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Leica Camera A Boutique Firm Faces a World of Change Case Solution
Leica Camera AG’s CEO Andreas Kaufmann is faced with intense competition and new product development from competitors that has resulted in a sharp decline in the sales of one of the premier brands of Leica Camera, the Leica R cameras and lenses. This has resulted in Andreas to make a difficult decision whether or not to continue with the brand. Moreover, a statement made stating that the line would be stopped has raised concerns amongst many loyal customers and users of the brand.
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Case Analysis for Leica Camera A Boutique Firm Faces a World of Change
Leica Camera’s R series consisted of high quality, premium priced SLR cameras and lenses which had gained a rapport and following amongst die-hard fans over the period since it was introduced in 1976. Over time, the series built a strong brand name and reputation in the European market and was well known. The company also has a strong edge over competitors regarding glass expertise, however, competitors such as Nikon and Canon resulted in sales dropping by a staggering 25.8% in FY 2003-04. This was the major problem faced by Andreas as the company faced difficulty in keeping at par with the developments and also the increased demand for more economical and less profitable digital cameras.
The major competitors that Leica Camera is facing include Canon and Nikon from Asia and Hasselblad from Europe. Various other small players are also entering the market given the increase in digital camera demand. Competitors such as Nikon and Canon witnessed an increase in market share whereas Leica’s market size, specifically regarding the R systems witnessed a loss in market share in 2005. From a quality perspective, all manufacturers provided high quality products, and Leica was also an established brand given its glass expertise. Leica did, however, price its products higher than those of competitors that resulted in a limited market as more customers were entering the market for more economical and affordable digital products that were being offered by Nikon and Canon. The target market for Leica’s SLR line had always been professionals, enthusiasts and hobby photographers when compared to Nikon and Canon that targeted a broader target market including high-end customers, middle-segment photographers and also entry level photographers at the low end of the spectrum. In Europe, Hasselblad is focusing its efforts towards targeting high-end professionals.
Leica Camera AG has been in existence since the 1920s and since then has developed a strong brand name and image in the eyes of customers, especially in Europe. Leica soon became a collectors brand for professionals due to its unique product offering, high quality, and precision and glass expertise. Owning a Leica became a culture over time, and a camaraderie amongst customers was developed during this time that resulted in loyalty.
Now that the times have changed, and sales for the line have dropped, the company is faced with the decision to continue or discontinue the Leica R System. In light of these competitive pressures and changing market dynamics, there are various strategic alternatives available to Andreas.
3. Strategic Alternatives
i. Discontinuation of the R System
Leica is currently being faced with several challenges regarding the R System. These challenges have impacted the bottom line of the organization and therefore one alternative for the company would be to discontinue the production of this line. This would have its advantages and disadvantages and implications for the organization.
At times it is better for organizations to discontinue the production of certain products that are resulting in losses or have dwindling markets (Loten & Maltby, 2012). In the case for Leica, it is evident that the business is suffering regarding net income and profitability coupled with falling demand. To sustain its long term growth in other segments, it would be better to discontinue the R System rather than let it have a negative impact on the financial resources of the organization.
This would, however, result in a negative image for the brand amongst the loyal customers. As discussed, Leica has a very strong fan-following albeit it’s a small following. The customers who are willing to pay a higher price for the brand will suffer if the brand is discontinued. This would also tarnish the image of the company and lack of commitment to rejuvenate the brand and ensure its survival.
ii. Continuation of the R System
Another alternative for the organization is to continue the production of the brand and make it available through limited channels so that customers willing to purchase can do so. The brand would only target the niche market of professionals and not compete directly with Nikon and Canon, and Leica would rely on other products to recover the losses incurred by R System.
It is important to ensure that the legacy of certain brands is maintained even though their demand might have fallen. This is because such products and brands have existed for a long time and have provided customers with those unique features and high quality performance over the years (Dickinson, 2016). Moreover, Leica should invest in research and development to further improve the product offering, position it as a very high-end product and target the niche market of photographers. This would also enable Leica to generate higher margins and work its way back to profitability. Product customization is another option available to the organization.
Although targeting the niche market would result in low demand for the product and lower market share and it will no doubt impact the bottom line of the organization if other products help neutralize the impact it would be possible for Leica to continue the product.
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