Question:

CASE STUDY 2: CALEDONIA PLAIN CHOCOLATE

Introduction

In late 1997 the marketing audit conducted by Booker-Greer Limited's confectionary division highlighted a number of weaknesses in their marketing position. The two main weaknesses were:

1.    Their strength in milk chocolate lines was matched by poor performance in plain chocolate. This situation was made more serious because of the growing importance of plain chocolate in the market.

2.    In a number of parts in the UK their market share was significantly worse than in the country as a whole. Among these Scotland stood out as particularly important because of its high per capita chocolate consumption and the unusually high sales of plain chocolate in that area.

Competitive history

Both these factors could be explained in part by a series of decisions made in the past. In the early 1950s the company had been the first major confectionary manufacturer to spot the trend away from toffees and boiled sweets.

For over thirty years the firm had sustained it position as one of the three largest confectionery manufacturers through a small number of major milk chocolate count lines backed by heavy advertising an extensive distribution. These traditional favorites had been supplemented by a number of new product launches. During the late 1980s and early 1990s a very high rate of new brand introduction by themselves and their competitors had occurred. Overall, Booker-Greer had come out of this period worse off than before. Unlike their competitors they had not established a major large-volume count line on the market. (Although the two competitors had established only one new major product each, the long-term contribution of these was likely to be substantiated.)

The current situation

Faced with the ever-escalating cost of introducing a new brand, the new product group embarked on a wide-ranging study of alternative strategies. In the light of the weaknesses in plain chocolate and in Scotland, it was recommended that the firm explore the scope for a brand geared to the specific needs of the Scottish market. It was hoped that this brand would take up some of the spare capacity then existing in the firm's manufacturing plant in Edinburgh. The large vote in favor of Scottish devolution, also, seemed to suggest that a distinct opportunity existed for a Scottish brand.

In the past the firm has always worked very closely with its existing advertising agencies on new product development projects. In this case it was decided that extra insight into the market in Scotland could be achieved through a local Scottish agency. Four Scottish agencies, two based in Glasgow and two in Edinburgh, were asked to compete for the business, as was the Edinburgh office of one of their London agencies.

On the competing agencies Alexander Gooch and Co. stood out as most committed to a distinctly Scottish offering. They were briefed to develop and research a new brand for possible launch in late 1998 or early 1999. Clear volume targets were set, amounting to 25 per cent of plain chocolate count lines (10 per cent total count line sales) in Scotland. This would minimize the impact on current sales of Booker-Greer products while biting into their competitors' market.

A number of names, packs and related advertising themes emerged, notable 'Stuart', 'Saltire', 'Caledonia' and 'Stirling' brand chocolates. These were researched in conjunction with a brand name and proposition, ' Silhouette', that had performed reasonably well in national research studies among both adults and children.

The research indicated considerable interest in the concept of a Scottish brand. The Caledonia brand and campaign (emphasizing Scottish links, made in Scotland etc.) did consistently well, out-performing all other propositions, including Silhouette. Unfortunately, two major problems emerged:

1.    Consumer preferences were for a milk chocolate Scottish brand.

2.    The results, although promising, suggested a market of less than 18 per cent of the plain chocolate market (for the plain brand) and 9 per cent of total chocolate count sales (if a milk chocolate brand was launched).

The results created a major debate within the firm about further actions. The brand group and advertising agency favoured progressing with the launch, initially with the plain brand but with a view to introducing a milk brand later. Both pointed to the overall appeal of the basic concept and suggested that the results might easily be an understatement, given the newness of the proposition. They also pointed to strong nationalistic feeling in Scotland, and the brand manager in charge saw increased pressure of greater economic, social and cultural autonomy as a possible platform for long-term strength.

The firm's research department recommended abandonment. In this they were supported by the corporate planning department, who pointed out the harshly reality the offering had failed to meet its targets at a time when national sentiment was high. Also, any milk chocolate derivative would draw much of its sales from their current offering.

After considering these arguments the marketing director decided to abandon this initiative.

Tasks

1.    Examine the thinking which led to this project.

2.    Review its development.

3.    Explore the final argument.

4.    Evaluate the final decision.

You are on the market for a new car. You want to check whether there is a significant difference between the fuel economy of mid-size domestic cars and mid-size import cars. You sample 24 domestic car makes and find an average fuel economy of 30.169 MPG with a standard deviation of 4.9556 MPG. For imports, you sample 14 cars and find an average MPG of 36.638 MPG with a standard deviation of 7.6187. Construct a 90% confidence interval for the difference between the true average fuel economies in question. Assume the difference will represent (domestic - import). You can also assume that the standard deviations are statistically the same between the two populations.

2.

A pharmaceutical company is testing a new drug to increase memorization ability. It takes a sample of individuals and splits them randomly into two groups. After the drug regimen is completed, all members of the study are given a test for memorization ability with higher scores representing a better ability to memorize. Those 20 participants on the drug had an average test score of 28.062 (SD = 4.642) while those 24 participants not on the drug had an average score of 46.056 (SD = 6.934). You use this information to create a 95% confidence interval for the difference in average test score. What is the margin of error? Assume the population standard deviations are equal.

3. A professor at a university wants to estimate the average number of hours of sleep students get during exam week. The professor wants to find a sample mean that is within 1.117 hours of the true average for all college students at the university with 99% confidence. If the professor knows the standard deviation of the sleep times for all college students is 4.067, what sample size will need to be taken?

4. The owner of a local golf course wants to determine the average age of the golfers that play on the course in relation to the average age in the area. According to the most recent census, the town has an average age of 48.89. In a random sample of 24 golfers that visited his course, the sample mean was 31.37 and the standard deviation was 9.976. Using this information, the owner calculated the confidence interval of (25.65, 37.09) with a confidence level of 99%. Which of the following statements is the best conclusion?

5. You own a small storefront retail business and are interested in determining the average amount of money a typical customer spends per visit to your store. You take a random sample over the course of a month for 42 customers and find that the average dollar amount spent per transaction per customer is $89.687 with a standard deviation of $10.9431. When creating a 99% confidence interval for the true average dollar amount spend per customer, what is the margin of error?

Read the following extract and answer the questions that follow. [20 marks]
Joe Gebbia and Brian Chesky were sharing a loft apartment in San Francisco in 2007 when they realised that attendees to a major design conference in town were going to struggle to find a room for the night.
With almost every hotel room in the city booked out, Gebbia and Chesky, who were struggling to pay their rent, seized their chance.
They threw the doors open to their place, offering strangers the chance to sleep on two airbeds on the floor and eat a home-cooked breakfast.
As the Airbnb website puts it: “Two air mattresses, a thousand dollars, three new friends, and many high fives later, the entrepreneurs realized an opportunity.”
With the addition of tech wizard Nathan Blecharczyk, the team decided to change the accommodation model by allowing people to list their own places to stay online, with the new business, Airbedandbreakfast.com, gaining revenue through a fee of between 6% and 12%, depending on the price of the booking.
Initially focusing on large-scale events where accommodation would be scarce, the trio raised cash for the venture in an unusual way – they sold $30,000-worth of special edition breakfast cereals they created, based on then-US presidential candidates Barack Obama and John McCain.
In 2008 the name was shortened to Airbnb and users were able to book whole properties, boats and even private islands, rather than just a couch to crash for the night.
In June last year, the business revealed it had booked its ten millionth night, with 75% of these bookings occurring outside its initial market of the US.

There have been hitches – such as the PR disaster of a woman writing on her blog that her apartment had been trashed by an Airbnb renter. Chesky wrote a contrite response, admitted the company had “dropped the ball” and introduced insurance and a 24-hour helpline to help solve future problems.
Airbnb now features listings in 33,000 cities in 192 countries. It has also raised a very handy $120 million in venture capital and is valued at $1.3 billion.
Chesky told CNN: “Sometimes it takes a fresh pair of eyes to look at a problem and see it as an opportunity, not just the way things are or have to be.”
“I think that being a young entrepreneur is a great opportunity to challenge the status quo and build the world as you think it ought to be.”
Source: https://www.smartcompany.com.au/business-advice/innovation/five-top-business-ideas-that-made-millions/
Accessed: 02/10/19

REQUIRED:
1. With reference to the extract, discuss two methods of generating business ideas that resulted in Airbnb.
2. Use the extract to discuss how a feasibility study can be used to ascertain whether a business idea is an opportunity.

Below you will find part of a job description for a part-time position in a campus bookstore. Read each task in the job description and identify those tasks for which training (rather than employee selection techniques) would be appropriate. In the next exercise, you will be asked to determine how to train the employees for each of the tasks you identify.

Textbook Clerk

Job Summary

The Textbook Clerk is a university work-study position. The student hired for this job is responsible for assisting the Textbook Supervisor with book inventories, shelving duties, and customer requests. Additionally, the Textbook Clerk performs general clerical and messenger duties and operates the cash register when additional assistance is needed. Work Activities

Inventory Duties - Inventories books by section and course number - Informs supervisor of number of books to be returned - Writes ISBN-13 on inventory sheet - Verifies all information as typed on each textbook requisition - Records price information

Shelving Duties - Shelves returned books - Straightens shelves - Removes previous semester's textbooks from store shelves at the end of each semester - Shelves used books in the stockroom by title - Shelves new books in the stockroom by publisher - Places shelf cards on appropriate shelf - Dusts shelves - Dusts books

Customer Relations Duties - Phones professors regarding new textbook editions - Mails book arrival notices to professors

Clerical Duties - Creates and prints shelf cards - Creates and prints book arrival notices - Types PU-6 Forms - Photocopies book orders and notices about book arrivals

Messenger Duties - Delivers materials or messages to other employees - Delivers materials to university departments 100

Cash Register Duties

- Writes name on register tab at beginning and end of shift - Watches customers entering store to make sure they do not take books and backpacks into store - Tabulates price of purchases using cash register - Counts appropriate change and gives it to customers - Pages employee on register list to assist with checkout when lines are long - Approves student's’ checks by validating university ID or by certifying driver's license - Approves out-of-town checks by verifying name, address, and phone number with driver's license - Pages supervisor to fill out void slips - Completes in-slip forms for returns - Sells laundry tickets, computer disks, and dissection coupons to students - Verifies textbook tags for price and author codes to ensure that the correct tag is still on the textbook - Pages supervisor if tag and code are incorrect

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A garden store prepares various grades of wood chips for mulch for sale in various tonnages for delivery to large garden construction sites around town. The grades are (a) fine, (b) standard and (c) course. The process requires red gum, machine time, labour time, and storage space.

The garden store owner has identified that the store can generate $90 profit per storage bin for fine, $90 for standard but only $60 for course chips.

Each load of chips require inputs in the following quantities:
Fine: 5 tonnes of material, 2 machine hours, 2 hours of labour and 1 storage bin Standard: 6 tonnes of material, 4 machine hours, 4 hours of labour and 1 storage bin Course: 3 tonnes of material, 5 machine hours, 3 hours of labour and 1 storage bin

Unfortunately, like every business, the garden store has limits in its production capacity. It is able to handle 600 tonnes of red gum at any one time, the machine can only operate for 600 hours before major maintenance must occur, it only has sufficient staff to provide 480 hours of labour time and it has 150 storage bins.

Required:

please give all calculations

(a) What is the marginal value of a tonne of red gum? Over what range is this price value appropriate?

(b) What is the maximum price the store would be justified in paying for additional red gum?

(c) What is the marginal value of labour? Over what range is this value in effect?

(d) The manager obtained additional machine time through better scheduling. How much additional machine time can be effectively used for this operation? Why?

(e) If the manager can obtain either additional red gum or additional storage space, which one should the manager choose and how much (assuming additional

quantities cost the same as usual)?

(f) If a change in the course chip operation increased the profit on course chips from $60 per bin to $70 per bin, would the optimal quantities change? Would the value of the objective function change? If so, what would the new value(s) be?

(g) If profits on course chips increased to $70 per bin and profits on fine chips decreased by $6.00, would the optimal quantities change? Would the value of the objective function change? If so, what would the new value(s) be?

William Smith, Sr., was the founder of Smith Enterprises, Inc. He owns 60% of the stock of Smith Enterprises (60,000 shares of 100,000 shares outstanding, stock basis $100 per share). The value of the stock was recently determined to be about $500 per share. Over the years, William, Sr., has done a very good job of getting his sons and daughters (and even grandchildren) involved in the business, and the other 40% of the Smith Enterprises stock is owned by is two daughters, his son and his granddaughter. William, Sr., has reached the point in his life where he is ready to retire from the family business that he founded. He has done a sufficiently good job of training up the younger generation in the management of the business that he feels able to completely withdraw from the business.

In a few concise, coherent sentences, advise William, Sr., of what steps he needs to take to assure that the tax consequences of the redemption of all of his stock in Smith Enterprises will be treated as a sale of stock (long-term capital gain/loss), rather than as distribution (dividend income). If William, Sr., cannot understand your advise, he will fire you and you will lose a $600,000-per-year client, so make sure that your advise is both correct and coherently presented.

Critical Thinking

The market for young people's food products has increased considerably in recent years. As a result, children have become high-potential customers and are now the focus of intense and specialized marketing and advertising efforts.

Children and adolescents have become attractive consumers and influencers: they have an increasing influence on their family's purchases.Childrenrepresent an important target audience for marketers because they have their own purchasing power, influence their parents' purchasing decisions, and are the consumers of tomorrow. Advertisers have an interest in seducing them from an early age.Thus, to be sure to attract young people, companies opt for a combination of different approaches and channels such as television advertising, contests and games, toys, the use of popular characters, the use of various attractive colors, school marketing, Internet and branded products etc.

Food and beverages products that target children have increased and these productsare dominated by foods that are high in calories, sugars, salt, fat, low in nutrients and therefore not compatible with national dietary recommendations.

Mr. Fahmy has already a business in the food sector and wants to open a new subsidiary specializing in natural and organic products for children. The goal is to provide healthy, nutritious food and use healthier ingredients.

Questions

1. Help Mr. Fahmy define his overall goals, objectives and strategies for his new business in the context of his mission and purpose.

2. Briefly describe the choices that Mr. Fahmy can make for each of the 4 Ps of the marketing mix.

3. Identify the target market and describe how Mr. Fahmy's activities will respond better than the competition to the needs of the consumer. (List consumer expectations for the product)

4. Describe the type of promotional methods that you recommend to Mr. Fahmy for the promotion of his product line. (Identify techniques such as word of mouth, personal sales, direct marketing, sales promotion, etc., on television, radio, social media, and newspapers).

5. Why is it important for a media planner to consider how different types of media could work together on a media plan?