Main Street Plumbing and Heating is a business owned and operated by Dick Watson and his wife Mary in a small Midwestern city. Dick has one full-time apprentice, and Mary works as secretary, receptionist, accountant, and public relations officer. Overhead costs are low because the business operates from the garage of the family home. Business is sporadic: There is too much work when a freezing spell bursts water pipes and too little work at other times, particu¬ larly in the summer, when the home handymen and women decide that they can do it them¬ selves. Dick knows you are studying managerial economics and has asked for your advice on how to ensure a steady flow of work, preferably inside or summer work, with the potential of expanding the business and enjoying a greater income.

Your questions elicit the following information: There are literally dozens of “general plumbing and heating” firms in the area. Dick’s costs and prices are as low as any of them. He does not advertise, except in the local yellow pages where he is listed under plumbing and heat¬ ing contractors. He says that some plumbing and heating firms specialize in particular areas, such as solar-heating systems. Some work only in new construction, installing the heating, wa¬ ter, and sewer systems. There appear to be several opportunities open. There is no firm special¬ izing in luxury bathroom design and installation, nor in in-ground lawn sprinkling systems, nor in fire-control systems for factories and other public buildings. Also, you perceive a need for a firm that sells plumbing tools and materials to the do-it-yourselfer where the proprietor knows plumbing and heating and is willing to dispense free advice to customers.

(a) Outline the generic strategies that are open to Dick and his wife.

(b) What strategy do you suggest, and why?

(c) Outline the product, price, and promotion decisions that must be made as part of this new strategy.