MOUNTAIN EQUIPMENT CO-OP: THE PRIVATE-LABEL STRATEGY

SUBMITTED BY:-PAYAL PATELSAI KIRAN MIMANI

Case Synopsis

The case is about a sport retail company which later started their own manufacturing and eventually their own R&D. The company was founded with the commitment to do good for society through philanthropy.

They offered huge product varieties at competitive prices but later the manufacturing was more or less shifted to Asian countries which was not acceptable to the customers as the jobs were outsourced and the quality of product was also not that good which Canadian manufacturing unit were able to produce.

Case Facts• Founded in August 1971 a group of Canadian climbers

founded Mountain Equipment Co-op (MEC).• David Labistour, chief executive officer (CEO).• A well-known Vancouver-based retailer of outdoor gear.• Branded jackets, bags and other accessories next to well-

known brand-name products. • They simply copied other brands’ designs, producing a

similar product at a lower price.• $7.5 billion a year market (Exhibit 2)• A lifetime membership in MEC cost $5 and allowed the

member to make purchases and vote on how MEC was governed.

• In years of surplus earnings, it retained 3 per cent for its capital budget and 1 per cent for an environment fund.

• From a single store in Vancouver, MEC had grown to a network of 15 stores across Canada.

Case Facts• MEC examined its entire value chain to remove material

waste and harmful substances, reduce its use of energy and improve the working conditions in its factories. MEC’s.

• MEC had three long term goals First, its core reason for existence was to increase

participation in self-propelled wilderness-oriented recreation in Canada.

Second, it supported the creation and stewardship of a comprehensive network of parks, wilderness and outdoor recreation opportunities in Canada.

Third, it fostered change toward environmental, social and economic sustainability in the marketplace.

• Online portal www.mec.ac• A typical store carried 20,000 stock-keeping units (SKUs).• MEC had 14 person design team included three apparel designers, three

hard goods designers, six technical developers, one fabric expert and one designer.

Inference

Exhibit 2- • Forzani is a constant

strong competitor whose market share is increasing every year

• Independent stores lost their market share to Walmart in 2006-08

• MEC is successful in increasing market share

Inference

Exhibit 6- Only 30.24% was manufactured in Canada while the rest of the manufacturing were Asia.

Problem Identified

1. Questioning by shareholders about the philosophy-the company is a democratically owned firm?

2. Cannot achieve Competitive pricing if they try to manufacture in Canada?

3. Getting negative reactions on the outsourcing of manufacturing?

4. Originality of products were questioned?

Recommendation

1. The shareholders should be retained as the company’s shareholders are mostly the customers as well, by communicating the message that they are still committed to their philosophy of green Canada and should display their previous efforts in the same in the shops and all other platforms where the brand is visible.

Recommendation

2. Competitive pricing can be achieved if they re-innovate the products and make use of the facilities in Canada which are not working in full volume capacity. The products then introduced will be Canada manufactured as well as new range which will not be comparable to any of the previous products so that the market will be open to higher prices too.

3. Reviving the Canada facilities and use of capital-intensive machines more instead of labor-intensive which will solve the labor cost problem although the restructuring will need good amount of capital but it is one-time.

4. The products before getting introduced in the market should be well compared with others so that any matching designs could be eliminated

MERCI BEAUCOUP