1. How cost leadership strategy will help Tropical Leisure to profitably increase sales and regain market share given its current production and financial constraints?2. Suggest how Mr. Grant might proceed to evaluate the cost leadership strategy. Tropical Leisure LimitedTropical Leisure Limited has been making high quality Caribbean leisure wears for over twenty-five years, in oldrented premises located in the heart of the Barbadian capital of Bridgetown. The company has a flexible labourforce of about twenty employees and three directors, only one of whom, namely Mr. Grant, the managingdirector, is fully active in the business.The company specializes in leisure and swim wear garments. Their current range consists of tee shirts, shorts,skirts and bath suits in rich vibrant Caribbean çolours and styles for men, women and children. The companycapacity is 400-500 garments per week, depending on style and continuity of the production run, but additionalfloor space and machines could be brought in quickly to raise production levels to a maximum of 1000 garmentsweekly if required.Trade sources estimated that the Barbadian market was valued at US$ 1.5 billion in 2010 but since then inflationand recession has deflated the market, resulting in many smaller businesses having to cease operations. Census ofproduction figures indicated some 15 leisure wear manufacturers, six of which accounted for 25 per cent of totalindustry output.Independent retail stores account for 25 per cent of tee shirts and 30 per cent of sales for shorts, shirts and swimwears; stores catering to tourists account for 15 per cent and 25 per cent while and department stores 15 handledanother 15 per cent and 20 per cent respectively.Tropical Leisure's sales were traditionally distributed through an assortment of clothing store agents, who tendedto change frequently throughout the years. However, in the period 2006 to 2012 Tropical Leisure's production wasincreasingly taken up by Modal Fashions, a successful regional clothing boutique chain store with outlets locatedthroughout the Caribbean. In the 2011-2012 financial year, Modal Fashions accounted for over 80 per cent of grosssales of Tropical Leisure. By, then, Tropical Leisure had terminated most of their other distributor agreementsleaving only the one it had with Modal Fashions.In 2012, owing to market depression, Modal Fashions drastically reduced their contract quantity to 25 per cent ofthe previous year and Tropical Leisure was forced into two-days-a-week production. Although quantities havegradually increased since late 2012, negotiations with Modal Fashions have become more and more difficult, suchthat the agreed price gives Tropical Leisure a net profit per garment as low as 10% on some styles. Mr. Grantbelieves level of profit is too low to sustain the company and suspects that Modal Fashions is using Tropical Leisureonly as a back-up supplier to complement the much cheaper garments it imports directly from China. It is currentlyTwmoured in the market that customers are turning away from Chinese made garments due to their unattractivestyles and tendency to quickly fade in çolgur, after the first or second washAn attempt was made in 2012 by Tropical Leisure to export through a large international department chain storethat has locations in Canada and America. However, the deal did not last long as the chain opted instead to importcheaper made garments from Asia.Although Modal Fashions ordered Tropical Leisure garments for sale through their outlets located in Trinidad,Jamaica and Guyana in 2012, the quantities were embarrassing low and the orders suddenly dried up without anyexplanation, although no complaints had been received by Mr. Grant.Since 2012 Tropical Leisure had traded around breakeven levels and is working within a bank overdraft ofUS$50,000 along with reduced credit levels from suppliers. Tropical Leisure's bankers have recently asked for ameeting with Mr. Grant to discuss both the overdraft and the future prospects of the company. The lease onTropical Leisure's premises is due for renewal at the end of this year. Mr. Grant, in some desperation, has called inthe services of a marketing consultancy for advice.

Cost leadership is a strategy to differentiate the product to gain competitive advantage and thereby…

1. How cost leadership strategy will help Tropical Leisure to profitably increase sales and regain market share given its current production and financial constraints? 2. Suggest how Mr. Grant might proceed to evaluate the cost leadership strategy

1. How cost leadership strategy will help Tropical Leisure to profitably increase sales and regain market share given its current production and financial constraints? 2. Suggest how Mr. Grant might proceed to evaluate the cost leadership strategy

Principles Of Marketing

17th Edition

ISBN:9780134492513

Author:Kotler, Philip, Armstrong, Gary (gary M.)

Publisher:Kotler, Philip, Armstrong, Gary (gary M.)

Chapter1: Marketing: Creating Customer Value And Engagement

Section: Chapter Questions

Problem 1.1DQ

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