User talk:Lucychenye

Marketing Strategy Simulation

Friday 23th, 2008

Author: Lucy Chen

EXECUTIVE SUMMARY:

2 products was developed by firm O in the Sonite market, during the competition, Firm O has lost significant market share in the period 2 and worked very hard to rebuild its market.

New product portfolio with effective advertising allocation by brand and breakdown by segment as well as reasonable sales force’s allocation by brand and distribution by channel that returns a stable growing net contribution and Return on Investment till period 8, SPI keeps stable in flat trend.

Marketing size’s shrinking in the segment of Professionals and Buffs and Hign-earners which led ineffective extra investment in period 9 and 10 with reflecting in ROI’s going down.

With adjusting future plan with cutting down extra expenditure on the focused segment in Sonite market and start new R/D project in Vodite market.

Maintain the Sonite market, develop and occupy the Vodite market is the overall marketing strategy of next 5 periods.

ECONOMIC ANALYSIS

The inflation and GNP growth rate remain the same at 2%( see Appendix 1), under this condition, the production costs, prices, advertising and sales force expenses will remain relatively stable which will be less volatility among the forecast variables which should help on more accurate predictions of targeted sales and expenses for future periods.

MARKET ANALYSIS

The Sonite and Vodite markets are comprised of its respective segments, which have been individually targeted and serviced by the competing firms., both markets are at varing stages of their product lifecycles and have clear segments within the larger markets which are at varying stages of their own lifecycles. As a result of this, individual products have been developed to meet the unique requirements of these segments. Because of this, separate strategies for each product in a companies portfolio mix must be developed for a company to compete successfully within a specific market segment.

The six firms with produce 21 brands compete in the Sonite market, With most segments in the Sonite markets in the maturity and decline phase of the life cycle, in the later periods, most of firms have chosen to enter the Vodite market which shows higher margins and growth potential, both of which translates to higher profit potential.

SONITE MARKET:

As shown in Appendix 2, the Sonite market has experienced consistent growth over the past 10 periods, from a demand of 1,186,000 units in period 1 to 2,855,000 units in period 10. Although there has been substantial growth in this market, but the size of its segment Buffs has been reduced since period 4, while Profs has been reduced from period 7, and Hign-earners showed no growth since period 5. Anyway, with effective marketing strategy after period 2’s sinking, firm O still earned the major market size in the above segments from period 3 to period 10, and its SPI/ROI/Net contribution showed a trend of going up from period 3 to period 8, unfortunately, because of the shrinking of the focused 3 segments, ROI started to drop since period 9.

	BUFF SEGMENT

The Buffs segment is in trend of decline. After having initial demand of 229,000 units, the segment now represents demand half that with 111,000 units. It holds little attraction due to this declining demand despite the segment having little competition and moderate margins. In period 4, Firm O moved one of its brand SOOO to approach BUFFS with decreasing its price only in the case of  that its Power is almost same level as requirement of BUFFS( see Appendix 3) with proper advertising, the movement works very effectively, and in the next series of period, SOOO closely followed the move of  Buffs by still adjusting price and changing its perceptual objectives according to the ideal value trend of Buffs, its market share is ranked in the top since period 4 as shown in Appendix 4

	SINGLES SEGMENT

The singles segment has experienced strong consistent growth since period 1, growing from 161,000 unit in demand to 611,000 units demand in period 10... Despite this competition and relatively low margins, this still remains an attractive market due to its size and position in the life cycle. But unfortunately Firm O had to give up the segment since period 5 as very limited budget.

	PROFESSIONALS

The professional segment has been the most competitive segment in terms of products offered, primarily due to the large margins that can be received. The segment grew substantially in the first 5 periods but in second half 5 periods it has entered the decline stage and represent a much smaller percentage of the total market. Anyway Firm O’s brand SONO was successfully focused on the segment since period 3 till the period 10, and market share in the segment ranked in the top as shown in Appendix 5 by effective advertising and sales force allocation.

	HI EARNERS

Hi Earners experienced significant growth from initial demand of 253,000 units in period 1 to 514,000 units in period 10. It presents high margins, remains an attractive market due to it’s relative market size, although it enters into the maturity phase of the life cycle in the later 5 periods, 5 companies were competing in this segment, Firm O developed a new project PSOHE to aim at the segment, and changed brand SONP’s project with PSOHE to focus on High-Earner segments with effective advertising and sales force allocation as well. The market share showed a significant going up trend from period 4 in the last place to period 9 and 10 in the first place as shown in Appendix 6

	OTHERS

The OTHERS segment presents a relatively low margins, but its demand for this segment has grown significantly from 289,000 units in period 1 to 1,342,000 units in period 10. so for the few of teams who compete in this segment earned a wide of market share which brought very positive impact to their SPI/ROI/Net contribution, unfortunitely Firm O has to give up the segment since period 4 in the case of very limited budget.

VODITES:

Vodite market’s high margin attracted 4 firms enterer into the market, but only only team A and team U demonstrated their success, team I entered into the market in the last period, but also successful with changed their place to the No.3 from No.5 for SPI. Team O had to give up the Vodite market in the period 6 as no enough money to do the very expensive R/D project although  specific project has planned to focus on certain segment.

BRAND ANALYSIS

Team O total had 5 brands, SOLD, SONO, SONP, SOOO after withdraw one brand, their characteristics respectively meet the needs of segments of Others, professionals, Hign-earners and Buffs, but due to limited market capital, Team O had to give up SOLD but focus on SONO, SONP and SOOO to win 3 top level in market share in each of its focused segments

COMPETITOR ANALYSIS

Competitor’s situation is vital to the effectiveness of a firm’s strategy, so before entering into a new market or implementing changes to an existing strategy, a company needs to research the information about competitors which is available from three sources: Company reports, Industry Newsletter, Market Research Studies. By using these three sources, a company can get a general understanding about market conditions which covers all the competitor’s marketing information. A firm’s strategy should be in general consistent but also need to be dynamic for the advertising, sales force, price, segment focusing, channel distribution etc for the purpose of competing with other firms in same industry.

Team A

It is the market leader’s position in both Sonite and Vodite market. 4 Sonite and 2 Vodite products that are well supported on the whole. Although there is no top position in all segments, but their market share in the segments of Buffs, Singles Professionals, High-earners is ranked in the higher level, their success is caused by first period’s success which brought them a high budget from beginning, their strategy kept consistent from period 1 to period 10, most of their products characteristics are close to customer needs and wants and as a result they accurately position the majority of their products, and the product mix is strongly supported through their advertising and sales force mix under the sufficient marketing budget. But however, in the segment of professionals and high-earners, they still behind the firm O although they have almost 2-3 times of budget of firm O... which showed that their effectiveness of strategy is still weaker than its of firm O in the later periods. If not because of team A won in the early periods, they should be very hard to compete with Team O in general…

Team U

Team U has 3 brands in Sonite market, it used same strategy as team A, but they still could not win team A because of lower budget compare to team A from period 2.

They successfully focus on Singles and Others segments which brought them a wide market share as Other segment’s strong growth in market size.

Team I/E/Y

The 3 teams are major competitors of Team O, in the later periods.

Team Y quit the Sonite market, and enter into the Vodite market, but their bad experience in Sonite market still be applied in Vodite market which brought them bad results. It actually was not a competitor of firm O in strategy

Team E figured out the right strategy and it started to work effectively since period 5, but due to their limited budget which constrain their strategy’s implementation in the later periods.

Team I is a team with no consistent right strategy, but their last action with Vodite products launching made effective which brought them a better results, but this could not indicate that their strategy is right with only one period’s success.

HOW TO MAKE EFFECTIVE DECISIONS

- Sales force allocation

The Sales force allocation is based on the brand’s sales target in value to allocate by brand, the channel distribution is based on shopping habits. The figure 5 is shown as below for the spreadsheet for how to allocate the sales people.

-Advertising breakdown

Advertising allocation by brand is based on the planned sales target for each brand, and further breakdown by segment is based on the analysis of effectiveness of advertising on market share in the early periods, base on this self-developed analysize tool, some strong and weak segments gradually separated which helped to find the strong segments and further take action to strengthen those segments and give up those weak segments.

- Production Level

Production level requirement is based on the marketing plan, so accurate marketing plan will bring no inventory either no losing sales…

- Price

The price of each brand is closely followed the perceptual ideal value of each segment for each period with its correspond Sematic Scales definition since period 3 which works very effective

- R/D

R/D project with its new characteristics should precisely position at the needs and wants of segment which will be focused in a specific period which plan to launch.

FUTURE STRATEGIES

Cut the extra expenditure from some segment which is in shrinking in Sonite market

Develop R/D project for Vodite

Continue to maintain the Sonite marketing, develop and occupy the VODITE marketing in the next 5 periods.

SUGGESTIONS

Would be better to have a trail run for each firm before official run the simulation as first period is very important

More cycles5/24/2008 instead of one cycle only which would be more objective for the teams’ performance.

Loan’s approval should be formulated by evaluating its ROI instead of subjective approval…

APPENDIX 1

Annual Growth and Inflation

APPENDIX 2 APPENDIX 3

APPENDIX 4

APPENDIX 5

APPENDIX 6

Case Study for Global Wine War - Lucy Chen
'''

French Wine – Dominant Competitor
''' French Wine is produced in several regions throughout France, on over 800,000 hectares (over 2 million acres) of vineyards, and in a typical year between 50 and 60 million hectolitres of wine is produced, or some 7 to 8 billion bottles. France thus has the world's second-largest total vineyard surface (behind Spain) and competes with Italy for the position of having the world's largest wine production. The earliest history of French wine goes back to the 6th century BC, and many of France's regions count their wine-making history to Roman times. Over the last several hundred years, France has been the most influential country in the wine world: France is the source of more well-known grape varieties and winemaking practices than any other countries, the names of many French wine regions such as Bordeaux, Burgundy and Champagne are well-known throughout the world, and the style of top French wines have long been the benchmark for winemaking in most wine-producing countries of the world. French wine therefore plays an enormously important role in French identity and pride, and the combination of French wine and the equally influential French gastronomy has been an important one.

International Competition – New world and Old world
Bold text

Over the last decades, however, international competition in the wine industry has gotten much more fierce, French wine and some other traditional procedures lost its competitive advantage. - Drink preferences: French domestic consumption of wine has decreased with young generation’s different drinking preferences and old generation’s concern about health issues and strict drunk-driving penalities -	Legislation: As old world wine producers, it is constrained by embedded traditions and practices, restrictive industry regulations and complex national and Europe Community legislation. -	Innovation: Some major changes driven by New world companies occurred in innovated packaging and marketing, product differentiation and distribution had been brought a competitive disadvantage to France and other traditional wine producers. -	Cost : French wine’s higher cost which brought a much lower winery margin compare to Australia and USA’s -	New technology : Less of technical in French wine and traditional wine industry and marketing advances which had allowed Australians and Americans to succeed by making a good use of new technologies and management in controlling the full value chains and extracting margins in every levels, thus making them- selves fled away from old and backward manufacture way of grape growing, wine making, distribution and marketing all steps being handled by separate entities -	Quality : The surrounding publicity raised public awareness of quality wines from New World sources and undermined the views of those who dismissed innovative approaches to wine making which woke traditional producers up and began taking new challenger seriously, and finally gave confidence to New world producers that they had the quality to compete against the best in global markets. As a result of this competition, though in the world, the % of France ‘s exports still occupied 41% in 2001 which was dropped from 51% of 1989, but in the biggest import wine country UK, France % of export to UK has been significantly dropped to 22% of 2002 from 43% of 1988, while Austrilia % of export to UK has been significantly increased to 22% of 2002 from only 2% of Y1988. also USA has been increased greatly, too. Therefore, The new wine world began to win International respect, an underscore warning was forecasted then that in 2002 France would be overtaken by Australia as a leading wine exporters to UK.

== Recommendations ==

-	To France Wine

1. Move price point to high scale: The reference is made to the report of Exhibit 11, the price point of France wine is mainly on the middle level which occupied over 70%, but naturally speaking, wine is not made only for drinking, by viewing from the angle of evaluation; it is also typical art product, and its brilliant history can be traced back to two thousands years ago, French Wine has the most long history, it should develop the high-scale and classic categories which to meet those requirement of high level banquet or packing off. 2. Cut down cost:  The reference is made to Exhibit 12, all the cost of France wine is higher than its of Australia or USA, so it is necessary to optimize the vineyard’s planting technology so that can cut down the grape cost in long term. Also it is necessary to adopt the new technology in wine industry, so that the efficiency and production capacity can be increased and accordingly production cost can be reduced in general and in long term. 3. Product differentiation: Since some medical reports has shown that the drinking wine is directly linking with some unhealthy facts, so it is suggested to develop new category with reduce the unhealthy ingredient and add some healthy ingredient with good tastes, which may be a way to reverse the situation of France wine. 4. Improve the Brand power: The reference is made to the Exhibit 8, in to top 10 brands in UK market, France wine occupied only 3, and ranked in the no 4, 5 and 10. while US and Australia ranked in the top 3. so it is necessary to improve the brand power by unique inner and outside package and efficient marketing activities.

- To Australia Wine

1. Further develop other export market out of UK, like China, Japan and South Korea and Canada etc which currently is not in the top list of wine import countries but hold a huge potentional  markets, as in the world market, Australia’s export only occupied 6% by 2001 which is still small part compare to 41% of France wine. 2. Integrate some small and middle level wine maker into big wine procedures for the purpose of enhancing the competitive advantage in the world market.

== Summary ==

Global Wine war will be continued and believe its competition will be more fierce, but to bring a total commitment to innovation and invention of wine will be a new history of being’s food quality and life taste.