ASU MKT 425 Country Manager Quiz

What are the countries available to enter?

-Argentina -Brazil -Chile -Colombia -Mexico -Peru -Venezuela *page 5 of case

Resources to help you determine segments

-existing sales by competitors to vrious segments (competition > brand formulation > country) -underlying deman from varios segements (consumers > decision criteria > demographics/cross section > each benefit section)

Demographics

-families -younger -older

Allstar brand

-formed in 1924 -multi-national consumer products company -sells ethical pharmaceuticals, OTC drugs and consumer products -divisions: ethical drugs, consumer healthcare and consumer products -each division has a group of category managers -13% of world toothpaste market

Distribution channel: hypermarkets

-found primarily in cities -large stores with a wide variety of goods -purchase items directly from the manufacturer (direct distribution) -more apt to focus on allowance and turnover -ex. Wal-Mart

Allowance decision

-higher the number the more you spend on making a promotion (lower profits) -low number can case small sales -want it between 11-20

How is sales leader determined?

-highest sales relative to competition in each benefit category -this meaure takes time

Advertising

-important is establishing brand awareness -messages are targeted in terms of benefits and demographics -message development and media purchases (higher)

Consumer promotion

-includes free trail size, coupons, etc. -enter a promotion budget and allocate it across the distribution channel

Allsmile

-key asset of Allstar brand -produced in the U.S., Germany and Australia -21 SKUs available (48 with pump)

Sources of production costs

-manufacturing costs (dependent on plant location/volume) -international shipping costs (based on plant location and market served) -import taxes and duties in certain cross-border situations

Pros/cons of producing at home

Pros: -offers reliable productive capacity -historically stable currency Cons: -unit costs are likely to be higher in the future -tariff and shipping considerations *these create a higher cost than local production

What happens when you over or underspend?

overspending hurts financial performance and underspending leads to a lower BEI

What are the objectives of the simulation?

profitability, awareness, distribution coverage, market share, BEI

Country Contribution Report

provides the same information for the individual countries you have entered

Net Contribution Report

shows overall profit and loss for the region

Sales Report

shows the sales by channel to help you evaluate the results of your distribution decisions

Budget Report

summarizes the spending on salesforce, promotion, and advertising

COGS (Cost of Goods Sold)

units x transfer price *parent firm charges a transfer price for products that are purchased by the subsidiary

How is consolidated brand equity measured?

weighted average BEI for each market, weights are based on country industry sales

Co-op advertising

money made available to the channel to feature the manufacture's brand in the channel's advertising

Who are the competitors?

-Britesmile -Bancav -Clean & White -Caregate -Dentacare -Eversmile -Local brands -Regional brands

What are the decisions for products?

-SKU selection -MSRP -Allowances (0-20%)

Modes of transportation

-U.S. to Latin America: container ship embarking from Miami -Mexico to South American market: container shipment embarking from Cancun -close regions: trucks

How is price position determined?

-are SKUs appropriately priced based on consumer expectations -must have 4 SKUs for calculation

Brand Equity Index (BEI)

-benefit positioning (target: 90-100) -creative execution (target: 90-100) -price positioning (target: 90-100) -sales leadership (target: over 50) -share of mind (target: over 50) divided by 5 = 74

What are the decisions in distribution?

-channel selection (consumer > shopping habits) -sales force allocation -promotion (budget and allocation)

Things to consider when pricing

-consumer expectations of reasonable price -consumers expect price consistency -inflation (after period one)

Resources for determining advertising

-consumers: brands purchased -competition: advertising

Resources to help you determine distribution

-consumers: shopping habits -environment: distribution -competition: retail sales, promotion, sales force, and distribution coverage

What are the decisions for advertising?

-create campaigns -set budgets

Trade promotion

-directed at wholesalers and retailers -includes slotting allowances and co-op advertising -enter a promotion budget and allocate it across the distribution channel

How is each market segmented?

-economy (basic cavity protection at a low price) -healthy (tartar control and disease prevention for healthy teeth) -white (seeks whiter teeth) -kids (seeks a good tasting product that appeals to children)

Toothpast formulation

-economy (original fluoride formula) -healthy (fluoride plus hydorgen peroxide) -white (fluoride plus abrasive material) -kids (fluoride plus special flavoring)

Slotting allowance

-ensures shelf space through discount from MSRP -affect gross margin -entered for each SKU

Resources for determining the plant

-environment: cost structure and tariffs and shipping -company: production cost -decision analysis: SKU forecast

Resources for determining production

-environment: cost structure, tariffs and shipping -company: SKU contribution and production costs

Distribution channel: home delivery

-more common in Latin America than U.S. -once more of population has access to Internet this would allow for a website-based channel of distribution

Distribution channel: self-serve

-more developed store where customers help themselves -offer a narrow line of merchandise -independent or part of a regional chain -almost all are locally owned -more apt to focus on sales force support -ex. convenience stores and grocery stores

Latin America

-population of over 500 million (50% larger than the U.S. and Canada combined) -traditionally served by local and regional companies -region has a history of political instability -many weak economies -low growth, high inflation and a reluctance to take economic actions to correct these problem

Sales Force

-primary contact with the distribution channel -direct sales force: responsible for developing new retail accounts and maintaining existing accounts indirect sales force: selling to distributors and retail support -each salesperson works in one channel within a country -cost for hiring and firing salesperson

Environment reports

-provide information about business conditions in the regions -survery results are available on consumer shopping habits and important factors in the brand purchasign decision -ex. economic outlook, costs, toothpaste retail sales, etc.

Distribution channel: whole sale

-retailers buy from wholesalers rather than direct from the manufacturer -serve smaller, independent retailers -potentially could reach any retailer who buys product indirect -most influenced by product turnover, allowances and promotions

Shipping costs

-size (weight/volume), distance and mode of shipment affect this -no import duties of tariffs within regional trading blocs

Toothpast packaging and formulation variations (SKUs)

-sizes: small (25g), medium (75g) and large (150g) -delivery systems: tube and pump (pump in future) -texture: paste and gel -benefit: economy, white, healthy, kids

Distribution channel: traditional

-small independent stores -or open market areas served by wholesalers (indirect distribution) -more apt to focus on sales force support

What are the decisions for production?

-source of production (default is the home plant) -can chose to build a local plant

Pricing

-suggested retail price (MSRP) -most consider production costs adn market conditions -manufacturers offer volume discounts (whole- 30%, hyper- 25%, internet- 25%, self-20%, tradition-15%) -need to consider segment being targeted (so you know price sensitivity, competition and their costs)

Building a plant locally

-takes one year to complete -requires one-time upfront costs (design and construction) -capacity costs are ~$1 million for each 1 million units -can increase capacity by up to 100 million units per period -costs depreciate over a 10-year period (annual charges of ~$100,000 per million units of annual production) -doesn't need to be where you are selling Allsmile

Resources for determining products

-the case -competition: brand formulations -decisions: SKUs and Pricing to estimate unit costs -competition: pricing for MSRPs and allowance

Distribution channels

-traditional -self-serve (more developed stores customers help themselves) -hypermarket -home delivery -wholesale

What are the decisions for plant?

-where to build it -capacity

World toothpaste market

-world sales are ~$20 billion -U.S. sales were $3.4 billion last year

When does Kay believe she should turn a profit? Recoup early investments?

5 years, 10 years

What is the name of your brand?

Allstar brands: makes Allsmile (toothpaste brand)

CIF

COGS + Insurance + Freight

How is performance evaluated?

Brand equity index and cumulative net contribution *for individual its country specific and adjusted for country size

Pros/Cons of selling direct to retailers

Pros: -gains in monitoring -control of merchandising -positioning and brand image -contribution margin is less spread across firms Cons: -more costly if there are many retailers to work with -moves manufacturer into a non-core business

Pros/cons of producing locally

Pros: -lowers unit manufacturing costs -experience effects reduce costs 6-10% with each doubling of cumulative production Cons: -inflation and exchange rates effect manufacturing costs

Pros/Cons of selling indirect via wholesalers

Pros: -useful in rural countries, typical if there are many small retailers Cons: -manufacturer is more removed, -uncertain amounts of support of retailers -loss of control

What do you need to do?

determine: -target market and positioning strategies -products to launch -production location -channels of distribution -pricing -advertising -promotion

How is creative execution determined?

appropriateness of advertising (based on language, culture, and budget)

Rules of the game

can only produce a single plant in one of the scenario countries

How is overall BEI calculated?

combines consolidated brand equity (weighted more heavily) with product standardization and regional diversification measures

Budget per ad

competition > advertising > consumer > brands

Total sales force size

competition > sales force

How is product standardization measured?

consistency of SKU selection across markets

SKU Contribution Report

helps monitor the profitability of your SKUs and manage your product mix

How is share of mind calculated?

how aware consumers are of your brand, both absolute and relative to competition -this meaure takes time

How is regional diversification measured?

how well sales are distributed over markets in the region

How is benefit positioning determined?

how well you select SKUs based on demand and if customers are appropriately targeted

Usual approach for market entry (SKUs)

introduce just four SKUs and review performance before investing in additional resources

Advertising decision

language/target/message

What information is in the decisions tab?

market entry/exit