Benton Textiles, Inc. (HBS case no: 9-341-001)
Introduction
Benton Textiles have developed a new process, which can apply a special finish to certain types of textiles. The subsequent analysis will discuss two of the key questions that every company faces when it introduces a new product: Which market should the company target? And how should the new product be priced? The alternatives for Benton is either to enter the higher priced market, to the lower priced market, or to combine the two and first enter the higher priced market and then move to the lower priced market.
First the current market situation is analysed in order to get a sense of the market and the challenges the company faces. Second the different alternatives of Benton textiles are assessed in terms of profitability, timing and risk. Lastly a recommendation is made on which market they should target a long with an action plan.
The current market situation
The product, which Benton Textiles has developed, has a good interest amongst the buyers, and several fashion magazines have featured it. At present there are no competitors with a similar product, why they are able to price it at what ever level they like (and thereby maximise their own profit).
The problem is that it might take a long time before the product gains common acceptance (up to two years), and it is the possibility that it never will. Furthermore their product is not protected by patents, so their only competitive advantage is know-how. If the product becomes a success it is likely that competitors will try to copy it.
Benton also has the option to sell to manufacture and distributors of upholstery. Although they assess this more difficult (and expensive to target), it also provides the opportunity to fill up unused capacity (and thereby secure a larger contribution to cover the fixed expenses).
In long term revenue from the Benton product will be threatened by a one-step process at the mills. They try to develop this process already, but faces some technical difficulties,
Benton Textiles have developed a new process, which can apply a special finish to certain types of textiles. The subsequent analysis will discuss two of the key questions that every company faces when it introduces a new product: Which market should the company target? And how should the new product be priced? The alternatives for Benton is either to enter the higher priced market, to the lower priced market, or to combine the two and first enter the higher priced market and then move to the lower priced market.
First the current market situation is analysed in order to get a sense of the market and the challenges the company faces. Second the different alternatives of Benton textiles are assessed in terms of profitability, timing and risk. Lastly a recommendation is made on which market they should target a long with an action plan.
The current market situation
The product, which Benton Textiles has developed, has a good interest amongst the buyers, and several fashion magazines have featured it. At present there are no competitors with a similar product, why they are able to price it at what ever level they like (and thereby maximise their own profit).
The problem is that it might take a long time before the product gains common acceptance (up to two years), and it is the possibility that it never will. Furthermore their product is not protected by patents, so their only competitive advantage is know-how. If the product becomes a success it is likely that competitors will try to copy it.
Benton also has the option to sell to manufacture and distributors of upholstery. Although they assess this more difficult (and expensive to target), it also provides the opportunity to fill up unused capacity (and thereby secure a larger contribution to cover the fixed expenses).
In long term revenue from the Benton product will be threatened by a one-step process at the mills. They try to develop this process already, but faces some technical difficulties,