Jones-Blaire Case

I. Situation Analysis

Industry:

• Divided into three segments

o Architectural Coatings-general purpose paints, varnishes, and lacquers.

• Can be purchased from wholesalers, retail shops, and paint shops

• Account for 43% of total industry sales

o Original equipment manufacturing

• Intended for industrial buyers, to be used during manufacturing

• Account for 35% of total industry sales

o Special-purpose coatings

• Used for special environmental conditions (high heat, chemical exposure, etc.)

• Account for 22% of total industry dollar sales

• Paint industry is approaching maturity, 2004 sales totaled just over $16 billion.

o In the Jones-Blair’s 50-county service area, estimated dollar sales of architectural paint and allied products sold in 2004 was $80 million

• Architectural paint coatings and sundries sales were $12 billion-plus in 2004, also considered a mature market.

o Growth in long-term sales growth projected to be about 1-2% per year.

o Architectural paint coating demand is affected by four factors

1. The amount of homes that are being prepared to be on the market, redecorated, and in need of repairs.

2. Competition with alternative building materials for houses, such as vinyl/metal, as well as decorative indoor wall coverings, like wood paneling.

3. Paint companies were developing new products that required one coat of paint, thus reducing the amount consumers were using.

4. On the other hand, the sundries market was expected to increase because the amount of do-it-yourself painting was on the rise

o Increased strictness of government regulations has greatly affected the paint industry.

• Acquisitions are being made, so there are a decreased number of companies in the industry

• Larger companies purchase smaller regional companies to increase their sales in the markets that they were not represented well in.

• Estimated to have 600 companies in the industry currently, which is a decrease by 40%, and are declining by 2 to 3 per...