Research problem

How to succeed in the PVC window market?

Case summary
This case study is based on real events which occurred in 2010. It describes
the launch by MPO Fenetres of new windows, characterized by improved
thermal performance, achieved by the use of triple glazing. This company is
based in the French region of Orne. It has 200 employees, and realized a
turnover of over €35 million in 2010. It has positioned itself as an innovative
company, always seeking to apply the latest technical developments.
In the current economic crisis customers are more careful with their money,
and think more carefully about potential purchases. In recent years it has been
shown that consumers’ purchasing behaviour has evolved, and that criteria
such as sustainable development and environmental protection are now among
the factors that may influence purchasing decisions. In this sense, an
“ecological consciousness” has emerged. Not only the Grenelle de
l’Environnement (a French forum for the discussion of issues relating to
sustainable development) and government standards, but also tax credits
associated with the purchase of certain goods, have affected the housing
industry, and therefore also window manufacturers. Rebuilding and renovation
are also subject to these factors.

In this context, the launch of windows made of PVC, with their high thermal
performance and technical and competitive advantages, was important for this
SME. It was the company managers’ responsibility to launch and market these
products successfully.

Introducing MPO Fenêtres

Founded in 1970 in Alencon (Orne), the company MPO Fenetres (Menuiserie

Plastique de l’Ouest) was one of the first French companies in the
PVC/carpentry sector to offer a customized service. However, at that time, in
France, very little was known about PVC, carpentry and double-glazing
technology: these markets were still in their infancy. It took about ten years,
and two oil crises (in 1974 and especially in 1979) for the PVC window market
to really take off. The commercial policy of EDF (the French public energy
provider) at that time favoured the development of this product, encouraging
investors to push for “all electric” installations, which would, according to the
manufacturer provider, require better insulation of public buildings to reduce
heat loss.

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Despite MPO Fenetres’s financial losses since the creation of the company in
1978, the managers decided to invest in new office and production buildings.
From 1970 to 1997, MPO Fenetres’s products were rather basic. Two new
product ranges were then offered by the company: a range of high quality
windows made of aluminum and wood (1997) and windows featuring super
heat, with an improved insulation value, made of aluminum with a thermal
break (2007). These additions to its product range were introduced in line with
the company’s desire to widen its target market. These two new product
categories now account for 10% of the company’s turnover. MPO Fenetres
initially specialized in public and collective markets (professional/ major
accounts, government, schools, municipalities and other communities).
However, from 1995 onwards it developed its sales to individual consumers.
The public market today accounts for about 60% of the company’s turnover,
while the (still growing) consumers’ market accounts for the remaining 40%.
There are 200 employees working for the company, and turnover is over €35
million (source: Internal figures 2010). Significant growth has occurred over the
last decade.
The company is constantly on the lookout for technical and technological
innovations, both of which are well represented in its range of low thermal
coefficient products. Further the high requirements of the company in terms of
the quality of materials, assembly, and installation exceed the market
standard. This allows the company to offer its customers products at the
forefront of innovation, a key success factor in this industry. Incidentally, this
is one of the four founding values of the company, together with perfectionism
(the aim to do the best possible job), cheerfulness within the company, and
honesty with all company’s stakeholders (both employees and customers).
The French carpentry market, and more specifically the market for windows,
has undergone several phases in recent years. We review these below.

A survey conducted by the UFME (Union des Fabricants de Menuiseries

Exterieures,July 2011) among stakeholders (designers, window manufacturers,
outlets and installers) reveals the following. In 2010, the French window
market suffered a decline of 4% compared to 2009 with a value of about €9
billion (€5 billion relating to installation). The market was at its historical
highest in the year 2005-2006, with 12.3 million windows sold, following a
steady increase in the global market of about 4% per year between 2000 and
2006.
The overall volume of sales in 2010 shows that more than 11 billion windows
(excluding opening glazed facades, shutters and doors) were sold. Among these,

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only 5% were imported: this is because the carpentry sector remained
unaffected by the massive industrial relocations occurring in recent years.
Local production is an important factor: most consumers prefer to buy from
local companies and artisans. Almost all components of windows sold in
France are produced in the European Community. Indeed, as consumer
preferences vary greatly from one country to another, it is very difficult to
market a standard product globally, which partly explains the customization
this phenomenon. In addition, over 90% of windows are custom made, which
further limits the importation of materials.
The housing sector, and more specifically the sector relating to windows and
shutters, employed 110,000 people in France in 2010. A third of this market
value is linked directly to the jobs created (€3.25 billion over 10 billion for the
housing sector overall). The market is mainly based on SMEs (around 5,000)
who manufacture the windows, and artisans (around 40,000) who install them.
Two major markets exist for windows: windows in new buildings account for
26% of market volume, while replacement windows represent the remaining
74% (source: UFME, 2011). In terms of market value, the renovation market is
larger, and generates more income.
Important price fluctuations can be observed on the market. The average price
of a window is €420 (net of tax). However, as soon as the cost of installation is
added, the price can rise by at least 80%, to €760. Since 2004, the average
price of a window has increased by 38%. Several factors explain this, including
the quality and type of material used: the market has shift towards aluminium
on one hand, and towards more efficient products on the other hand. However,
in terms of the volume of products sold, PVC largely dominates the market,
with 62% of market share, followed by aluminium (22%) and wood (13%).
However, looking at value estimates, aluminium accounts for 33% of market
value and PVC for 49%. Nevertheless, the distribution and installation costs
are declining, which, in a highly competitive mar MPO

Toute reproduction non authorize offsets the rising costs of the commodities
and materials used in the manufacturing process. The research institute Xerfi
forecast two major changes in this market by 2011. Its first prediction was
accelerated growth in the renovation market, reinforcing its importance. As a
result of rising energy prices, individuals will be more likely to invest in better
insulating materials for their houses in order to reduce their energy bills. Its
second prediction was a sharp rise (expected to be a long-term trend) in new
building, accounting for a third of the construction market.
Given the likely future development of the market, there are plenty of
opportunities for window manufacturers, including a greater focus on

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customization. However, it is important to note that most of these new
products linked to innovations will be linked to improved technical attributes of
these products. This does not allow further development toward the consumers’
market. It also protects companies from enjoying a share of the activity of the
do It Yourself market segment. The largest distributor of joinery products in
France is Lapeyre (a subsidiary of Saint-Gobain), one of the largest producers,
processors and distributors of materials in France. Yet this operator represents
only 10% of the market. The market report by Xerfi identifies other actors on
the market:
1. Specialists in manufacture, marketing their products primarily business to
business (B2B) but invest small amounts in niche markets, due to higher
profitability expectations.
2. Independent joinery networks (including MPO Fenetres) usually suffer from
a lack of recognition and limited geographical coverage.
3. The DIY and unskilled distribution networks. These actors (such as Leroy
Merlin), which have become essential market windows, now offer a
comprehensive range of joinery (doors, windows, etc.) and benefit from their
vast distribution networks to offer promotions.
4. Finally, a new type of actor has recently emerged on the market: Online sale
specialists (such as Fenetre24, Brico-Fenetre). These target individual
customers with specific building or DIY knowledge.
Most of these companies use a business and development model based on
franchising (to promote rapid development of their distribution network) and
aim their products at middlemen or independent artisans. Of these, the
company which enjoys the greatest level of customer awareness is FPEE and
its associated distribution network, Art & Fenêtres. Sales of windows are
governed by a set of strict regulations and legislation. For instance, government
initiatives and statutes promote the acquisition or replacement of windows by
individual home-owners. Some of the relevant regulations are detailed in the
next section.
3 The statute on thermal regulation
Since 1975, the statute on thermal regulation has imposed rules on French
companies regarding the energy consumption of buildings. Since its inception,
the aim has been to reduce energy consumption by 15 to 20% every five years.
The Thermal Regulation of 2012 (“RT 2012”) has been in force since July 2011
for the tertiary sector and public buildings, and from 1 January 2013 for
residential houses. It is intended to promote better building design so as to
reduce overall energy consumption and the need for heating. In 2012 these
statutory requirements were increased, requiring contractors to increase their
efforts to reduce the energy consumption of buildings. The main objective is to

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achieve self-sufficiency for energy purposes in buildings by 2020. Thus, this
regulation promotes the use of more efficient technologies for the production
and retention of heat, as well as the production of renewable energy.

Many standards apply to the design of buildings, including windows and doors.
The new ISO 23045: 2008 establishes specific guidelines applicable to the
design of buildings, to improve energy efficiency. To this end, the ISO covers
the choice of the raw materials and components used, the location of the
building, and the energy sources used. In theory, the ISO enables the
transmission and sharing of information about a building’s energy efficiency by
standardizing its energy statement. It also defines objectives specific to each
construction project from the design stage onwards (source: ISO Standards
habitat).
In addition, companies use independent inspection and certification to prove
the increased performance of their products, and to act as a guarantee of their
quality. Thus, the NF and CSTB labels ensure compliance for window
manufacture, with minimum levels of quality and standards concerning air –
and water-tightness, and wind resistance. Such certification of PVC joinery
allows consumers to assess manufacturing quality with respect to those three
factors.
Finally, in response to the growing concerns of both individuals and
institutions about global warming, the “Grenelle Environment Forum”,
organized in 2007 by the Fillon government, brought together for the first time
the State and the representatives of civil society to define a roadmap for
Ecology, Development and Sustainable Planning (source: Presentation by the
Grenelle, October 2010). The Grenelle has achieved some progress by
promoting the involvement of all stakeholders. In terms of development and
planning, the Grenelle’s objectives are to: ≪promote efficient urban land
resources, energy and implement technological breakthrough in thermal
improvement renovation and accelerate the renovation of the old fleet” (source:
Grenelle Environment Forum, “Building rises to the challenge”, October 2010).
Following discussions, two key measures were implemented.

The first was the introduction of interest-free loans for qualifying energy
efficient building projects, from early April 2009. Such loans are available for
house renovation work to reduce both energy consumption and the emission of
greenhouse gases. The loan is granted for certain types of work (such as project
management and energy consumption assessments, insurance fees, etc.) or for
any work involved in and inseparable from energy efficiency improvements and

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installation carried out by a professional. This latter category includes the
installation of new windows, including triple-glazed windows. Specific
conditions must be met to qualify for such a loan (concerning the age of the
house, the grant of any previous loan, the amount of the loan, repayment
schedule, etc.) These loans rapidly became popular: by late July 2009, 15,000
applications had been received, and by the end of March 2010, more than
100,000 loans had been granted.
The second measure introduced were training schemes for companies and
craftsmen, to encourage them to take into account the energy performance of
buildings. Since its launch in 2008, over 10,000 workers have been trained
under this measure. Following this market trend, MPO Fenetres has obtained
certification, allowing the company to showcase its commitment to sustainable
development, from product design through to its installation. MPO Fenetres
highlights its long-term commitment by ensuring that the joinery products it
sells are environmentally-friendly.
MPO Fenetres maintains its commitment to the continuous improvement of its
products, including products with triple glazing, which allow an increase in
performance of over 40% compared to the best double-glazing on the market.
This commitment is reflected in all companies’ activities, as stated above, but
MPO Fenetres has also improved its installation and waste treatment along
ecological lines, including waste recycling. In other words, since 1 March 2007,
MPO Fenetres has committed itself to producing more eco friendly windows,
offering NFcstBat-certified eco friendly windows and triple-glazed Visio
windows. As such, MPO Fenetres puts the most efficient windows in terms of
thermal insulation within reach of everyone. The company decided to
concentrate on this market sector, which, according to the company’s CEO,
represents the future of the company. Noting that for an average surface area
of 50 to 100 m2, 10 to 15% of heat loss from dwellings comes from windows,
it appears that they are an important element that could improve the overall
energy performance of homes. Indeed, these windows have become the ideal
solution in terms of domestic thermal insulation. The three panes which make
up the triple glazing are separated by spaces filled with gas, giving them
excellent thermal performance. Triple glazing captures very little heat. It
therefore gives very good thermal insulation and ensures low heat loss, saving
energy by reducing the amount of heating needed in winter and of cooling in
summer. However, triple glazing products are much more expensive to
purchase, and the acoustic insulation offered is not necessarily better than
that of “acoustic double glazing”. Therefore, the company needs to ensure the
best promotion in order to convince clients to invest in these products.

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Many consumers are willing to spend large sums on products which produce
immediate benefits. Expenditure on housing (including joinery) often involves
substantial outlay, from which the expected savings are less obvious to
individuals. Yet such investment is an effective way to reduce energy costs
significantly. Thus, the company’s marketing should focus on the potential
savings in energy costs for homeowners over the long term. In order to support
sales, MPO Fenetres has developed products within the framework of
sustainable development, from design to installation. Additional certification
for the installation of windows obtained in 2011 is further evidence of the
company’s desire to provide a quality service. These certificates and service
evaluations conducted by independent arbiters are highlighted by the
company’s sales staff in discussions with existing and potential customers. The
sales force is therefore a very important element of the new marketing strategy
and the launch of the triple-glazed windows.

4 Marketing and distribution strategies

With regard to marketing and distribution, the business is customer-oriented:
therefore MPO Fenetres has chosen to keep control of the entire supply chain,
right through from the order to delivery to (and sometimes installation for) the
customer. For both new and replacement windows, MPO Fenetres markets,
designs, manufactures and installs its own products, thus ensuring complete
control of the order and keeping to a minimum the number of contacts for the
customer.The company distributes its products through two distribution
channels: a central department in charge of “key accounts” and “communities”,
and a network of eight agencies deployed in northeastern France, all owned by
the company. These agencies are the cornerstone of the distribution network.
Each agency employs fifteen salespersons, as the control of about 15% of its
market area, and operates in a sales territory of approximately 45,000
customers. The company’s salespeople actively seek potential clients, especially
at trade fairs and exhibitions. These events are of paramount importance: they
afford opportunities to expand the client base and win new contracts. Up to
25% of the annual turnover of an agency can be attributed to contacts made
during these events.

Today, the continuing strong growth of the market has encouraged MPO
Fenetres’s CEO to rethink the organisational model of its agencies. In order to
improve performance and increase the commercial strength of the company, an
audit of its business performance was conducted. Internal research within the

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company enabled the identification of tasks conducted by employees, and the
time allocated to each task, over the course a year. The results are as follows.
Each year, a salesperson has two weeks of training and five weeks of paid
holidays (in accordance with employment law). Two weeks of their annual
working time is devoted to attending trade fairs. In addition, the average
salesperson is absent one week per year for personal reasons. In terms of the
organization of their five-day working week, the Director observed that one day
is devoted to purely administrative tasks (making appointments and reporting
activities). For the remaining four days of the week, based on a working day of
11 hours, one hour is devoted to the management of administrative problems
and urgent tasks, and one hour is taken as a lunch break. In terms of
customer contacts, information obtained from sales staff showed that the
average sale is concluded at the end of the third meeting, and that such
meetings last on average about an hour.
Convinced that high thermal performance PVC windows are the future of the
company, the company’s directorate decided to develop sales of these as its
primary strategic activity. It therefore needed to develop a marketing strategy
for these products on the retail market. Some factors are key to the strategic
approach needed: individuals are not necessarily aware of the technical
features of the products. In addition, although they offer real benefits, triple-
glazed products are more expensive. This may hinder sales of triple-glazed
products, because many alternatives, which are cheaper and perform equally
well, are still marketed, both in the company’s own catalogue and in those of
its competitors. Although the triple-glazed products are better in terms of
insulation and sophistication, their price may be an important deterrent.

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Questions
1. Conduct an internal and an external diagnosis of the company. Use the
SWOT tool to synthesize this information.
2. Identify the Key Factors for Success from the diagnosis.
3. Write a sales pitch for the company. Prepare sales claims to be
presented to sellers. Remember to take into account the potential
objections of customers: provide the employees with arguments to
counter customers’ misconceptions.
4. Suggest incentives to stimulate the sales force (bonuses, collective or
individual incentives, etc.) to encourage their continued training and to
support sales of this product.
5. Determine the optimum size of a business team for an agency, using the
information provided in the case study. Consider the effectiveness of an
agency’s sales team and the commercial influence that the agency can
exercise in its area of operation.
6. Assess the feasibility of a commercial promotion offering “triple-glazed
windows for the price of double glazing” for the product launch., etc.)