What is Cima’s current situation? After the renovation of Cima mountaineering, Inc.
in 1990, they started with $ 13 million revenues, with profit margin of 4. 01%. The next 3 years witnessed a continuous increase in sales and revenues. Their profit margin increased to reach 4. 97% by year 1992. They reached an all time high sales and revenues in 1995 of $20 million; however their profit margin decreased to 4. 27%.
Cima mountaineering, Inc. has been growing steadily & the sales by a significant percentage to reach 8. 4% increase in sales in 1994, from the previous year and by 7. % in 1995. Sales in hiking boots segment are growing and it’s even dominating over the mountaineering segment to reach 85% from their total sales. They are only targeting 2 segments which are Mountaineering and Hiking and are not dominating in either segment. Their market share in the whole hiking boots – all the 6 segments – is 3.
33% in 1995. In the mountaineering segment they only have 2. 33% of the market. In hiking segment is 3. 63% of the market. Cima delivers high customer value through their manufactured boots. The customers perceive the boots as durable and comfortable.
Cima is an active innovator and always develops new constructive techniques to its products, which add more customers’ benefits and boost the added value in Cima’s manufactured boots. After the transition, the company’s name was changed to “Cima Mountaineering Inc. ” to position the brand as a more specialized boots manufacturer. Cima boots positions its self as for the rugged outdoor enthusiast. This segment includes advance hikers who use the boots on challenging trails and extended backpacking trips, as well as rugged mountaineers who climb in rugged terrain.The company used corporate branding as “Cima” was embossed on the leather on the side of the boots, to enhance customer recognition. Cima boots is also positioned as the best available for the intended purpose.
Cima is successfully marketing its brand in the Western States, by focusing on quality, innovation and the continuous product developments. Cima Mountaineering is an organization in a state of “dying slowly”. Cima doesn’t have a clear strategic management; managers had never seriously thought about segmentation of the market.On the other hand Cima has strong operational management; the company adopted a cost/efficiency leadership strategy, it implemented CAD system to shorten development. Also Cima achieved significant cost savings by the new approaches. What are the problems facing Cima? Although Cima has a competitive edge –high quality, exceptional performance and durability -over the other domestic boots manufacturers, it is encountering a great competition from domestic rivals. Cima is losing retailers and market share to potential competitors like Merell and Vasque.
These competitors are introducing boots’ styles to the market more than that Cima is producing, especially to the Serious Hikers segment. This shortage in line depth probably is giving the competitors dominance over more market share. Another threat which Cima must deal with is that domestic shoes manufacturers entered the market due to the attractiveness of the hiking boot market. Currently Nike, Reebok and Timberland are targeting other segments in the market which benefit from less specialized boots. But they are considering stretching to more advanced hikers segments.Foreign boots manufacturers such as Asolo, Raichle and Hi Tech are now exporting to the United States.
Depending on performance and their reputation from overseas, these companies are marketing their products to Mountaineers, Serious Hikers and Weekenders. Cima is only selling in the Western States and Canada. Distribution of Cima boots is limited to only 10 states in the United States. Obviously Cima made a mistake by narrowing its distribution channels, as it sells only to retailers specialized in mountaineering, backpacking and hiking equipments.Cima recently rejected the idea of internet selling and now managers are considering selling to catalogue companies though this might lead to losing some of the loyal customers. Cima Mountaineering targets only to segments in the hiking boots market; the mountaineers and Serious Hikers. Market shares of these two segments are 5% and 17% respectively of the total market.
Combining the two segments we find that Cima targets only 22% of the market. Serious Hikers can be considered as good market but it has moderate growth rate, While Mountaineers is a niche market with a slow growth rate.Pricing is one of the major obstacles in front of Cima; the produced boots are priced very high compared to the potential competitors’ boots. This led to losing retailers such as Rock Mountains Sports and Western Outfitters. Retailers’ Managers returned this replacement on the change in demand of college students to lower priced boots. As for promotion, Cima only advertises in backpacking magazines like Summit, Outside and Backpacker. Their campaigns don’t reach non professionals that may be interested in their boots.
Also Cima has only 10 independent sales representatives that don’t sell competing boots, but sell complementary products.S. W. O. T. Analysis: STRENGTHS: •Products with very high quality, durability and unique materials. •Products resistant to wet & cold.
•High level of specialization in mountaineering & serious hiking. •Striving to maintain customers’ loyalty. •Good Distribution in the Western States. •A strongly established brand that is well recognized by customers (Brand Equity). •They have the necessary infrastructure & experience to customize the manufacturing process according to their needs; hence they have the advantage of manipulating their economies of scale.WEAKNESSES: •Seasonal sales figures. Product’s price is too high as compared to competitors.
•Lack of product variety & low product depth. •Traditional styles. •Localizing them in a highly sophisticated niche market, producing products to highly sophisticated customers. •Low profitability. •Limited channels of distribution. •Lack of designing capabilities. •Very high retailers’ product margins.
•15% of the production capacity is not used. OPPORTUNITIES: •The market has 4 more segments of high potential to growth that are untargeted by Cima. •Catalogue companies showed interest in working with Cima. •Sports retailers like REI want to sell Cima’s boots. Change in people’s life style to healthier life led to increase in the hiking boots market demand. •Availability of wide variety of distribution channels (direct sales, retailers, mail order, and internet sales). THREATS: •High foreign competition with highly styled low priced products, in the domestic market.
•Shifting demand for more fashionable products. •Low growth rate in the current targeted niche markets. •The current market demands are seasonal because mountains are hardly accessible in winter. •Potential competitors offer more product depth; thus control greater market share. StrengthsWeaknessesOpportunitiesExpanding market channels through direct market sales, catalogue sales and internet sales. Depending on the Brand reputation of Cima; the company can produce new boots to untargeted high segments of high growth rate. Utilizing the dead 15% of their production capacity to penetrate a new market.
Cima can increase its distribution channels to reach more customers ThreatsUtilizing its strong infrastructure & experience Cima can adopt mass customization to reduce prices of the current produced boots. Cima should have more product depth to meet with different customers’ preferences.What is main issue that Cima currently come across? Cima’s biggest demanding issue is to figure out how to expand the product mix to increase the company’s growth and keep up with competitors. Managers, Anthony and Margret, are confused trying to choose between expanding line’s depth by producing three new boots, which will target the Mountaineering and Serious Hikers segments. Or to expand the line’s length and manufacture new light, low-priced boots that targets occasional “Weekenders” hikers. Cima must choose only one alternative because the company’s budget can’t afford to finance the two alternatives.What do we recommend? We recommend that Cima should introduce less expensive, more versatile “Weekender” boots.
This boots are meant to target the young and middle aged men and women who are recreational hikers and enjoy outdoors and spending time with friends and family. This diversification strategy will benefit the company in many ways. First, Cima will be targeting 47% of the hiking boots market; this will probably lead to increase in market share and profitability. The Weekenders segment has large appeal and potential for growth; thus it promises more profits in the future.And last, stretching to other segments in the market will acquire the company more experience which might lead to further stretching to the remaining segments in the market. Why not recommend the expanding of existing boots? If we compare the currently targeted segments’ shares to the Weekender’s market share, we will find that the current segments have smaller market share combined together against the Weekender’s. Also the Weekender segment has higher growth rate and potential than the currently targeted segments.
and finally, if we look at the company’s current market position in those two segments. e will find that the Cima’s relative market share is definitely less than 1 – we assume that the highest competitor has more than 3% of the market share – and the market growth rate is between slow and moderate. Then Cima Mountaineering can be considered as dogs. This means that Cima shouldn’t invest more in the current market. Cima is supposed to divest this business or at least continue harvesting these two markets. Other recommendations to Cima’s problems? Cima must increase the distribution channels of all product lines. Boots selling must be expanded through all the United States.
Excluding the distribution on the western states deny Cima from an increase in profits opportunity and potential growth. Cima should expand the distribution to sporting good stores such as REI. Cima has to sell by mail order and to catalogue companies because this generates a lot of revenues. Finally, Cima must construct its own website and consider selling online from its web page and retailers’ web page. About pricing, Cima may consider adopting mass customization marketing strategy in manufacturing and selling boots to Mountaineering and Serious Hikers segments.The company can create a product with standard features and any additional feature or benefit is added according to customers’ customizations and preferences for a suitable amount of revenue. This will lower the boots prices and makes it affordable for more customers without affecting the brand position as a high quality, high priced brand.
Mass customization probably will lead to increase in market share and may be by time convert the state of currently targeted markets from dogs to cash cows. Increase of promotion is an urgent need for Cima.Promotion if extended to life style, vacation and family magazines, would probably add more recognition to Cima Brand and increase sales. The extension of promotion should also reach the internet. Because it is cheaper and is widely spread. Cima may intensify the company’s internet advertising campaign on hiking, trail and retailers websites. Suggested action plan: •Construct a flexible strategic plan in order to cope with market’s changing demands.
•Expand line length by introducing new boots that target Weekender Hikers. • Implement Mass Customization marketing strategy in Advanced Hikers’ boots to lower its prices. Expand distribution channels of all lines through all the United States and internet. •Expand promotion to non-specialized magazines and internet. What can we learn from this case? •Managers should come up with a clear, attainable and flexible strategic plan. Organizations must continually monitor the market and redesign the plan to meet the market’s demands. •Mangers shouldn’t neglect segmentation because it is the key to the door of marketing.
•Proper promotion leads to increase in market share – mind share + heart share = market share. •Organizations should try to increase their distribution channels.