Chipman Union Inc Case Study

CASE ANALYSIS

SITUATIONAL ANALYSIS

Chipman- Union Inc. (CU) is primarily a manufacturer of men's and boy's casual and athletic socks, and they were into private label merchandise. Industry shipments of such socks totaled 37 million dozen pairs in 1979 with about $250 million in factory sales and $400 million in retail sales, CU's market share was about 10% of unit sales and 11% of factory sales.

CU were into men's socks business which accounted for only 25% of total shipments in 1979. There was a trend of increasing shipments in tube socks from 1970 to 2979. The dress hosiery market had the maximum % of sales at 34.9% followed by casual (21.9%) and athletic (20.9%).

It was also observed that the distribution of men's hosiery went on to increase through discount stores like Kmart at the expense of general merchandise chains. Also, three of CU's largest customers accounted for over 60% sales.

The main competitors of CU were those companies manufacturing private label socks for general merchandise, discount chains etc. Private label merchandise accounted for 75% of the total dollar sales of men's and boy's casuals. Also no company had more than 20% share of this business. Hence it can be seen that CU has a fair amount of market share in the private label merchandise which accounted for major chunk of sales. Whereas the branded stocks sale was dominated by Burlington and Interwoven.

It could be inferred that the private label merchandise segment is highly price sensitive and there was difficulty in achieving profit margins of more than 20% in this segment. Product differentiation was difficult in this segment. Also the merchandise was sold heavily based on price promotions and seasonal sales by the retailers.

In addition to the private labeling, CU was also into controlled labels and tie in promotions to achieve better profit margins. There were lots of issues in controlled labels like cost, lack of distinctive features etc. Tie up promotions produced better margins and would have performed better when pushed through all classes of trade.

PROBLEM IDENTIFICATION

To achieve profit margins of over 20%, the company mulled over launching a new product Odor Eaters, for which consulting and marketing research activities had been done and a marketing program too was developed. The company has to decide whether to launch the product or not and if yes, whether through prescribed marketing program and assess if 15000 display units of those could be placed in retail outlets in 2 years.

Whether product differentiation in the form of odor eaters work in increasing the company's profit margin. What communication strategy is to be used for the new product promotion. The company also needs to evaluate