Question 24

Cressida Grainger started her entrepreneurial career at the age of 22, running a small antiques business. Whilst on a visit to Glasgow market, she discovered lava lamps and bought some to sell on her Camden market stall. The 1960s lamps, which mix oil and water to create psychedelic patterns, were an instant success so she tracked down the inventor, Edward Craven, and eventually bought the then loss-making business from him.

In 1989, Mathmos was born. The firm started to market the lamps to a new set of fashion conscious consumers eager to buy ‘retro chic’ products. The marketing paid off and since then, Mathmos has enjoyed spectacular success, achieving £18 million of sales in 1999.

However, the business has recently run into some difficulties. Following the success of the lava lamps, competitors from the Far East have realised the potential of the products and the market is now being flooded with imitation lamps that are sold at prices that Mathmos would struggle to make the item for. This problem is increased by retailers who stock the cheaper, imported goods alongside the Mathmos originals. In effect, the Mathmos name is advertising other companies’ products.

Grainger is determined to fight back, though. With the name Mathmos linked to high quality products and first-rate after sales service, she believes that her business can be expanded in order to win back market share. Two strategies are being considered.

Option One: Diversification into other product areas, such as gifts and fashion accessories.

Option Two: Extend Mathmos’ unique position as leaders in innovative domestic lighting through the development of new lighting products.

Ultimately, Grainger knows that Mathmos must maintain its innovative edge in order to remain successful in the market place.

(Adapted from Sarah Gracie, The Sunday Times, April 9 2000)

Questions

1. Explain why Mathmos lava lamps were initially so successful. (4 marks)

2. Recently, Mathmos has begun to experience some difficulties. Analyse the key causes of these problems. (8 marks)

3. Explain how the use of market segmentation could help Mathmos to market its products

effectively. (5 marks)

4. Evaluate the advantages and disadvantages of the possible options for development. (8 marks)