San Fabian Case Study

Essay text:

Specifically, San Fabian earns 15% margins (2% loss) on dealer sales accounting for 22% of total sales of MacDowell products, while it earns 20% (3% profit) on government and retail sales accounting for the other 78% of sales of MacDowell products. However, MacDowell serves an important function in that it helps San Fabian to become a solutions provider to the Filipino housing market. There aren’t a plethora of replacements that San Fabian can pursue. - Permalite pipes o The only two other Filipino suppliers of cement-based pipe already have exclusive distributor relationships in place o Cast iron pipes are significantly more expensive than Permalite at 8” below (which accounts for 85% of Permalite sales today) o Neither plastic pipes (not suitable for target market) nor imports (high duties) make sense for San Fabian either - Pyrolite corrugated sheets (roofing) o Two suppliers in the Philippines with cement-based solutions are the same as for cement-based Permalite alternatives ? already have exclusive distributors o Dealer margins on galvanized iron are below what San Fabian needs to break even, while offering no fire resistance, low differentiation, and tough-to-crack distribution networks o Aluminum may provide a viable alternative, although it is weaker than Pyrolite in extreme weather conditions (although Pyrolite may in practice be no better due to faulty installations) - Pyrolite flat sheets o Same two Filipino suppliers ? already have exclusive distributors o Plywood, mindamar and galvanized iron all represent weak alternatives that would detract from San Fabian’s reputation for high quality 3) Should San Fabian walk away from the MacDowell business? No – I believe that MacDowell’s are too strategically important to drop them entirely...