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Markops Online Simulation

Introduction

222 Third Street Cambridge, MA 02142 Tel: (617) 494-8282 Fax: (617) 494-1421

The Markops Online World

Population : 80,000,000 Currency : Markops Monetary Unit (Symbol = $) Stable GNP growth No inflation No major political, social or economic events anticipated in the near future

1

1

4 companies are in competition in a fictitious FMCGmarket: the “Yumite” market
“Yumites” are a class of edible consumer products comparable to savory snacks, confectionary products or dessert items “Yumite products have existed for several years Now a well-established market, with several strong brands at different price points covering a wide range of needs Consistent solid growth since the introduction of the first Yumite brand Probable continuedgrowth over the next five years

2

4 well-established competing firms are in different starting positions
Varying strengths & weaknesses
R&D Pipeline, Brand portfolio, Target segments, Channels, Finances

Distribution through established distribution channels Slow transition into the new Internet world

CHEWY (Your Firm) Tasty

Savor Whippit

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2

“Yumite” brands are usuallydifferentiated in terms of 4 most important attributes High Rating
(highest achievable)

Four tangible attributes on a 0 (Poor) to 100 (Excellent) scale

100

PERFORMANCE
Main product benefit Appearance Texture Mouthfeel

NUTRITION
Healthful/Quality ingredients No preservatives Lack of artificial coloring No added sugar

WAHOO

CARE

PACKAGING
Quality of packaging AttractivenessEase of use/convenience Serving size

FLAVOR
Taste experience Uniqueness Pleasure Smooth, natural, fresh 0
Low Rating
(minimum acceptable)
4

SAGA

TEENS

Newsletter Attributes of marketed brands
Brand names start with firm’s initial

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3

The unit cost of Yumite brands is set by the production department
The Unit cost increases as attribute levels increase PERFORMANCENUTRITION PACKAGING FLAVOR The Unit cost decreases with cumulative production due to experience effect MILLIONS OF UNITS PRODUCED (CUMULATIVE)
LOWER THAN 10 FROM 10 TO 20 FROM 20 TO 40 GREATER THAN 40 BASE UNIT COST E.G. $ 5.65 FOR BRAND “CENTO”

RESULTING UNIT COST
C : BASE UNIT COST C x 0.85 C x 0.85 x 0.85 = C x 0.72 C x 0.85 x 0.85 x 0.85 = C x 0.61
6

R&D Report Formula’s attributes andestimated unit costs
Product attributes

List of “Formulas” developed by R&D

Estimated unit costs for each of the 4 production batches

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4

Five consumer segments of Yumite products vary in age, occupation and family status
HIGH EARNERS SINGLES
Low income 18 – 35 Single, student or employee Heavy users, rather price sensitive High income 25+ Single or married no kids Buy expensiveproducts Motivated by social status

AFFLUENT FAMILIES
High income 25 – 45 Married with kids Frequent buyers of Yumites Buy high quality products

LOW INCOME FAMILIES
Low family income 25 – 45 Married with kids Buy lower quality products Very price sensitive

MEDIUM INCOME FAMILIES
Lower income than Affl. Fam. 25 – 45 Married with kids Buy average quality products Slightly price sensitive8

Over 95% of Yumite products are purchased in traditional distribution channels
SUPERMARKETS
20 chains – 2,000 stores Large % sales from Yumites Broad product line Both cheap and expensive brands

MASS MERCHANDISERS
10 chains – 12,500 stores Food, house wares, personal care products Limited product line Cheaper, lower-quality brands

SPECIALTY CHAIN STORES
15 chains – 6,000 storesSpecialize in Yumites Extensive customer service Focus on expensive, high quality brands

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5

The growth of web-based channels has decreased strongly in the past two years
E-GROCERS
10 web sites Food, house wares, personal care products, … Limited product line Cheaper, lower-quality brands

E- BOUTIQUES
8 sites Specialized in Yumites Focus on expensive, high quality brands

DIVAGO...
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