This document contains a situational analysis (SWOT) of El Cerrito in the leather goods market in 2000, including recommendations for 2015-2016. Strengths included quality products, brand recognition, and stable profits. Weaknesses were slow growth and emphasis on quality over design. Opportunities included improving the online presence and leveraging the brand. Threats included strong competition. The analysis identifies customer segments based on income, age, and other factors. It recommends focusing on the middle class and millennial segments and outlines the 4Ps of marketing strategy.

1. TMP 244
Entrepreneurial Marketing
Spring 2016
Final Case Report
El Cerrito: Driving Growth
Harshitha Chidananda Murthy
Perm Number: 9987819

2. Table of Contents
1. Answers
a. Answer 1
b. Answer 2
i. Answer 2a
ii. Answer 2b
iii. Answer 2c
iv. Answer 2d
v. Answer 2e
2. Tables
3. Graphs
4. Figures
5. References

3. 1. Provide a situational analysis (SWOT) analysis of El Cerrito (EC) in the leather goods market in 2000
given the case input
Strengths
 High Quality: EL Cerrito products were well
known for their quality and company focused
largely on quality of the product [Ref 1] [Fig 3]
 Diversified products: As the company grew,
they started selling new products [Table 1]
 Varied channel of distribution: El Cerrito had
different channels of distribution:
o Company-owned stores
o Retail
o Online
 Longest presence in Market: El Cerrito has
been selling its goods since 1936 (USA) [Fig 1]
 Stable and Profitable company: Revenue for
fiscal 2000 was $550M and Operating Profit
was $56M [Graph 2] [Table 2]
 Public company: RS International was a public
company which gave it a market
capitalization of $800M
 Affordable luxury brand: Their price was
affordable with good quality offering
Weakness
 Slow growth: The firm began with 6 employees
and grew slowly [Ref 1]
 More Emphasis on quality: The emphasis on
quality was more than the design
 Quality and Purchase trade-off: Since the
product has rich quality, people usually buy
only once in several years. Hence, if a customer
makes a purchase once, the next purchase
would be made by the customer only after
several years
 Raw look: People considered leather to be a
raw look during 2000 and only few people
bought it. So mostly only the trend-setters
bought it.
 High costs: High costs in terms of
o Administrative cost
o Duties and Tax
 Lack of promotional activities: The company
has variety of products, but very less efforts
was laid in promoting
Opportunities
 Improve online presence: El Cerrito had
online presence even in 2000.
 Reliable brand and emerging market growth:
El Cerrito has marked themselves as a reliable
brand and this could have been used to get
hold of greater market share
 Whole sale discounts: Company could give
discounts on whole sale, so as to encourage
mass buying of the products
 Leverage quality and brand name: Since the
company was already known for their good
quality and brand, they could have leveraged
this fact to gain more customer gain
 Rise in Export: Have global presence and sell
to more countries
 Be market leader in new leather products
Threats
 Strong competition: Faced severe
competition from European brands like Coco
Channel, Louis Vuitton, Hermes [Graph 4]
 Investment in fashion line: Since the company
already offers good quality product, the
company could have invested more on
making their products more fashionable
 Increase in manufacturing cost: The
manufacturing cost has been increasing with
each year making the company gain less
marginal price with each growing year
 Environmental causes: Since leather is mostly
made out of animal skin, the rise in
environmental awareness among the people
might act as a major threat to the company

4. 2. Assumption: 2015-2016 Case
2a. Upgrade your SWOT if needed. Highlight the changes and “why” you have made them
Strengths
 Shift from quantity to quality over the past
decade: Increasing use of quality components
 Continuous emphasis on product
 Meat production continues to be number 2,
hence no added import cost [Table 3]
 Willingness to Pay: For good quality leather
products, people are willing to pay any price,
especially in developed countries like USA
 Continues to hold strong position locally
 Faster delivery options
 With the development in technology, easy
communication and base set up across
countries
 Growing fashion consciousness globally
Weakness
 Online market still unexplored
 New unmet trends in the market
 Increase in tax and cess
 International price fluctuation
 High labor force: resulting in high labor charges
 Lack of strong presence in the global fashion
market.
 USA in not in top 10 producer of leather [Table
5]
 Unorganized sectors
 No pronounced improvement in research and
development
 Still no wide geographic coverage
 Lack of easy access to online customers
Opportunities
 Extend relationship with
o Chemical industries
o Finishing auxiliaries
o Tanning base
o Modernized manufacturing units
 Rising potential in the domestic market
 Collaboration with leather institutes and
leather research labs
 Consumer expectations rise year by year and,
to maintain its position, the leather and
leather products industries require ongoing
research at all levels.
 Participate in International Leather fairs [Ref
3] and El Cerrito should collaborate with
various leather organizations well established
in USA over the past decade [Table 6]
 Expand to Asian market
 Franchises have gained popularity only
recently
 Use internet and E-commerce as a medium to
sell products
Threats
 Growing domestic market for footwear and
leather articles
 Major manufacturing and tanning firms are in
the process of shifting their base to
developing countries sue to high wage levels
and strict environmental norms in developed
countries
 Stricter international standards
 Increase in competition
 Lack of communication facilities and skills
 With increasing pressures regarding
chemicals, water usage, and landfill issues,
researchers are called upon to ensure the
stability of the industry
 Growing competition from developing
populated countries like China, India and
Japan
 Continuous policy changes
 Recession strongly affects leather industry

5. 2b. Recommend a positioning statement for El Cerrito
“El Cerrito is an affordable luxury brand providing varied range of quality leather products to choose from
for those who are looking for comfort and good experience. El Cerrito is one of the early movers in leather
industry, dominating since 1936 in offering good quality products at reasonable price and is well known
because of the importance the company gives to the brand”
2c. Identify the segments, their characteristics, motivations, and needs/desires
El Cerrito can be divided based on Income level, demographic and new segmentation.
Segment description based on Income level in USA
Segment Characteristics Motivation Needs/Desires
Rich  Stands 2nd
in population after
Middle class [Graph 7]
 Look for quality and luxurious
brand. Brand conscious
 Willing to pay any amount for a
branded and high quality product
 Own high end designer goods
 It is possible to obtain
brand loyalty from the
rich segment
 Sending gifts to them
during special occasions
will motivate them to
buy more products
 Good quality products
 Use only branded goods
 Always looks for
uniqueness
 Liked to be paid special
attention
Middle
Class
 Forms majority of the population
[Graph 7]
 Willing to pay a little more for
quality products
 Has varied options to choose
from
 Highly influence the market
It is possible to get greater
market share in middle
class by offering:
 Good discounts
 Variety of products
 Fashionable products
 Coupons
 Good online presence
 Reasonable pricing
 Good customer service
 Perfect balance of quality
and pricing
 Fashion trend-setters
 Usually buys what
everyone around them
are buying
Poor  Forms least set of population
[Graph 7]
 Spend only on basic necessities
 Usually earn money on day to day
basic
 Give out of trends
products at a much
lower price or for free
 Can sell during off-
season
 Look only for basic needs
 Usually, finding food is
the main priority
 Frugal spending
Segmentation based on Age in USA
Segments Characteristics Motivation Needs/Desires
Boomlets  They are 8-12 years old
 Use what their parents choose
for them
 Unaware of brands
 Get inclined towards
attractive products
 Like to use playful goods
 Look for products
that can entertain
them and attractive
Millennium  Form the largest group [Graph
6]
 Easily influenced by
surrounding
 No strong intention of saving
 Buy products that have
good discount, but also
good quality
 Look for fashionable
goods
 Like shopping
 They need
 Fashionable
 Good quality
 Good pricing
 Varity of options
Generation
X
 Next large group
 Usually have a family
 Save money
 Once this segments like
a product, they continue
to buy the same
 Money conscious
 Spends reasonable
money

6. Baby
Boomers
 First generation to witness
many things, like increase in
working women, technology,
innovation, etc.
 They are motivated to
buy products that last
long
 Habit of buying the same
product again
 Like to buy long
lasting products
 Pays reasonable
price
Mature + GI
Generation
 Less in number
 Strong loyalty for brands
 Buy products with
reasonable price
 Look for quality over
quantity
 Comfort
 Quality
New segments, characteristics and Unique value proposition:
 University students: There are a large number of university students who are fashion conscious
and usually buy what other students are buying. So on campus delivery and online invitation to
buy products would greatly profit the company and customer base increases.
 Focus of having more sales during mid-winter season when temperature is moderately cold and
this is the best time to wear leather jackets. Provide discounts during other seasons as off-season
discounts
 Geographic segmentation:
o The current geographic segmentation for the company is to concentrate on the
metropolitan cities of the country only as they have greater population, fashion
conscious, trend-setters and increase sales
o Expansion at a global level: Expand the customer base at a global level. Since Europe is
already dominated, choose Asia since the population is more, fashion conscious, position
as market leader. Offer good starting promotion and online advertising
 Sales of Pet goods and services are growing at 6.5% a year. 93% of the owners buy at least one
gift for their pets each year, and 55% buy four or more. Hence dog chains, etc can be made of
leather and sold. Emphasis on the fact that metal may be irritable to pets, hence to use leather
neck chains.
2d. Select the segments that you think the company should prioritize on and define the Unique Value
Proposition
Among the segments based on income level, it is wise for El Cerrito to focus on Middle class since
they form the highest percentage in population [Graph 7], look for luxurious products at affordable price
and if majority of them buy the product, then the rest will also most likely buy since this segment is
influenced a lot by people around them. Product can be marketed to these customers by having strong
promotion and good customer care to ensure they are satisfied with the product and continue to increase
customer base by word of mouth.
Among the segments based on generation, it makes sense for El Cerrito to focus on Millenniums
as they not only form the largest group, but are willing to try new things and like shopping more than any
other group. It is easy to attract such customers with various discounts and coupons to ensure they keep
buying the product more and more. The company could also offer gifts coupons in order to make customer
feel special and try more of their new products. They usually get easily convinced to buying products.

7. 2e. Determine the “4 Ps” for each segment you choose
The 4 P’s described below holds well for all the segments:
Product
El Cerrito has range of products which are high-quality
 They started with Leather wallets
 Leather handbags
 Belts
 Key rings
 Charms
 Folios
 Different material products
Attract new segment of customer by adding new
products
New product scope:
 Leather chains for pets
 Leather footwear
 Leather sofas
 Leather chair cushions
 Stylish leather jackets
 Leather Jackets
 Phone leather cases
Price
 Affordable luxury brand [Graph 5]
 Offer pricing depending on the place:
o If the place already has good market leader,
then offer good discounts and promotional
coupons
o If the place does not have a market leader in
leather, then strongly position the brand so as
to leverage initial movers in the industry. Try
skimming technique for such a place
o If the place has other leather sellers, but none
are market leader, offer reduced price initially,
so as to set up good brand value and then go
on to increase the price of the product.
 Make efforts to foresee the price before
competitors do.
 Increased price for customized leather products
such as collars, key chains, etc.
Place
 El Cerrito Channel of distribution:
o Company-owned stores [Graph 1]
o Retail
o Online
 Increase of sales through whole-sale retailers
 Massive improvement needed in terms of online
presence and online promotion
 Sell using eBay, Amazon, Walmart, and other well-
known online shopping websites
 Expand globally:
o Target Asian countries as there are no well-
established market leaders yet
o Focus on metropolitan cities as the population
is more and more fashion conscious
 Consider tie-ups with sports bikes and raw bikes
like Harley Davidson
 Consider tie-ups with research and development
in universities to improve products
 Pay more attention to advertising and selling
using technology
Promotion
 1-year warrantee on all products
 24*7 toll free customer care number to satisfy the
customer
 Continuous feedback from customers
 Special offers + Free gifts during special occasions
 Endorsement by celebrities in advertisements
 Endorsement in movies
 Grand launching events in new places
 Good online presence in social media like
Facebook, twitter, blogs, Quora, Medium and also
good website
 Clearance sale at the end of year
 Presence in many fashion Magazines, specifically
women’s magazines
 Have photos of normal people who use the
product in Instagram. This encourages more
people to buy products
 Promote in international leather fairs.
 Promotion through:
o Television
o Newspapers
o Online advertising
o Banners

8. TABLES
TABLE 1: El Cerrito existing and future scope
Existing Products Future scope
Leather handbags Leather chains for pets
Belts Leather footwear
Key rings Leather sofas
Charms Leather chair cushions
Folios Stylish leather jackets
 Leather Jackets
 Phone leather cases
Table 2: El Cerrito Financial Results
Results 1997 1998 1999 2000
Net Sales 540.4 522.2 507.8 548.9
Cost of sales 227.1 235.5 226.2 220.1
Gross Profit 313.3 286.7 281.6 328.8
SG&A 269.1 261.7 255 272.8
Operating Income 44.3 25 26.7 56
Gross Margin 58.00% 54.90% 55.40% 59.90%
SG&A 49.80% 50.10% 50.20% 49.70%
Operating Income 8.20% 4.85% 3.80% 10.20%

9. Table 3: Major meat producing countries
Table 4: Major Leather producing countries

10. Table 5: Leather Production by country
Table 6: Organizations El Cerrito should collaborate with
Column1 International Leather Organization
Organization Expansion
ALCA American Leather Chimists Association
FFANY Fashion Footwear Association of New York
FIA Footwear Industreis of America
LLGMA
Luggage and Leather goods manufacturers of
America
SSIA Shoe Service Institue of America
Table 7: Expensive brand competitive analysis

11. GRAPHS
Graph 1: El Cerrito Company-owned stores
Graph 2: El Cerrito Financial Results ($ in Millions)
0 20 40 60 80 100 120 140 160 180
U.S branded
U.S Outlet
Total
FY 2000 FY 1999
0
100
200
300
400
500
600
Net Sales Cost of sales Gross Profit SG&A Operating Income
1997 1998 1999 2000

12. Graph 3: El Cerrito Gross Margin, SG&A and Operating income
Graph 4: Price of Handbags offered by different companies
0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00%
Gross Margin
SG&A
Operating Income
2000 1999 1998 1997
250
100
90
3000
5000
0 1000 2000 3000 4000 5000 6000
El Cerrito
Kohls
Sears
Louis Vuitton
Hermes
Price($)

13. Graph 5: Leather production and trade in 2006
Graph 6: Population division based on age
350
550
422
222
in Million sq. ft
Output Export Import Available
0
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
35,000,000
40,000,000
45,000,000
50,000,000
Population

14. Graph 7: Income Level in USA
0 200000 400000 600000 800000 1000000
Bottom 10%
Bottom 20%
Bottom 25%
Middle 33%
Middle 20%
Top 25%
Top 20%
Top 5%
Top 1.5%
Top 1%
Starting Ending

15. Figures
Figure 1: El Cerrito logo
Figure 2: El Cerrito: Driving Growth, History of El Cerrito

16. Figure 3:
Figure 4: El Cerrito: Driving Growth : Quotes by Sara Jansen, CEO, RS International
Thank You Professor 

17. REFERENCES
[1] El Cerrito: Driving Growth
https://hbr.org/product/el-cerrito-driving-growth/KEL929-PDF-ENG
[2] Leather Market
http://leatherpanel.org/sites/default/files/publications-
attachments/future_trends_in_the_world_leather_and_leather_products_industry_and_trade.
pdf
[3] International leather fairs
http://10times.com/leather/tradeshows
[4] Understanding market of Chanel
http://www.slideshare.net/UznadzeSonia/chanel-new-product-team-f
[5] Understanding Leather market
http://www.slideshare.net/anmol135/market-segmentation-of-a-company?qid=7eede1b6-
bd6c-405e-820c-9747f57fc296&v=&b=&from_search=11
[6] Demography of USA
https://en.wikipedia.org/wiki/Demography_of_the_United_States
[7] Six generation in America
http://www.marketingteacher.com/the-six-living-generations-in-america/
[8] Market Segmentation
https://www.mindtools.com/pages/article/stp-model.htm
[9] Leather Jacket, bikers
https://www.google.com/search?q=harley+davidson+bikes+leather+jacket&espv=2&source=ln
ms&tbm=isch&sa=X&ved=0ahUKEwivotbhpY7NAhWq64MKHakyDzUQ_AUIBygB&biw=1745&bi
h=828