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Assignment
Subject: Behavioural Science
Q.1 Case study
Four years ago, the Texas Office of the Attorney General (OAG), which is the
state’s child support enforcement agency, began mailing letters to a small
number of incarcerated noncustodial parents (NCPs) with information on
how to apply for a modification of their child support order. NCPs often
become unable to make their monthly child support payments when they
are incarcerated, and, if they do not request and obtain a downward order
modification, they may leave prison with significant child support arrearages
that follow them for years. Despite the clear benefits of this pilot program for
NCPs, only a small percentage of incarcerated NCPs who were contacted by
OAG applied for a modification. The BIAS team has partnered with OAG to
determine whether the tools of behavioral economics can be used to increase
the overall response rate of incarcerated NCPs, as well as the accuracy and
timeliness of their application materials.
BIAS and OAG analyzed every step in the modification request process from
the wording of the outreach letter and application to the actions the NCP
must take within the prison to get an application notarized by a law
librarian and returned to OAG by mail. The team identified several potential
“bottleneck” points at which NCPs may not follow through with the process,
a few of which are discussed below:
The NCP may receive the letter but decide not to open it. Because the NCP
likely associates OAG with child support enforcement, seeing a letter from
this agency may stimulate a negative affective response and the ostrich
effect1 (the tendency to “put one’s head in the sand” and avoid undesirable
information). Or, the NCP may perceive the deliberation costs in time and
mental effort to be too high to fully examine the letter.
The NCP may not decide to act on the letter. The letter mentions the NCP’s
incarceration several times, identifying him as a prisoner rather than a
parent. This increases the saliency of their prisoner identity,2 which may
reduce their motivation to act.
The NCP may not follow through. Even if the NCP is interested in applying
for a modification, he may procrastinate3 in completing the application or
forget to request an appointment with the law librarian because this is not
part of his everyday routine.
The NCP may not successfully submit the application. After the NCP attends
the appointment, the law librarian may find that the application is
incomplete and the NCP will need to complete the application and return it
at another time. The NCP may forget to request notarization or even forget to
drop the completed application in the mail.
The NCP may see the future when they are released from prison as too
distant to plan for. NCPs may exhibit some degree of present bias —
overweighing the present with respect to the future. When the projected
release date is psychologically distant, the NCP may think about it
abstractly, and neglect to consider the negative effects of accrued arrears.
The team has redesigned the materials that are sent to incarcerated NCPs to
address these bottlenecks in ways that are informed by behavioral
economics.
include
2. How should an email to be managed?
Q u e s t i o n :
(10 × 2 = 20)
1. What are the changes according to you that should be include in it
Assignment
Subject: Behavioural Science
Q.2 Case study
A new report released by AIM Research and Hansa Cequity studies how and
to what extent organisations in India leverage behavioural science and data
science to analyse consumer behaviour across different industries and
functions.
The report titled “Impact of Behavioural Science and Data Science on
Consumer Behaviour” also dives into the connection between behavioural
and data science in comprehending consumer behaviour and makes a case
for their use in collaboration.
Data science has seen increasing popularity in the last couple of years and
is used extensively by most organisations to identify growth drivers. While
data is a critical input to improve customer satisfaction and increase
revenues, Behavioural Science plays a crucial role in studying and analysing
customer experiences, brand loyalty, and overall consumer journey.
According to the study, there is limited use of Behavioural Science
techniques by Indian organisations to study buying behaviour. Around one
in five respondents said they had none or rare utilisation, indicating a
significant scope for improvements across certain industries and functions,
some more than others. This includes studying consumers’ implicit
attitudes towards the brand or analysing the impact of celebrity
endorsements, ethnocentrism, the social image of inclusion or exclusivity,
etc.
The report provides detailed insights through a comprehensive analysis of
the survey. The study highlights cases where the utilisation of Behavioural
Science could see improved outcomes if two functions within the same
company worked together. Along with this, the study identifies areas in
which Behavioural Science and Data Science can be used in conjunction.
The study can be used by leaders or decision-makers to get insight into
where their companies stand in utilising Behavioural Sciences compared to
others and realise areas where they are falling behind. The study also helps
its readers identify future roadmaps in terms of using Behavioural Science
along with Data Science to their advantage.
Overall, almost every Behavioural Science technique (surveyed) had more
than two in five respondents (40%) agreeing to its high/very high utilisation.
Although, almost every technique also had more than 20% who said they
had none or rare utilisation. Respondents in the marketing function had
higher utilisation of most Behavioural Science techniques surveyed than all
the other functions. Almost every technique had more than/around two in
three (66%) Marketing respondents, saying that they have a high/very high
utilisation.
In terms of industry, different sectors had the highest share of respondents
claiming they have a high/very high utilisation of different Behavioural
Science techniques. However, Telecom & Media consistently performed
well—almost every technique had more than 50% of Telecom & Media
respondents saying yes to utilising it to a high/very high extent.
behavior.
Q u e s t i o n :
(10 × 2 = 20)
1. Write the factors that influence the behavior of an individual.
2. Discuss about the situation how behaviour science deals with consumer
Assignment
Subject: Behavioural Science
Q.3 Case study
Organizational behavior in this coca cola case study refers to the study of
activities or behavior of the employees inside a commercial enterprise. The
reflective case study has been made depending on the issues faced the
famous soft drink company Coca Cola. The aim of this coca cola case study
is to figure out the strategies with which the company can utilize it human
capital in order to make the organization a better place to work. At the same
time, I have described the opportunities through which the company can
continue its growth in the local market.
Coco Cola has been serving the world for more than 130 years however, the
organization is facing extreme problem in the market of the island country
like Sri Lanka. The company is facing a downtrend regarding its brand
value. In the year 2014 the brand value of Coca Cola a around 34 billion
dollar whereas it has decreased to nearly 32billion dollar in the year 2018. It
means the company has faced an acute loss of around 5.4 percent. In this
coca cola case study discovered certain factors that have caused such an
acute downfall of the branded organization. One of the factors is the
mismanagement inside the organization. In the following coca cola case
study, I have highlighted how the improper workforce management of Coca
Cola has leaded the company to such an adverse situation.
Reasons of the downfall of Coca Cola Company
Communication: In order to identify problem lied behind the downfall of the
Coca Cola Company discussed in this coca cola case study, I found certain
issues and communication is one of such issues. The entire set up of the
organization is so much corporate like that the employees hardly get time as
well as scope to share their opinion or thought with other. It has affected the
growth of the company in two different ways. First of all the staffs has could
not get chance to share their problem with their leader. As a result, they
could not develop their skill in order to improve their performance. On th
contrary, the company lost the opportunities of utilizing the innovative ideas
of the workers that could have been fruitful for the Coca Cola Company.
Feedback sharing: The HR of the team leader did not pay proper attention
on sharing the feedback with the staffs of the. As a result, the employees did
not get the chance to improve their skill. Sometimes, they lacked of the
proper knowledge of using the latest technology while producing the various
products. This situation had a negative repercussion on the company’s
growth as a lot of employee left the firm out of lack of dissatisfaction. As an
irreversible effect, the company had to face an acute shortage of labour that
has hindered the production rate. In my opinion the shortage of the human
capital is one of the most important factors that has affect the growth of
Coca Cola Company in a profound way.
Motivation: I think motivation is one of the factors that are responsible for
the shortage of the staffs inside the organization. It is true that Sri Lanka is
one of the densely populated area in South Asia. As per the recent report
held on 8th May, in the year 2019, which is refered in this coca cola case
study the entire population of the country is 21,008,582 (Chandrajith et al.,
2019, pp-12, pp-37) which is approximately 0.27 percent of the entire
population of the world (Wijesuriya et al., 2019). As a result of such huge
population the country enjoys the facility of plenty human capital. May be
that is the reason that the company treated its staff as a factor that
caneasily be replaced by some other employ. The management of the
company did not pay attention in order to motivate the employees. For
instance in this coca cola case study, they did not arrange proper
compensation or increment which was quite demotivating for the staffs. As a
result, theemployee showed less interest in order to enhance their
performance.
Absence of proper training: I found in this coca cola case study that one of
the reasons of the downfall of Coca Cola Company is the lack of training the
needed to be provided to the employee in order to enhance their
performance. Like other country like Australia, UK and many more the
company did not have proper training facility for their employees. I think,
that is the reason why the staffs that were unable to perform well were
easily demotivated. In addition, the management did not take any measure
in order to increase the efficiency of their workers. This situation had a
adverse effect on their work performance which consequently followed by the
decrease in products’ quality.
Improper human resource management: Before writing this coca cola case
study, I had gone through certain researches, which illustrate the error of
the human resource management of Coca Cola Company. For instance, the
company has collaborated with four bottling firms that created a big issue
as the organization brought around ten thousand workers (Chiu, Fischer
and Friedman, 2019, pp-109). It was actually double of the entire work
force. As a result of such collaboration the company had to encounter with
the problem of complexity of the unnecessary staffs as well as resignation of
termination of employees (Chiu, Fischer and Friedman, 2019, pp-98). It
created an unstable situation inside the organization that had a negative
impact on the reputation of the company. In addition, the human resource
managers did not show proper interest in order to attract or retain the
quality employee who could play significant role in betterment of the
company.
Attitude of team leader: The team leader failed to motivate their team
members. Most of the time they could not encourage their subordinate staffs
and thus they could take proper initiative in order to achieve the company’s
target. In addition, the team leader r the supervisors did not perform the
proper monitoring of the tasks of their subordinate team members. Even
they showed reluctant to share proper feedback which could improve the
quality of the performance of their team members. The irresponsibility of the
team member or the management of the Coca Cola Company has increased
the uncertainty among the subordinate staffs of the organization. In my
opinion this kind of attitude of the higher authority was quite responsible for
the loss of status of the world famous Coca Cola Company.
Relation between the management and the staffs: I discovered that the
company management was failed to build a lateral relation between the
employees as well as the team leader inside the company premises. I have
discussed earlier in this report that the workers hardly got chance to talk
about their problems whatever they faced at the time of performing their
task. The management of Coca Cola Company hardly arranged meetings in
order to discuss the problems of their staffs as well as the possible remedies
to resolve those problems.
Proper working environment: The management failed to create the proper
working environment that can encourage or motivate the employees to give
their best performance (Jones and Comfort, 2018, pp-43). As I have earlier
mentioned that Coca Cola Company provided a strict corporate environment
to its employees. This situation created obstruction in building an emotional
attachment between the workers as well as the management of the
organization. As a result, the employees failed to understand that their
improvement was closely related to the success of the company (Jones and
Comfort, 2018). That was the reason in this coca cola case study why the
workers of the Coca Cola Company did not take enough enthusiasm in order
to provide their best performance for the organization’s upliftment.
Cont…
Q u e s t i o n :
(5 × 4 = 20)
1. What are the factors that are responsible for the downfall of the Coca Cola
Company in Sri Lanka?
2. Suggest some possible remedies through which the company can
overcome such situation?
3. Justify’ Coca Cola targets middle class people in rural areas”.
4. Discuss the attitude and related beliefs towards Coca-Cola of intensely
brand-loyal consumers.
5. What are the key success factors for Coca-Cola?
Assignment
Subject: Behavioural Science
Q.4 Case study
Pepsi Next was launched by PepsiCo into the US market in February 2012,
and has since been rolled out to various international markets (for instance,
it was launched in Australia in September 2012).
The new product is described as a mid-calorie cola beverage, having a mix of
sugar and artificial sweeteners, designed to deliver a full cola taste with
reduced calories. While filling the market gap between full sugar and diet
soft drinks, PepsiCo has indicated that its prime target market is lapsed cola
drinkers (giving them a reason to return to the product category). PepsiCo,
which owns range of high profile beverage brands in addition to its flagship
brand Pepsi, appear to be highly committed to Pepsi Next providing it with
strong launch and management support. In fact, according to PepsiCo
themselves, this is their most significant product launch for several years.
PepsiCo is the second largest food and beverage company in the world, with
revenues now in excess of $60 billion. The corporation has 22 brands that
achieve retail sales in excess of $1 billion each. As a result of their brand
diversification, around half of PepsiCo’s revenue is generated from their food
lines, such as Frito-Lay (snack food) and Quaker Oats.
In addition, they have progressively expanded internationally and now
access over 80% of the world’s population. Their international (non-US)
markets account for almost 50% of their total revenues and they still see
significant growth potential from these markets, on the basis that per capita
consumption of snacks and beverages in other countries is well below US
market levels.
As a result, PepsiCo has achieved solid growth is many international
markets. While their US beverage sales fell by 2% in 2011, this has
beenmore than offset by double-digit sales increases in Europe, Asia, the
Middle
East and Africa.
In terms of their overall strategic approach, PepsiCo (as highlighted on their
website) see themselves as innovative and adaptive, as stated in the
following website quote: “Pepsi is constantly on the lookout for ways to
ensure their consumers get the products they want, when they want them
and where they want them.”
“Pepsi is constantly on the lookout for ways to ensure their consumers get
the products they want, when they want them and where they want them.”
In their Annual Report, PepsiCo has structured their brands around three
related themes, as highlighted in the following table. This brand structure
gives some insight into the role of their brands and how they see their brand
portfolio developing in the future.
Emphasis of Brand Key Brands
Fun-for-you Pepsi, Mountain Dew, 7-Up, Lays, Doritos,
Cheetos,Red Rock
Better-for-you Pepsi Max, Diet Pepsi, Lays (oven baked), Quaker
bars
Good-for-you Tropicana, Quaker Oats, Gatorade, Nut Harvest
As you can see from PepsiCo’s classification of their brands, it appears that
the firm has the dual goals of supporting and leveraging its existing ‘fun’
brands, while moving towards a broader range of healthier offerings. While
this second goal may appear to be mainly related to improving their
corporate image, it does have commercial intent, as explained on the
PepsiCo website: “Because a healthier future for all people and our planet
means a more successful future for PepsiCo.”
To help implement this corporate goal, across their various brands, PepsiCo
has focused on providing a wider range of healthier choices, introducing
more natural ingredients, reducing fat content, reducing the environmental
impact of their packaging, and so on.
Recent Product Innovations
PepsiCo has a history of developing and launching a number of mid-calorie
beverages and Pepsi Next is by no means their first attempt with this style of
product. In addition to various Pepsi variations (described in the ‘Before
Pepsi Next’ section below), they have had some recent success with reduced
calorie versions within their Tropicana and Gatorade brands.
One very successful mid-calorie product initiate is Trop50, which was
launched in 2010. Trop50, as implied by its name, is a version of Tropicana
with 50% less sugar and calories. This new product was ranked as the 6th
most successful new food/beverage product in its launch year with retail
sales in excess of $70 million. Its initial success has continued over the last
two years, with the Trop50 product line now generating over $150 million in
sales. And even more successful was Pepsi’s launch of Gatorade G2 in 2007.
(Note: Pepsi acquired the Gatorade brand with their purchase of the Quaker
Company in 2001.) This low-calorie version of Gatorade was identified as the
most successful new food/beverage product in 2008 in the US market,
achieving sales over $150 million in its first year.
Clearly, these fairly recent product successes with reduced calorie offerings
under strong brands would have had the effect of buoying Pepsi’s confidence
regarding the viability of this style of product. Hence, they believed that it
was the right time to revisit a reduced calorie Pepsi variation.
However, as some commentators have pointed out, it should be noted that
their success (with Trop50 and G2) has occurred in their ‘good-for-you’
brand range, where consumers are already quite health-conscious and
probably more responsive to healthier options. Therefore, whether this
perceived benefit (of less sugar) will carry to ‘fun-for-you’ brands, like Pepsi,
is less certain for the firm.
Before Pepsi Next
Perhaps surprisingly, Pepsi Next is PepsiCo’s fifth attempt at a mid-calorie
beverage. In the 1970’s they introduced Pepsi Light, which was lemonflavored
and contained 70 calories (as opposed to a normal Pepsi can at 150
calories). (Not to be confused with the current Pepsi Light brand marketed in
various countries, which is a version of Diet Pepsi.)
Then in the late 1980’s the firm introduced Jake’s Diet Cola, which came in
at a mere 15 calories, but did not leverage the Pepsi brand name. At the
time, Pepsi stated that the beverage had the potential to “revolutionize” the
diet segment of the cola market. Prior to launch, Jake’s was extensively
taste-tested against Diet Coke and the firm had strong hopes for its success.
According to one of their vice presidents at the time (Edward E. Jenkins),
“Jake’s represents a new taste concept in diet beverages and will provide
consumers in the booming diet soft drink category with a better-tasting,
lowcalorie cola”.
In the mid-1990’s, they then introduced Pepsi XL, another 70 calorie
formula. In their promotions, they indicated that X stood for ‘excellent taste’
and the L stood for ‘less sugar’. According to reports at the time, Pepsi XL
was a year in development at a cost of $1.5 million and was supported by an
$8 million advertising budget.
More recently, in 2004, PepsiCo released a 70-calorie beverage branded as
Pepsi Edge. Around the same time, Coca-Cola brought out a similar product
under the brand Coca-Cola C2. Coke supported C2 quite aggressively, with
an estimated launch promotional budget of somewhere around $40 million,
making it their most significant launch since Diet Coke. Both of these
brands only lasted around 18 months or so in the market before being
withdrawn.
About the Soft Drink (Soda) Market
The US soft drink market generates over $70 billion in sales. Volumes
(units) have weakened slightly since 2005, indicating that the market is in
late maturity-early decline stage of the product life cycle. Retail dollar sales
have been supported somewhat by price increases.
One of the biggest impacts on soft drink consumption has come from bottled
water, which now accounts for over 10% of beverage consumption. This is
up from just 2% in 2000. And the soft drink market has also been slightly
challenged by sports drinks and energy drinks that have seen a minor
increase in market share.
The trend towards diet soft drinks continues, with these offerings now
representing 30% of the carbonated soft drink (CSD) market, up from 25%
just 10 years ago. Overall, these movements indicate changing tastes of
consumers as a result of a stronger health focus. One of the brands most
impacted by these market changes has been the flagship Pepsi brand. In the
most recent market share figures available,
Pepsi now has less than 10% share of the US CSD market (which ranks the
brand 3rd behind Coke and Diet Coke). While still well positioned, keep in
mind that they were sitting at over 13% market share ahead of Diet Coke 10
years ago, at a time when the CSD market was still growing at 3% per year.
Their Diet Pepsi product enjoys a solid 5% market share. That product,
along with Pepsi’s other soft drink offerings (Mountain Dew in particular),
gives Pepsi an almost 30% share of the US CSD market, behind Coca-Cola
at 42% (with Coke at 17% and Diet Coke at 10%) and ahead of Dr Pepper
Snapple at 17%.
Competitor Offerings
Pepsi isn’t the only player seeking to tap into the perceived demand for
reduced sugar beverages. Dr Pepper Snapple (who has two products in the
top 10 in the US CSD market) has also introduced a low-sugar offering.
Their new product, Dr Pepper Ten (with 10 calories), is squeezed between
their normal Dr Pepper and their Diet Dr Pepper, much in the same way the
Pepsi Next product. Reportedly, Dr Pepper Snapple is pleased with the
performance of this new product to date. Independent to the Pepsi Next
offering, Coca-Cola is currently (mid-late 2012) in the process of test
marketing (in four American cities) mid-calorie versions of their Fanta and
Sprite brands. Carrying the sub-brand ‘Select’ (to make Fanta Select) the
concept is quite similar to Pepsi Next in that it uses a mix of sugar and
artificial sweeteners to cut the calorie count by half.
Obviously if these tests are successful and these products are fully rolledout
to the market as a standard product, it appears that there could be a third
sub-category of soft drinks; traditional, diet, and now mid-calorie beverages.
It would then be interesting to see how and if this sub-category develops,
particularly with more offerings and overall promotional support. But on the
other hand, it might be possible that Coke might be test marketing the midcalorie
Sprite and Fanta options as a form of market research only.
products.
2. What will be benefit if Pepsi compromise to the competitor offerings?
3. How do companies protect themselves against the nonstop allegation of
special interest group that have made them a target?
4. Identify the ongoing issues in this case with respect to issue management
crisis management, global business ethics, and stakeholder management.
Q u e s t i o n :
(4 × 5 = 20)
1. As per the above situation what would be the impact of substitute
Assignment
Subject: Behavioural Science
Q.5 Case study
Amway’s Relationship with Stakeholders
Amway is one of the largest direct sales companies in the world. It continues
to be a family owned business which was founded in 1959. Today, it
employs 14,000 people worldwide and markets over 450 product lines. Its
vision is to help people lead better lifes. Its success islargely due to its three
million ABOS Amway Business Owners) spread across 80 countries. Thanks
to Amway, these people have a business of their own. The only shareholders
of Amway are the families that own Amway. The communication channels
used by Amway to communicate regularly with its internal and external
stakeholders are websites, email, events, publications and membership of
trade bodies.
Amway sells directly to consumers, without the presence of retail outlets. It
has its own supply chain through the ABOs. Amway seeks regular feedback
from ABOs and customers to find out how well it is doing and to improve
services. The ABOs are independent small businesses, but depend on
Amway suppliers to produce quality products.
Amway’s involvement with communities is a part of its vision to help people
lead better lives’. It promotes its corporates social responsibilities (CSR) all
over the world. Corporate social responsibilities at Amway involve
supporting social causes, acting in an ethical manner by making good
product and supporting its stakeholders in a number of ways. For example,
Amway has partnered with the children’s charity UNICEF. It helps provide
vaccination to fight the world’s six most deadly diseases. It has chosen this
charity because of its ABOs’ concern about families.
Ethical businesses get actively involved in improving the communities where
they work. Amway’s business ethics not only provides a clear framework
within which to work, but also gives it a positive business advantage. Its
‘One by One’ program is good for both the environment and for business.
This program supports organic farming, seeks to reduce waste but this can
be balanced against the benefits derived by both the business and the
community. Amway has to balance the needs of its many different
stakeholders. It sets high standards of ethics and codes of conduct, in order
to make sure that these are upheld. Its CRS program helps the environment,
its own employees and underprivileged children all around the world.
from what is mentioned in the case and why?
3. Stakeholders are the consumer of Amway. Comment.
4. Who are the external stakeholders that Amway communicates with?
Q u e s t i o n :
(4 × 5 = 20)
1. Who are the external stakeholders that Amway communicates with?
2. What communication channels would you recommend to Amway, a part
Assignment
Subject: Marketing Management
Q.1 Case study
American Tourister re-positioning itself as a hip travel brand leveraging
Sports Partnership
American Tourister, Samsonite’s mass market label, is re-positioning itself
as a hip international travel brand; targeting the cool, young traveller.
In December 2016, as part of their India campaign, Virat Kohli was brought
onboard as a brand ambassador. Kohli is – for India - the ideal face for the
brand as he is the personification of American Tourister’s re-positioning.
Following the success in India, American Tourister took things to the next
level and in February 2018 appointed football star Cristiano Ronaldo, the
most followed male on social media, as their brand ambassador.
Anushree Tainwala, Executive Director, Marketing at Samsonite, said,
“There couldn’t be a better time to bring Cristiano on-board. His lively and
vivacious personality, on and off the field, resonates perfectly with our
funloving, vibrant brand personality. His presence will help bring American
Tourister to a whole new audience, allowing us to stand out from the
competition, and enabling us to take the Brand to the next level.”
In Kohli and Ronaldo, it has found two iconic sports personalities who have
strong personal brands & massive following in emerging markets. This helps
American Tourister win asymmetrically and leave competition in the dust. In
addition to transferring the sports stars' attributes to the brand, the
partnerships:
Elevate the brand from Samsonite's low end product to a contemporary,
practical international travel brand; targeting the aspiring, young
international traveller. Explode the reach: Getting the reach in India via
Kohli (81m social media followers) and globally through Ronaldo (315m
followers) -especially with the FIFA World Cup around the corner.
Engage audiences: Kohli with “I’m ready” & "Swagbag", Ronaldo with “Bring
back more” are examples of sharply positioning the brand leveraging the
ambassadors to provide differentiated, exciting engagement.
Top of Mind: Standing out in a commoditised travel accessary category,
American Tourister is positioning itself as closer to the hearts of young
travellers and in their purchase consideration. In February & March this
year it has activated both players - Ronaldo (here) & Kohli (here & here),
Let's see where the brand takes such partnerships as we get closer to the
Russia World Cup. It has achieved a strong cut-through even before the
world gets gripped by the World Cup fever.
Question:
(10 × 2 = 20)
1. How can your brand differentiate & asymmetrically win in a
commoditised category through sports?
2. What other, more effective ways can brands use to reposition themselves?
Assignment
Subject: Marketing Management
Q.2 Case study
In August 2004, a leading business newspaper reported that Hyundai
Motors India Limited (HMIL), an Indian subsidiary of the South Koreabased
Hyundai Motors Company (HMC)3 was expected to reduce the price of its
flagship car - Santro - by as much as Rs 40,000. Industry experts were
expecting a reduction in Santro's price in response to the price war being
waged by the market leader in India - Maruti Udyog Limited (MUL),4 which
had reduced the price of its largest selling car in the B segment – Alto - by
Rs 58,000 in two price cuts starting from September 2003. This move had
resulted in Alto replacing Santro as the largest selling car in the B segment
in the period January to June 2004 (Refer Exhibit I for the market
segmentation of the Indian car industry).
Marketing Management Case Studies | Case Study in Management,
Operations, Strategies, Marketing Management, Case Studies Rebutting the
report on price cuts, HMIL's managing director, BVR Subbu (Subbu) said,
"We are not cutting prices on the Santro. We have allowed our competitors
the prerogative of cutting prices."5 Several dealers of HMIL also felt that the
company would not reduce Santro's price as it had not adopted such tactics
earlier.
Santro had been the most successful product of HMIL and was also the
largest selling car in the B segment till the fiscal year 2003-04. Introduced
in late 1998, Santro had emerged as the second largest selling car in India
after MUL's M800 and had retained its position till March 2004
(Refer Exhibit II for the total units and value sales of the top eleven car
models in India).
In mid 2004, HMIL with its four models, Santro, Accent, Sonata and
Elantra, was the second largest car company in India with 19% market
share in the industry. The company was planning to launch another model,
'Getz', in September 2004.
Analysts attributed HMIL's success to its ability to launch technologically
superior products and its innovative marketing strategies. However, they
expressed concerns that the company relied heavily on Santro and any fall
in demand for that model would hit the company.
It was felt that the introduction of new cars by the competitors and pgrading
& price reduction of existing cars in the B segment would affect Santro's
sales. This would lead to a loss in Santro's market share. (Refer Exhibit III
for the comparison of features of various models in the B segment).
For a long time after India became independent in 1947, the car market had
just two models to offer - the sturdy 'Ambassador' from Hindustan Motors
(HM) and the sleek 'Fiat' from Premier Automobiles (PA). This was the result
of Government of India's (GOI) decision to keep the car industry tightly
protected.
For HM and PA, the GOI dictated as to what type of vehicle the two
companies should manufacture. No other domestic or foreign car
manufacturer was allowed to enter the Indian car industry. The restriction
on foreign collaboration led to poor technological improvements in Indian
cars. As a result, car prices remained high while quality was inferior. This
affected the growth of the industry. The demand for cars in 1960 was
15,714 units and in the next two decades, this rose to 30,989 units, which
meant that the Compound Annual Growth Rate (AGR) was just 3.5 per cent.
In the 1980s, the GOI felt the need to introduce an affordable small car,
targeting the Indian middle class. As manufacturing a small and affordable
car required better technology than was available indigenously, the
government tied up with the noted Japanese company, Suzuki. The
government formed a joint venture with Suzuki and founded Maruti Udyog
Limited (MUL). It held 74% and Suzuki got 26% equity stake in MUL. In
1983, MUL launched the 'Maruti 800', priced at Rs 40,000 Hyundai's Entry
in India
One of the major players that entered the Indian car market was HMC
through its subsidiary HMIL. Before making its move, the company closely
studied the industry for a year. The company's officials talked to vendors,
dealers and customers to get a thorough knowledge of the industry...
Marketing Santro: Santro received an encouraging feedback from customers
who appreciated its unique design that gave more headroom and facilitated
easy entry and exit... Launch of Accent: By mid 1999, the major players
realized that the 'B' segment would be the fastest growing in the car
industry. To cash in, Telco re-launched its 'Indica' by introducing several
new features and solving the glitches in the original model...
Marketing Management Case Studies | Case Study in Management,
Operations, Strategies, Marketing Management, Case Studies Repositioning
Santro By late 2002, the competition in the B segment had increased
significantly. MUL's Alto which was launched in October 2000 had received
a good response. Although HMIL's Santro remained the largest selling car in
the B segment, MUL commanded the largest market share in this segment
due to the combined sale of its three cars - Zen, Wagon R and Alto... Status
in 2004: The financial year 2003-04 ended on a positive note for HMIL. The
company achieved revenues of Rs 50 bn and profit after tax (PAT) of Rs. 1.90
bn in the financial year 2003-04 compared to Rs 43 bn revenues and PAT of
Rs 1.65 bn in the fiscal 2002-03...
Question:
(10 × 2 = 20)
1. Examine and analyze the marketing mix of Hyundai Motors in the Indian
passenger car industry.
2. Compare and contrast the marketing strategy of Hyundai with other
leading players in the Indian passenger car industry.?
Assignment
Subject: Marketing Management
Q.3 Case study
The British Company, Woolworths is normally categorized as a variety store
dealing in retailing of a range of varying products. Historically it was
established as a subsidiary of an American Company F.W. Woolworth &Co,
in 1879 by Frank Winfield Woolworth It was incorporated in England on
23rd July, 1909 as private limited company with initial capital of 50,250
pound sterling. It, first time floated a new idea of selling all the products at a
cost not more than five cents. This idea gained popularity amongst the
customers resulting in fast growth of the subsidiary. Its first shop at
Liverpool attracted about 60,000 people in first two days because of
attractive one penny, three penny and six penny products put at sale. It
continued to open new shops at various cities that attracted heavy rush of
customers and visitors. It was company’s policy to purchase the products
directly from manufacturers, who also were very happy due to momentum in
their business as well. Some of the manufacturers started doing business
solely with the Woolworths and labeled their products with the company’s
name. Company’s business grew day by day and it had 31 shops in United
Kingdoms by the year, 1914. Due to inflationary trends after the World War
II, the company had to do away with its three pence and six pence price
limits. It introduced self service first time in its retail side in the year 1955.
Woolworth opened about 190 self-service stores by the year 1970. It created
new division in the stores by establishing Woolco departmental stores in the
year 1966. These stores had full range of quality products like, clothes,
groceries, car service and restaurants etc. available at affordable prices.
The Company continued to flourish very fast because of its stated aim to
remain at the customer’s heart and best kid’s retailer till 1966. But
thereafter its sales as well as profits started falling because of its
competitors, Marks & Spencer who overtook its sales as well as profits. The
results of the company were the worst in the year 1969, because it failed to
chalk out suitable strategies necessary to take on its competitors in the
market. Sales at Woolworth began to decline. Consumers were reportedly
not satisfied with the quality of customer services of the company. Many of
the business sites were not at prime locations. Its new products could not
attract the customers because of lack of well trained staff and availability of
‘A class service’. The company tried to improve its services in the year 1971
by introducing new system of centralized payments besides closing its 23
unprofitable shops, as an attempt to trade up. The profits of the company
increased to some extent as a result of these measures but it failed to boost
up its profits at the desired level. The competitors of Woolworth like Wal-
Mart, Argos and Next very soon became more prevalent in the market
because of low prices, better service and vast range of their products. The
Management of the company ultimately decided to sell out the Woolco stores
in 1977. In the year 1981 it sold-out some of its valuable prime located
properties to cover-up the losses suffered by the shops situated at these
locations. Even then its profits went down in the said year and the company
was forced to cut the dividends first time since its establishment. In the
normal restructuring process during the year 1985, the company decided to
abandon the sale of food and adult clothing that was contributing about
30% of its overall sales. The Management of the company sold out its 200
unprofitable shops out of about 990, during the years 1982-1991. During
this decade company made a number of acquisitions in order to become
more diversified in retail business. It launched Music and Video Club that
specialized in CDs, videos and other entertainment products. The company
succeeded in boosting its sales and turnover during 1990s and gave
impressive results despite the fact that some of major chains like Wilkinson
expanded their business in the Woolworth areas.
Woolworth reviewed its entire business in the year 2002. It reconsidered its
further expansion and realignment and merger of its overall management
structure. It strengthened infrastructure and planned accurate management
of its stocks so as to maintain them at their optimum levels. It introduced
new till system in order to ensure its stock holding capacity besides
provision of improved and efficient services to the customers. The
management decided to cut the number of suppliers and enhance the use of
their own branded products. These improvements contributed a little in the
sales as well as profits. One of main money spinners of the company was its
music business that collapsed. The financial results for the year 2004
showed just 4.5% increase in the profits of the company. It had to compete
strongly with Argos in the sales of toys and gifts. In the year 2006, the
company introduced an in-store collection service for items ordered through
website. Company continued its business mainly in entertainment and
electronics till the year 2008. It expanded its chains and set up out of town
stores that were known as ‘Big W’. It announced considerable loss in its half
yearly statement of affairs as on 2nd August, 2008.
The management, therefore decide to sell out about 120 stores, cut jobs and
reduce web operations. At this stage reportedly the company rejected an
offer to buy its 815 stores. From September onwards the entire World
entered into worst ever economic and financial crises that resulted in
decrease in availability of necessary credit from the banks and financial
institutions besides decrease in consumer spending. The lending banks of
the company not only refused to give further credits, they also demanded
repayment of their existing loans towards the company. As a result of this
crisis the retail business badly suffered. Media also reported possible price
crashes, increased personal debts, unemployment, pension shortfalls, stock
market crashes and decrease in availability of disposable income.
Under these circumstances as well as in wake of market saturations,
coupled with economic downturn, it was highly difficult for the Woolworth to
maintain competitive pricing. Woolworth’s financial results for the first half
of the year 2008 showed 99.7 million pounds pretax loss. Decreased credit
availability, decreased public spending and pressure of creditors to pay off
debts of about 385 million pounds, forced the company to sell out its 120
shops that were going in loss besides reducing the web operations, cutting
the products and axing the employees. These measures could not help the
company to survive and ultimately it suspended trading of its shares on the
26th 0f November, 2009 and at last decided to close down its all 819 stores
and axe its 27000 highly dedicated employees. The parent company of
Woolworth also announced its intention to go into administration on the
19th of January, 2009.
Question:
(4 × 5 = 20)
1. Why Woolworths Failed as a Business?
2. What is the main focus or purpose of Woolworths?
3. What challenges are Woolworths facing now a day?
4. What are the advantages of Global Expansion in Retailing?
Assignment
Subject: Marketing Management
Q.4 Case study
Its Global Marketing Plans In the 1940’s itself PepsiCo started branching out
into the international arena. At first it was into Latin America, the Middle
East and the Philippines. Here too Coke had the early bird advantage. Yet
the product soon gained popularity. With the Arab countries boycotting
Coke, Pepsi enjoyed a monopoly for many years in the Middle East. In the
1950’s Pepsi went to Europe and this included Russia, with whom there
existed a Cold War by USA. Though there were initial difficulties, getting into
Russia was a major breakthrough which the company exploited. The
company posted pictures of the then leaders of the United States and Russia
sipping the drink. Its arch rival, Coca Cola, was able to enter the Russian
markets only after more than 25 years after Pepsi’s entry.
In many of the countries that Pepsi ventured into comparative advertising
was prohibited and in many countries it was not an accepted concept. For
example, Pepsi tried its “Pepsi challenge” promotional gimmick in Japan.
However, the country and its people were not aware of comparative
advertising and as such the campaign did more harm than good. Hence in
Japan they had to break their tradition of running with the global campaign
and come up with a campaign that the Japanese would identify with and
was more Japanese. The “Pepsiman” was a superhero like figure that was
devised by a Japanese person for the Japanese market. The commercial was
an instant hit and helped improve Pepsi’s share in the Japanese market by
as much as 14%. From Japan Pepsi learned a valuable lesson – the same ad
will not have the same effect everywhere. When it comes to cross national
advertising, there is always the inherent risk of alienating the people.
Question:
(20 × 1 = 20)
1. What challenges Pepsi had to face, If Pepsi would not follow the cultural
factors in international marketing environment? What is the good marketing
way for pepsi?
Assignment
Subject: Marketing Management
Q.5 Case study
In 1980, Peter A, Horekens, marketing director for Kellog company, was
faced with the problem of developing a market for ready-to-eat cereals in the
Latin American region. Although Kellog had no competition in the ready-to
eat cereal market in this region, they also had no market. Latin Americans
did not eat breakfast as the Americans did. The problem was especially
prominent in Brazil. To create a market and increase sales in this region,
Horekens had to create a nutritious breakfast habit.
Kellog Company, which headquartered in Battlecreek, Michigan, was
founded in 1906 by W.K. Kellog. The company continued to operate
successfully with sales in 1980 amounting to 2,150.9 million U.S. Dollars.
The Kellog Company manufactured and marketed a wide variety of
convenience foods with ready-to-eat cereals topping the list. The company’s
products were manufactured in 18 countries and distributed in 130
countries. The ready-to-eat cereals sales made up the majority of
international sales.
In 1980, Kellog International operations accounted for 38 percent of Kellog
Company’s sales of more than $ 2.0 billion. The United Kingdom was by far
Kellog’s largest market. Internationally, sales in the ready-to-eat cereal
market continued to increase, although in the past few years the
competition also had increased. But in Latin America, consumption of
ready-to-eat cereals was negligible.
The Latin American Market
The Latin American Market, mainly Mexico and Brazil, showed great
potential as a Kellog’s ready-to-eat cereal market. The demographics fit the
ready-to-eat market, the only problem was that Latin Americans did not eat
the traditional American-style breakfast.
The Latin American market included a growing number of families with
children. The population mix was becoming younger. The developing
economy enabled consumers to spend more of their income on food. Kellog
wanted to increase sales in this Latin American region, especially Brazil, but
consumers had turned their backs on the American style breakfast. How
was Kellog to create a nutritious breakfast habit among the Brazilians?
The company asked J. Walter Thompson, Kellog’s advertising agency, to
help instill the breakfast habit in Brazil. According to Horekens, “In general,
Brazilians do what people in novellas do”. Novellas are Brazilian soap
operas. J. Walters Thompsons tried to advertise Kellog ready-to-eat cereal
and instill the breakfast habit by advertising within a soap opera. The first
experience of advertising within a soap opera failed; the advertisement
portrayed a boy eating the cereal out of a package. Kellog wanted to teach
the Brazilians how to eat a complete, nutritious breakfast, not just Kelloy’s
cereal. The commercial did not work, because it made Kellog ready-to-eat
cereal seem more like a snack than a major part of a complete breakfast.
Kellog wanted to portray ready-to-eat cereal as a part of a complete, wellbalanced
nutritious breakfast. Thus, they needed the cereal to be eaten in a
bowl with milk alongwith other foods to make a complete breakfast.
The company believed that the growing population in this region would
reinforce the importance of grains as a basic food source. The 1980
population in Brazil was 119 million, which made it the sixth most
populated country in the world and the population was expected to grow to
165 million in the next few years. Within this population growth was an
increase in the number of women of childbearing age, which further
supported Kellog’s potential for a successful cereal market. The structure of
the population in Brazil in 1980 was:
Thirty seven percent of population under age 15.
Forty-eight percent of population under age 20.
Twelve percent population over age 50.
Six percent of population over age 60.
These figures showed that the population of Brazil better fit the
market for a ready-to-eat cereal, with the increasing number of
children and elderly people as the two largest cereal consuming
segments.
The “cult of the family” continued to be the most important institution in the
formation of the Brazilian society. This culture ideal was reflected in the
ways they conceptualized and evaluated the range of personal and social
relations. This seemed to be the way Kellog would have to demonstrate the
importance of a nutritional breakfast – by playing up the family and its
importance. Through the use of the novellas, Kellog made a second attempt
to teach the Brazilians the importance of breakfast. Most Brazilian families
watched these soap operas, composed mostly of family scenes. In their
commercials, Kellog opted for scenes that showed the family at the breakfast
table. One member of the family, usually the father, took the cereal box,
poured the cereal, and then added milk. This scene represented a complete
“Kellog” breakfast in a way that Brazilians could relate to. The advertisement
focused first on nutrition, then on flavor, and finally on ease of preparation.
As a result of this campaign, sales in Brazil increased. Kellog controlled 99.5
percent of the ready-to-eat cereal market in Brazil; however, per capita
cereal consumption was less than one ounce or several spoonfuls per
Brazilian annually, even after advertising. Although Kellog controlled the
market, there was not much of a market to control. Brazilians had begun to
eat breakfast, but Horekens was not sure whether sales would continue to
increase. His problem was – how could Kellog further convince the
Brazilians of the importance of eating a nutritional breakfast in order to
establish a long-term market?
Question:
(10 × 2 = 20)
1. Analyse the case to enable you to prepare a report about the given
situation.
2. What would be your advice – to continue or quit – to the board of
Directors of Kellog? Explain with reasons the factors which you would
consider essential in framing your report?
Assignment
Subject: Strategy Execution
Q.1 Case study
Discourse Analysis
Bill Corwin was employed by a large bank for several years. He started as a
messenger, and then was assigned to a branch. He progressed in this
branch from a bookkeeping clerk to a platform assistant. In this position he
had a variety of duties largely centring on administrative assistance to the
officers of the branch
The bank’s many branches were divided regionally, each region having a
group of officers responsible for the branches in that region. Bill was
transferred from the branch in which he had worked for 12 years to a
branch in another region. At the time of his transfer he was told that the
branch was completely “run down” as to operational procedures and
systems. The branch had a normal complement of 4 officers and 35 staff
members. One month prior to Bill’s transfer, one of the four officers had
retired, and two weeks after this retirement the branch manager was
hospitalized with serious illness. When Bill arrived at his new assignment,
he found a rather demoralized situation. Complete lack of interest was
shown by two remaining officers and the rest of the staff was not properly
trained or disciplined. The two officers did not know Bill, and they were
informed by the regional office that he was being assigned to the branch as
a platform replacement for only two weeks.
During his first week at the branch Bill discovered that the senior clerks
were not qualified to train other staff members, customer complaints were
rampant, there was both a record of excessive absenteeism and excessive
overtime, and the branch had received very poor audit report by the bank’s
internal auditors with the same major exception reported on the previous
four audits.
After two weeks Bill was called to the regional office and offered the job of
operations officer. He was told that he would receive the official title in two
months. He was also told that the present operations officer, who had held
the job at this branch for seven years, was to be relieved of all operational
responsibilities and that he would be instructed to work with Bill until the
branch was functioning effectively. Bill returned to the branch and started
on his assignment. He found the former operations officer cooperative for
about one week. Bill then decided to go ahead without the help of the former
operations officer. Over the next three months he worked almost every night
until 8:00 or 9:00p.m. He tried to correct the problem that had developed
over several years. The training of employees involved considerable time,
and he found it necessary to release 12 clerks who were causing trouble in
various ways. The remaining staff and replacements started to function
smoothly. He received his title as promised. Then the branch manager
returned to work after his prolonged illness. A week after his returned, he
called Bill to his office and questioned his efforts in this branch. He told Bill
that the former operations officer had mentioned that he was an upsetting
influence in the branch, had fired several good people, did not know his job,
and that he left his job early several days a week.
Questions
(4 × 5 = 20)
1. If you were Bill, how would you answer the branch manager?
2. Did the regional office handle Bill’s transfer properly?
3. What should be done by the regional office now?
4. Do you believe that Bill can function effectively as a manager in this
branch?
Assignment
Subject: Strategy Execution
Q.2 Case study
Successful execution of the strategy for developing markets requires a
degree of flexibility, an ability to adapt in often unforeseen ways to local
conditions, and a long-term perspective that puts building a sustainable
business before short-term profitability. In Nigeria, for example, a crumbling
road system, aging trucks, and the danger of violence forced the company to
re-think its traditional distribution methods. Instead of operating a central
warehouse, as is its preference in most nations, the country. For safety
reasons, trucks carrying Nestle goods are allowed to travel only during the
day and frequently under-armed guard. Marketing also poses challenges in
Nigeria. With little opportunity for typical Western-style advertising on
television of billboards, the company hired local singers to go to towns and
villages offering a mix of entertainment and product demonstrations.
China provides another interesting example of local adaptation and longterm
focus. After 13 years of talks, Nestle was formally invited into China in
1987, by the Government of Heilongjiang province. Nestle opened a plant to
produce powdered milk and infant formula there in 1990, but quickly
realized that the local rail and road infrastructure was inadequate and
inhibited the collection of milk and delivery of finished products. Rather
than make do with the local infrastructure, Nestle embarked on an
ambitious plan to establish its own distribution network, known as milk
roads, between 27 villages in the region and factory collection points, called
chilling centres. Farmers brought their milk – often on bicycles or carts – to
the centres where it was weighed and analysed. Unlike the government,
Nestle paid the farmers promptly. Suddenly the farmers had an incentive to
produce milk and many bought a second cow, increasing the cow population
in the district by 3,000 to 9,000 in 18 months.
Area managers then organized a delivery system that used dedicated vans to
deliver the milk to Nestle’s factory. Although at first glance this might seem
to be a very costly solution, Nestle calculated that the long-term benefits
would be substantial. Nestle’s strategy is similar to that undertaken by
many European and American companies during the first waves of
industrialization in those countries. Companies often had to invest in
infrastructure that we now take for granted to get production off the ground.
Once the infrastructure was in place, in China, Nestle’s production took off.
In 1990, 316 tons of powdered milk and infant formula were produced. By
1994, output exceeded 10,000 tons and the company decided to triple
capacity. Based on this experience, Nestle decided to build another two
powdered milk factories in China and was aiming to generate sales of $700
million by 2000.
Nestle is pursuing a similar long-term bet in the Middle East, an area in
which most multinational food companies have little presence. Collectively,
the Middle East accounts for only about 2 percent of Nestle’s worldwide
sales and the individual markets are very small. However, Nestle’s long-term
strategy is based on the assumption that regional conflicts will subside and
intra-regional trade will expand as trade barriers between countries in the
region come down. Once that happens, Nestle’s factories in the Middle
East should be able to sell throughout the region, thereby realizing scale
economies. In anticipation of this development, Nestle has established a
network of factories in five countries, in the hope that each will, someday,
supply the entire region with different products. The company currently
makes ice-cream in Dubai, soups and cereals in Saudi Arabia, yogurt and
bouillon in Egypt, chocolate in Turkey, and ketchup and instant noodles in
Syria. For the present, Nestle can survive in these markets by using local
materials and focusing on local demand. The Syrian factory, for example,
relies on products that use tomatoes, a major local agricultural product.
Syria also produces wheat, which is the main ingredient in instant noodles.
Even if trade barriers don’t come down soon, Nestle has indicated it will
remain committed to the region. By using local inputs and focussing on
local consumer needs, it has earned a good rate of return in the region, even
though the individual markets are small.
Despite its successes in places such as China and parts of the Middle East,
not all of Nestle’s moves have worked out so well. Like several other Western
companies, Nestle has had its problems in Japan, where a failure to adapt
its coffee brand to local conditions meant the loss of a significant market
opportunity to another Western company, Coca Cola. For years, Nestle’s
instant coffee brand was the dominant coffee product in Japan.
In the 1960s, cold canned coffee (which can be purchased from soda
vending machines) started to gain a following in Japan. Nestle dismissed the
product as just a coffee-flavoured drink rather than the real thing and
declined to enter the market. Nestle’s local partner at the time, Kirin Beer,
was so incensed at Nestle’s refusal to enter the canned coffee market that it
broke off its relationship with the company. In contrast, Coca Cola entered
the market with Georgia, a product developed specifically for this segment of
the Japanese market. By leveraging its existing distribution channel, Coca
Cola captured a 40 percent share of the $4 billion a year, market for canned
coffee in Japan. Nestle, which failed to enter the market until the 1980s, has
only a 4 percent share.
While Nestle has built businesses from the ground up, in many emerging
markets, such as Nigeria and China, in others it will purchase local
companies if suitable candidates can be found. The company pursued such
a strategy in Poland, which it entered in 1994, by purchasing Goplana, the
country’s second largest chocolate manufacturer. With the collapse of
communism and the opening of the Polish market, income levels in Poland
have started to rise and so has chocolate consumption. Once a scarce item,
the market grew by 8 percent a year, throughout the 1990s. To take
advantage of this opportunity, Nestle has pursued a strategy of evolution,
rather than revolution. It has kept the top management of the company
staffed with locals – as it does in most of its operations around the world –
and carefully adjusted Goplana’s product line to better match local
opportunities. At the same time, it has pumped money into Goplana’s
marketing, which has enabled the unit to gain share from several other
chocolate makers in the country. Still, competition in the market is intense.
Eight companies, including several foreign-owned enterprises, such as the
market leader, Wedel, which is owned by PepsiCo, are vying for market
share, and this has depressed prices and profit margins, despite the healthy
volume growth.
Question:
(5 × 4 = 20)
1. Does it make sense for Nestle to focus its growth efforts on emerging
markets? Why?
2. What is the company’s strategy with regard to business development in
emerging markets? Does this strategy make sense? From an organizational
perspective, what is required for this strategy to work effectively?
3. Through your own research on NESTLE, identify appropriate performance
indicators. Once you have gathered relevant data on these, undertake a
performance analysis of the company over the last five years. What does the
analysis tell you about the success or otherwise of the strategy adopted by
the company?
4. How would you describe Nestle’s strategic posture at the corporate level;
is it pursuing a global strategy, a multidomestic strategy an international
strategy or a transnational strategy?
5. Does this overall strategic posture make sense given the markets and
countries that Nestle participates in? Why?
Assignment
Subject: Strategy Execution
Q.3 Case study
Starbucks Growth Strategy
In 1971, three academics, English Teacher Jerry Baldwin, History Teacher
Zel Siegel and writer Gordon Bowker opened Starbucks Coffee, Tea and
Spice in Touristy Pikes Place Market in Seattle. The three were inspired by
entrepreneur Alfred Peet (whom they knew personally) to sell high-quality
coffee beans and equipment. The store did not offer fresh brewed coffee by
the cup, but tasting samples were sometimes available. Siegel will wore a
grocers apron, scooped out beans for customers while the other two kept
their day jobs but came by at lunch or after work to help out. The store was
an immediate success, with sales exceeding expectations, partly because of
interest stirred by the favorable article in Seattle Times.
Starbucks ordered its coffee-bean from Alfred Peet but later on the three
partners bought their own used roaster setting up roasting operations in a
nearby ramshackle building and developed their own blends and flavors. By
the year 1980s the company had four Starbucks Stores in Seattle area and
had been profitable every year. Later on, Siegel left the company and
Jerry Baldwin took over day-to-day management of the company. Gordon
Bowker remained as an owner but devoted most of his time in his Design
Firm. In 1981, Howard Schultz, the vice president of U.S operations for
Swedish Maker of stylish kitchen equipment and coffeemakers decided to
pay Starbucks a visit. He was curious about why Starbucks was selling so
many of his company products. He was impressed with the company
management and the quality products the make. Schultz asked Baldwin
whether there was any way he could fit into Starbucks and it took long time
to decide his request. He tried many times till one day he was given a job of
heading marketing and overseeing the retail stores.
Howard Schultz spent most of his working hours in the four stores learning
the retail aspects of the company business; Schultz was overflowing with
ideas for the company. His biggest inspiration and vision for Starbucks
future came during 1983 when the company sent him for an international
house wares show to Milan, Italy. There he spotted an espresso bar and
went to take a coffee. He was impressed with the coffeehouse services and
decided to stay at Milan for a week to explore all coffee bars and learned as
much as he could about the Italian passion for coffee drinks. He made a
decision to serve fresh brewed coffee, espressos, and cappuccinos in its
stores and try to create an American version of Italian coffee bar culture. He
shared his idea with Baldwin and it took nearly a year to convince Jerry
Baldwin to let him test an espresso bar. In April 1984, the first espresso bar
was opened and it was a successful too. Yet Baldwin felt something is
wrong. After Schultz failed to convince Baldwin for the expansion of
business, he left Starbucks in 1985. Schultz started the “Il Giornale” coffee
bar chain in 1985 and the coffeehouse was very successful. In 1987
Starbucks owner Jerry Baldwin and Bowker decide to sell the whole
Starbucks chain to Schultz’s Il Giornale, which rebranded the Il Giornale
outlets as Starbucks and quickly began to expand. Starbucks opened it’s
first locations outside Seattle at Waterfront Station in Vancouver, British
Columbia, and Chicago, Illinois, that same year. At the time of its initial
public offering on the stock market in 1992, Starbucks had grown to 165
outlets. In 2009 The Company plans to open a net of 900 new stores outside
of the United States.
Today, Starbucks coffee shops and Kiosks can be found in a variety of
shopping centers, office buildings, bookstores, and other outlets. Starbucks
is capitalizing on taste changes that predate the company’s founding. In the
early 1960’s, American adults consumed on an average ofthree cups of
coffee each day. Today, consumption has declined to less than two cups,
with only half of American adults as coffee drinkers. During this time,
decaffeinated coffee sales soared. In addition, a new category of intensely
loyal coffee drinkers was born. This group of adults consumes “specialty” or
“premium” coffees, including regular and decaffeinated versions with a
variety of origins and flavors. Sales of specialty coffee have climbed from
about $45 million annually to more than $2 billion today, accounting, for
about 20 percent of all coffee sales.
Because Starbucks markets whole beans and coffee beverages, its
competition comes from two distinct groups of firms. A number of regional
coffee manufacturers distribute premium coffees in local markets, while
several large national coffee manufacturers such as Nestle, Proctor &
Gamble, and Kraft General Foods market and distribution specialty coffees
in supermarkets. Coffee beverages are distributes by restaurants, grocery
stores, and coffee retailers. Seattle’s Best Coffee is a fierce competitor.
Chairman Howard Schultz projects that Starbucks will grow from its present
6,000 stores to more than 20,000, 75 percent of which are in the Unites
States. The company added 280 intentional locations in 2001 and is
targeting an additional 650 stores in Europe by 2004 and 900 locations in
Latin America predominantly Mexico by 2005, Starbucks is also moving into
China. Retail stores account for more than 80 percent of revenues, with
specialty operations accounting for the remainder.
Question:
(5 × 4 = 20)
1. What are some of the challenges associated with Starbucks aggressive
growth strategy?
2. Could an unanticipated change in coffee consumption patterns disrupt
Starbucks in the same way that it paved the way for the company’s growth
in the 1980s?
3. What problems might arise from Starbucks’ efforts to expand rapidly into
nations such as India?
4. Comment on the pricing strategies of Starbucks.
5. How would you see the competition of Starbucks in India, with players
like Costa Coffee?
Assignment
Subject: Strategy Execution
Q.4 Case study
In July 2013, Yasumori Ihara (Ihara), Executive Vice President of Toyota
Motor Corporation was readying plans to bolster Toyota's position in the
emerging markets by expanding operations into Cambodia, Myanmar, and
Kenya. According to Ihara, who was in charge of the company's emerging
markets business, "Compared with North America, Europe, or Japan, where
buyers are mostly replacement buyers, it's mostly first-time buyers in
emerging markets. It's where the future growth is."
The Japan-based Toyota was the world's largest automaker with a presence
in more than 170 countries. In March 2011, Toyota announced its ‘Global
Vision' in which emerging markets were given particular importance as part
of its strategy. The company wanted to get 50% of its global sales from the
rapidly growing emerging markets by 2015. The company considered China,
Southeast Asia, India, and Brazil as its key emerging markets. In 2012,
Toyota's consolidated vehicle sales was 8.7 million units, out of which 3.7
million were sold in emerging countries.
But in the second half of 2013, Toyota was facing intense competition from
its rivals both in the developed as well as the emerging markets. The
company had invested a huge amount in emerging markets, but key
emerging markets were facing a lot of volatility and sluggish growth. There
were concerns that these markets were no longer attractive enough. In
addition to getting Toyota's emerging markets strategy right, Ihara's main
responsibility was to reverse the disastrous sales decline in China, where
consumers were boycotting Japanese-built cars due to diplomatic tensions
over some disputed islands.
The global automotive market was highly competitive and competition was
likely to intensify further with continuing globalization. The factors affecting
competition included product quality and features, safety, reliability, fuel
economy, the amount of time required for innovation and development,
pricing, customer service, and financing terms. With growing economies and
a low vehicle penetration rate, emerging markets were considered as the key
source of growth for the global automobile industry.
According to the International Monetary Fund, between 1988 and 2011,
while the developed markets' of global GDP declined from 61% to 49%.
Toyota's presence in the emerging markets dated back to the 1960s when it
used to sell vehicles in markets like Taiwan, Brazil, South Africa, Thailand,
the Philippines, Malaysia, Russia, and China. In the initial years, Toyota
was mostly exporting vehicles from Japan to these countries as it only had
production facilities in Brazil, South Africa, and Thailand.
During the 1970s, Toyota started producing multipurpose vehicles in the
Philippines and Indonesia as families in these two countries tended to be
large and therefore vehicles that could be used both for business and family
were preferred. In 1976, Toyota launched the Tamaraw in the Philippines
followed by the Kijang in Indonesia in 1977. In the 1980s, Toyota started
producing vehicles in Taiwan and Malaysia followed by India in the 1990s.
By the 2000s, Toyota had production facilities in all these emerging
markets. In an effort to increase its presence in the emerging markets,
Toyota began strengthening its supply system in the emerging markets and
increasing localization. During the 2000s, the company set up a local parts
distribution network and a supply chain to provide greater autonomy to
affiliates in the emerging markets.
Toyota's presence in South East Asia dated back to the 1950s. By 2012,
Toyota had 14 production companies in Thailand, Indonesia, the
Philippines, Malaysia, and other Southeast Asian countries. Under the
Innovative International Multi-purpose Vehicle (IMV) project launched in
2004, Thailand and Indonesia became Toyota's global production centers.
By 2012, Toyota was the market leader in Thailand, Indonesia, the
Philippines, Taiwan, Brunei, and Vietnam. The IMV Project was intended to
create an efficient production and distribution structure for pick-up trucks
and multipurpose vehicles to meet the needs of consumers globally. Toyota
applied the ‘genchi genbutsu' approach to observe and analyze the needs of
each region and the types of vehicles used in those regions to develop and
introduce IMVs.
The IMV project included manufacturing diesel engines in Thailand, gasoline
engines in Indonesia, and manual transmissions in the Philippines and
India. The IMV project adopted a leaner development process based on a
common platform, and developed five vehicles: three pickup trucks, a
minivan, and an SUV, especially developed in 2004 for launch in over 140
countries. Though Toyota was still the #1 automaker in mid-2013, its
position was coming under threat from a resurgent GM and Ford in the US
market.
Competition was catching up in the hybrid car market too. In its home
market, the company was hit hard in late 2012, after government incentives
for consumers to buy fuel-efficient models expired. In 2013, the Yen
declined more than 12% against the dollar. In emerging markets, Toyota had
to contend with intense competition from other Japanese companies such as
Nissan, Honda, and Suzuki, some of which had managed to entrench
themselves in key emerging markets. Companies such as GM and Germanybased
Volkwagen were also pushing ahead with their own emerging
strategies.
In 2008 and 2009, analysts were expecting emerging markets to become a
safe haven for investors, considering the recession in the US and Europe
post the global financial crisis. But as of 2013, while developed economies
seemed to be strengthening, the emerging markets had underperformed in
the previous couple of years. Analysts were also concerned about the
vulnerability of the emerging markets which reacted strongly to modest
changes in the world economy. In mid-2013, many emerging markets were
struggling with rapid depreciation of their currencies. Countries such as
Brazil, India, South Africa, and Indonesia were among the worst affected.
Between May and September of 2013, while the Indian Rupee fell by 21%,
the Brazilian Real fell by 17%, followed by the Indonesian Rupiah (15%), the
Thailand Baht (8%), and the Russian Ruble (6%). Central banks in key
markets like Brazil and India were working frantically to prop up their
currencies.
As of mid-2013, Toyota pursued the emerging market strategy with Asia as
its ‘second mother base'. According to Toyota's Global Vision, the company
aimed to implement its IMV Project strategy in the emerging markets by
continuing to fortify its core models along with new hybrid models. It would
also strengthen its production and supply bases, and enhance its cost
competitiveness by 100% localized procurement.
Question:
(4 × 5 = 20)
1. Analyze the automobile industry in emerging markets and discuss and
debate whether automakers should focus on these markets.
2. Evaluate the strategies adopted by Toyota to increase its presence in
emerging markets.
3. Discuss ways in which Toyota could get its emerging markets strategy
right and bolster its position further in emerging markets.
4. Give your suggestion for better marketing strategy.
Assignment
Subject: Strategy Execution
Q.5 Case study
On December 14, 2012, French-Dutch airline, Air France KLM SA (Air
France-KLM), announced an addition of €500 million (USD654 million) to its
savings target for 2013-14, in an effort to match the margins of its
competitors. Earlier in 2012, the airline had announced a plan for a €1.4
billion investment in 2013, followed by a further €1.6 billion investment in
2014 as part of its "Transform 2015" plan. However, with the new savings
target, investment would be cut by €500 million, out of which Air France
would contribute €300 million while the remaining €200 million would be
cut from KLM's budget.
After the changes, Air France-KLM's capital expenditure would be €1.1
billion in 2013 and €1.4 billion in 2014. "This is a necessary reduction, but
given the group's younger fleet age versus competitors they have the
flexibility to do it. The Transform plan is gathering pace and should be well
on track to deliver," said analyst Donal O'Neill at Goodbody Stockbrokers.
Air France-KLM was formed through a merger of French and Dutch carriers
in 2004. With sound financials in the initial years, the merged entity became
an example of how a cross border merger could prove a success. However,
from 2009, the company was struggling to remain competitive in the
changing global aviation industry. In 2011, the company's net debt was at
€6.5 billion, €2 billion more than it had been the previous year. The
company also incurred a substantial operating loss for the fourth
consecutive year in 2011. It attributed its deepening indebtedness to
increasing fuel costs, competition from low-cost airlines, and the aftereffects
of the financial crisis. "We have been incapable of financing our investments
for the past three years, as we don't generate enough cash flow," said
Alexandre de Juniac (Juniac), CEO of Air France.
The company had announced the "Transform 2015" plan in January 2012.
This included reducing unit costs by 10 percent and slashing €2 billion from
its net debt by the end of 2014. The company also planned to cut some
5,000 odd jobs to turn around its short- and medium-haul business.
Aviation experts welcomed the restructuring initiatives of Air France-KLM.
However, they were worried about whether the company would be able to
achieve the targets mentioned in "Transform 2015". According to a Bank of
America report published in March 2012, "the core structural longer-term
issue of value destruction in this business remains unresolved".
On September 30, 2003, Air France and KLM announced their intention to
merge through a public exchange offer. In May 2004, the two merged to form
the largest European airline group, Air France-KLM. On May 5, 2004, Air
France-KLM shares were listed for trading on the Euronext Paris and
Amsterdam markets as well as on the New York Stock Exchange. Two days
later, Air France was privatized following a transfer of the majority of its
shares to the private sector, thus diluting the French government
shareholding. On September 15, 2004, the group's organizational structure
was finalized with the creation of the Air France-KLM holding company,
regrouping the two airline subsidiaries, Air France and KLM. The merger
between Air France and KLM was a unique example, not only because it was
a cross border merger, but also because two airlines with different cultures
formed one company where both companies kept their brands alive by flying
their planes under their respective names. In the initial years, the merger
was considered a success story, because of early anticipation of the needs of
consolidation in the European aviation industry.
In 2007, the company completed its first phase of integration and became
the best performing airline globally in terms of profitability. It was a global
leader covering 240 destinations in 105 countries with its 900 aircraft. In
the financial year 2006-07 ended March 31, 2007, Air France-KLM
generated revenues of € 23.1 billion, an increase of 7.6 percent year on year.
However, the company started facing problems from 2008. The global
financial crisis of 2008-09 affected the airline industry very badly. The
industry responded by reducing capacity and cutting costs. In the financial
year 2008-09, Air France-KLM reported revenues of €23.97 billion and an
operating loss of €129 million. From then onward, the airline started
struggling to improve its financials. In the financial year 2009-10, Air
France-KLM reported a 15 percent decline in revenues to €21 billion, and an
operating loss of €1.28 billion.
In 2012, Air France-KLM continued to counter the effects of downturns in
its domestic market as well as in several of its foreign markets: Japan, the
Middle East, and North Africa. In France, the company was grappling with
high costs due to increasing fuel prices. Moreover, weak economic growth
due to Europe's financial crisis aggravated the problems for the airline. On
October 8, 2012, Air France-KLM and Etihad Airways signed an agreement
to codeshare on flights across the airlines' networks. The codeshare
agreement would allow both airlines to offer joint codes on destinations in
Europe, the Middle East, Asia, and Australia. At the same time, Air France-
KLM also announced another codeshare agreement with Air Berlin , in
which Etihad Airways held a 29.21 percent stake
Question:
(4 × 5 = 20)
1. Analyze the problems faced by Air France-KLM
2. Evaluate the turnaround strategies adopted by the airline
3. Analyze the issues and challenges in transcontinental and cross-cultural
alliances.
4. Analyze the future challenges of the airline and how these can be
overcome.
