Introduction
Background
The pen industry started off in the year 1875 by Louis Waterman. It was the market leader for more than 70 years with the fountain pens. However, during 1950s ballpoint pens were introduced in the United States market. They reduced the sales of fountain pen and the customers shifted towards ballpoints that were cheaper, user friendly and better than fountain pens.
Clique Pens were introduced in the market in the year 1922 when two cousins started off in Kansas City. The initial products offered by the company were all kinds of fountain pens, however, in 1960, the company introduced ballpoint that were cheap and innovative. The major success factor for Clique has been its ink formula, which as stated in the case has been the company’s secret sauce. The company was acquitted by U.S. Home in 1980 and its sales grew steadily until 2013 (Frank, 2013).
Issues Identified
The major issues identified in the case “Clique Pens: The Writing Implements Division of U.S. Home” is that despite the sales, the president of the company, Elise Ferguson, has observed a decline in margins from 42% to 36% in the year 2012 (Frank, 2013).
The decline has occurred due to excessive discounts, allowances offered to the retailers. The president is, therefore, considering introducing MDF that would promote retail merchandising for Clique. However, the problem is that the company needs to find a relative structure that shall eliminate the differences and conflicts among the sales and marketing department. The management is keen to offer discounts directly to the customers than to the retailers (Frank, 2013).
Industry Current market
The current market of the pen industry has been quite saturated and all the different players competing in the market are trying to compete in terms of discounts they offer to the retailers. Moreover, the large retail giants such as Walmart, Kroger, etc. have been providing shelf space to those companies that offer better discounts (Frank, 2013).
The customer is more concerned over the quality rather than the brand. The industry is not judged by the players competing, in fact it is only concerned with the discounts and quality, features and innovation offered to the customer.The major sales in the industry take place during July 15 to September 1 when the sale accumulated gross 18% of the total industry ales.
Porterfive forces model
Bargaining power of buyers: High
The bargaining power of buyer for the pen industry is high. The reason why it is high is because of the highly price sensitive market with no any chance in the product offerings. People generally have various options to choose the products from (Porter, 2008).
Along with this, the switching cost is quite low in the industry, which again makes it easier for their buyer to purchase goods.The entire product is standardized in the market.
Bargaining power of suppliers: Low
The bargaining power of suppliers is low for the industry because of the large number of suppliers available in the industry. The enormous presence of huge industry players has actually made the bargaining power of buyers quite low (Porter, 2008).
Many industry players purchase goods from a number of suppliers which makes their bargaining power for suppliers quite low. Due to this, the suppliers generally try to work with large retailers to sell in bulk quantity.
Threat of new entrants: Low
The threat of new entrants is also low for the industry. It is low because of the already mature and stagnant market. Moreover, the high capital investment required to enter the industry makes it difficult for a new entrant to enter the market.
Along with this, the trade restrictions imposed by the government on various levels makes it difficult for the new entrant. The number of large and well established players already in the market that operates at such a huge scale makes it extremely difficult to compete for new players.
Competitive Rivalry: High
The competitive rivalry is also high for the industry. It is high because of the large number of well established players already competing in the market. For instance, Clique, Pilot, BIC are already well established brands that have high market share.
Threat of substitutes: Medium
The threat of substitutes for the pen industry is medium. With the advent of paperless organizations, and computer technology the use of pen and pencil has become quite limited. Along with this, the price of the substitute is also reasonable which makes the industry product offerings substitutable.................
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