Entrepreneur Tom McCormick was the vice president of sales for an $800-million global manufacturer of electrical components when he proposed an idea for expansion to his boss. By creating another company to sell accessory items to the 50 per cent of the market not being supplied through the existing company because of distribution restrictions, the manufacturer could generate considerable profits. McCormick led the skunk works project that created a business plan and proposals. The projections were extremely favourable, but due to other pressing issues within the organization, it was ultimately decided that the concept did not fit the company’s strategy. McCormick always wanted to have his own business: “I talked about it constantly to the point where some close friends made fun of me!” In college, he sold T-shirts, met with business brokers, and networked. When his employer rejected his business proposal, McCormick decided that it was time to take the business plan and run with it. He says, “I knew where my first 100 sales were going to be and I had already researched who and how.” He found suppliers, starting with one in Germany, and hired a graphic designer to produce two short product catalogues. In July of 1997, he took $60,000 from his retirement fund and founded American Electrical, Inc. (AEI). Today, McCormick’s company generates approximately $3 million per year in sales and has three full-time employees. It operates from a 5,000-square-foot office/warehouse in Richmond, Virginia. American Electrical imports electrical and electronic controls from 10 companies, primarily in Europe, for the industrial

controls marketplace in the United States. Tom McCormick took his business plan and turned it into a successful venture.

Case Study Analysis

1. In what areas of the market did McCormick do research before starting his business?

2. What research methods would you recommend for AEI today? Name three specific sources of information.

3. How did McCormick identify AEI’s market? Name the segmentation method and the segment they chose.

4. What is the role of marketing in McCormick’s business?