Pros and cons of the product diversification strategy

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Reference no: EM131288146

Zippo Manufacturing Company: Has product diversification beyond the lighter gone too far?
History

Zippo (www.zippo.com) was founded in Bradford, Pennsylvania in 1932 when George G. Blaisdell decided to create a lighter that would look good and be easy to use. Blaisdell obtained the rights for an Austrian windproof lighter with a removable top, and redesigned it to his own requirements. He made the case rectangular and attached the lid to the bottom with a welded hinge, and surrounded the wick with a windhood. Fascinated by the sound of the name of another recent invention, the zipper, Blaisdell called his new lighter ‘Zippo', and backed it with a Lifetime Guarantee. The 70-year old brand's fame took off during the Second World War, when Zippo's entire production was distributed through commercial outlets run by the US military.

Today
Zippo has produced over 375 million windproof lighters since its founding in 1932. Except for improvements in the flint wheel and modifications in case finishes, Blaisdell's original design remains virtually unchanged. The Lifetime Guarantee that accompanies every Zippo lighter still guarantees that ‘It works or we fix it free^TM'. Although the windproof lighter is the most popular Zippo product, Zippo has been hurt by the antismoking campaigns.

Its business is fundamentally tied to smokers, and it has suffered from US tobacco regulations. Cigarette makers order thousands of Zippos to promote their brands, distributing them to smokers in exchange for coupons. One of the company's recent advertising campaigns suggested 101 ways to use your Zippo. Warming your hands and de-icing car locks were on the list; lighting a cigarette was not. The success of this product led Zippo to expand the line to its current product family of tape measures, pocket knives, money clips, writing instruments, key holders and its newest product, the MultiPurpose Lighter.

All of these items can be imprinted with company logos or trademarks. In 1993 Zippo licensed its name to Itochu Fashion System Co., a large clothing manufacturer in Japan. Zippo leather jackets, Zippo jeans and Zippo gloves are now available in Tokyo, and Zippo may license clothes in the United States too. Today Japan is still the biggest export market for Zippo. Zippo has expanded its sales operations nationally and internationally through a wide network of sales representatives. In more than 120 countries throughout the world Zippo is synonymous with US-made quality and craftsmanship.

Zippo windproof lighters enjoy a widespread and enviable reputation as valuable collectibles. The company produces the Zippo Lighter Collectors' Guide, containing illustrations of the lighters and descriptions of the series, as well as an explanation of the date code found on the bottom of every Zippo lighter. Clubs for lighter collectors have been organized in the United Kingdom, Italy, Switzerland, Germany, Japan and the United States. Zippo also sponsors it own collectors club, Zippo Click.

Questions

1. What are the pros and cons of the product diversification strategy that Zippo has been following recently?

2. On www.sramarketing.com/experience/outdoor/ case_studies/zippo_casestudy.cfm you will find a case story, where Zippo in the late 1990s was repositioned as an essential tool for avid outdoorsmen. However the outdoor market was entirely new to the Zippo salesforce, who were accustomed to calling on tobacconists and convenience stores. How would you use the PLC concept for this case story?

3. What obstacles would Zippo Manufacturing Company face if it repeated the outdoor campaign in other countries?

Reference no: EM131288146

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