Rationale:
Hopefully the revamp of TIME will end the stagnation of the HE segment. We won't be putting too much in advertising ($1.6 m), so it may be a period or two before consumers catch on to the product change. TILT and TINK will see their advertising expenditures cut as well to $1.6 and $1.5 million, respectively. All of these savings are being put into Nutrites since we will be up against competition this period. TILT will also see a price increase of $.50 due to the perception by the AF segment that TILT is priced less than ideal. With this price increase, we will be able to forego 72k in unit sales and maintain the same revenue.
After TINY's fall from grace last period, we decided to throw everything at it to get ourselves back to a position of dominance. Commercial team, merchandising, and ad spend will all be increased while the price is dropped by $.50. We will need to sell an additional 506k units to cover the price drop, and another 175k units to cover the additional advertising and commercial costs. This should be more than feasible given our previous dominance in this segment. Production for TIME is going to be 8 million units, which gives us a range of 15.6 to 18.8 million units when our massive 9.2 million unit is taken into account. If we have no market share growth and only capture additional sales from market growth, our demand would be approximately 14 million units. We should be able to capture some market share, so risking the 1.6 million unit overrun should be worthwhile, especially if we see the segment size spike.
We will finally be seeing some competition in Nutrites. Hopefully the teams have not learned much in the way of product launches. One worrisome factor is the size of Riesling's $20 million budget next period. They only have three products in Clinites and will have more than enough capital to make quite the splash in Nutrites. We also may have shown our hand too early by cutting the price of TUGR prior to any other entrants to the market. TUGR is still perceived as too expensive, so we will be dropping the price by $2 to $48/unit. This will require a volume increase of 337k units to cover the lost revenue.
TUNA's inventory of 1.6 million units could just about cover its demand forecast of 1.5 million units. We will, however, be dropping TUNA's price from $100 to $80/unit. This could potentially lead to a large increase in volume, so we are putting production at 1 million units. At this level, we will need an increase of 297k units to cover the lost revenues.
We will also be running our last R&D project, TUFA. This will be tailored for the FA segment. Hopefully FA is also the segment that the two teams entering the market plan on exploiting since our team has not had a product for that segment yet. This may be wishful thinking on our part.
Results:
Not too bad. We broke the 10k SPI and $1 billion retail sales barriers, so that's nice. We also reversed course on the SI segment, jumping up to 62% market share from ~50%. The Clinites market as a whole grew much more than it did last period where it very nearly had negative growth. The growth rate in Nutrites dropped down to the 45% range. Given that several competitors were joining that market, we were expecting steeper growth due to a larger ad spend, but maybe the mixed messages confused consumers. The SI and LI segments are also continuing a trend of near-parity that began last period. the ME segment is still shrinking, but there was a decent sized bump in HE after several periods of stagnant or negative growth. This may be due to us altering the characteristics of TIME, which did extremely well in the segment. Our overall unit market share is 52% and our value market share is 66%. Obviously our dominance of Nutrites gives us a huge boost on the overall VMS, but even within the Clinites market we have a 50% VMS. We also have four of the top six selling brands by retail sales. Unfortunately, we were unable to snag the number one spot for the LI segment, so we are top in only seven of the eight segments.
Our modification of TIME was wildly successful. Though we have had the number one spot in the HE segment for the entire simulation, we never really had a commanding lead. With the alteration, our sales and market share more than doubled. So much so that we, unfortunately, ended up with a stock out. TIME has generally been a laggard for us, but in this one period it went from a mid-performer to one of our top non-core brands. Prior to this period TIME was definitely one of the brands that was up on the chopping block for if we decide to shelve one to cover next period's expenses.
Time to address the elephant(s) in the room: the other teams have entered the Nutrites market, and one team with some measure of success. Team Riesling debuted RUGS and team Mimosa debuted MUST. MUST looks as though it was meant for the EL segment, but they may have muffed up when calculating the clinical attribute, which will obviously work in our favor. RUGS, on the other hand, nailed that calculation and now sits perfectly aligned with EL. This is a problem. We will need to R&D new attributes for TUGR, otherwise Riesling will start chipping away at our lead. They already snagged 10% of the market, and will likely be doubling that next period (along with the doubling of the segment itself). Riesling also made a $3 million investment into Nutrites R&D, which means they will likely be coming in for the FA segment along with TUFA next period. This is a problem as well. Riesling is now at parity with us for next period's budget, which means they will be able to do a lot more since they will only have five brands to our eight, in addition to the fact that we are now going to have to drop a couple million on R&D to fix TUGR. Riesling has a great opportunity here, we just need to hope that they are unable to capitalize in a way that causes us actual harm, and not just lost potential new customers from market segment growth. Raiding our lower margin brands in Clinites for ad spend may be the best option for us. Our advertisement experiments show that last period a 20% bump in spending would have translated into $6.3 million in additional contribution at a cost of $700k, which is not a bad ROI. That would have given us another 262k units that our competitors would not have been able to pick up. Which they did.
Our production figures are still not under control. Granted, there has been a variability in the market that we have yet to have to deal with, but we may also just be getting sloppy with our forecasts and being overly optimistic. The stock out of TIME is understandable, especially considering we have been carrying inventory of TIME since pretty much the first period. TUNA's price may be pushing itself out of the market as well.
Our modification of TIME was wildly successful. Though we have had the number one spot in the HE segment for the entire simulation, we never really had a commanding lead. With the alteration, our sales and market share more than doubled. So much so that we, unfortunately, ended up with a stock out. TIME has generally been a laggard for us, but in this one period it went from a mid-performer to one of our top non-core brands. Prior to this period TIME was definitely one of the brands that was up on the chopping block for if we decide to shelve one to cover next period's expenses.
Time to address the elephant(s) in the room: the other teams have entered the Nutrites market, and one team with some measure of success. Team Riesling debuted RUGS and team Mimosa debuted MUST. MUST looks as though it was meant for the EL segment, but they may have muffed up when calculating the clinical attribute, which will obviously work in our favor. RUGS, on the other hand, nailed that calculation and now sits perfectly aligned with EL. This is a problem. We will need to R&D new attributes for TUGR, otherwise Riesling will start chipping away at our lead. They already snagged 10% of the market, and will likely be doubling that next period (along with the doubling of the segment itself). Riesling also made a $3 million investment into Nutrites R&D, which means they will likely be coming in for the FA segment along with TUFA next period. This is a problem as well. Riesling is now at parity with us for next period's budget, which means they will be able to do a lot more since they will only have five brands to our eight, in addition to the fact that we are now going to have to drop a couple million on R&D to fix TUGR. Riesling has a great opportunity here, we just need to hope that they are unable to capitalize in a way that causes us actual harm, and not just lost potential new customers from market segment growth. Raiding our lower margin brands in Clinites for ad spend may be the best option for us. Our advertisement experiments show that last period a 20% bump in spending would have translated into $6.3 million in additional contribution at a cost of $700k, which is not a bad ROI. That would have given us another 262k units that our competitors would not have been able to pick up. Which they did.
Our production figures are still not under control. Granted, there has been a variability in the market that we have yet to have to deal with, but we may also just be getting sloppy with our forecasts and being overly optimistic. The stock out of TIME is understandable, especially considering we have been carrying inventory of TIME since pretty much the first period. TUNA's price may be pushing itself out of the market as well.
HE
SI
Hi,
ReplyDeleteI'm currently playing Markstrat in my class, and I'm finding it weird that only on Period 7 you had competition entering Nutrites. Aren't you using the loan?
Our professor did not give us the option to use loans.
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