in the final quarter of 1999, the company started facing instability and lost a significant amount of its marketing share. In this year, the overall sales of the carpets decline by 68%. Though the business to business sales of the industry increased by 80%, but ...