Midterm Exam

I will email the remaining 3 attachments in the next email.

Midterm Exam

Summer 2017

Name:

Directions: Complete and return this exam. Be sure to “attach” a Word or PDF document using the Assignment link provided under Week 7. Most of these questions can be answered correctly with very short answers so if you are writing a very long essay you are probably doing something unnecessary. Ideally, it would help if you used this exam and added your answers after each question.

In many cases your support is more important and worth more than the answer itself. Please do not try to find outside information about any of the companies discussed in this exam. All of the company or situation specific information you need is provided in the exam questions and may not always reflect current realities. I have referenced the location of course material relevant to the question, to the best of my ability, to help you save time. Each question is worth 15 points. Good luck.

(1)Iron Mountain recently acquired Recall Holdings. When Iron Mountain, the U.S. based data storage giant tried to buy its Australian based rival, Recall Holdings, in December, Recall rebuffed the $1.8B bid. Not only did Iron Mountain raise its offer, but a strengthening dollar sweetened the deal for Recall, which accepted a bid of $2B. The companies both compete in the global data storage market and are #1 and #2 respectively in market share in the global industry. Together, the merged firms will employ about 25,000 people.

(a) Which of the 9 Corporate Growth Strategies was Iron Mountain following with this acquisition? (b) Explain why your strategy choice is the correct one? (Week One Lecture Notes)

(2) S.C Johnson Co. offers dozens of different brands worldwide such as Off, Pledge, Raid, Ziploc, Windex and Glade.

(a) What primary type of brand identity strategy does S. C. Johnson follow as a corporation?

(b) Explain the reason and support for your choice? (Week Six Lecture Notes or Ch. 7 in text)

The following information should be used to help answer Questions 3, 4 and 5:

The Coca Cola Company in 2015 introduced a new brand for their United States market only, Fairlife milk. I’ll bet you didn’t even know that Coke sold milk? I’ll bet it is even less likely that you have actually purchased Fairlife? As you know from Case 1, the Coca Cola Company has become much more than just a soft drink company. They are the worldwide leader in the overall non-alcoholic beverage market. For marketing planning purposes and answering these questions, prior to introducing Fairlife, assume the Coca Cola Company competed in fiveproduct/markets: (1) still the largest and most significant carbonated soft drink market; (2) fruit juice market: (3) sports/energy drink market; (4) bottled teas/coffee market; and (5) bottle water market.

In 2015 the Coca Cola Co. introduced Fairlife with a nationwide rollout. With the Coca Cola Company’s extensive sales and distribution capabilities, they entered the market as a result of a partnership with Dairy Select Milk Producers in Wisconsin and the Coca Cola Company’s Minute Maid division in Texas to form a separate entity, Fairlife LLC. Select Milk Producers and Coke each have a 50% equity share in the new entity. Minute Maid has the sales and distribution capabilities for refrigerated products so Fairlife was the most logical fit to add under this division. The Coca Cola Co. believes that entering the U.S. market with Fairlife provides the opportunity for a lucrative additional revenue stream in the future which will help to offset the growing trend of decreased soft drink consumption. Fairlife is positioned as a premium milk product that costs almost twice as much as regular milk. Recently a half gallon sold for around $3.99. For regular milk you can usually get a gallon of milk for less than $3.99. Fairlife is much richer in proteins, is lactose free, and goes through a unique pasteurization process. It is in a category by itself as a premium milk product and probably competes more with organic milk and dairy free milk substitutes like lactose free milk, soymilk, almond milk, and etc.

(3) Based upon the above information

(a) What is the relevant market that Fairlife is competing in?

(b) Which of the nine corporate growth strategies was the Coca Cola Company following with the introduction of the Fairlife brand?

(c) Explain and support why your strategy choice in

(d) is the correct one? (Week 1 Lecture Notes)

(4) Based on the above information, when Coke partnered with Dairy Select Milk Producers to form Fairlife LLC

(a) which “specific” type of partnership or strategic relationship was used?

(b) Why do you believe that this is the correct type of strategic relationship? (Week 7 Lecture Notes)

(5) A marketing intern at the Coca Cola Co. working on the Fairlife marketing efforts suggested that one way to segment the milk market they compete in was to do it by fat content. Why not segment the milk market and target those who want non-fat, 1%, 2%, or whole milk?

(a) Does marketing Fairlife toward possible segments by fat preferences make sense?

(b) Why or why not? Include in your support an analysis that you describe for each of the five “requirements for effective segmentation” from the text or “criteria for evaluating a proposed bases of segmentation from my lecture notes” as at least partial support for your answer.

(c) Would you recommend that Fairlife follow some other type of segmentation based target market strategy or would it be better to follow a mass market strategy with variety? Explain? (Ch. 5 or Week Three Lecture notes).

(6) Sprout Pharmaceuticals recently received FDA approval to introduce Addyi, the first prescription drug to boost female libido and introduced to the U.S. market in 2016. Other competitors are expected to enter the market in the future that has an estimated market potential of $2 Billion in the U.S. alone. One potential competitor, Palatin Technologies, is close to finishing clinical trials and seeking FDA approval. Analysts estimate that Addyi will generate initial sales of $200 Million in 2017.

(a) At which stage of the “industry” product life cycle did Addyi enter the U. S. market? Explain?

(b) What do the market measurements suggest with regards to the need for pursuing primary vs. selective demand strategies? Explain? (Ch. 4 and Ch. 7 or Week Two and Week Six Lecture Notes)

(7) Providing value is a key objective of market-driven organizations. Based on the formula for providing added value, there are only five “basic”, alternative strategies that a company can consider if their goal is to provide additional value to their customers. This typically involves decisions involving your product offering and/or your price. Let’s consider Time Warner Cable. Time Warner offers a number of different packages. For example, let’s assume one package Triple Play Silver is offered with 175 channels, internet up to 60Mbps and unlimited calling for $49.99 per month. Due to increased competition from streaming and etc. Time Warner wants to pursue a strategy of providing greater value to its customers in the Los Angeles area.

For your 2018 marketing plans, if you were the Product Manager for cable services for Time Warner and you wanted to provide “additional value to customers” starting January 1, 2018

(a) describe the five possible “general” alternative value strategies that you could consider and state how each alternative provides additional value (using only the value formula primarily as your guide) and

(b) using at least 3 of the 5 alternative value strategies, provide “actual examples specifically related to Time Warner’s current Triple Play offering” describing what you, the Product Manager, might do to the product offering and/or price to deliver more value to customers who sign up for cable services in 2018? (Ch. 10 and Week Seven Lecture Notes)

(8)One of Daimler’s product lines competing in the global automotive market is the Smart car, which has had limited success in primarily urban markets throughout the world. Daimler wants to shore up its image as a city transport specialist rather than just another small auto maker. Thus, Daimler has started a new approach for its Smart brand. In addition to their line of Smart cars, they have also decided to enter the existing markets for e-bikes and e-scooters. They already introduced the “Smart e-bike” and more recently also introduced the “Smart e-scooter”.

(a) Based upon the Booz, Allen, Hamilton study, what specific classification of product innovation would the introduction of e-bikes and e-scooters represent?

(b) Explain?

(c) What type of brand leveraging strategy was being used with the introduction of the Smart e-bikes and Smart e-scooters? Explain why? (Week Four and Week Six Lecture notes)

(9) Gillette, when they release a new shaving system, considers both the sale of the razor and the longer revenue stream from the sale of blades and follows a Captive Pricing strategy. As a result, the concept of Customer Lifetime Value is critical to their marketing planning efforts. Let’s say they are considering introducing a new shaving system. Let’s say the average price of their proposed Gillette He Man Power razor is $16.00. The average customer needs 6 packs of razor blades (8 blade cartridges per pack) per year at $32.00 per pack. From past experience, the average customer loyalty period for a shaving system is 7 years. The estimated, allocated one time marketing costs required to sell each new razor in the first year is $80.00 for sales, distribution and promotional costs. The profit margin on the blades is 40%. Using a Captive Pricing strategy, at $16.00 Gillette will be selling the razor at 50% below cost. (for you accountants don’t look for the flaws in this example. It is only intended to consider a basic marketing concept and planning tool and not necessarily be 100% accurate from an accounting standpoint)

In this example, (a) What is the estimated profit or loss per customer to Gillette in year 1?

(b) Using the concept of lifetime customer value, does it or does it not make sense to introduce this new shaving system?

(c) Demonstrate why or why not by calculating the total estimated customer lifetime value? (Lecture Notes Week Seven).

(10) From 1990 to 2016 the number of inmates in the U.S. state or federal prisons more than doubled to 1.64 million. Benefiting from that surge are corrections contractors such as JPay. The Miami-based company competes only in the prisoner market and offers services such as money transfers, e-mail communications, and video visitations (all of which are monitored by corrections officers) for more than 1 million prisoners in about 35 states. Last year JPay began marketing its own customized line of “prison proof” MP3 players that satisfies the requirements for correctional institutions. The JP3, which family or friends can buy for prisoners online for around $40 is virtually indestructible. Inmates use it to browse Jpay’s library of more than 10 million songs on electronic kiosks the company installs in common areas inside prisons. Downloads run from $1.29 to $1.99 a tune. JPay didn’t pioneer its new line. Keefe Group, a St Louis-based supplier of food and personal care products to prison commissaries, launched its own MP3 player and music download service for prisoners in 2010.

(a) Which of the Five Patterns of Target Market Selection is JPay following with their products and services?

(b) Explain why you made this choice? (Week Three Lecture Notes) and

(c) which of Porter’s 4 Competitive strategies do you think JPay follows and why? (Week 2 Lecture Notes)