Case Study Example
Live Case Study:
- Mark Rogers – President
- Frame Destination, Inc.
- Dallas, TX
- What Products or Services are being sold? Describe in detail.
Frame Destination manufactures a line of picture frames that are focused more on digital photos than other types of art. When they formed in 2004 there was not as many choices for digital photos as there now are. Over the years their product line has expanded and they now manufacture a wider line of frames with more size and material and mat options than in the early years. The business has also added sales of a variety of supplies that individuals may need when they purchase frames, along with a patented special carrying pouch made from bubble-wrap that is ideal for artists who go to trade shows to sell their wares.
- What was the initial vision or thought or motivating circumstances that triggered the business?
Mark was an amateur photographer and was taking advantage of new technology that allowed him to print his own prints at 13×19 and he Google 13×19 picture frame and there were lots of results for people selling prints but none for frames. That prompted the idea that other people may have the same problem and maybe he could solve the problem. It became obvious that this was a very popular size therefore the opportunity to build a business was huge. All stores are selling 13×19 paper he just assumed that the opportunity was there. Essentially, he felt that the risk vs potential for success was within reasonable parameters so he got started.
- What is the mission statement? Vision Statement?
Frame Destination Inc. strives to achieve the highest customer satisfaction possible. Our goal is perfection in all our products and harmony in all of our business relationships. We believe a picture frame is more than just fashion; it’s a safeguard for something you love. Frame Destination is committed to providing top notch customer service and the highest quality of workmanship.
- When was the business formed?
Frame Destination was started in 2004 in the garage of the Founder, Mark Rogers. After about 18 months the business took over not only the garage but much of the interior of the town house where Mark and his wife live and they needed to get a true business space. In late 2005 Frame Destination moved to a 1500 sq.ft. facility near Texas Instruments. In 2006 the business expanded to take in another 1500 sq.ft. of space, increasing to approx. 3,000 sq.ft. and about 3 full time employees. In 2008 the business moved to a larger 5,000 sq.ft. space around the corner. In 2010 the business took in additional space and currently have nearly 11,000 sq.ft. and approximately 14 full time employees.
- What are the Key Factors of Success?
Rapid manufacturing and delivery of a high quality product are the primary Key Success Factors. The convenience of a fully automated online ordering system which is user friendly is another Key Success Factor. Over the years the online system has been one of the major capital investments made by the company. Each time the system is improved and becomes easier for customers to order products sales increase as a result. Naturally, with something as complicated as manufactured frames that are shipped in either a completed or a ‘to-be-assembled’ format some customer service issues are to be expected. Customer service is provided by highly skilled staff and a great deal of effort goes into making sure that the products are easy to assemble when they arrive to the customer premise.
- Who are the competitors? List at least 5 competitors.
- What competitive advantage does the entrepreneur enjoy?
- PictureFrames.com – significant competitor because they have one of the oldest, largest and best recognized. They have the best SEO. Their prices are higher and they are not direct competition.
- AmericanFrame.com – most significant competitor because they have been in business about 40 years. They are about 5-10 times larger with about 150 employees and about 50,000 sq.ft. or larger so their economies of scale give them a cost and process advantage. They used to be mail-order before they became online so they had lots of systems and processes that have been mature for a long time. The also have a similar product line and pricing model.
- Framesbymail.com – lower quality supplier, not quite as good of a website for the user, higher priced.
- FramingSupplies.com – tend to more of the full sheet mats versus cut mats so they are a little more into the DIY market than the finished goods market. They only encroach on FD’s space in a minor way.
- FrameFit.com – similar in pricing and product mix but not highly visible in the online photography forums.
Manufacturing frames in an online environment require many different process steps which must all work together to deliver a high quality end product. The investment in software systems is a critical component, however, there must also be an investment in equipment, inventory, inventory control, employee training, and order fulfillment processes. Each of these investments are significant. Equipment that can operate at a high volume and produce low cost per unit finished goods often costs in excess of $50,000 per machine, and there are quite a few of these machines needed to fully equip the facility. The software investment alone is several hundred thousand dollars. Having made these investments means that the business is one where new entrants have a difficult time overcoming the financial barriers to entry. Having a solid reputation that generates significant repeat business a customer referrals also means that the business has a competitive advantage in a proven process for producing goods and services which customers appreciate.
- What competitive and environmental threats does the entrepreneur face?
Frame Destination one of well over a dozen established competitors. Some are much larger and have corporate organizations that have synergies with the frame manufacturing business unit with which Frame destination competes. Some of the competitors are also manufacturers of mat paper and mat-boards and other frame raw materials such as metal stock and wood stock used in the frame products. These additional products represent sales that help the competitors to have a lower overall cost of production. New technologies include more efficient computerized frame manufacturing equipment that lowers to cost per unit and improves the resulting quality. New entrants into the field have the benefit of purchasing such equipment at a time when Frame Destination is still having to amortize investments in older technologies. New entrants into the business can focus on sub-segments of the market and produce a limited range of products at a lower cost and this represents a significant threat. The entire business is located in a single location and a fire or natural disaster such as a tornado would be catastrophic to the point where the business may be unable to recover.
- What goals has the entrepreneur established?
Mark has established financial targets for the business that have been met and which continue to push the business to ever higher levels of sales. One goal is to have the business be debt free within the next 12 months.
- Is the entrepreneur succeeding at accomplishing their goals?
Mark is accomplishing his goals, however, each time the business grows to a new level many changes are required. The changes include increased debt load, employee turnover, and supplier relationships that have to be renegotiated. Goals that are accomplished often come with problems that are generated that were unanticipated and that need to be overcome.
- How could the entrepreneur improve their business?
One of the main difficulties that the business deals with is financing. Providing a good quality source of long term capital is proving to be a challenge. Improvements to the financial statement ratios that banks look for will take time and until then long term traditional bank financing may be difficult to secure. Paying down debt and improving capital reserves is a crucial step in improving the business.
- Why did you choose this entrepreneur?
I chose this Entrepreneur because I felt that he has demonstrated a good growth rate and an impressive story of success in a competitive market. The Entrepreneur was not formally trained in business but managed to succeed through organization and careful planning. All funding was accomplished by use of personal credit cards and lines of credit which is generally considered a bad way to proceed, however, in some cases it works. Mark has managed to use this unconventional financing source to his advantage and managed to keep his cash flow sufficient to pay off the debt as it has arisen.
- What marketing is the entrepreneur using? Is it effective? Do you recommend other choices?
Frame Destination relies primarily on a combination of SEO and Forum participation. A small amount of money is spent on PPC marketing. There are a number of discussion forums for photographers and Frame Destination is very active in such groups and has been for many years. The groups are the initial way that Frame destination grew.
- Final Paragraph: Tell me why you think this business will succeed, struggle, or fail over the next 2 years.
Mark has proven to be a very resourceful business owner. His business is now well enough established that he will be able to overcome normal obstacles. The only real threat to his business is an environmental threat such as a fire or tornado. Otherwise, so long as Mark continues to be actively involved in the business the business should survive indefinitely into the future.
Prepared by: Student Name