Market Analysis and Strategy for New Products
Define the term mass market.
A market for goods that are produced in very large quantities. Because of economies of scale, products sold in mass markets are less expensive than goods produced for niche or highly specialized markets.
Construct a forecasted profit and loss account for the production of PP’s new pie (show all your working).
Explain one disadvantage for PP of selling older non-current assets to finance the production of the new pie.
1- Selling assets to finance the new pie will reduce PP’s productive capacity. Even though sales of their more expensive pies have fallen, PP will still have to produce a forecasted 42,000 new pies. 2- PP sell the highest quality luxury pies. Reducing productive capacity may impact on PP’s ability to continue to sell the highest quality pies.
Define the term brand awareness.
Brand awareness refers to the degree to which consumers recognize a product by its name and/or special characteristics. This recognition could be due to a specific logo or trademark associated with the brand.
(LOS CALCULOS ESTAN EN LA ANTERIOR HOJA DESPUES DE LA DEFIMICION DE BRAM AWARENSS)
Calculate the margin of safety (show all your working).
Margin of safety = 88,000 watches – BE point (50,000) watches = 38,000 watches.
Explain one advantage for SF of introducing the new watch.
The new watch will create a new market opportunity for SF at a time of falling sales due to growing online competition. This market opportunity could lead to a new positioning of SF’s watches in a higher price bracket and increased sales.
The new watch will allow SF to use up some of its spare capacity, as the current margin of safety is 38,000 watches, and possibly in the future allow the new watch to be produced at lower cost, thus reducing its high retail price.
Describe ONE feature of batch production.
- Involves production of a group of identical products. Products are made as specified groups or amounts within a given time frame.
- Customers are offered customized products but using a range of standardized options.
- This method of production requires careful planning, as the components for the products need to be interchangeable.
Describe how the mean sales of pairs of shoes per month for FS could have been calculated.
The mean sales per month could have been calculated by adding together the total sales for the year and dividing by 12.
On the graph, plot the mean sales of pairs of shoes per year since 2014 (show your labeling clearly).
On the graph you plotted in (b)(ii), construct a line of best fit through the mean sales data
On the graph you constructed in (b)(iii), draw (extrapolate) a value for mean sales in 2022 and 2023 from the line of best fit.
From the graph, the extrapolated value of mean sales for 2022 is 11.7, or 1170 shoes, while for 2023 it is 13.3, or 1330 shoes.
Explain one diseconomy of scale that FS could experience
A possible diseconomy of scale occurs when the unit costs of production increase over the long run. Sales at FS are growing at a dramatic rate and, with a small number of managers and limited workspace, coordination and communication challenges may lead to rising unit costs as the scale and sale of production of shoes increases.
Ocurrirá si la empresa crece más allá de su capacidad para operar eficientemente. Esto hace que los costos promedio de producción de la empresa aumenten debido a problemas como falta de comunicación, malentendidos y una gestión deficiente (ineficiente) de los recursos.
Describe one feature of a supply chain(SOLO UNA)
- A supply chain illustrates the full production process of a product from the extraction of raw materials through manufacturing and eventually to distribution so that it reaches the end user. Parts of a supply chain could include extraction to manufacturing. It is possible to outsource parts of the supply chain process to a third party.
- Encompasses all the stages required for the production of a product or the provision of a service—from its conception to delivery. Efficiently managing inventory is crucial. This involves maintaining optimal stock levels, minimizing excess inventory, and ensuring timely replenishment.
Explain one advantage and one disadvantage for CD of using a premium pricing method for the new ethical chocolate bar.
- Advantages(ELEGIR SOLO UNA)
- An ethical bar will be a new venture for CD. The stimulus indicates the possibility for a first mover advantage as there are no existing competitors. A premium pricing method under these circumstances could allow CD to earn significant profits.
- IF consumers are influenced by ethical and environmental considerations in their purchasing habits then a premium pricing method (with some of the profits being used to ensure sustainability of the crops) can be justified and could lead to brand loyalty.
- CD could become a price leader and influence the prices of its other bars and positively impact on positioning.
- Disadvantages (SOLO UNA)
- However, given that CD’s current chocolate bar range is priced considerably lower, a premium pricing method could discourage existing customers as the marketing mix for the new bar is different. Overall sales volumes of CD’s bars may fall.
- The premium price method will impact negatively on the positioning of CD and may cannibalize the sales of its existing bars in its portfolio.
- A premium pricing method will require an extension of promotional campaigns both below and above the line to convince existing and potential customers that the additional mark-up in price is appropriate and justified given the ethical and environmental opportunities.
Comment on the market research results in Table 4.
The results indicate that country X has the highest number of respondents who would try or possibly try the new ethical chocolate bar at 92% and the lowest negative response at 8%
Country Y has a high level of response rate at 80% for both try and possibly try but has the highest response rate of those who would not try the ethical chocolate bar at 20%
Country Z has a low negative response (10%) and a high positive result (90% for those who would try or possibly try). These results are close to that of country X. The market research strongly supports launching in country X and Z
Explain one benefit for CD of collecting market research using random sampling.
Random sampling is an unbiased method of market research because respondents are equally likely to be chosen in the research process. CD will obtain unbiased responses regarding their new brand. These customer responses to their new chocolate bar will help CD with more realistic future sales, cash flow and profit projections.
Using the data provided in Table 4 and Table 5, and other information in the stimulus, recommend which target country CD should launch its new ethical chocolate bar in.
CD have three target countries and will be using a combination of market research and information from an economics consultancy. Both agencies provided forecasts and, with the launch of the chocolate bar being a new venture for CD, all decisions on which country in which to launch the new chocolate bar must be taken in this context. Country X seems a strong candidate. Market research indicating that 60% of respondents would try this new bar is the most favorable.
The economy seems stable, but the probability of success based on the experience of other companies is the lowest. The STEEPLE analysis suggests that launching this product into country X will be met by a favorable attitude to the business. Country Y has a stable economy but with no clear trend in the STEEPLE and limited technology; it must therefore be viewed as a less favorable proposition. The market research for country Y is also less favorable than for country X: country Y has the highest rate of respondents who would not try the new product.
Country Z clearly represents the biggest challenge and potential opportunity for CD. Market research is not conclusive, and the STEEPLE raises concerns for the future. Information is lacking about the impact of the declining economy in the short term. Basing a judgment on these forecasts alone is not sufficient, and more information would be required around the cultural preferences/barriers, consumer confidence and the inevitable reaction by competitors.
This is a new chocolate ethical bar and it is expected that competitors will analyze CD’s success before making a decision, but competition is likely. The probability of success for the chocolate bar also has to be treated with a note of caution. Country X seems the safest bet, with country Z a close second. The company’s attitude to risk will be important in determining the final decision.