Principles & Practice of Marketing, 3/e by David Jobber - Student Centre - New Case Studies

Goode Sure Components - Download MS Word file

John Goode founded Goode Sure Components Limited (GSC) in 1984 as a distributor of engineered products to firms in the centrally located city where he lived. His extensive product range consisted of fasteners, hand tools, measuring implements, welding accessories, gauges, flanges, filters and similar or related items. Prior to setting up GSC, Goode had worked for 20 years as a qualified precision engineer and a buyer for an engineering company. This background had given him a deep understanding of customer needs and GSC had built an outstanding market reputation for price competitiveness, customer service and rapid, reliable delivery. A sign over GSC’s counter typified the company’s service focus. It stated ‘We give you what you need: if we don’t stock it we will get it fast’.

GSC had been very successful with margins averaging 19 per cent on sales. Initially the company had faced six established competitors in the area. However, with unrelenting competitive aggression and marketing innovation, Goode had driven all of the rivals out of the market or into tiny specialist niches where they posed no threat to the company. The outcome was that GSC had established a large clientele of over 500 regular customers. These were safely spread across a range of different industries although nearly one-third of them were engineering firms. Despite the recession of the early 1990s, the company’s workforce had increased from 11 to 46 employees between 1987 and 1994 while profits had soared by over 700 per cent in real terms.

GSC’s best selling line was industrial fasteners, which accounted for some 20 per cent of total sales. Indicative of his innovative approach, Goode had in 1991 begun to hold and promote stocks of unthreaded screws and bolts so that customers could save 40 per cent on the usual price by threading the fasteners themselves on their own threading machines. The price sensitive market had responded as Goode had anticipated. Over 30 new customers had switched their patronage to GSC and by 1994 the company was supplying unthreaded fasteners to over 50 customers in total. This venture had reduced Goode’s average margin on fasteners but it had also led to sales of other items to the new customers and had locked in some existing customers more tightly. An unexpected bonus was that GSC had been able to make extra profits by meeting customer requests to obtain and supply the threading machines. This activity had provided average margins of 28 per cent. A further spin-off was that more than 20 of the customers that were threading fasteners in-house had enquired about GSC’s potential to supply other machines such as lathes, boring, milling and shaping machines and other types of engineering machinery. These developments had prompted Goode to consider expanding proactively into machinery distribution. GSC was encountering the beginnings of market saturation in its traditional business and machines might provide a synergistic growth impetus. Goode reasoned that GSC’s close proximity to customers would provide product demonstration, delivery and spares advantages over domestic machinery manufacturers and distributors of foreign machines. He had recognized that the company would need to introduce some organizational changes but felt that these could be managed.

The main obstacle to the possible expansion was that it would be necessary to stock and demonstrate machines but this was not feasible at GSC’s current premises without adversely limiting storage capacity for the firm’s traditional ‘bread and butter’ products. For some months Goode had pondered whether to search the commercial property market for suitable premises in which to open a Goode Sure Machinery business. Then in April 1994 ideal premises adjoining GSC’s current establishment had become available for £500000. Goode had considered this a realistic price but was daunted by the large investment that meeting it would entail. At only 42 years of age and faced with a mature traditional market, an innovative track record and a hunger for growth, Goode knew that a major decision was required. However, he knew also that he would need to assess all the pros and cons relating to an entry into a less familiar and therefore more risky but potentially more profitable new venture.

Questions
1. What have been the bases of GSC’s success to date?
2. What issues should be examined before making a drop or go decision?
3. What differences in buying behaviour can be expected in the market for the existing range and the market for machinery?

This case was prepared by David Shipley, Professor of Marketing, Trinity College, Dublin. The company’s identity and certain other facts have been disguised.