Question: Risks of converting a manufacturing business into a service business

"Chris, we make the highest-quality grass seed and fertilizer in the world. Our brands are known everywhere!" stated Caroline Ebelhar, the vice president of manufacturing for The Lawn Care Company. "Yeah! But the customer does not have a Ph.D. in organic chemistry to understand the difference between our grass seed and fertilizer compared to our competitors! We need to also be in the lawn-care application service business, and not just the manufacturer of super-perfect products," responded Chris Kilbourne, the vice-president of marketing, as he walked out of Caroline's office. This ongoing debate among Lawn Care's senior management team had not been resolved, but the chief executive officer, Mr. Steven Marion, had been listening very closely. Soon they would have to make a major strategic decision.

The Lawn Care Company, a fertilizer and grass seed manufacturer with sales of almost $1 billion, sold some of its products directly to parks and golf courses. Customer service in this goods-producing company was historically very narrowly defined as providing "the right product to the right customer at the right time." Once these goods were delivered to the customer's premises and the customer signed the shipping documents, Lawn Care's job was done. A local subcontractor or the customers themselves applied the fertilizer and seed for many park and golf course customers. This application personnel often did the job incorrectly, using inappropriate equipment and methods. The relationship among these non-lawn care application service personnel, The Lawn Care Company and the customer was not always ideal. When claims were made against The Lawn Care Company because of damaged lawns or polluted lakes and streams, the question became one of who was at fault. Did the quality of the physical product or the way it was applied cause the damage? Either way, the customers' lawns or waterways were in poor shape, and in some cases, the golf courses lost substantial revenue if a green or hole was severely damaged or not playable. One claim filed by a green advocacy group focused on a fish kill in a stream near a golf course.

One of Lawn Care's competitors began an application service for parks and golf courses that routinely applied the fertilizer and grass seed for its primary customers. This competitor bundled the application service to the primary goods, fertilizer, and grass seed and charged a higher price for this service. The competitor delivered and applied the fertilizer on the same day to avoid the liability of storing toxic fertilizer outside on the golf course or park grounds. The competitor learned the application business in the parks and golf course target market segment and was beginning to explore expanding into the residential lawn-care application service target market. The Lawn Care Company sold the "highest-quality physical products" in the industry. However, it was not currently in the professional park and golf course or the residential "application service" lawn-care market segments. The Lawn Care Company considered its value chain to end once it delivered its products to the job site or non-lawn care application service. The competitor sold the customer "a beautiful lawn with a promise of no hassles." To the competitor, this included an application service bundled to grass seed and fertilizer.

Assignment Instructions

In one paragraph preview the case facts and background. Do not duplicate what is in the case itself.

The body of the report addresses Questions 1-4 in a clear, concise and cohesive manner. This report should be business like, organized and methodical. Please note: each question should become a section title.

1. Sustainability of the existing business model
2. Risks of converting a manufacturing business into a service business
3. Options to compete in a broader geographic area
4. Partnership alternatives