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UNIVERSITI TEKNOLOGI MARA
MKT 750: MARKETING MANAGEMENT
FINAL EXAM:
CASE STUDY – FRITO – LAY, INC;
SUN CHIPS TM MULTIGRAIN SNACKS
PREPARED FOR
ASSOCIATE PROF. DR. FAIZAH ABD RAHIM
PREPARED BY
FATIN HUSNA SUIB 2010241764
DATE OF SUBMISSION
1st November 2010
QUESTION 1
Using the “DECIDE” Formula, analyze the above case.
The decision making process describe as the DECIDE Formula which:
1. Define the problem
2. Enumerate the decision factors.
3. Consider relevant information.
4. Identify the best alternative.
5. Develop a plan for implementing the chosen alternative.
6. Evaluate the decision and the decision process.
Step 1: Define the problem.
The problem of Frito Lay, Inc face is to determine the continuously marketing strategy
for Sun Chips Multigrain Snacks for future, how they need to retain and when they need
to take action on future action pertaining to the brand. The objective of this company is
1. To create a sustainable competitive advantage
2. Maximizing business performance.
3. Increase sales of the brand.
4. To examine the nature of the US market; whether Frito Lay, Inc should consider
venturing into healthy snacks industry.
5. Lower the risk of introducing their new product, Sun Chips TM Multigrain.
6. Ensuring that this product been recognized (brand awareness) by their consumer
and target market.
Step 2: Enumerate the decision factors.
In enumerate the decision factors; there are two sets of decision that must be enumerated
in decision making process, which are:
a) Alternative changes of action.
These are controllable decision factors which include the marketing mix; product, place,
price, and promotion strategy.
Product
First, the product itself should be evaluated based on its added value and uniqueness,
which differs it from others, so that it could attract consumers to buy.
The product that the company wants to introduce to the market is the Sun Chips TM
Multigrain Snacks. The details about the product are as follow:
i. Sun Chips TM Multigrain Snacks is a crispy, textured snack chip consisting of a
special blend of whole wheat, corn, rice and oat flours with a lightly salty
multigrain taste chips and is made with canola or sunflower oil which represent a
healthier snack for the consumer.
ii. It had been packages in two sizes: 2 ¼ , 7 and 11 oz.
iii. It had two different tastes: Natural and French Onion.
Price
Frito Lays, Inc should consider the amount consumers pay for the product. Is it worth for
their money or otherwise. The prices of Sun Chips TM Multigrain Snacks when the
company introduces in their test – market plan are as follows:
Package Size
(ounce)
Suggested Retail Price Frito – Lays Selling Price to
Retailer
2 ¼ $ 0.69 $ 0.385
7 $ 1.69 $ 1.240
11 $ 2.39 $ 1.732
Table 1.0 : SunChips TM Multigrain Snacks Price List
For the selling prices, here is the calculation:
Product size
(ounce / oz)
Selling price Price per ounce % of purchase Average price
per ounce
2 ¼ $ 0.385 0.1711 $ / oz
(2.25 / 0.385)
15 % 15 % x 0.1711
= 0.0257 $/0z
7 $ 1.240 0.1711 $ / oz
(7 / 1.240)
47 % 47 % x 0.1711
= 0.0832 $/oz
11 $ 1.732 0.1575 $ /0z
(11/1.732)
38 % 38 % x 0.1575
= 0.0599 $ /oz
Average Price per oz 0.1688
Average Price per 2.7004
The price that ad been introduce by the company for the product were consistent with
customer reference prices for snack chips and represented a good value.
Place
Place is the location where the product can be purchased or distribution channel also
important for availability of the product.
Frito Lay, Inc had chosen Minneapolis – St. Paul, Minnesota for their product‟s test
market. This location had been chose due to its high population volume, which
Minneapolis is a metropolitan area that could give them sufficient information to test the
product. The population of consist of 1.98 million households that were identified as
users snack chips, (2.2 % of the 90 million snack chip user households in the United
States).
Frito Lay, Inc been distributes this product to:
1. Supermarkets.
2. Grocery stores.
3. Convenience stores.
4. Retail stores.
Promotion
Promotion is all the communication, which Frito Lays, Inc may use in the market place
chosen. These include advertising, public relation, personal selling and promotions
strategies.
The company had introduced the product marketing strategies to pursue growth
opportunity:
1. Grow established Frito – Lay brands through line extension.
2. Create new products to meet changing consumer preferences and needs.
3. Develop products for fast – growing snack - food categories.
4. Reproduce Frito – Lay successes in the international market.
The company also makes advertising and merchandising strategy:
1. Television advertising.
Television advertising had successfully gain several groups of target market:
- ages 19 – 34 (primary users).
- Ages 34 – 49 (demand for healthier snacks).
- Ages under 18 years and below (in – home usage)
2. in store displays.
3. free standings inserts (FSIs) in newspaper
4. coupons in newspaper FSIs
5. free samples in supermarkets.
6. trade allowances given to retailers.
b) Uncertainties in competitive environment.
Uncontrollable factors that face Frito Lays, Inc are:
1. Competitors.
The company cannot control the existence of competitors in snack food industry.
Their competitors are:
- national brand firms (Borden, Procter & Gamble, RJR Nabisco, Eagle
Snacks)
- regional brand firms (Synder‟s, Mike Sells, Charles Chips)
- private brands ( Kroger and Safeway).
2. Buyer response.
The company cannot control their buyer‟s response of the Sun Chips TM
Multigrain Snacks that represents a healthier snacks compared to other
competitor‟s products.
In this case, positive consumer response had been recognize by an independent
marketing research firm towards the product concept and brand name of Sun
Chips TM Multigrain Snacks.
Step 3: Consider of Relevant Information.
The third step in the decision-making process is Consider of Relevant Information
that relates to the alternatives identified by the company as being likely to affect the
future events. Refer to First In Show Pet Food, Inc; the company has several
consideration of relevant information which will influence the decision-making. The
table below shows one of the relevant information in terms of Strengths, Weaknesses,
Opportunities, and Threats (SWOT) Analysis.
Strength Weaknesses
1. Established company name.
Frito – Lay already has an establish
company name due to it is a division of
PepsiCo, Inc and a worldwide leader in the
manufacturing and marketing of snack
chips.
2. Capture of nearly one – half of retail
sales for snack chips.
Frito – Lay, Inc accounts for 13 % of sales
in the United States snack – food industry
which consists of nearly one – half from
retail sales in the snack food category.
Eight of Frito – Lay‟s snack chips also are
among the top ten best selling chips in the
U.S Supermarkets.
3. Plenty of capital available.
PepsiCo, Inc recorded net income of $
1.077 billion on net sales of $ 17.8 billion
in 1990 which could provide enough
capital to the Frito-Lay, Inc.
4. Test market research ability.
The company has effective Research and
Development Department to test their new
product in the market. The company also
uses an independent marketing research to
monitor potential customer response.
5. Established distribution strategy.
The company has several effective
distribution strategies to make sure that
their product could be finally reached to
1. High new product rate failure
Frito – Lay, Inc face the problem of high
new product rate failure that happens on a
multigrain snack chip called Prontos was
introduced in 1974. the failure is caused by
“noncommittal” copy , a confusing name,
and a product that generated appeal among
too narrow target market.
2. Weak management team.
Frito – Lay, Inc face the problem of weak
management team in the mid – 1980s due
to staff changes and other responsibilities
of project team members thus cause in
change in top management and corporate
objectives.
3. Competitive pricing.
The prices that had been introduced by the
company give them difficulties to compete
with other competitor‟s prices which quite
similar with them.
customer. The strategies include using
store – door delivery system that will be
sold to supermarkets, grocery stores,
convenience stores and retail stores.
6. Brilliant president in managing the test
market.
Dr. Dwight R. Riskey is the vice –
president of marketing research and new
business at Frito – Lay, Inc; have the
ability to manage the test market.
Opportunities Threats
1. Fast growing snack food categories.
The snack food industry had been
increasing due to the customer demands.
This situation gives Frito-Lay, Inc a chance
to develop their new product introduction
to the market.
2. Positive customer response towards a
more nutritious snacks.
Frito – Lay‟s corporate marketing research
had indicate that consumers were looking
for nutritious snacks in the early 1970s thus
open up the opportunities to introduce the
Sun Chips TM Multigrain Snacks which
had been claimed as a healthier snacks.
3. international marketing of products.
1. Competitors.
Increase number of competitors makes
Frito – Lay, Inc introduction program of
Sun Chips become harder.
2. Copying similar products.
Other competitors could copy similar
technology and products like Frito – Lay,
Inc plan.
3. change in consumer preferences.
Step 4: Identify the best alternative.
There are four alternatives that could be choose by Frito – Lay, Inc:
1. Continue the Test Market to collect more data
2. Expand the Test Market
3. Eliminate the Sun Chip project
4. National introduction of Sun Chips, which consist of:
• Use Test Market strategy
• Increase Advertising and Merchandising spending
• Add larger package size
• Add additional flavor
The pros and cons of each alternative have been show in the table below:
Pros Cons
Continue the test market to
collect more data.
1. Obtain more accurate
information.
2. Lowers risk by performing
more research
1. Lost revenue and market
niche.
2. Risk losing first to market
advantage.
3. Allows competitors time to
develop a similar product.
Expand the test market 1. May be more representative
of the entire U.S. population
2. Lowers risk by performing
more research
3. Could provide key
demographic information for
products (size, flavor).
1. Risk losing first to market
advantage.
2. Allows competitors to
develop products.
3. Original test market may
have been accurate.
Eliminate the Sun Chip
product.
1. Limit risk and potential
losses.
2. Eliminate project‟s future
expenses.
3. Company‟s superior image
will remain in tact.
1. Risk of losing potential
profits.
2. Risk of losing access to a
potentially growing and
uninhabited segment of the
market.
3. Not pursuing would violate
company product-marketing
strategies.
National introduction of
Sun Chips.
1. Huge potential profits
2. Portray healthier image
3. First to market advantage
4. Easy to add to distribution
strategy
5. Gain access to new segment
of market
1. Risk of potential losses.
2. Potential damage to
company image.
3. Segment of market may not
be profitable.
Step 5: Develop a plan for implementing the chosen alternative
From step 4, we had identified the best alternative, which is National introduction of Sun
Chips. After choose this alternative, Frito-lay must increase advertising and marketing
expenditures to create brand awareness.
Brand awareness would increase with additional spending and felt that spending the
national introduction equivalent of $30 million could stimulate brand trial as well.
However, there are some pros and cons when they increasing the expenditure on
Advertising and Merchandising campaign:
1. Pros
- Increase brand awareness and trial rates
- Increase volume
- Larger sustained profits
2. Cons
- Reduced 1st year profits
- Trial rates are projected based on PMT data
Second plan to be developed for the launching of Sun Chips is to add larger package size.
They can develop 4 package sizes of 2¼, 7, 11 and 15oz. A fourth, larger package could
add about one-half ounce to the average annual purchase amount per repeat (and
repeater) purchase occasion. However, there are some pros and cons to be considered
when add larger package size
1. Pros
- Increases volume and profits
- Additional purchase options
- Once product has foothold in market
- Consumer survey indicates demand for larger size
2. Cons
- Stretches production capacity
- Increases inventory
- Increases number of SKU‟s
- Limits marketing efforts
Third plan to be considered is to add new cheddar flavor (mild cheddar). Flavor
extension could increase the „repeats per repeater‟ to an average of 3.5 times per year. In
addition, of another flavor could increase the cannibalization rate to 35%. Frito-lay also
can introduce new two flavors, which are Natural and French Onion.
1. Pros
- More consumer options
- Increase sales and profits
- Increase “repeats per repeater”
- Perfect large scale production of new flavors
2. Cons
- Increases number of SKU‟s
- Expensive to produce
- Higher cannibalization rates
- May not be popular with consumers
- Large scale production not perfected
Competitive Positioning
PepsiCo‟s Frito-Lay division focuses on product innovation to differentiate its snack
foods from those of other producers in the market. Premium products such as Frito-Lay
Doritos, Cheetos, and Sun Chips demonstrate this differentiation strategy. These
products are comparatively high-priced, offering more than just a typical salty snack.
This strategy effectively creates a competitive advantage, increasing the consumer‟s
willingness-to-pay while maintaining or decreasing costs.
In order to increase the consumer‟s willingness-to-pay, Frito-Lay focuses on adding
product value through product innovation. For example, to find the perfect “chipping”
potato Frito-Lay develops “thousands of proprietary potato seed varieties not available to
other manufacturers.”i Frito-Lay has also patented a process that intensifies flavoring by
coating both sides of its potato chips. Both of these examples show efforts to
differentiate potato chips (an unlikely candidate) in order to increase prices.
While Frito-Lay works to differentiate its products by adding value, it also is involved in
aggressive cost cutting measures. Investments in improved distribution channels, such as
through the merger with Quaker Oats, will reduce lead times and inventory carrying
costs. Maintaining or lowering product costs allows PepsiCo/Frito-Lay to further gain a
competitive advantage and increase operating profits.
Competitors in the salty snack foods industry use a variety of positioning strategies.
Proctor and Gamble, Frito-Lays largest competitor, uses a similar differentiation strategy
to position its Pringles potato chip line. The innovative Pringles round cylinder
packaging adds customer value by improving quality (less broken chips) and increasing
product awareness (branding). Alternatively, generic chip producers pursue a low cost
position. These generic products come in plain packaging and are sold at a discount. In
these companies, competitive advantage will be gained through the efficient operation of
their production and distribution facilities
Step 6: Evaluate the decision and the decision process.
Frito-Lay has to explore additional markets (International) to grab more variety of clients.
The recommendation to increase the expenditure for advertising and merchandising will
help to create brand awareness. Frito-Lay considers timing and competitive the big
strategic issues so that quick decisions, operational efficiency and high capital investment
are critical for Sun-Chips™ Multigrain snacks to take advantage of first markets. Frito-
Lay introduces two package sizes with distinctive package design for each flavor. It
does not charge a premium price in order to be consistent with consumer reference prices
for snack chips. The primary target of Sun-Chips™ is people between the ages of 18
and 34 because they represent the principal purchasers and heavy users of snack chips.
The secondary target is people who bracket to 49 years old. Sun-Chips™ will be
supported by television advertising so that people will aware about this product.
Introduction of Sun Chips Multigrain Snacks in other states of America would expand the
product distribution channel and cater more customers which would lead to greater
market share instead of take more time doing test market.
QUESTION 2
Test market is critical prior to new product introduction versus consumer research
and launching. Discuss.
New product development (NPD) can initiate from new technology or new market
opportunities. But irrespective of where opportunities initiate, when it comes to
successful new products it is the consumer who is the ultimate judge. So, in order to
develop successful new products, companies should gain a deep understanding of their
consumer. Consumer research can be taken during each of the basic phases of the NPD
process: (1) opportunity identification, (2) development, (3) testing, and (4) launch. It is
most widely applied during the development, testing and launch stages. Companies use
consumer research to verify that consumers will accept a new product when it will be
launched at the market. Successful NPD strongly depends on the quality of the
opportunity identification stage. The goal of this phase is to search for new areas of
opportunities, which typically involve the unmet needs and wants of consumers.
Consumer research is often considered difficult during this stage because it is unsure
what to ask consumers at this point. Consumer research, however, helps to increase the
probability of success in the market. Even though consumers may not always be able to
state their wants, it is important to understand how they recognize products, how their
needs are shaped and influenced and how they make product choices based on them. In
this way, it helps to avoid working on a new product that has a low probability of success
in the first instance. Additionally, it guards against potential winning product concepts
being overlooked. As a result, carrying out consumer research in this stage is inexpensive
compared to the risk of product failure. Moreover, gathering consumer understanding
with the help of formal consumer research methods has the advantage that the results can
more easily be disseminated across departments in an organization.
Fig. 1 shows the four typical major stages in NPD along with representative consumer
research methods. Since this review is focusing on the opportunity identification stage,
only examples of methods are being listed under the other phases. Unfortunately, despite
the large number of available methods and techniques to be used in the NPD process, the
majority of them are not used by companies or mostly applied in an ad-hoc manner.
Large parts of the conducted research in NPD consist of focus groups, surveys and the
study of demographic data. This is considered to be one of the reasons for the relatively
low new product success rates.
A test market, in the field of business and marketing, is a geographic region or
demographic group used to gauge the viability of a product or service in the mass market
prior to a wide scale roll-out. The criteria used to judge the acceptability of a test market
region or group include a population that is demographically similar to the proposed
target market and relative isolation from densely populated media markets so that
advertising to the test audience can be efficient and economical. The test market ideally
aims to duplicate 'everything' - promotion and distribution as well as 'product' - on a
smaller scale. The technique replicates, typically in one area, what is planned to occur in
a national launch; and the results are very carefully monitored, so that they can be
extrapolated to projected national results. The simple go or no-go decision, together with
the related reduction of risk, is normally the main justification for the expense of test
markets. At the same time, however, such test markets can be used to test specific
elements of a new product's marketing mix possibly the version of the product itself, the
promotional message and media spend, the distribution channels and the price. In this
case, several `matched' test markets (usually small ones) may be used, each testing
different marketing mixes. Clearly, all test markets provide additional information in
advance of a launch and may ensure that launch is successful, it is reported that, even at
such a late stage, half the products entering test markets do not justify a subsequent
national launch. However, all test markets do suffer from a number of disadvantages:
1. Replicability - Even the largest test market is not totally representative of the
national market, and the smaller ones may introduce gross distortions. Test market results
therefore have to be treated with reservations, in exactly the same way as other market
research.
2. Effectiveness - In many cases the major part of the investment has already been
made (in development and in plant, for example) before the `product' is ready to be test
marketed. Therefore, the reduction in risk may be minimal; and not worth the delays
involved. 'Competitor warning'. All test markets give competitors advance warning of
your intentions, and the time to react. They may even be able to go national with their
own product before your own test is complete. They may also interfere with your test, by
changing their promotional activities (usually by massively increasing them) to the extent
that your results are meaningless.
3. Cost- Although the main objective of test markets is to reduce the amount of
investment put at risk, they may still involve significant costs.
One form of `new product launch' which is little discussed, but is probably the most
prevalent - and hence most important - of all, is that of replacement of one product by a
new one; usually an `improved' version. The risk levels may be much reduced, since
there is an existing user base to underwrite sales (as long as the new product doesn't
alienate them - as `New Coca-Cola' did in the US and `New Persil' did in the UK). Such
an introduction will be complicated by the fact that, at least for some time, there will be
two forms of the product in the pipeline. Some firms may opt for a straight cut-over; one
day the old product will be coming off the production line, and the next day the new
product. Most will favor parallel running for a period of time, even if only because this is
forced upon them by their distribution chains. This ensures that the new really does,
eventually, replace the old; and it may reveal that both can run together. The considerable
amounts of time and resources necessary to conduct test markets restrict the amount of
test markets which can be conducted by companies. The risk to reveal a new product
design too early is another concern for companies in fast moving and highly competitive
markets, which is independent from any cost & time considerations.
But irrespective of where opportunities originate, when it comes to successful new
products it is the consumer who is the ultimate judge. So, in order to develop successful
new products, companies should gain a deep understanding of 'the voice of the consumer.
Consumer research is often considered difficult during this stage because it is unsure
what to ask consumers at this point. An often-heard argument is that asking consumers
what they want is useless, because they do not know what they want. Consumer research,
however, helps to raise the odds of success in the market. Even though consumers may
not always be able to express their wants, it is important to understand how they perceive
products, how their needs are shaped and influenced and how they make product choices
based on them. In this way, it helps to avoid working on a new product that has a low
probability of success in the first instance. Additionally, it guards against potential
winning product concepts being overlooked. As a result, carrying out consumer research
in this stage is inexpensive compared to the risk of product failure. Moreover, gathering
consumer understanding with the help of formal consumer research methods has the
advantage that the results can more easily be disseminated across departments in an
organization. Knowledge obtained through formal methods is generally used to a greater
extent, most likely through its verifiability and credibility.
QUESTION 3
Cannibalism effect for Sun Chips TM and calculate the effect based on incremental
Gross Profit effect.
Cannibalization refers to a reduction in the sales volume, sales revenue, or market share
of one product as a result of the introduction of a new product by the same producer. In
the world of business, there is such thing as inside product competition. This aptly refers
to cannibalism in that two offerings from the same manufacturer would compete head on
for revenue, being similar in function, market and other attributes. Cannibalism is
common among conglomerates and empires that produce several brands under the same
line. To address cannibalism, though, a company must carefully plan out the marketing of
its product or service. If it offers two similar products, it must make sure that each one
has a specific and unique market segment to serve. The entire market can be divided into
different categories: upscale, middle and downscale market; kids and adults; men and
women; young boys and young girls; east and west; etc. The company needs to carefully
examine its offerings regularly, making sure there is no cannibalism whatsoever. Effect
of cannibalism made Sun Chips Multigrain Snack sales rapidly increase in a short period
of time. Based on the result, 30 percent of Sun Chips Multigrain Snack pound volume
comes from consumer switching from Frito-Lay‟s potato, tortilla and corn snack chips.
And one-third of the cannibalized volume from Frito-Lay‟s products came from Doritos
brand tortilla chips. Because of that, the gross profit for Sun Chips Multigrain is higher
than other snacks chips. Below show the calculation based on incremental Gross Profit
effect. The independent research firm also identified the incidence of product
cannibalization. The research firm‟s tracking data indicated that 30 percent of Sun Chips
Multigrain Snack pound volume resulted from consumers switching from Frito-Lay‟s
potato, tortilla, and corn snack chips.
About one third of the cannibalized volume from Frito-Lay‟s products came from Doritos
brand tortilla chips. The 30 percent cannibalism rate was not uncommon in new product
introductions in the snack food industry. For example, when Frito-Lay introduced
O‟Grady‟s brand potato chips, one third of its pound volume came from its Ruffles brand
and Lay‟s brand potato chips. Even though cannibalization was an issue to be considered
in evaluating test market performance; Frito-Lay executives noted that the gross profit for
Sun Chips Multigrain Snacks was higher than for its other snack chips.
INDUSTRY ANALYSIS
VOLUME CALCULATION
Purchase Amount Volume Calculation Total Ounces
Trial Volume
(6 oz)
19.9% x 90,000,000 x 6oz
107,460,000
Repeat Volume
(13 oz)
41.8% x (19.9% x
90,000,000) x 13oz
97,322,940
Repeater Volume
(13 oz)
3.0rep x (41.8% x (19.9% x
90,000,000)) x 13oz
291,968,820
Total Volume (oz)
Total Volume (lbs)
496,751,760
31,046,985
SELLING PRICE CALCULATION
Product Size
Selling Price
Price Per
Ounce
% of Purchases
Average Price
Per Ounce
2.25 oz
$0.385
0.1711 $/oz
15%
15% x
0.1711$/oz
=0.0257 $/oz
7 oz
$1.240
0.1771 $/oz
47%
47% x
0.1771$/oz
=0.0832 $/oz
11 oz
$1.732
0.1575 $/oz
38%
38% x
0.1575$/oz
=0.0599 $/oz
Average
Price$/oz
Average Price
$/lb
0.1688
2.7004
Similar calculation yields Average Retail Price = 3.8726 $/lb
Projected Sales & Gross Profit
Total Volume = 31,046,985 lbs
Average Selling Price = 2.7004 $/lb
Projected Sales = $83,839,278
Projected Retail Sales = $120,231,344
Gross Profit = 1.30 $/lb x 31,046,985 lbs
Gross Profit = $40,361,081
Cannibalization Analysis
Gross Margin Sun Chips = 1.30 $/lb
Gross Margin Others = 1.05 $/lb
Cannibalization = 30%
Cannibalization Volume = 30% x 31,046,985 lbs
= 9,314,096 lbs
Profit Increase = (1.30 $/lb - 1.05 $/lb) x 9,314,096 lbs
= $2,328,524
Incremental Profit Analysis
Sun Chips Incremental Volume = 70% x 31,046,985 lbs
= 21,732,890 lbs
Incremental Profit = 1.30 $/lb x 21,732,890 lbs
= $28,252,756
Cannibalization Profit = $2,328,524
1st Year Profit = $30,581,280*
*not including Advertising & Merchandising spending
Sustained Sales & Profit
Repeater Volume = 18,248,051 lbs
Average Price = 2.7004 $/lb (3.87 $/lb Retail)
Sustained Sales = $49,277,037 ($70,666,692 Retail)
Sustained Gross Profit = $23,722,467
Sustained Profit Increase with 30% Cannibalization =
(70% x 18,248,051 lbs x $1.30) + (30% x 18,248,051 lbs x $.25)
= $17,974,330*
*not including Advertising and Merchandising spending
QUESTION 4
Analyze the Snack Industry using the Porters Five forces model.
Michael Porter provided a framework that models an industry as being influenced by five
forces. The strategic business manager seeking to develop an edge over rival firms can
use this model to better understand the industry context in which the firm operates.
a) The threat of the entry of new competitors
The snack industries main threats is on the its brand identity. There need to be well
known through advertisement. Next is access to distribution channels. The snack
products need to supply easily and in large supermarket. Capital requirements can be a
threat of the snack industries because to market the snack need cost for advertisement and
marketing expenses.
b) The intensity of competitive rivalry
For most industries, the intensity of competitive rivalry is the major determinant of the
competitiveness of the industry. Competitive rivalry is likely to be based on dimensions
such as price, quality, and innovation. The snack industries growth rapidly and generate a
huge profits. The brand identity of the products must merge with current customers
needs.
c) The threat of substitute products or services
The existence of products outside of the realm of the common product boundaries
increases the propensity of customers to switch to alternatives. Buyer inclination to
substitute product. Customers maybe switch to eat snack as light food to fast food. Some
of the snack products need to switch their products lines to compete with other products.
The cost for switching the product lines can be a biggest threat to the industries. The
switching may need new advertisement or branding cost and also the product research
and development.
d) The bargaining power of customers (buyers)
The bargaining power of customers is also described as the market of outputs, the ability
of customers to put the firm under pressure, which also affects the customer's sensitivity
to price changes. The buyer volume play an important roles in determine profits to the
company. So products in snack industries need to compete in price and product identity.
Product differentiation will resulting the success of the company.
e) The bargaining power of suppliers
The bargaining power of suppliers is also described as the market of inputs. Suppliers of
raw materials, components, labor, and services to the firm can be a source of power over
the firm when there are few substitutes. In the snack industries, the most important is to
get the supplier concentration so that they will always to get our products. The volume of
products supply to the supplier should high and consistency to ensure consistent profits.
QUESTION 5
How would you answer the criticism that it is impossible to plan given how fast
today’s market condition are changing?
With competition arising from diverse and unexpected sources enterprises can no longer
be confident about their market shares: they must constantly innovate to compete. In this
new business environment the following key drivers have been gaining in importance: a
focus on improving the productivity of knowledge and service workers (rather than
industrial productivity), with productivity programmes shifting from culling costs to
improving organizational performance and effectiveness; a focus on quality in both
products and service, with quality programmes moving from manufacturing operations to
knowledge and service operations and firms building a corporate culture around quality
the challenge of responsiveness, with a rising need to react rapidly to changing market
conditions, competition and customer demands; the globalization of markets, operations
and competition; an interest in out-sourcing certain aspects of production, distribution,
sales service and support functions, resulting in a shift of enterprise focus to vertical and
horizontal integration across organizations; partnering, to function on global markets by
establishing alliances and joint ventures with other key players in both similar and
disparate markets and greater attention to social and environmental responsibility.
Overall, the trend suggests that the changing market conditions now require firms to meet
more refined and personalized customer tastes, as well as society's collective needs, as
expressed through a wide range of democratic and associative mechanisms. Interaction
between producers and these more demanding and better informed customers is an
essential factor for growth and competitiveness.
A marketing plan is a written document that details the necessary actions to achieve one
or more marketing objectives. It can be for a product or service, a brand, or a product
line. Marketing plans cover between one and five years. A marketing plan may be part of
an overall business plan. Solid marketing strategy is the foundation of a well-written
marketing plan. While a marketing plan contains a list of actions, a marketing plan
without a sound strategic foundation is of little use. A formal, written marketing plan is
essential in that it provides an unambiguous reference point for activities throughout the
planning period. However, perhaps the most important benefit of these plans is the
planning process itself. This typically offers a unique opportunity, a forum, for
information-rich and productively focused discussions between the various managers
involved. The plan, together with the associated discussions, then provides an agreed
context for their subsequent management activities, even for those not described in the
plan itself. Additionally, marketing plans are included in business plans, offering data
showing investors how the company will grow and most importantly, how they will get a
return on investment. In particular, we focus attention on the importance of marketing
planning with special attention given to the role marketing strategy plays in the planning
process. For marketers planning is an essential task that must be continually undertaken.
As we will see, shifting market conditions, including changing customer needs and
competitive threats, almost always insure that what worked in the past will not work in
the future, thus requiring revisions in how a product is marketed. Marketing planning is
also important since it is often a prerequisite for obtaining funding whether one is a
marketer in a large corporation seeking additional money for his or her department or is
part of a small startup company looking for initial funding. Like a business plan, a
marketing plan is an important document that needs to be updated on a regular basis.
Even five year marketing plans should be revisited periodically - at least once each year -
to address changes in market conditions, demand, pricing issues, etc.