Strategic Business Plan

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Monaco Coach Corporation
Strategic Business Plan
By Su-Young Jeong, Mark Crouch, Penny Peters,
Katie Sadowski, Jeff Walker and Robert Long
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Monaco Coach Corporation
Todays Agenda

• Industry Company Background
• Industry Analysis
• Marketing Sales
• Competitor Analysis
• Financial Analysis
• Management Organization Analysis
• Conclusions and Recommendations
• Question and Answer

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Industry History

• First motorhome build in 1915 to take tourists
  out West for the San Francisco Exposition
• Wealthy industrialists pioneered the RV industry
• 1960s introduced the first towable trailers
• 1970s Winnebago introduced innovative products
  and assembly line production

• Today 14 billion industry
• 9 growth in revenues over the last 8 years

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Company History
1968 Caribou Coach Corp opened in Junction
City 1987 Officially became Monaco Coach
Corp 1989 Redesigned Roadmaster chassis 1990
Debuted the Dynasty model 1993 Became a public
company
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Company History
1994 Moved to newly built plant in Coburg,
OR 1996 Acquired Holiday Rambler Recreational
Vehicles 1998 Launched McKenzie line of
towables 2001 Acquired Safari and Beaver
motorcoaches 2005 Initiated Franchise for the
Future program 2005 Acquired R-Vision line of
motorhomes 2005 Manufactures 2000-3000 travel
trailers for Katrina victims
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Generic Strategy

• Use distinctive competencies to differentiate
  products
• Competencies include
• Research and development
• High quality products
• Strong brand identity
• Differentiate through
• Unique chassis design
• One piece windshields
• Quad and full-wall slide out rooms

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Unique Product Factors

• Complex to manufacture
• Subject to government regulations
• Large and hard to transport
• Appeals to the freedom to travel
• Appeals to comfort and luxury

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Market Segmentation

• Two Categories
• Towables (designed to be towed)
• Travel Trailers
• Fifth Wheels

• Motorhomes (built on a motor vehicle chassis)
• Class A (diesel and gas)
• Class C

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Class A Motorhome Market
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Diesel Motorhome Market
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Gasoline Motorhome Market
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Class C Motorhome Market
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Towable Market
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Strengths

• Strong brand identity
• Good reputation among customers
• Keep introducing new, innovative products and
  services
• Well organized distribution channels
• Customer loyalty and relationship
• High technological product quality
• Wide range of product lines
• Strong management

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Weaknesses

• High Cost Structure
• High Distribution Costs
• Downsizing

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Opportunities

• Change in population age-structure
• Change in lifestyle trends
• IRS tax reduction
• GO RVing marketing campaign
• New distribution channels
• Technological advances

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Threats

• High fuel prices
• Competitors in the RV industry
• High interest rates
• Tax rate increase
• Technological advances (competitors)
• Government regulations

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Industry Trends

• Cyclical industry subject to
• Slowdowns in the general economy
• Fuel availability and cost
• Interest rate levels
• Levels of discretionary income
• Availability of credit
• Overall consumer confidence

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End-User Profile

• Lifestyle Decision, Planned Purchase
• Very High Level of Commitment
• Very Brand Loyal
• Mostly Retired or Semi-Retired
• Average Consumer Will Own 3-5 RVs
• Average Consumer Trades Every 3-5 Years
• Consumer Base Undergoing Positive Changes

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End-User Profile

• Baby Boomers
• Ages 42-60
• Represent 27.5 of total U.S. population
• 49.1 male, 50.9 female
• Over 24 million baby boomers are over age 50
• Total number of households 45.8 million
• Estimated annual spending power 2.1 Trillion

• Annual average spending per household 45,655
• Annual household average income 57,695

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End-User Profile
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End-User Profile

• RV Enthusiasts
• Includes ages 34-64
• Ages 34-54 is fastest growing segment
• First purchase at entry level
• Strong family appeal
• Build strong brand loyalty

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Purchasing Motivation

• Price
• Functionality/Performance
• Services
• Flexibility and Convenience
• Comfort
• Family Appeal
• Affordability

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Distribution

• Independent Retail Dealers
• Over 360 MNC Dealers
• Shared with Competitors
• Importance of Shelf-Space
• Not All MNC Dealers Carry All MNC Products
• Dealers Specialize
• Few Full-Line Dealers
• Multi-brand Approach Increases Market Penetration
• Dealers Finance Inventory

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Pricing Policies

• Monaco offers premium pricing
• Most notable on their Class A Diesel models
• Higher prices due to differentiation strategy
• Other competitors offer parity pricing
• Similar prices for similar models

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Pricing Policies
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Advertising and Promotion

• Deals exclusively with dealers who sell directly
  to end users
• Franchise for the Future program
• Challenges traditional positioning
• Traditionally carried multiple brands with no
  emphasis on brands
• Customers are brand focused, dealers not
• Dealers given marketing materials and training
• Educates consumers
• Aligns demand with manufacturing schedules
• Decreases overstock and unsold inventory

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Advertising and Promotion

• Industry manufacturers use push strategy
• Industry wide Go RVing Campaign by RVIA sparks
  growth
• Focus on attracting younger people and families
• 52 million campaign
• TV commercials
• Consumer print Ads
• Public relations efforts

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Advertising and Promotion
Selling, General and Administrative Expenses
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Competitors

• Fleetwood Enterprises
• 1.659 billion in 2005
• 8.9 growth over 2004

• Coachman Industries
• 702.4 million in 2005
• 18.8 growth over 2004

• Monaco Coach Corp
• 1.2362 billion in 2005
• 11.5 growth over 2004

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Competitors

• Intense rivalry among competitors
• Similar market share, revenues and growth rates
• Top 5 Manufacturers account for 60 of sales
• Industry Ratios
• Profit Margin -0.55
• Return on Equity -8.18
• Return on Assets 0.81

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Entry/Exit Barriers

• High Barriers to Entry
• High cost of capital investment
• Train employees
• Specific machinery
• Large manufacturing facility
• Large inventory costs

• High Barriers to Exit
• High depreciation costs
• High liquidation costs

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Competitive Advantage

• Generic strategy of differentiation
• Constant innovation to attract new customers
• High quality products and strong brand identity
• Maintain market share by reducing margins
• Increased market share in declining class A market

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Financial Analysis

• Overall Monaco Coach financial outlook is healthy
• Positive cash flows for 2005
• Invested 54,482,000 in 2005
• Paid cash dividends in 2004 and 2005

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Financial Analysis
Key Ratios
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Management Organization

• Mechanistic Organization
• Highly specialized jobs and processes
• Motorhomes built to same specifications
• Established by technostructure
• Hierarchy of middle-line managers
• Controls standardization

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Management Organization

• Technostructure maintains standardization
• Establishes protocols and procedures for quality
  control
• R D creates innovative processes
• Support staff handles internal services
• Such as sending promotional pamphlets for dealers
• Centralized authority details highly
  formalized structure

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Management Organization

• Code of Business acts as boundary controls
• Regularly scheduled department meetings
• Dealer surveys to get company feedback
• Fair and equitable compensation practices
• 2005 hired outside consulting firm
  for compensation benchmarks

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Industry Conclusions

• Maturing Industry
• Shrinking margins
• High exit barriers
• Subject to external factors
• Growing target market due to aging boomers
• Industry sales growth
• More growth in lower-end
  models

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Company Conclusions

• Differentiation as a competitive advantage
• Innovation and high quality
• Sustained through expertise and brand image
• Strong advertising and promotional campaigns
• Franchise for the Future
• Go RVing
• Compete on all price points
• Offers premium price for premium products
• Standardization leads to consistency in quality

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Recommendations

• Continue leading Class A Diesel segment
• More emphasis on Franchise for the Future
• More emphasis on non commodity product
• More presence in Class C segment
• RD Class C Diesel

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Questions and Answers
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Additional Ratios
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Additional Ratios
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Additional Ratios
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Additional Ratios