MBA GENERAL MANAGEMENT ISBM EXAM ANSWER SHEETS PROVIDED WHATSAPP 91 9924764558

 MBA GENERAL MANAGEMENT ISBM EXAM ANSWER SHEETS PROVIDED WHATSAPP 91 9924764558


GENERAL MANAGEMENT
Total Marks : 80
CASE-1 : ATTEMPT ANY 4 CASES, EQUAL MARKS PER CASE (20 Marks)
Case on Discomfort in a factory and Management Decision Making
Mohan remembered the call from the head office as he puts down the telephone receiver. His boss
from head office he said, "I just read your analysis and I want you to go down to our plant in Kollakal
near Mysore right away. You know we cannot afford this plant any more - the costs are just too high.
So go down there, check out what would be our operational costs would be if we move, and report
back to me in a week."
Mohan knew the challenge quite well as the branch manager of the Good will Specialty Products. His
company is into manufacturing of special apparel for injured and people with other medical conditions.
He needs to deal with high-cost labor in a remote village not so sophisticated plant, unionized
manufacturing plant. Although he had done the analysis there were 480 people who made a living at
this facility and if it is closed most of them will find it very difficult to get another job in the small
town consisting of about 10 000 people.
Instead of the Rs.20/- per hour paid to the Kollakal workers the wages paid to the migrant workers near
Aurangabad will be much cheaper Rs.7/- hour working in sub human conditions. This provides a
saving of 15 lakhs to the company for a year, which, can now be used to meet the costs for training,
transportation and other matters.
After two days of talking with Migrant workers association and representatives of other companies
using the same services in the town, Mohan had enough information to formulate alternative plan for
production and the cost figures for production and transportation. What was bothering him was only
the thought that how is going to handover the termination of service notice to the Kollakal workers.
The plant in Kollakal had been in operation since 1930s making special apparel for persons suffering
from injuries and other medical conditions. Mohan has often talked to the employees who would
recount stories of their fathers and grant fathers working in the company plant-the last of the original
manufacturing operations in the town.
AN ISO 9001 : 2008 CERTIFIED INTERNATIONAL B-SCHOOL
But friendship aside competitors had already edged past Good will in terms of price and were
dangerously close to overtaking it in product quality. Although Mohan and his Boss had tried to
convince the union to accept the lower wages, union leaders resisted it. In fact, in one occasion when
Mohan tried to discuss a cell manufacturing approach, which would cross train employees to perform
up to three different jobs, local union leaders could barely restrain their anger. Yet probing beyond
their anger Mohan sensed their vulnerability, but could not break through.
Tomorrow he will discuss his report with the CEO. Mohan does not want to be responsible for
dismantling of the plant at Kollakal, an act, which Mohan believes is personally wrong, but he is
helpless. Mohan said to himself "The costs are too high, the union's unwilling to cooperate, and the
company needs to make a better return on its investment if it has to continue at all. It sounds right, but
it feels wrong. What should I do?
Questions :
1. Assume you want to lead the change to save the Kollkal plant. Describe how you would proceed?
2. What is the primary type of change needed - technology, product, structure or people/culture?
3. What techniques would you use to overcome union resistance and implement change?
CASE-2 (20 Marks)
A small group of managers at Falcon Computer met regularly on Wednesday mornings to develop a
statement capturing what they considered to be the 'Falcon Culture'. Their discussions were wideranging,
covering what they thought their firm's culture was, what it should be and how to create it.
They were probably influenced by other firms in their environment since they were located in the
Silicon Valley area of California. Falcon computer was a new firm, having been created just eight
months earlier. Since the corporation was still in the start- up phase managers decided it would be
timely to create and instill the type of culture they thought would be most appropriate for their
organization. After several weeks of brain storming, writing, debating, and rewriting, the management
group eventually produced a document called 'Falcon Values', which described the culture of the
company as they saw it. The organizational culture statement covered such topics, as treatment of
customers, relations among work colleagues, preferred style of social communication, the decision
making process, and the nature of working environment.
Peter Richards read over the Falcon values statement shortly after he was hired as a software trainer.
After observing managerial and employee behaviors at Falcon for a few weeks, he was struck by wide
discrepancy between the values expressed in the document and what he observed as actual practice
within the organization. For example the Falcon values document-contained statements such as this:
"Quality; attention to detail is our trademark; our goal s to do it right the first time. We intend to
deliver defect free products and services to customers on the date promised."
However Richards had already seen shipping reports showing that a number of defective computers
were being shipped to customers. And his personal experience supported his worst fears. When he
borrowed four brand-new Falcon computers from the shipping room for use in a training class he
found that only two of them started up correctly without additional technical work on his part.
Another example of the difference between the Falcon Values document and actual practice concerned
this statement on communication: "Managing by personal communication is part of the Falcon way.
We value and encourage open, direct, person to person communication as part of our daily routine."
Executives bragged about how they arranged their chairs in a circle to show equality and to facilitate
open communications whenever they met to discuss the Falcon values document Richards had heard
the "open communication" buzzword a lot since coming to Falcon, but he hadn't seen much evidence
of such communication. As a matter of fact all other meetings used a more traditional layout with top
executives at the front of the room. Richards believed that the real organizational culture that was
developing at Falcon was characterised by secrecy and communications that followed the formal chain
of command. Even the Falcon values document Richard was told had been created in secret.
Richards soon became disillusioned. He confided in a coworker on afternoon "the falcon values
document was so at avarice with what people saw everyday that very few of them took it seriously."
Employees quickly learned what was truly emphasized in the organization-hierarchy, secrecy, and
expediency and focused on those realities instead, ignoring many of the concepts incorporated in the
values document. Despite this frustration Richards stayed with Falcon until it filed for bankruptcy two
year later. "Next time" he thought to himself as he cleaned out his desk "ill pay more attention to what
is actually going on, and less to what top management says is true. Furthermore, I guess you just can't
create values."
Questions
1. What is more important the statement in a corporate culture document or actual managerial
behaviour?
2. Why did the Falcon executives act as they did?
3. Why didn't employees like Richards blow the whistle on Falcon, challenging the inconsistency
between values and behaviour?
4. How can executives go about changing the old values that govern an organization?
CASE-3 (20 Marks)
Study the case below.Discuss customer insight? Define CRM,role and advantages for todays
management?
Archana Tuli (Owner of a water purifier): Look at my water purifier. Last week a person came to my
house saying my service contract was up for renewal. Mind you, that was the first time in 10 months I
was seeing anyone from Purifo. I did not like his barging into my time without prior notice. But that
did not bother him. He had a list to clear, never mind if I was in the midst of cooking lunch.
I asked him about the servicing, since under the maintenance contract the company should have
serviced the unit twice that year. " You should have called the company," he said. But that was a
preventive maintenance contract and it was for the company to call and take a date.
Finally, he set about servicing the machine. I found that his handling of the machine was rather
clumsy. He dropped the casing twice and strewed the carbon all over the sink. I discovered that he was
just four months old in the Company. Before that, he used to sell plastic boxes. Is this what I get for
being your customer?
Then he said the filter candle needed to be changed which I would have to pay for. That annoyed me. I
showed him the contract, which clearly stated that the company would replace the candle once a year
at its cost. He did not know that. Would you believe that? Clearly such service contracts are simply a
means to make money. There is no attitude to servicing. He came because it was February and he had
contract renewal targets to complete. He came without calling, expecting we would drop everything
else to serve him. He had no clue as to what he had to give the customer for the contract. He messed up
my kitchen and did not even attempt to tidy it up.
The worst was that when I started the machine, the water would not flow. I was furious. Purifo sends
incompetent, inexperienced people to cut costs. I carry the responsibility of providing my family a
safe, hygienic environment at home, so I am prepared to pay for preventive maintenance. But what did
I get?
But it is a good product and I am an informed consumer who knows how to work around a
manufacturer's inefficiency. I simply gave the service contract to a private firm. I don't want to have
anything to do with Purifo.
Ritikant Sharma (Credit Card holder): Every month, I receive a credit card bill and my payment is sent
the very next day. Five months ago, the bill did not come on the 22nd evening as it normally would. I
received the bill 10 days later with a charge of Rs. 675/- for overdue interest. I was taken aback and
called up by the bank. But the bank manager argued that the bill had been sent earlier. It was my word
against his.
I wrote to Monet Bank, protesting against this undue charge. Eventually, after six letters from me,
including one to the managing director, the bank " waived" the interest. But I was left with a bitter taste
in my mouth. I wondered why the bank did this to me. Did I deliberately delay payment? I had this
card for three years and not once had I defaulted on payment.
I also wondered if the bank considered the cost of this argument to me. Was it worth the Rs. 675/-?
Why was the customer not right this time? And what about all those times when I paid four days
before the due date? I was amazed that the bank treated me like an errant schoolboy. Since then I have
not felt good about using the Monet credit card.
Worse, every month the bill continues to show the overdue interest and every month there is a fresh
exchange of letters on the matter. Only last week I received an invitation to become a member of
another credit card company. I am planning to surrender the Monet Card.
Divya Mathur (Owner of a washing machine): You say I am an important customer of Crysta. Great.
But for your customer service cell, I am just a number. For six months now, I have been having
problems with the washing machine. Last month, when I called the customer service cell to follow up
an old complaint about the motor, the lady who took the call asked me to repeat the details: model
number, date of purchase, and the like. When I pointed out that all these details had been given several
times before and all she needed to do was check the complaint order number, her response was
shocking. " May be, but I can't boot the system. I am only standing in for someone who has not
reported today. So, you have to give the details again." She said.
Tell me what am I getting for being your customer? Respect? Good handling? No. Now you come here
and ask me personal details like family income, number of members, husband's designation. You still
haven't told me why you need all this information. You are researching. Are you collecting this
information to help your company or me?
Then there was the problem with the V-belt. Within a day of replacing it, there were some cracking
sounds. The engineer said he would have to wait for the senior supervisor to examine it. Reason? " We
recently changed our supplier and all his pieces are turning out to be defective." I was taken aback. It
frightened me to know that there was no quality check at your end. We outsource a lot of stuff for our
garment business, but every button and needle is checked before it is used. We are not a multinational,
just an old family-managed business.
Radhika Iyer (School Teacher): That feeling for the customer is simply not there. The customer is not a
person but a collective noun. If the customer was important, wouldn't my water purifier Company tell
me when it changed the service agent? When I called the number in my contract card, I discovered that
the number now belonged to a courier company. I had to call the head office in Mumbai and get the
new service agent's number in Delhi.
Is this fair? Or does it matter? I guess the Company's attitude was: " If a customer needs service, let her
break her back and spend money to find out who the new agent is. " The only motives are profits and
sales volumes. Not customer loyalty or service. Therefore a customer is one who buys your product,
not one who has bought your product. Once you've bought the product you are a 'has been'. Why
would you want to invest energy in a set of people to whom a sale has been made? You spend energy
as long as a sale is not made. Once a sale is done, it is for the customer to invest energy in sustaining
his relationship with the manufacturer. Isn't that how it is? The manufacturer's attitude is-you need me
more than I need you, so guess who should work harder?
And everyone once in a while, there is a new face at my door asking me if I own a Zento purifier.
Dammit, don't you have a customer file? No, he says. We go from door to door. Splendid. Then what
do you do with all the data you collect? And every one of these men asks me the same questions: when
did you buy it, what is your model number, is it working properly? The worst is: " What is your
address?" I don't care what the information is being used for. But I don't want to be disturbed for
information, which you already have.
We believe that because India now manufactures Coke and Mercedes, we have progressed. But this
new market is no different from the gray market, where you can buy anything but cannot expect
service. For instance, I bought a packet of macaroni, which said I had to boil it in 250 ml of water. I
did that, but after the prescribed five minutes of boiling, there was enough water left in the pan. I then
boiled it for another three minutes, and the pasta dissolved into a unrecognizable mass.
One day, I met someone who worked for this macaroni company. I told him about my experience. He
said I should let the pan rest for five minutes after turning off the heat. The residual water would get
absorbed. That worked. Couldn't the firm have said so on the pack? Or is it cheaper to let the customer
learn? Does the Company use experienced hands-on cooks while designing these products or are they
MBAs who can't tell a stove from a cigarette lighter?
I bought a jar of mayonnaise the other day. The label said it should be used within six months. Of
what? Of the date of manufacture or of the date of opening the seal? Do I refrigerate it or not? It takes
us back to what I said before: once the sale has been made, the consumer does not matter anymore.
The sale is not on the customer's involvement, loyalty or satisfaction. It never was; it will never be.
DIPANKAR BARUAH (Cell Phone Owner): There are numerous messages that are flashed on the cell
phone to announce the sale of wedding suits, printers, shoes, or TV programmes, or updates on cricket
scores. These messages usually send out a single, short beep. Only personal messages are announced
with a long, continuous beep. Last week, I was distracted by six ad messages for a chocolate. And all
of them were long beeps. It made me mad because I was in the midst of meeting clients and that kind
of triviality is distracting.
The cell phone is a great device. It helps me catch messages, which I would otherwise have missed.
But I don't want it to distract me during a meeting. Please respect my privacy. The cell phone is for my
convenience, not for the convenience of callous advertisers. Now, I leave the cell phone with the
secretary and she calls me only if the message is a personal one.
Tell me, has the advertiser benefited? He sought to get his messages across to 1,50,000 subscribers at
one go. It appears to me that my cell phone has become a cheap medium for advertising. Since it has
done me the favour of selling me the cell phone, the cell phone operator can pass on my personal
details to advertisers without even asking me. The cell phone is a private medium of communication,
not a public address system like a radio.
We have allowed a million new products to enter the country but along with that, we have not allowed
the market mindset to evolve or grow. Few people realize that the customer needs to be treated with
respect.
BERYL DIAS (owner of a laser printer): This printer cost me Rs. 28,000. My company did not fund it.
I saved for it for a year. Saving that kind of money was not easy. I wanted the best, which is what I
thought I got when I bought it., It worked very well and I know it is a good product. But that's where
my ecstasy ends.
One day, the paper jammed and I needed help. So I called up the company. The lady who took the call
said: " You will have to bring the printer here, we are not going to come there." I felt that was very
hostile. I expressed surprise that their service engineers would not come to my home. The lady gave
me a silly reason. " If your mixie breaks down wouldn't you take it to the service center?" Maybe she
took the liberty to talk down to me because I was a woman and I operated a home office. But there's a
world of difference between a Rs. 2,500 mixie and a Rs. 28,000 printer. But she was surly from the
word go. Worse, their office was located very far from where I lived and going there would mean
wasting an entire morning.
It was her surly behaviour that angered me the most. I recall how the sales engineers hovered around
me when I had first contacted the company for a brochure. For three weeks someone from the
company would call me practically daily. They virtually pushed me into buying the printer. I
remember I still had the last Rs.1,500 /-to save up, when they decided to give me a Rs.1,000/- discount
to hasten my decision. Their sales pitch mesmerized me. Today, I am just a statistic. I can almost hear
them saying: "You have no choice. If your printer is not working, that's your problem. If you live afar,
that's also your problem.!"
I had not considered the after - sales trauma when I brought the printer. I assumed that the company
would come home to repair it, as other companies do for other products. They did not tell me about
their service terms at the time of the sale. It was not important, I guess. For, all they wanted was my
Rs.28, 000/-.
To repair the printer, I went through an agent, who lost my complaint order papers, forgot to intimate
the company about the part I wanted and made me wait for four weeks before the printer was repaired.
Then I discovered it had not been repaired at all. I decided then that I wouldn't have anything to do
with the company ever again. I sold that printer and brought another brand after ascertaining that there
was a service agent close by. My old printer was state of the art, but the real differentiator is the effort
a firm is willing to put into customer service.
CASE-4 : (20 Marks)
Company Social Responsibility & AIDS
The AIDS epidemic today is unparalleled in the challenges it poses to the world, and it is clearly an
issue that no one can address alone. Business is an essential partner in the response to AIDS. The
private sector like the other sectors is not immune from AIDS. Involvement of the private sector in the
response to HIV/AIDS is crucial to the success of our country's efforts against the epidemic.
Questions
1. What is the impact of AIDS on businesses? Do you agree that businesses in the near future would
be actively interested in addressing the issue of AIDS? Justify your answer
2. ABC Corporation wants to partner with an NGO and address the issue of AIDS around its factory,
discuss what steps should ABC Corporation take to initiate, manage and sustain its partnership
with the NGO .
CASE-5 : (20 Marks)
Read the following case study and answer the questions that follow
Prakash Gupte is a sales representative with Beta Water Purifiers. Prakash is a star sales representative
with the highest sales turnover record for 5 consecutive months. He is an aggressive and a dynamic
sales person with a strong target-orientation. His marketing manager Shreyans Desai is very proud of
his accomplishments. Based on his performance appraisal, Prakash has been promoted to the rank of
Assistant Manager (Marketing). He is now required to supervise the work of 6 sales representatives
and to manage sales targets for his area.
After assuming charge as an Asst. Marketing Manager, Prakash set the targets for the first month and
communicated these to the sales representatives in a direct and explicit manner. 4 sales representatives
found the targets to be too ambitious but reserved their comments. After the meeting they discussed the
issue informally and dispersed. Prakash called the fortnightly review meeting to take stock of the
situation. He was extremely disappointed to know that all the six representatives were trailing behind
in target achievement. He was very blunt in communicating his disappointment and told their team to
get their targets by the end of the month. After the meeting, all the six representatives expressed their
displeasure with the meeting and found the demand of Prakash unreasonable. They commonly
perceived him to be a difficult person to deal with. They thought of approaching Shreyans for this.
Harish and Sameer, two of the representatives met Shreyans and discussed this with him. Shreyans was
a little upset with Prakash, but he thought to himself that Prakash is very efficient but lacks tact to
work with people. He assured the duo that he will speak to Prakash in this regard.
Shreyans called Prakash for an informal chat and advised him to go a little easy with people. Prakash
was clearly agitated about this since he took this as a personal affront, as he sensed during this meeting
that someone must have complained about his behavior to Shreyans. Instead of going easy with the
team, he turned more bitter in his approach. He called a meeting of all the sales representatives, and
indirectly communicated his displeasure with the incident. He once again made it clear that the targets
were attainable but needed a greater sense of commitment from the group. Obviously the sales
representatives did not like this. At the month-end briefing, Prakash was absolutely disappointed with
the team for having under-achieved on the targets’ count. He rebuked them for going slow on their
work and told them sternly to adhere to the targets in the next month. Deepak, on of the sales
representatives, objected to highly monthly targets and suggested that the targets be made more
reasonable. To this Prakash retorted by saying that the targets were absolutely reasonable. Obviously
the team was disheartened with this. They all decided to collectively approach Shreyans this time and
seek his intervention. When they met Shreyans to brief him about the situation, Shreyans was sure that
he had made a mistake somewhere.
QUESTIONS:
1) What happened when Prakash got promoted to the position of Asst. Manager (Marketing)? Why
did this happen?
2) If you were entrusted with the responsibility of managing 6 sales representatives & creating an
effective sales team, how would you do it?

 HOTEL MANAGEMENT
Q1) What are the minor operating departments of a hotel? Explain each.
Q2) What are the basic principles in requisitioning guest and cleaning supplies?
Q3) Write short notes on the following (Any 2)
a) Role of the housekeeping control desk.
b) Lost and found procedure
c) Responsibilities of the Public area supervisor.
Q4) How can we reduce physical stress?
Q5) What are the types of notices in a house keeping operation?
Q6) How do small hotels survive?
Q7) Explain briefly what services dos a franchisor provide to a franchisee?
Q8) Explain the role of maintenance (engineering department)?
Q9) Discuss the relationship between management and supervisors?
Q10) Explain the meaning of the various occupancy codes?
AN ISO 9001 : 2008 CERTIFIED INTERNATIONAL B-SCHOOL

AEREN FOUNDATION’S Maharashtra Govt. Reg. No.: F-11724
SUBJECT : MARKETING MANAGEMENT
Total Marks : 80
Case-1 : The use of the marketing mix in product launch
Introduction
NIVEA® is an established name in high quality skin and beauty care products. It is part of a range of
brands produced and sold by Beiersdorf. Beiersdorf, founded in 1882, has grown to be a global company
specialising in skin and beauty care.
In the UK, Beiersdorf’s continuing goal is to have its products as close as possible to its consumers,
regardless of where they live. Its aims are to understand its consumers in its many different markets and
delight them with innovative products for their skin and beauty care needs. This strengthens the trust and
appeal of Beiersdorf brands. The business prides itself on being consumer-led and this focus has helped
it to grow NIVEA into one of the largest skin care brands in the world.
Beiersdorf’s continuing programme of market research showed a gap in the market. This led to the
launch of NIVEA VISAGE® Young in 2005 as part of the NIVEA VISAGE range offering a
comprehensive selection of products aimed at young women. It carries the strength of the NIVEA brand
image to the target market of girls aged 13-19. NIVEA VISAGE Young helps girls to develop a proper
skin care routine to help keep their skin looking healthy and beautiful.
The market can be developed by creating a good product/range and introducing it to the market
(product-orientated approach) or by finding a gap in the market and developing a product to fill it
(market-orientated approach). Having identified a gap in the market, Beiersdorf launched NIVEA
VISAGE Young using an effective balance of the right product, price, promotion and place. This is
known as the marketing mix or ‘four Ps’. It is vital that a company gets the balance of these four
elements correct so that a product will achieve its critical success factors. Beiersdorf needed to develop
a mix that suited the product and the target market as well as meeting its own business objectives.
The company re-launched the NIVEA VISAGE Young range in June 2007 further optimising its
position in the market. Optimised means the product had a new formula, new design, new packaging and
a new name. This case study shows how a carefully balanced marketing mix provides the platform for
launching and re-launching a brand onto the market.
AN ISO 9001 : 2008 CERTIFIED INTERNATIONAL B-SCHOOL
Product :
The first stage in building an effective mix is to understand the market. NIVEA uses market research to
target key market segments which identifies groups of people with the same characteristics such as
age/gender/attitude/lifestyle. The knowledge and understanding from the research helps in the
development of new products. NIVEA carries out its market research with consumers in a number of
different ways. These include:
• using focus groups to listen to consumers directly
• gathering data from consumers through a variety of different research techniques
• product testing with consumers in different markets.
Beiersdorf’s market research identified that younger consumers wanted more specialised face care
aimed at their own age group that offered a ‘beautifying’ benefit, rather than a solution to skin problems.
NIVEA VISAGE Young is a skin care range targeted at girls who do not want medicated products but
want a regime for their normal skin.
Competitor products tend to be problem focussed and offer medicated solutions. This gives NIVEA
competitive advantage. NIVEA VISAGE Young provides a unique bridge between the teenage market
and the adult market.
The company improved the product to make it more effective and more consumer-friendly. Beiersdorf
tested the improved products on a sample group from its target audience before finalising the range for
re-launch. This testing resulted in a number of changes to existing products. Improvements included:
• Changing the formula of some products. For example, it removed alcohol from one product and used
natural sea salts and minerals in others.
• Introducing two completely new products.
• A new modern pack design with a flower pattern and softer colours to appeal to younger women.
• Changing product descriptions and introducing larger pack sizes.
Each of these changes helped to strengthen the product range, to better meet the needs of the market.
Some of these changes reflect NIVEA’s commitment to the environment. Its corporate responsibility
approach aims to:
• reduce packaging and waste - by using larger pack sizes
• use more natural products – by including minerals and sea salts in the formula
• increase opportunities for recycling - by using recyclable plastic in its containers.
Price :
Lots of factors affect the end price of a product, for example, the costs of production or the business
need to maximise profits or sales. A product’s price also needs to provide value for money in the market
and attract consumers to buy.
There are several pricing strategies that a business can use:
• Cost based pricing – this can either simply cover costs or include an element of profit. It focuses on the
product and does not take account of consumers.
• Penetration price – an initial low price to ensure that there is a high volume of purchases and market
share is quickly won. This strategy encourages consumers to develop a habit of buying.
• Price skimming – an initial high price for a unique product encouraging those who want to be ‘first to
buy’ to pay a premium price. This strategy helps a business to gain maximum revenue before a
competitor’s product reaches the market.
On re-launch the price for NIVEA VISAGE Young was slightly higher than previously. This reflected
its new formulations, packaging and extended product range. However, the company also had to take
into account that the target market was both teenage girls and mums buying the product for their
daughters. This meant that the price had to offer value for money or it would be out of reach of its target
market.
As NIVEA VISAGE Young is one of the leading skin care ranges meeting the beautifying needs of this
market segment, it is effectively the price leader. This means that it sets the price level that
competitors will follow or undercut. NIVEA needs to regularly review prices should a competitor enter
the market at the ‘market growth’ point of the product life cycle to ensure that its pricing remains
competitive.
The pricing strategy for NIVEA is not the same as that of the retailers. It sells products to retailers at one
price. However, retailers have the freedom to use other strategies for sales promotion. These take
account of the competitive nature of the high street. They may use:
• loss leader: the retailer sells for less than it cost to attract large volume of sales, for example by
supermarkets
• discounting – alongside other special offers, such as ‘Buy one, get one free’ (BOGOF) or ‘two for
one’.
NIVEA VISAGE Young’s pricing strategy now generates around 7% of NIVEA VISAGE sales.
Place
Place refers to:
• How the product arrives at the point of sale. This means a business must think about what distribution
strategies it will use.
• Where a product is sold. This includes retail outlets like supermarkets or high street shops. It also
includes other ways in which businesses make products directly available to their target market, for
example, through direct mail or the Internet.
NIVEA VISAGE Young aims to use as many relevant distribution channels as possible to ensure the
widest reach of its products to its target market. The main channels for the product are retail outlets
where consumers expect to find skin care ranges. Around 65% of NIVEA VISAGE.
Young sales are through large high street shops such as Boots and Superdrug. Superdrug is particularly
important for the ‘young-end’ market. The other 35% of sales mainly comes from large grocery chains
that stock beauty products, such as ASDA, Tesco and Sainsbury’s. Market research shows that around
20% of this younger target market buys products for themselves in the high street stores when shopping
with friends. Research also shows that the majority of purchasers are actually made by mums, buying for
teenagers. Mums are more likely to buy the product from supermarkets whilst doing their grocery
shopping.
NIVEA distributes through a range of outlets that are cost effective but that also reach the highest
number of consumers. Its distribution strategies also consider the environmental impact of transport. It
uses a central distribution point in the UK. Products arrive from European production plants using
contract vehicles for efficiency for onward delivery to retail stores. Beiersdorf does not sell direct to
smaller retailers as the volume of products sold would not be cost effective to deliver but it uses
wholesalers for these smaller accounts. It does not sell directly through its website as the costs of
producing small orders would be too high. However, the retailers, like Tesco, feature and sell the
NIVEA products in their online stores.
Promotion
Promotion is how the business tells customers that products are available and persuades them to buy.
Promotion is either above-the-line or below-the-line. Above-the-line promotion is directly paid for, for
example TV or newspaper advertising.
Below-the-line is where the business uses other promotional methods to get the product message across:
• Events or trade fairs help to launch a product to a wide audience. Events may be business to consumer
(B2C) whereas trade fairs are business to business (B2B).
• Direct mail can reach a large number of people but is not easy to target specific consumers costeffectively.
• Public relations (PR) includes the different ways a business can communicate with its stakeholders,
through, for example, newspaper press releases. Other PR activities include sponsorship of high profile
events like Formula 1 or the World Cup, as well as donations to or participation in charity events.
Branding – a strong and consistent brand identity differentiates the product and helps consumers to
understand and trust the product. This aims to keep consumers buying the product long-term.
• Sales promotions, for example competitions or sampling, encourage consumers to buy products in the
short-term.
NIVEA chooses promotional strategies that reflect the lifestyle of its audience and the range of media
available. It realises that a ‘one way’ message, using TV or the press, is not as effective as talking
directly to its target group of consumers. Therefore NIVEA does not plan to use any above-the-line
promotion for NIVEA VISAGE Young.
The promotion of NIVEA VISAGE Young is consumer-led. Using various below-the-line routes,
NIVEA identifies ways of talking to teenagers (and their mums) directly.
• A key part of the strategy is the use of product samples. These allow customers to touch, feel, smell
and try the products. Over a million samples of NIVEA VISAGE Young products will be given away
during 2008. These samples will be available through the website, samples in stores or in ‘goody bags’
given out at VISAGE roadshows up and down the country.
• NIVEA VISAGE Young launched an interactive online magazine called FYI (Fun, Young &
Independent) to raise awareness of the brand. The concept behind the magazine is to give teenage girls
the confidence to become young women and to enjoy their new-found independence. Communication
channels are original and engaging to enable teenagers to identify with NIVEA VISAGE Young. The
magazine focuses on ‘first time’ experiences relating to NIVEA VISAGE Young being their first
skincare routine. It is promoted using the Hit40UK chart show and the TMF digital TV channel.
• In connection with FYI, NIVEA VISAGE Young has recognised the power of social network sites for
this young audience and also has pages on MySpace, Facebook and Bebo. The company is using the
power of new media as part of the mix to grow awareness amongst the target audience.
Conclusion
NIVEA VISAGE Young is a skincare range in the UK market designed to enhance the skin and beauty
of the teenage consumer rather than being medicated to treat skin problems. As such, it has created a
clear position in the market. This shows that NIVEA understands its consumers and has produced this
differentiated product range in order to meet their needs.
To bring the range to market, the business has put together a marketing mix. This mix balances the four
elements of product, price, place and promotion. The mix uses traditional methods of place, such as
distribution through the high street, alongside more modern methods of promotion, such as through
social networking sites. It makes sure that the message of NIVEA VISAGE Young reaches the right
people in the right way.
Answer the following questions:
1. Describe what is meant by a business being ‘consumer led’.
2. What are the key parts of the marketing mix? Explain how each works with the others.
3. Explain why the balance of the marketing mix is as important as any single element.
4. Analyse the marketing mix for NIVEA VISAGE Young. What are its strongest points? Explain why
you think this is so.
Case-2 : SWOT analysis in action at Škoda
Introduction
In 1895 in Czechoslovakia, two keen cyclists, Vaclav Laurin and Vaclav Klement, designed and
produced their own bicycle. Their business became Škoda in 1925. Škoda went on to manufacture
cycles, cars, farm ploughs and airplanes in Eastern Europe. Škoda overcame hard times over the next 65
years. These included war, economic depression and political change. By 1990 the Czech management
of Škoda was looking for a strong foreign partner. Volkswagen AG (VAG) was chosen because of its
reputation for strength, quality and reliability. It is the largest car manufacturer in Europe providing an
average of more than 5 million cars a year – giving it a 12% share of the world car market. Volkswagen
AG comprises the Volkswagen, Audi, Škoda, SEAT, Volkswagen Commercial Vehicles, Lamborghini,
Bentley and Bugatti brands. Each brand has its own specific character and is independent in the market.
Škoda UK sells Škoda cars through its network of independent franchised dealers.
To improve its performance in the competitive car market, Škoda UK’s management needed to assess its
brand positioning. Brand positioning means establishing a distinctive image for the brand compared to
competing brands. Only then could it grow from being a small player. To aid its decision-making, Škoda
UK obtained market research data from internal and external strategic audits. This enabled it to take
advantage of new opportunities and respond to threats.
The audit provided a summary of the business’s overall strategic position by using a SWOT analysis.
SWOT is an acronym which stands for:
• Strengths – the internal elements of the business that contribute to improvement and growth
• Weaknesses – the attributes that will hinder a business or make it vulnerable to failure
• Opportunities – the external conditions that could enable future growth
• Threats – the external factors which could negatively affect the business.
This case study focuses on how Škoda UK’s management built on all the areas of the strategic audit.
The outcome of the SWOT analysis was a strategy for effective competition in the car industry.
Strengths
To identify its strengths, Škoda UK carried out research. It asked customers directly for their opinions
about its cars. It also used reliable independent surveys that tested customers’ feelings. For example, the
annual JD Power customer satisfaction survey asks owners what they feel about cars they have owned
for at least six months. JD Power surveys almost 20,000 car owners using detailed questionnaires. Škoda
has been in the top five manufacturers in this survey for the past 13 years. In Top Gear’s 2007 customer
satisfaction survey, 56,000 viewers gave their opinions on 152 models and voted Škoda the ‘number 1
car maker’. Škoda’s Octavia model has also won the 2008 Auto Express Driver Power ‘Best Car’.
Škoda attributes these results to the business concentrating on owner experience rather than on sales. It
has considered ‘the human touch’ from design through to sale. Škoda knows that 98% of its drivers
would recommend Škoda to a friend. This is a clearly identifiable and quantifiable strength. Škoda uses
this to guide its future strategic development and marketing of its brand image.
Strategic management guides a business so that it can compete and grow in its market. Škoda adopted a
strategy focused on building cars that their owners would enjoy. This is different from simply
maximising sales of a product. As a result, Škoda’s biggest strength was the satisfaction of its
customers. This means the brand is associated with a quality product and happy customers.
Weaknesses
A SWOT analysis identifies areas of weakness inside the business. Škoda UK’s analysis showed that in
order to grow it needed to address key questions about the brand position. Škoda has only 1.7% market
share. This made it a very small player in the market for cars. The main issue it needed to address was:
how did Škoda fit into this highly competitive, fragmented market?
This weakness was partly due to out-dated perceptions of the brand. These related to Škoda’s eastern
European origins. In the past the cars had an image of poor vehicle quality, design, assembly, and
materials. Crucially, this poor perception also affected Škoda owners. For many people, car ownership is
all about image. If you are a Škoda driver, what do other people think?
From 1999 onwards, under Volkswagen AG ownership, Škoda changed this negative image. Škoda cars
were no longer seen as low-budget or low quality. However, a brand ‘health check’ in 2006 showed that
Škoda still had a weak and neutral image in the mid-market range it occupies, compared to other players
in this area, for example, Ford, Peugeot and Renault. This meant that whilst the brand no longer had a
poor image, it did not have a strong appeal either. This understanding showed Škoda in which direction
it needed to go. It needed to stop being defensive in promotional campaigns. The company had sought to
correct old perceptions and demonstrate what Škoda cars were not. It realised it was now time to say
what the brand does stand for. The marketing message for the change was simple. Škoda owners were
known to be happy and contented with their cars. The car-buying public and the car industry as a whole
needed convincing that Škoda cars were great to own and drive.
Opportunities and Threats
Opportunities
Opportunities occur in the external environment of a business. These include for example, gaps in the
market for new products or services. In analysing the external market, Škoda noted that its competitors’
marketing approaches focused on the product itself.
Audi emphasises the technology through its strapline, ‘Vorsprung Durch Technik’ (‘advantage through
technology’). BMW promotes ‘the ultimate driving machine’. Many brands place emphasis on the
machine and the driving experience. Škoda UK discovered that its customers loved their cars more than
owners of competitor brands, such as Renault or Ford.
Information from the SWOT analysis helped Škoda to differentiate its product range. Having a
complete understanding of the brand’s weaknesses allowed it to develop a strategy to strengthen the
brand and take advantage of the opportunities in the market. It focused on its existing strengths and
provided cars focused on the customer experience. The focus on ‘happy Škoda customers’ is an
opportunity. It enables Škoda to differentiate the Škoda brand to make it stand out from the competition.
This is Škoda’s unique selling proposition (USP) in the motor industry.
Threats
Threats come from outside of a business. These involve, for example, a competitor launching cheaper
products. A careful analysis of the nature, source and likelihood of these threats is a key part of the
SWOT process.
The UK car market includes 50 different car makers selling 200 models. Within these there are over
2,000 model derivatives. Škoda UK needed to ensure that its messages were powerful enough for
customers to hear within such a crowded and competitive environment. If not, potential buyers would
overlook Škoda. This posed the threat of a further loss of market share.
Škoda needed a strong product range to compete in the UK and globally. In the UK the Škoda brand is
represented by seven different cars. Each one is designed to appeal to different market segments. For
example:
• The Škoda Fabia is sold as a basic but quality ‘city car’
• The Škoda Superb offers a more luxurious, ‘up-market’ appeal
• The Škoda Octavia Estate provides a family with a fun drive but also a great big boot.
Pricing reflects the competitive nature of Škoda’s market. Each model range is priced to appeal to
different groups within the mainstream car market. The combination of a clear range with competitive
pricing has overcome the threat of the crowded market.
The following example illustrates how Škoda responded to another of its threats, namely, the need to
respond to EU legal and environmental regulations. Škoda responded by designing products that are
environmentally friendly at every stage of their life cycle. This was done by for example:-
• Recycling as much as possible. Škoda parts are marked for quick and easy identification when the car
is taken apart.
• Using the latest, most environmentally-friendly manufacturing technologies and facilities available.
For instance, areas painted to protect against corrosion use lead-free, water based colours.
• Designing processes to cut fuel consumption and emissions in petrol and diesel engines. These use
lighter parts making vehicles as aerodynamic as possible to use less energy.
• Using technology to design cars with lower noise levels and improved sound quality. Outcomes and
benefits of SWOT analysis.
Škoda UK’s SWOT analysis answered some key questions. It discovered that:
• Škoda car owners were happy about owning a Škoda
• the brand was no longer seen as a poorer version of competitors’ cars.
However,
• the brand was still very much within a niche market
• a change in public perception was vital for Škoda to compete and increase its market share of the
mainstream car market.
The challenge was how to build on this and develop the brand so that it was viewed positively. It
required a whole new marketing strategy.
Škoda UK has responded with a new marketing strategy based on the confident slogan, ‘the
manufacturer of happy drivers.’ The campaign’s promotional activities support the new brand position.
The key messages for the campaign focus on the ‘happy’ customer experience and appeal at an
emotional rather than a practical level. The campaign includes:
• he ‘Fabia Cake’ TV advert. This showed that the car was ‘full of lovely stuff’ with the happy music
(‘Favourite things’) in the background.
• An improved and redesigned website which is easy and fun to use. This is to appeal to a young
audience. It embodies the message ‘experience the happiness of Škoda online’.
Customers are able to book test drives and order brochures online. The result is that potential customers
will feel a Škoda is not only a reliable and sensible car to own, it is also ‘lovely’ to own.
Analysing the external opportunities and threats allows Škoda UK to pinpoint precisely how it should
target its marketing messages. No other market player has ‘driver happiness’ as its USP. By building on
the understanding derived from the SWOT, Škoda UK has given new impetus to its campaign. At the
same time, the campaign has addressed the threat of external competition by setting Škoda apart from its
rivals.
Conclusion
Škoda is a global brand offering a range of products in a highly competitive and fragmented market. The
company must respond positively to internal and external issues to avoid losing sales and market share.
A SWOT analysis brings order and structure to otherwise random information. The SWOT model helps
managers to look internally as well as externally. The information derived from the analysis gives
direction to the strategy. It highlights the key internal weaknesses in a business, it focuses on strengths
and it alerts managers to opportunities and threats. Škoda was able to identify where it had strengths to
compete. The structured review of internal and external factors helped transform Škoda UK’s strategic
direction.
The case study shows how Škoda UK transformed its brand image in the eyes of potential customers and
build its competitive edge over rivals. By developing a marketing strategy playing on clearly identified
strengths of customer happiness, Škoda was able to overcome weaknesses. It turned its previously
defensive position of the brand to a positive customer-focused experience. The various awards Škoda
has won demonstrate how its communications are reaching customers. Improved sales show that Škoda
UK’s new strategy has delivered benefits.
Answer the
1. What was the key weakness that Škoda was able to identify?
2. What strength did Škoda use to turn its brand weakness into an opportunity?
3. How has Škoda strategically addressed external threats?
4. What in your view are the important benefits of using a SWOT analysis
Case-3 : Marketing strategy for growth
Introduction
Businesses must respond to change in order to remain competitive. Developing appropriate strategies
which allow them to move forward is essential. Wilkinson is a prime example of a business that has
responded to changing customer needs throughout its history. It is one of the UK’s long-established
retailers of a wide range of food, home, garden, office, health and beauty products.James Kemsey (JK)
Wilkinson opened his first Wilkinson Store in Charnwood Street, Leicester in 1930. After the Second
World War, the 1950s saw a rise in the use of labour-saving devices and DIY. Wilkinson responded by
making this type of product the focus of its sales. In the 1960s customers wanted more convenience
shopping. Wilkinson started selling groceries and supermarket goods and created the Wilko brand. In the
1980s Wilkinson extended its range of low-cost products to include quality clothing, toys, toiletries and
perfumes. In 1995 it opened a central distribution centre in Workshop, serving stores in the north of
England and in 2004, a new distribution centre opened in Wales. In 2005 Wilkinson launched its
Internet shopping service, offering over 800,000 product lines for sale online. Wilkinson currently has
over 300 stores, which carry an average of 25,000 product lines. 40% of these are Wilko ‘own-brand’
products. The company’s target is to see this element grow and to have over 500 stores by 2012.
Wilkinson’s growth places it in the top 30 retailers in the UK. Recently it has faced increasing
challenges from competitors, such as the supermarket sector. Wilkinson needed to combat this and
identify new areas for growth. Over two years it conducted extensive market research. This has helped it
create a marketing strategy designed to continue growing by targeting a new market segment - the
student population. This case study focuses on how Wilkinson created and implemented this strategy,
using the findings of its market research to drive the strategy forward.
Marketing strategy aims to communicate to customers the added-value of products and services. This
considers the right mix of design, function, image or service to improve customer awareness of the
business’ products and ultimately to encourage them to buy. An important tool for helping develop an
appropriate marketing strategy is Ansoff’s Matrix. This model looks at the options for developing a
marketing strategy and helps to assess the levels of risk involved with each option. Marketing strategies
may focus on the development of products or markets. Doing more of what a business already does
carries least risk; developing a completely new product for a new audience carries the highest risk both
in terms of time and costs.
Based on its research, Wilkinson committed to a market development strategy to sell its products to a
new audience of students. This is a medium risk strategy as it requires the business to find and develop
new customers. It also carries costs of the marketing campaigns to reach this new group. The main focus
of the strategy was to increase awareness of the brand among students and encourage them to shop
regularly at Wilkinson stores.
Market research
Market research is vital for collecting data on which to base the strategy. Market research takes one of
two main forms – primary research and secondary research. Primary research (also called field
research) involves collecting data first hand. This can take many forms, the main ones being interview,
questionnaires, panels and observation. Secondary research (also called desk research) involves
collecting data which already exists. This includes using information from reports, publications, Internet
research and company files.
Both methods have advantages and disadvantages. The advantages of primary research are that it is
recent, relevant and designed specifically for the company’s intended strategy. The main disadvantage is
that it is more expensive than secondary research and can be biased if not planned well. Secondary
research is relatively cheap, can be undertaken quickly and so enables decision-making sooner.
However, secondary research can go out-of-date and may not be entirely relevant to the business’ needs.
Wilkinson undertook primary market research using questionnaires from students across the UK and
secondary research using government and university admissions data. The statistics revealed that there
were three million potential student customers.
They had a combined annual spend of around £9 billion per year. This research confirmed that the
choice of focusing on the student market as a means of growth was valid. Wilkinson undertook further
research to identify how to reach students and persuade them to start shopping at Wilkinson stores. This
information was used to formulate a focus strategy. This was aimed specifically at the needs of the
student ‘market segment’.
Marketing to students
Wilkinson involved 60 universities in research, using questionnaires distributed to students initially in
Years 2 and 3 of a range of universities and then to ‘freshers’ (new students) through the University and
Colleges Admission Service. This ensured the widest range of students was included to eliminate bias. It
also gave a wide range of responses. From this initial group, students were asked a second set of
questions. Participants were rewarded with Amazon vouchers to encourage a good take-up. The research
focused on two areas:
1. student awareness of the Wilkinson brand and
2. reasons why students were currently not using the stores regularly.
The market research enabled Wilkinson to put together its marketing strategy. The aim was to ensure the
student population began shopping at Wilkinson stores early in their student experience. This would
help to maintain their customer loyalty to Wilkinson throughout their student years and also to develop
them as future customers after university. Repeat business is key to sustained growth. Wilkinson
wanted to create satisfied customers with their needs met by the Wilkinson range of products. A
marketing campaign was launched which focused on a range of promotional tactics, specifically
designed to appeal to university students:
• Wilkinson being present at freshers’ fairs – and giving free goody bags with sample
products directly to students
• direct mail flyers to homes and student halls, prior to students arriving
• advertisements with fun theme, for example, showing frying pans as tennis racquets
• web banners
• offering discounts of 15% with first purchase using the online store
• gift vouchers
• free wallplanners.
The challenge was to get students into Wilkinson stores. The opportunity was to capture a new customer
group at an early stage and provide essential items all year round. This would lead to a committed
customer group and secure repeat business.
Outcomes/evaluation
Wilkinson wanted to know what would inspire students to shop at Wilkinson more and what factors
would help to attract non-customers. The research provided significant primary information to analyse
the effects of the campaign. Wilkinson used questionnaires collected from the first year undergraduates
to gather qualitative data. In addition, Wilkinson obtained quantitative data from various other
sources, including:
• redemption rates – how many people used the discount vouchers when buying
• sales analysis – how much extra business did the stores handle
• footfall in stores analysis – how many extra people went into stores.
This information helped Wilkinson to develop its plans for future marketing campaigns. It identified
Motivation factors for the student audience which would help to encourage future purchase. Key
factors included products being cheaper than competitors and easy access to stores. 23% of students
questioned gave ‘distance from university’ as a reason for not regularly visiting the store. The layout of
the store was another major problem affecting repeat visits. These findings have been taken on board by
Wilkinson in its future planning of store locations and layouts.
Researching students’ opinions after the campaign showed that:
• Awareness of Wilkinson brand had significantly risen from 77% to 95% of those interviewed. This
brought it in line with Morrison supermarkets, a key competitor.
Conclusion
Wilkinson’s marketing strategy began with its corporate aim to grow and increase stores across the UK.
It was facing increased competition from supermarkets and needed to identify an area to focus on. To
pursue a growth strategy, Wilkinson used market research to identify new target customers. This enabled
it to prepare marketing strategies to fit the audience.
Primary and secondary research was used to find out customer views regarding its brand. Data indicated
the student market segment was a significant area to focus on to achieve market development. A
marketing campaign using data from a follow-up survey was put in place. The campaign showed
significant increase in students’ levels of awareness about Wilkinson and its products. It encouraged
them either to shop more or to try Wilkinson for the first time. The campaign helped to achieve many of
the business’ aims, creating increased brand awareness and repeat visits. It also helped to inform the
company’s future strategies for growth. Market research gathered will help to formulate future plans for
new stores. These will be in line with Wilkinson commitment to providing communities with affordable
products across the country.
Answer the following questions
1. What is the difference between primary and secondary research? Identify one example of primary and
secondary research carried out by Wilkinson.
2. Explain why Wilkinson needed a marketing strategy to help them to grow.
3. Evaluate the benefits of the marketing campaign to Wilkinson.
4. Analyse how effective the marketing campaign was in helping Wilkinson respond to competitive
pressures.
Case-4 : Extending the product life cycle
Introduction
Businesses need to set themselves clear aims and objectives if they are going to succeed. The Kellogg
Company is the world’s leading producer of breakfast cereals and convenience foods, such as cereal
bars, and aims to maintain that position. In 2006, Kellogg had total worldwide sales of almost $11
billion (£5.5 billion). In 2007, it was Britain’s biggest selling grocery brand, with sales of more than
£550 million. Product lines include ready-to-eat cereals (i.e. not hot cereals like porridge) and nutritious
snacks, such as cereal bars. Kellogg’s brands are household names around the world and include Rice
Krispies, Special K and Nutri-Grain, whilst some of its brand characters, like Snap, Crackle and Pop, are
amongst the most wellknown in the world.
Kellogg has achieved this position, not only through great brands and great brand value, but through a
strong commitment to corporate social responsibility. This means that all of Kellogg’s business aims
are set within a particular context or set of ideals. Central to this is Kellogg’s passion for the business,
the brands and the food, demonstrated through the promotion of healthy living.
The company divides its market into six key segments. Kellogg's Corn Flakes has been on breakfast
tables for over 100 years and represents the ‘Tasty Start’ cereals that people eat to start their day. Other
segments include ‘Simply Wholesome’ products that are good for you, such as Kashi Muesli, ‘Shape
Management’ products, such as Special K and ‘Inner Health’ lines, such as All-Bran. Children will be
most familiar with the ‘Kid Preferred’ brands, such as Frosties, whilst ‘Mum Approved’ brands like
Raisin Wheats are recognised by parents as being good for their children.
Each brand has to hold its own in a competitive market. Brand managers monitor the success of brands
in terms of market share, growth and performance against the competition. Key decisions have to be
made about the future of any brand that is not succeeding. This case study is about Nutri-Grain. It shows
how Kellogg recognised there was a problem with the brand and used business tools to reach a solution.
The overall aim was to re-launch the brand and return it to growth in its market.
The product life cycle
Each product has its own life cycle. It will be ‘born’, it will ‘develop’, it will ‘grow old’ and, eventually,
it will ‘die’. Some products, like Kellogg’s Corn Flakes, have retained their market position for a long
time. Others may have their success undermined by falling market share or by competitors. The product
life cycle shows how sales of a product change over time. The five typical stages of the life cycle are
shown on a graph. However, perhaps the most important stage of a product life cycle happens before
this graph starts, namely the
Research and Development (R&D) stage. Here the company designs a product to meet a need in the
market. The costs of market research - to identify a gap in the market and of product development to
ensure that the product meets the needs of that gap - are called ‘sunk’ or start-up costs. Nutri-Grain was
originally designed to meet the needs of busy people who had missed breakfast. It aimed to provide a
healthy cereal breakfast in a portable and convenient format.
1. Launch - Many products do well when they are first brought out and Nutri-Grain was no exception.
From launch (the first stage on the diagram) in 1997 it was immediately successful, gaining almost 50%
share of the growing cereal bar market in just two years.
2. Growth - Nutri-Grain’s sales steadily increased as the product was promoted and became well
known. It maintained growth in sales until 2002 through expanding the original product with new
developments of flavour and format. This is good for the business, as it does not have to spend money
on new machines or equipment for production. The market position of Nutri-Grain also subtly changed
from a ‘missed breakfast’ product to an ‘all-day’ healthy snack.
3. Maturity - Successful products attract other competitor businesses to start selling similar products.
This indicates the third stage of the life cycle - maturity. This is the time of maximum profitability, when
profits can be used to continue to build the brand. However, competitor brands from both Kellogg itself
(e.g. All Bran bars) and other manufacturers (e.g. Alpen bars) offered the same benefits and this slowed
down sales and chipped away at Nutri-Grain’s market position. Kellogg continued to support the
development of the brand but some products (such as Minis and Twists), struggled in a crowded market.
Although Elevenses continued to succeed, this was not enough to offset the overall sales decline. Not all
products follow these stages precisely and time periods for each stage will vary widely. Growth, for
example, may take place over a few months or, as in the case of Nutri-Grain, over several years.
4. Saturation - This is the fourth stage of the life cycle and the point when the market is ‘full’. Most
people have the product and there are other, better or cheaper competitor products. This is called market
saturation and is when sales start to fall. By mid-2004 Nutri-Grain found its sales declining whilst the
market continued to grow at a rate of 15%.
5. Decline - Clearly, at this point, Kellogg had to make a key business decision. Sales were falling, the
product was in decline and losing its position. Should Kellogg let the product ‘die’, i.e. withdraw it from
the market, or should it try to extend its life?
Strategic use of the product life cycle
When a company recognises that a product has gone into decline or is not performing as well as it
should, it has to decide what to do. The decision needs to be made within the context of the overall aims
of the business. Kellogg’s aims included the development of great brands, great brand value and the
promotion of healthy living. Strategically, Kellogg had a strong position in the market for both healthy
foods and convenience foods. Nutri-Grain fitted well with its main aims and objectives and therefore
was a product and a brand worth rescuing.
Kellogg decided to try to extend the life of the product rather than withdraw it from the market. This
meant developing an extension strategy for the product. Ansoff’s matrix is a tool that helps analyse
which strategy is appropriate. It shows both market-orientated and product-orientated possibilities.
Extending the Nutri-Grain cycle – identifying the problem
Kellogg had to decide whether the problem with Nutri-Grain was the market, the product or both. The
market had grown by over 15% and competitors’ market share had increased whilst Nutri-Grain sales in
2003 had declined. The market in terms of customer tastes had also changed – more people missed
breakfast and therefore there was an increased need for such a snack product.
The choice of extension strategy indicated by the matrix was either product development or
diversification. Diversification carries much higher costs and risks. Kellogg decided that it needed to
focus on changing the product to meet the changing market needs.
Research showed that there were several issues to address:
1. The brand message was not strong enough in the face of competition. Consumers were not impressed
enough by the product to choose it over competitors.
2. Some of the other Kellogg products (e.g. Minis) had taken the focus away from the core business.
3. The core products of Nutri-Grain Soft Bake and Elevenses between them represented over 80% of
sales but received a small proportion of advertising and promotion budgets.
4. Those sales that were taking place were being driven by promotional pricing (i.e discounted pricing)
rather than the underlying strength of the brand.
Implementing the extension strategy for Nutri-Grain having recognised the problems, Kellogg then
developed solutions to re-brand and re-launch the product in 2005.
1. Fundamental to the re-launch was the renewal of the brand image. Kellogg looked at the core
features that made the brand different and modelled the new brand image on these. Nutri-Grain is
unique as it is the only product of this kind that is baked. This provided two benefits:
• the healthy grains were soft rather than gritty
• the eating experience is closer to the more indulgent foods that people could be eating (cakes and
biscuits, for example). The unique selling point, hence the focus of the brand, needed to be the ‘soft
bake’.
2. Researchers also found that a key part of the market was a group termed ‘realistic snackers’. These
are people who want to snack on healthy foods, but still crave a great tasting snack. The re-launched
Nutri-Grain product needed to help this key group fulfil both of these desires.
3. Kellogg decided to re-focus investment on the core products of Soft Bake Bars and Elevenses as these
had maintained their growth (accounting for 61% of Soft Bake Bar sales). Three existing Soft Bake Bar
products were improved, three new ranges introduced and poorly performing ranges (such as Minis)
were withdrawn.
4. New packaging was introduced to unify the brand image.
5. An improved pricing structure for stores and supermarkets was developed.
Using this information, the re-launch focused on the four parts of the marketing mix:
• Product – improvements to the recipe and a wider range of flavours, repositioning the brand as
‘healthy and tasty’, not a substitute for a missed breakfast
• Promotion – a new and clearer brand image to cover all the products in the range along with
advertising and point-of-sale materials
• Place – better offers and materials to stores that sold the product
• Price – new price levels were agreed that did not rely on promotional pricing. This improved revenue
for both Kellogg and the stores.
As a result Soft Bake Bar year-on-year sales went from a decline to substantial growth, with Elevenses
sales increasing by almost 50%. The Nutri-Grain brand achieved a retail sales growth rate of almost
three times that of the market and most importantly, growth was maintained after the initial re-launch.
Conclusion
Successful businesses use all the tools at their disposal to stay at theSuccessful businesses use all the
tools at their disposal to stay at the top of their chosen market. Kellogg was able to use a number of
business tools in order to successfully re-launch the Nutri-Grain brand. These tools included the product
life cycle, Ansoff’s matrix and the marketing mix. Such tools are useful when used properly.
Kellogg was able to see that although Nutri-Grain fitted its strategic profile – a healthy, convenient
cereal product – it was underperforming in the market. This information was used, along with the aims
and objectives of the business, to develop a strategy for continuing success. Finally, when Kellogg
checked the growth of the re-launched product against its own objectives, it had met all its aims to:
• re-position the brand through the use of the marketing mix
• return the brand to growth
• improve the frequency of purchase
• introduce new customers to the brand.
Nutri-Grain remains a growing brand and product within the Kellogg product family.
Answer the following questions:
1. Using current products familiar to you, draw and label a product life cycle diagram, showing which
stage each product is at.
2. Suggest appropriate aims and objectives for a small, medium and large business.
4. Consider the decision taken by Kellogg to opt for product development. Suggest a way in which it
could have diversified instead. Justify your answer.


OPERATIONS MANAGEMENT
Total Marks : 80
CASE-1 (16 Marks)
Bloomsday Outfitters produces T-shirts for road races. They need to acquire some new stamping
machines to produce 30,000 good T-shirts per month. Their plant operates 200 hours per month, but
the new machines will be used for T-shirts only 60 percent of the time and the output usually includes
5 percent that are "seconds" and unusable. The stamping operation takes 1 minute per T-shirt, and the
stamping machines are expected to have 90 percent efficiency considering adjustments, changeover of
patterns, and unavoidable downtime. How many stamping machines are required?
CASE-2 (16 Marks)
In the table given below the Distribution Manager is expected to service these DCs as per the demands
placed. If the actual sales after completing week one is as follows, what would be the quantities that
would need amendment as far as Distribution Manager is concerned to service for week two and
onwards?
After week one the actual sales to Forecasted sales for week one ratio is as under: Mumbai did 80 % of
forecast , Lucknow did 75 % of forecast Kolkata did 60 % of week one forecast Chennai did 125 % of
forecast and Delhi did 150 % of week one forecast
AN ISO 9001 : 2008 CERTIFIED INTERNATIONAL B-SCHOOL
Note : Kolkata will receive transit stocks in week 2 .
CASE-3 (16 Marks)
After working for 30 years, Ramjee Somjee Dutt opted for VRS and started a courier company and did
very well in the first four years. He was now looking for expansion of his business and decided to
venture into Road transportation business between Chennai and Mumbai and Mumbai and Delhi as he
felt that he could do well on this line. However before taking a final decision he hires your
Management Consultant firm formed by yourself. He has requested you to work out the Price to quote
his clients for these two routes considering the costs involved. He expects to earn a minimum profit of
Rs 1000 per day per truck after meeting all expenses. Your analysis of market conditions tell you the
following:
Vehicle cost Rs 7 lacs Depreciation 15 % Maintenance costs per day Rs 150 Drivers monthly Salary
Rs 5000 : Attendants monthly salary Rs 3000 . Misc expenses Rs 200 per day. Driver allowance is Rs
125 per day and attendant gets Rs 75. Diesel cost per liter is Rs 25 and the vehicle gives an average
mileage of 4 km to a liter. The Financial institutions offer loans at 10 % interest pa, which Ramjee has
been negotiating. It has been observed that on an average the vehicle covers 400 km per day. The
distance between Mumbai to Delhi is 1500 km and Mumbai to Chennai is 1350 km. The driver gets
rest day in Mumbai only for one day after they return from any trip.
CASE-4 (16 Marks)
A company is operating in two unrelated businesses. The first one is making common salt, which is
sold in one-kilogram consumer packs. The second business is making readymade garments. The owner
of the businesses has decided to implement Materials Requirement Planning (MRP) in one of the two
businesses, which is likely to give him greater benefit. Assuming that the current turnover and profits
of both the units are comparable, compare the relative benefits and limitations of Materials
Requirement Planning (MRP) for these two businesses.
CASE-5 (16 Marks)
A Manufacturer of motorcycles buys spark plugs at Rs.15 each. Now he wishes to manufacture the
plugs in his own factory. The estimated cost for the manufacture of spark plugs is around
Rs.50,000=00 and the variable cost comes to Rs.5 per spark plug. The Production Manager advises the
Manufacturer that the factory should go for manufacturing instead of procuring them from the open
market.
List out reasons for the decision of the Production Manager backed up by the necessary data.