The Microfridge Case
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The document discusses the Microfridge product, which combines a refrigerator, freezer, and microwave. It is targeted at institutional living situations like colleges, military bases, and hotels/motels. The main markets in 1994 were colleges (55% of revenue), military (25%), and motels (18%). Microfridge faced medium competition but had patent protection. It acquired another company and replaced refrigerators with Microfridge units. While using two suppliers reduced costs, it created compatibility issues. Microfridge planned to focus on new "home away from home" products, rapidly increase sales, get $4M in equity, and repay debt to withstand future competition. Recommendations included innovating for new markets, focused product development, and exploring new
The Microfridge Case
- 1. The Microfridge Case Ishpreet Singh – 12P139 Karan Jaidka – 12P141 Kshitij Agrawal – 12P142 Kshitij Ahuja – 12P143 Manav Gupta – 12P146 Vikas Jain – 12P178 Group 1 – Strategic Management – II PGPM 2012-14
- 2. About the Product A unique combination of a refrigerator, freezer, and microwave unit, fulfilling all 3 functions Targeted at “A Home away from Home” segment Benefits of the Microfridge Helped to solve the electricity problem in schools. Saved costs. Students using Microfridge could cook safely in their rooms Students would purchase food from convenience stores on campus for their Microfridge units The concerns of students’ parents were addressed Convenient, easy to use, attractive, durable and easy to clean Very useful for military bases and hotels/motels
- 3. The Target Market – Home away from Home Institutional Living Situations Colleges Military bases Motels/Hotels Motels/Hotels •3 million in the US out of which 2 million had no restaurant space •Microfridge ideal for budget hotels and small town motels Other Markets •Small Individual apartments •1 million in the US, numbers expected to grow Colleges •Campus wide installation •Campus rental program •The rental price was $110 and students were charged $130 as rent •Selling and Renting Company Rental Program •Run by Microfridge •All operations carried out by Microfridge •Yearly rental fee was $160 55% 25% 18% 2% Revenue (1994) Colleges Military Motels Assisted Living Apartments
- 4. Porter’s 5 Forces Model Threat of new entrants: Medium No product difference Patent Sharing Non compete Agreement Getting expired in 3 years No strategic advantage in distribution network Profitable industry with high Market potential Threat of substitutes: Medium Price differential between stand alone components(fridge and oven) and Microfridge Refrigerator leasing companies with regional presence Low innovation level Bargaining power of customers: Low Few alternatives High Switching Cost Bargaining power of supplier: Low Low product differential No switching cost for Microfridge Intensity of competitive Rivalry: Low No competitor due to patent protection
- 5. The Competitive Scenario Limited degree of competition with retailers selling microwaves and refrigerators and leasing companies Microfridge acquired Campus Equipment Company It replaced 6,000 refrigerators with Microfridge units Companies needed similar products and structures to compete Microfridge was on the look out for alternate suppliers to reduce dependency on Samyan Daewoo agreed to charge $83 per unit, compared to Samyan’s $100 Problems with using two suppliers Samyan would not accept delivery of microwaves made by others Microfridge could either set up a new distribution channel or stick with the high- priced Samyan Attaching the refrigerator and microwave was an issue The Samyan bracket did not work with the Daewoo microwave Samyan reluctantly altered their bracket for compatibility Decision taken by Microfridge Shipped roughly half the units with Daewoo microwaves and the remainder with Samyan Usage of four regional warehouses Daewoo microwaves: Shipped to a warehouse closest to the customer Samyan microwaves (Rented): Went to a warehouse Samyan microwaves (Selling): Went directly to the customer
- 6. The Plan for the Near Future Though the company was on track, Bennett was not content at the current growth Taking advantage of its structure, the company would focus on new products in the “home away from home” category In order to be able to withstand competition, Microfridge would increase sales rapidly To receive USD 4 million in additional equity The funds would be used to purchase Microfridge units (rental) and to repay old debt Aim to increase entry barriers in the market
- 7. Recommendations Product Recommendation Innovate Try to modify product for Travel : Bus, Rail and Air Category Recommendation New product for home away from home Focused innovation Market Recommendation Explore New Geographies Acquisitions for regional penetration