Period 3 Decision and Results

With our budget now more than doubled, the time is ripe to get into the Nutrites market. The question now becomes: which segment do we target to start with? Unlike the Clinites market with its five segments, Nutrites only has three: the elderly (EL), families (FA), and health conscious (HC). EL is the smallest segment, estimated at ~300k units, but also has an average growth rate over the next five periods of 161%. FA starts at 1.2m units with average growth of 55%, and HC starts at 2.4m units with an average growth rate of 15%. Based on the semantic scales for the market, we were able to extrapolate the product features desired by each segment. After running these figures through R&D's online tool, we were able to estimate that a product tailored for EL would cost $7.8m, FA would be $8.2m, and HC would be $8.9m. Despite the $8.6m bump in budget, we still needed to make a smart strategic choice, and not just chase after the larger HC segment. If we were to pursue the HC market, we would greatly weaken our ability to skim HC. When we enter Nutrites, we plan on having our price set at 5-6 times base cost, but there are fairly sizable differences in the price sensitivities of the three segments. If we were to drop in a HC-tailored product that is perceived as being inexpensive by the HC consumers, we will be missing out on a ton of revenue. If, however, we come in on the lower end and see how everyone's perception of our price lines up, we will be able to come in at the high end with a product that is perfectly priced for the HC segment. And, from the looks of our competition, we will not need to worry about another entrant for at least two more periods, if not more. This will give our EL-tailored product a huge advantage in creating brand loyalty through the beginning stages of what will eventually become an absolutely massive market. If we can keep our competitors at bay, we could very well carry the vast majority of the 18.3m units of volume predicted in five periods for EL.

In order to bump sales for TINK, its commercial team was increased so that we could increase distribution, and price was also decreased $0.50 to increase demand. Production was also set to 0 so that we could get rid of the excess inventory.

After being burned by under-production in the previous period, TINY's production was dramatically increased. Our model suggested a production run of 9.8m units, but we threw caution to the wind and bumped that figure to 12m units. This was also due to another factor; the SI segment's ideal economic value had slightly shifted in the cheaper direction, so we opted to drop TINY's price from $14 to $13.50. This price drop was also seen as necessary because we pulled $500k from TINY's advertising budget to ensure an on-time completion of the Nutrites R&D of TUGR.

For TIME, we followed our model and set production to 2.7m units with no price change. TIME got a slight increase to its ad spend, but that was just from $38k that was lying around as extra.

Results:

Still killing.

SPI up to 2877. Our closest competitor is at 1434, which is just 11 points higher than our SPI after the first decision. $119m in revenue with $57m EBT, compared to $61m and $27m for our closest competitor. Without TUGR's R&D costs, our EBT would have been closer to $66m. Our budget next period: $21.6m. Our closest competitor's: $10.7m. Without a serious series of blunders on our part, we should have this just about locked up. Production of TIME and TINY did fairly well, neither under- nor over-produced. TINK's sales were up ~80%, but we still have 232k units in inventory. TINY had 10.5m in sales, and TIME had 2.25m in sales. Both under the production that we entered, but well within the 20% flex range. CM/unit also increased for both TINY and TIME, going from $1.80 to $3.06 and $2.82 to $4.31 for each, respectively. TINY's jump doesn't entirely make sense. The $500k that was taken out of its ad budget would have added just a few cents when divided across all 10.5m units sold. The increase in sales also does not fully account for the increase. The extra could potentially be due to economies of scale.

TINY now has 59% market share in SI and 27% overall. It also holds in the #1 spot in MI. TIME continues to hold the top spot for HE, but it is somewhat tentative with only a 2.4 point lead over the nearest competitor. Team M is making moves in the AF segment, with a 25% share, and TIME comes in second at 19.3%. That will have to change.

Market Share

Contribution Margin

Revenue

SPI