It was early $2012,$ and Kenneth Weller, CEO of Spriware Canada Inc., was thinking about his company's next strategic direction. It had invested heavily in Canada, and although sales were quite impressive for a new company in a very competitive industry, Kenneth knew that Spriware's current profitability wouldn't allow it to achieve its targeted payback period. He was considering two options: cutting prices to drive an increase in market share $($a market penetration strategy$),$ or entering a new international market that appeared to have considerable potential $($a market development strategy$).$THE COMPANYSpriware Canada Inc. was a manufacturer of refrigerators for middle$-$class families. It produced a line of high$-$quality, functional, extremely energy$-$efficient refrigerators with no fancy gadgets or features. The company's new $$60-$million plant, located in Surrey, British Columbia, began production at the beginning of $2011$; it had a capacity to produce $100000$ refrigerators per year, and could be expanded to produce another $50000$ units at a capital cost of $$10$ million. No extra labour or overhead would beCopyright $2012$ Mark Parker, School of Business, Niagara College, St$.$ Catharines, ON$.$ This case was written by Mark Parker as a basis for classroom discussion and is not intended to illustrate either effective or ineffective handling of a management situation. Information in this case is disguised. Reprinted with permission.required for the additional production. All refrigerators were sold in Canada, where Spriware had a $10\%$ market share after its first year of operation.Spriware's success was due to several aspects of its marketing strategy. First, it distributed its product exclusively through two large retail groups. The company co$-$marketed with these groups, developing television and newspaper advertising for their primary target market: young middle$-$class families with a household income of around $$70000.$ Second, Spriware priced its products competitively. The average retail price for its refrigerators was $$1500,$ compared with about $$1700$ for similar competitor models and private brands.Third, the company offered a competitive warranty, which included covering repair costs for the first five years of ownership, provided that repair$-$service companies subcontracted by Spriware were used.In $2011$ the company had revenue of $$90$ million, operating costs of $$42$ million $($including variable material and energy costs of $$500$ per appliance, and fixed labour costs of $$12$ million$),$ and fixed overhead costs of $$42$ million $($including an annual marketing cost of $$10$ million$).$ Net income, after $30\%$ corporate income tax, was only $$4$ million, a profit performance well below Spriware's targeted after$-$tax return on investment $($ROI$)$ of $10\%.$Kenneth Weller was especially concerned about how this would affect the five$-$year payback period he'd set. The market for refrigerators in Canada wasn't expected to grow at all over the next two years, and longer$-$term growth was expected to be about only $3\%$ per year.KENNETH'S DILEMMAPrice ReductionKenneth thought about his first option: reducing the average price of Spriware refrigerators in an attempt to increase market share. His marketing director, a recent graduate of an international business program, advised him that based on her analysis, the firm could increase market share to $15\%$ if he reduced his prices by $10\%.$ This would enable Spriware to take market share away from lower$-$quality brands by effectively offering its product at the same price but with better performance and warranties. In the longer term, the manager believed that with proper marketing and product$-$positioning strategies, Spriware could obtain $20$ to $25\%$ of the market, as Canadian households were increasingly looking for greater value for their money. But Kenneth's concern was that his current pricing was already competitive for the products Spriware offered, and reflected fair value for what customers received. Why should Spriware undersell itself? As well, he feared that a price reduction strategy could start a price war in the short term. This was, after all, an industry with $10$ manufacturers, all of which had excess capacity and were aggressive in maintaining sales volumes.Overseas ExportThen Kenneth turned to his second option: exporting to an overseas market in an attempt to produce and sell more refrigerators. His highly skilled marketing director, through intelligence gathering, had identified market potential in the island nation of Mabuhailand, located in the Pacific region around Indonesia and the Philippines. In the last $20$ years Mabuhailand had emerged into a fairly stable democracy, governed by the pro$-$business centrist Liberal Democratic Party. This had followed nearly $30$ years of corrupt dictatorship and infighting among various extreme political factions, several of which still existed and were reported to be dissatisfied with the distribution of political power formed under the country's new constitution. Extreme groups were considered to be either ultra$-$nationalistic and anti$-$foreigner, or left$-$wing with a desire for complete control of the nation's emerging commercial and industrial system. Some of the groups were reported to have links to the Chinese government, whose past political and economic involvement in the country was still resented by many of its people. Despite its success, the country had been plagued at times with violent protests, resulting in road blockades and disruption of some commercial activities.The people of Mabuhailand were an interesting mix of Chinese, Malay, and Portuguese, the result of a colonial past in which Portugal had occupied such areas as Formosa $($present$-$day Taiwan$).$ The dialect, known as Latgalog, was unique to the country. Little was known about it$,$ especially its symbolic aspects; it had been described as Brazilian Portuguese with an Asian sound to it$.$ Literacy rates, while improved, were still quite low at only about $70\%$ of the population. However, virtually all young people under the age of $18(25\%$ of the population$)$ were receiving education; they showed a great interest and were highly motivated to learn. English was compulsory in school as of age five. Mabuhailand had one government$-$owned television station, though only about $30\%$ of households owned a TV$.$ The country had one privately held national newspaper, Mabu Express, in circulation.The culture was characterized by strong family ties, with two or more generations living in the same household, and a strong sense of obligation to the community, with activities focused around the local Catholic or nontraditional Protestant churches. Informal communication within communities was an important source of information for many people. Traditional authority was shown great respect. However, with the country's growing economic prosperity, many younger families were looking to live on their own.Mabuhailand was rich in natural resources, including high$-$value precious metals, cop$-$per, cobalt, diamonds, and offshore oil reserves. Following political change, the country's leaders encouraged foreign investment in order to develop these resources and train the population. The ruling party's policy had been to encourage domestic industries through a stable, competitive tax policy. Resources accounted for $40\%$ of the economy, and the government was looking to encourage more value$-$added manufacturing as part of the economic mix. With an industrious and hard$-$working population numbering around $10$ million, the country had increased its GDP in $10$ years from $$40$ billion to $$120$ billion in $2011.$Over the next five years economic development policies were forecasted to grow the economy by $$10$ billion each year. Most tax revenues, representing $30\%$ of GDP$,$ were derived from business taxes and import duties, and had enabled the country to build needed infra$-$structure, including ports, roads, electric power utilities, and social services like hospitals and schools. But more would be needed. Economists at the International Monetary Fund had predicted that over the next five years government spending could rise to at least $$50$ billion annually, based on the government's infrastructure and social spending plans. The government had previously resisted borrowing to finance spending, and as a matter of policy strove to achieve balanced budgets. Total outstanding government debt was estimated at $40\%$ of GDP$.$Because many of the nation's $2\mathrm{.}5$ million households now had power, and given the country's growing per capita income levels, Kenneth believed that Mabuhailand represented a tremendous opportunity for refrigerator sales. A benchmarking exercise with other developing nations had suggested that, based on Mabuhailand's income levels, annual purchases should be one refrigerator for approximately every $40$ households. However, according to government import statistics, in $2011$ only $20000$ units had been purchased, representing an estimated retail value of $$24$ million. Kenneth thought there may be several reasons for this low level of demand. Import statistics showed that virtually all the units were re$-$exports from Hong Kong, which he suspected were secondary$,$ low$-$quality units likely made in China.The sale of refrigerators was handled by numerous small$-$scale retailers, many of which weren't appliance specialists but rather remnants of the old traditional economy. Larger modern retailers had begun to emerge, and their refrigerators tended to be purchased from numerous traders, who in turn had bought them from various manufacturers in China, reselling them to any outfit that would take them. There was no advertising or marketing of any significance.Kenneth believed that he could capitalize on a first$-$mover advantage and quickly become the market leader. At the projected economic growth rate, the resulting gains in income would result in $1$ in $30$ households purchasing refrigerators within the next five years, and $1$ in $20$ households purchasing refrigerators within $10$ years. Spriware's market studies further suggested that, based on neighbouring markets' performance, it could sell refrigerators into Mabuhailand at $$1400$ per unit, net of distribution costs. The price wouldn't include import duties paid to the government, which would represent $5\%$ of the selling price. This duty was applied to all of the nation's $$40$ billion of annual imports.Although Kenneth was excited about the trade opportunity, he knew he had a couple of issues to consider. First, he wondered whether Mabuhailand's economy would grow as strongly as was forecasted. This forecast was based on a doubling of resource production in the next five years and stable prices at current levels$-$reflecting strong demand in emerging nations like China and India. However, about two$-$thirds of the resource sector$\text{'}$s growth had been due to a doubling in prices over the past $10$ years rather than any increase in output, and many observers believed that the nation's commodity prices should have increased by only $3$ to $5\%$ per year in the last decade. As a result, there was concern that these commodity prices ran the risk of collapse.Second, Kenneth knew that to be positioned in this market longer term, he'd eventually have to build a plant in the country, even if it was on a smaller scale than the Canadian operation. He'd had discussions with senior Ministry of Industry and Trade representa$-$tives, who'd visited him in Surrey to discuss this trade opportunity. The sense he got from these discussions was that the government would likely accept imported products for a period of time, but eventually its policy would be to encourage domestic industries. No doubt, Kenneth thought, the government would soon use duties as a means to encourage and protect domestic development of the industry.Still, the longer$-$term prospects in Mabuhailand were great, and neighbouring countries could hold additional opportunities. Government officials had hinted at these countries' moves to develop a regional trading bloc, with the goal of eliminating import duties and excess customs regulations. But, Kenneth wondered, did he want to commit assets in Mabuhailand? Labour costs would be a mere $20\%$ of what they were in Canada, but what about productivity and training needs? What about marketing and promotion? Kenneth felt it was time to have a discussion with his management team. He wanted to get their input into what would be Spriware's best course of action.Fill out the template below from the above case studyIssues to solve:Click here to enter text.Reason the case was assigned:Click here to enter text.Issue Importance and Urgency Matrix ImportanceUrgencyLowHighLow I IIHigh III IVCheck the appropriate box above and explain the rationale for your rating below.Click here to enter text.Case Data AnalysisSelect at least two data analysis tools from the list below. 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