Countrywide Corporation Case Analysis: Qualitative and Quantitative Outlook

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Table of Contents

Executive Summary
Problem Statement: Background Information of the Case
Situation Analysis
Possible Alternatives and Analysis
Decision Criteria
Choice and Rationale
Implementation
Control (Evaluation Criteria)

Executive Summary

This case report seeks to address marketing projections for Countrywide Company and examine the situation that occurred earlier. The problem statement highlights the financial woes of Countrywide as a company regarding the examination of issues such as a portfolio and benchmarks. The situation analysis section provides a synopsis of what the firm has passed through over the decades and shows its liquidity position, strengths, weaknesses, competition, as well as business strategies.

In the fourth section, possible alternatives highlight various marketing scenarios that are necessary for the company’s take-off. Consequently, the decision criteria section specifies how marketing decisions such as promotion via magazines and newspapers are viable. On the other hand, the implementation section rationalizes the ease with which such strategies would be implemented, while control shows the methods and rationale for assessment.

Problem Statement: Background Information of the Case

Countrywide Financial Corporation has experienced a number of problems that are worth scrutinizing. Angelo Mozilo, the company’s founder, was the key driving force that enhanced the company towards creating one of the largest real estate mortgage firms within the United States of America. In the end, unfortunately, he participated in the collapse of the company.

The organization, having started in 1969, had expanded and opened a retail branch in California in the year 1974, and had already opened offices in 8 different states. In 1981, Mozilo and his partner Loeb had launched a securities subsidiary with the aim of selling mortgage-backed securities (MBSs). In addition, the company’s yearly loan production went beyond $1 billion in 1985, and started growing dramatically with annual rates on the back of United States housing market bubble, which began in the year 1994 ending in 2006 firms.

While a number of successful benchmarks had occurred through 2007, the problem with the corporation’s loan portfolio and lending practices became evident within the Bank of America (BOA) management. In the year 2009, the Securities and Exchange Commission (SEC) exposed Mozilo and two other key Countrywide Executives with charge of fraudulent misrepresentation of credit and market risk inherent in Countrywide’s loan portfolio.

Later on, an in-depth scrutiny into the organization’s economic practices exposed how the real estate market was supported by the United States federal legislative and regulatory decisions. This situation promoted an atmosphere that resulted in the failure of Fannie Mae and Freddie Mac, leading banking institutions, Wall Street investment firms, as well as a number of mortgage brokerage firms.

As a result, the financial crisis in 2008 left people building a negative impression against the organization. The financial crisis of 2008 resulted in foundation subprime mortgages, mortgage-backed securities, as well as capital markets activity. The company is viewed as a crucial contributor within the subprime mortgage debacle firms because the organization was among the largest mortgage lenders within the United States.

Situation Analysis

The effect of liquidity on stock returns in Countrywide Corporation

On the basis of the 3×3 liquidity and beta value-weighted portfolios, neither the relative bid-ask spread nor the turnover rate of the portfolios provided any evidence of a significant relationship between liquidity and stock returns.

These observations are robust in the presence of the Fama French factors; hence, the no-effect finding does not change when the Fama-French factors are excluded from the analysis. Also, the observations are robust to the weighting convention. As such, stocks within the portfolios do not provide evidence of a relationship between liquidity and stock returns for the measures of liquidity firms.

However, the findings are not robust to the portfolio formation criteria. Value-weighted portfolios based on stock betas give evidence of a significant effect of liquidity on stock returns. In addition, the signs are in line with the theory for both relative bid-ask spread, as well as the turnover rate. It should be noted that the identified relationship between liquidity and stock returns for the beta portfolios is not robust to the weighting convention in the year 2007 for instance.

Marketing Strategies

On several occasions, it is essential to examine the breakeven point before analyzing the strategies.

Projected breakeven point (Overall Outlook)

Fixed cost/contribution margin

=c.m=p-v

=c.m=10

The unit sales that provide the breakeven point

=185,000/10

The unit sales for the breakeven point

=18,500

As mentioned, the key marketing strategies known to be used by the Countrywide Corporation include price alterations, as well as exploitation of selected competitive advantages such as adequate defensive strategies. Under the price selling strategy, the company gives significant concerns about the matters raised by consumers, which attend the need for remarkably low prices. Therefore, this ensures that remarkably stable prices rather than constantly shifting prices are established within the market. Initially, they used pricing tactics that employed low prices from the thriving methods, which worked well for the organization.

Possible Alternatives and Analysis

Countrywide has a high marketing budget of above $185,000. First of all, there must be an agreement on whether, or not the company should have another buzz campaign for its services. If this is an excellent marketing investment for the company, another alternative must be chosen as long as it fits within the allocated budget. If the buzz campaign is not chosen, then there must be a decision of which alternatives should be implemented for the preceding years.

Alternative 1 – Buzz Campaign (approx. $73,500)

Countrywide uses the same coupons used for the previous buzz campaign; hence, they will receive a pessimistic amount of extra sales of $95,760 and an optimistic amount of extra sales of $119,700. This campaign will be covering the geographic areas that were not covered in the previous buzz campaign; therefore, giving the product improved advertisement reach towards other consumers. However, the service sales executives for the company were concerned about the reaction of supermarket buyers.

They could not use the buzz campaign alone to receive additional placements, or increase shelf space with their established customers. Also, the sales force reported that retail executives were unimpressed by the campaign; thus, they became skeptical about its ability to build sustainable service demand. Therefore, having another buzz campaign may not necessarily meet the target market of the organization.

Alternative 2 – Price-oriented Promotions (approximately $90,000)

This alternative is one that was requested by the company’s service sales force. The attractiveness of this promotion was also influential in the stock market decision with regards to shelf space and retail advertising locations. The success achieved by competing companies will depend on their key consumer advertising budgets along with extensive coupon and other promotion programs.

Alternative 3 – Newspaper and Magazine Advertisement (approximately $19,882.50 – $107,000)

This alternative consists of advertising in Housing leverage, stocks and other financial services. This alternative might help the organization generate sustainable demand for the brand; thereby, lead the service sales executives towards success that will have many subscribers search for their financial services. However, the customers should be exposed to the advertisement many times so as to achieve a significant effect from the service.

Alternative 4 – Status Quo

This alternative is a risky choice because the company may not be doing any marketing in a growing market. Countrywide needs to seize the opportunity to grab as much market share as they can, especially because they are currently the number one sausage brand within their market boundaries.

If Countrywide chooses to stick with their status quo, there will be a chance that consumers may not be able to find their product since the brand will not be doing anything to increase placements or shelf space in grocery stores. The company may use such time for building business relationships, but as of now, the organization lacks a lot of marketing exposure that would back up their brand.

Alternative 5- Competitive Advantage

According to relevant sources, cost and differentiation advantages offer a business organization a considerable competitive advantage. Competitive advantage is normally attained when a business firm’s profits attains profits that are over and above what is expected in its industry. Similar benefits are attained at the same cost thus increasing the profit margins.

Though Countrywide Corporation had not attained a competitive advantage, various measures had been identified to ensure that it remains competitive within the market. Value creation was made possible through constant innovation and continuous research of the customer behaviors changes.

Decision Criteria

At a time when the global economy is in crisis, corporations such as Countrywide have suffered serious challenges while trying to maintain their desired profit margins. Hand in hand, the organizations generate enough cash and liquidity to run their daily operations. As such, the following holds the key decision factors while identifying the best alternatives for implementation.

The first factor taken into consideration is that the decision must provide the company with the most cost efficient marketing solution, which would result in the best use of new advertising budget that was expanded for strategic implementation. The second factor holds that the decision must have the strongest reach towards the target markets so as to enable the company develop excellent consumer communication efforts towards the product.

Thirdly, the decision chosen must provide solutions to each of the concerns that the company’s services sales executives announced for attaining full benefits of implemented marketing efforts. Finally, this decision must build a sense of goodwill with company sales executives and build a sense of retailer relationships in order to gain improved service positioning; hence, allow consumers to find the products worth the hustle.

Choice and Rationale

In order to provide the most efficient and effective marketing efforts for Countrywide Company, the company should provide a combination of two of the suggested alternatives.

The choice remains whether to implement another buzz marketing campaign or follow through without buzz marketing and implement one or more of the other alternatives. Buzz marketing for the company’s services does not seem to provide enough reliable return, nor would it help the product visibility grow. In addition, it is likely that the same complications that occurred in the first campaign will happen again.

The other alternative that will not be chosen would be the service trade promotions; this marketing option does provide many benefits, especially in building mortgage subscriptions relations, but will not directly hit the target market and will not communicate as effectively.

With this combination of services, promotions and publishing magazine advertisements will provide the best results, while using the budget to the fullest. With the concerns from the service executives, the price promotions are believed to be the most effective national advertising. With the addition of the magazine advertisements, this will further the national advertising and allow the company to educate and communicate to costumers at a different level, who may not necessary get, the services initially.

Both of these alternatives combined provide the company with the best use of budget resources and investment cost efficiently, allows the services to be best communicated to the public and most importantly, the appropriate target market, provides solutions to each of the concerns of the personnel, and will ultimately build goodwill and growth in retailer relations.

Implementation

Implementation of promotion gives the company further financial service appearance because of the demand from customers that increase the accessibility of services. This alternative will generate interest among consumers. It will be distributed through many channels such as direct mail and online. The company will develop and publish magazines and newspaper after entering marketing media in the category of magazines.

Control (Evaluation Criteria)

Countrywide must monitor and evaluate its market share after initial implementation of chosen marketing initiatives to review if drastic market share is lost. In addition, this company must monitor return on investments to make sure the chosen marketing initiatives have a positive return on investments. If these results come back negatively and the company is drastically losing market share with low or negative results, the company must then implement a fairy aggressive approach in product marketing.

With a gross margin currently, which is nearly moderate, there is some room for lower prices that can gain further consumer product awareness and attract a higher advertisement benefit. According to relevant sources, this can be used for free standing inserts that will help in promoting price cuts, as well as generate further communication with the direct target market. As a result, this will allow time for recovery and increased profitability.

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