Introduction
The Allstar Brands Corporation was founded in 1924 and is among the leading makers of packaged goods around the world (James, Deighan and Spotts 19). Over the years the company has merged or acquired several smaller packaged goods companies.
Today the company is made up of three divisions namely Consumer Products, International and Pharmaceuticals. The Consumer Products division is primarily concerned with a number of packaged goods including laundry detergent, bar soap and shampoo.
The International division is in charge of the distribution of Allstar products in international markets around the world. The Pharmaceutical division is in charge of the production and marketing of ethical and over the counter medications (James, Deighan and Spotts 19).
The primary product currently offered by the Allstar brand is an over the counter cold liquid known as Allround. The products designed as combat remedies are designed to relieve several basic symptoms including aches and fever, nasal congestion, chest congestion, runny nose and coughs.
It is common for allergy remedies to be grouped together with cold remedies due to the fact that these address many of the same symptoms as cold remedies (James, Deighan and Spotts 21).
In the current over the counter cold and allergy market the Allstar brand has four other competitors. The cold and allergy industry is divided into five different product categories namely cold liquid, cough liquid, allergy capsule, cold capsule and nasal spray (James, Deighan and Spotts 20).
The five firms offer a total of 10 brands that cater for these product categories. Based on current statistics the Allstar brand currently accounts for 12% of the total sales in the industry (James, Deighan and Spotts 20).
The current financial statistics indicate that Allround which is the company’s only product is performing fairly well within the market. Based on statistics from the last period the product managed to report sales of $ 214.3 million (James, Deighan and Spotts 29).
The company reported a gross margin of $132.5 million and after making deductions received $ 50.7 million in net profits for the same period (James, Deighan and Spotts 29). It is the belief of the senior management that the OCM group will continue to make even more significant contributions in the coming years. For this reason it will be wise to consider what goals the company intends to achieve to improve its current position in the future.
Goals
In this section some of the crucial goals will be highlighted and some insight will be shed on how to improve. For example, one of the goals that Allstar will have to focus on includes maintaining the drive within the company as far as product development is concerned.
According to the company report there are expected to be a released reformulations of the Allround brand within a year. In addition to that it has been reported that three new products are expected to be released by the beginning of the third period (James, Deighan and Spotts 29).
This drive to continue production of new and competitive products is crucial because one risk associated with the industry stems from the fact that new competing products can be launched at any time within the market.
To push this point further home, it has been reported that Curall announced the introduction of a new drug called cold cure in the same period (n.p.).
This is of special concern to the company because this new drug is the second drug by Curall to be launched into the market suggesting a loss in the market to this drug.
In addition to this it has been observed that prior to this launch Curall had only a cough liquid which did not affect the market for Allround whereas cold cure may have a direct effect on sales in the following period (James, Deighan and Spotts 20). The company must therefore focus on research and release new products drugs to be more competitive.
Another important goal for the company to focus on in the coming period is that of increasing expenditure on advertising. The main reason for this is due to the fact that advertising plays a major role in creation of awareness among a product’s consumers. In addition to that it has been reported that advertising can be used to shape consumers perception about products (James, Deighan and Spotts 25).
Based on that information it is clear to see that the company risks losing business by not advertising adequately. In addition to the above information highlighting the importance of advertising it was reported that in the just concluded period the total expenditure on advertising went up by $19.6 million whereas promotional expenditure increased by $ 6.3 million (n.p.).
This fact proves that competitors are increasing spending on advertising and thus the company should make efforts to also increase expenditure on advertising. The focus on increased advertising expenditure should also be driven by the fact that when listed against 10 competitors it was noted that the company expenditure on advertising had it ranked between 5th and 6th (n.p.).
In addition to focus on advertising it would appear that in order to improve its competitive position the company will need to consider increasing its focus on the mass merchandiser sales. This is due to the fact that it was reported that during the last period mass merchandiser sales showed the strong growth with 8% (n.p.). This statistic indicates that it is likely that with more emphasis sales from this sector can grow even further.
Given the increase in mass merchandiser sales it is possible to see that the company risks losing business if it does not increase the sales force in this area. Upon observation of the company sales force it was noted that only 10 of the sales staff were mass merchandisers (James, Deighan and Spotts 27).
When this figure was compared with competitors it was noted that the number was very low and for this reason the number of mass merchandisers for the next period should be increased. It may be that the competition has not yet identified this potential loophole thus giving the company a head start.
In addition to the sales force it would also be prudent to focus on ways to increase retail sales. This is due to the fact that it was reported that retail sales increased by 4.6% for the ended period (n.p.). In order to achieve this there is a need to reassess the current prices of products.
It has been observed that the current Manufacturer’s Suggested Retail Price (MSRP) for Allround is $5.49. In addition to this retailers receive an allowance of 13% and a volume discount of 30%. It has already been observed that the current price was significantly higher than that of its competitors (James, Deighan and Spotts 24). To increase the retail sales further it would appear wise to make reductions on the MSRP.
Overall Competitive Strategy
Situation Analysis: As it has been mentioned earlier in the report Allround has so far been a successful and profitable brand with sales exceeding $200 million at the manufacturer’s level during the last period. These sales figures translate to net income of slightly over $50 million (James, Deighan and Spotts 29). However it has been observed that the company urgently needs to increase it expenditure due to trends within the industry.
It has already been reported that competitors have launched competing products into the market that are likely to affect the sales figures of the company in the coming period (n.p.). This matter causes a lot of concern and needs urgent remedial action due to the fact that the product in question is in the same category of products such as Allround.
In addition to the competing products in the market it has already been observed that there have been significant increases in advertising and promotional expenditure in the concluded period (n.p.). Given the crucial role played by advertising in shaping customer perceptions it would appear that the company will need to increase its expenditure on advertising in response.
Also to be given consideration in the upcoming budget is the need to increase the sales force. This comes in light of the fact that mass merchandiser sales had increased significantly (n.p.). This report comes when the company is ill equipped to deal with this sector of retail sales and such some money needs to be spent on this sector in the upcoming budget.
It has also been observed that despite the good performance in the just ended period, Allround’s prices were comparatively high (n.p.). At the same time it has also been observed that trends within the market indicate that retail sales were increasing. It has therefore been suggested that with a view to improving sales further, the MSRP be reduced and the allowances and volume discounts be increased as an incentive.
SWOT: In the case of Allround its main strength stems from the fact that the company has no competition in the manufacture of cold liquid (James, Deighan and Spotts 20). In an overview of the industry it is noted that the company is in competition with four other firms.
The firms all produce products that can be categorized into cold liquid, cough liquid, allergy capsule, cold capsule and nasal spray. The five companies offer a total of 10 brands within the market and only Allstar provides cold liquid from this list (James, Deighan and Spotts 20).
In the market a brand can be availed in three forms namely liquid, capsule or spray (James, Deighan and Spotts 22). The consumer’s selection of a product with regard to form is usually based on personal preference. For this reason those who prefer liquid form the only available option is Allround.
Being a relatively new market the company will also exhibit some weakness in comparison to the competition. This is because it has been observed that advertising plays a major role in creation of brand awareness among consumers (James, Deighan and Spotts 25). The entry into the market suggests that brand awareness is comparatively low and therefore will require much more expenditure to build.
Another weakness that the company has within the new market is a lack of resources. It has been reported that the company senior management will only make budget increases based on results from sales and profitability (James, Deighan and Spotts 29). This leaves the company at a disadvantaged position when compared with its competitors. This is the case given the significant financial input that is required to address the current financial demands for the next period.
However, there are some opportunities that the company can exploit to improve its position in the market. It has been observed the United States Food and Drug Administration regulate the amount of medication for various periods of relief.
Based on this a drug can be made in a 4 hour formulation such as Allround or in 12 hour formulation (James, Deighan and Spotts 22). This presents an opportunity for the company due to the fact that it can still produce 12 hour formulations of the same drug to improve its product range.
In addition to changing the formulation to increase product range another opportunity exists in making different cold formulations. It has been reported that a brand can be made available in one of three forms namely liquid, capsule and spray (James, Deighan and Spotts 22).
It has been reported nasal sprays typically provide faster relief than other forms of drugs (James, Deighan and Spotts 22). In addition to that it has also been reported that most consumers find the capsule form more convenient than liquid (James, Deighan and Spotts 23). The production of a nasal spray or capsule for relief of cold and flu symptoms presents an opportunity.
In order to have a complete marketing plan the company also has to prepare to deal with threats. The main threat to the company exists in the form of its competitors and the likelihood of their releasing similar products within the market.
The current statistics places the number of competitors in the market at 5 (James, Deighan and Spotts 20).It has already been observed that one of the competitors released a product that may affect sales for the coming period (n.p.).
Basis for effective competition: In order for the firm to remain competitive in the coming periods it would have to increase its expenditure on advertising and promotions. This comes in light of the fact that the market indicates spending on advertising is increasing (n.p.).
In addition to this it has already been established that advertising plays a crucial role in product awareness. For these reasons the marketing plan for the future would require this change be made.
It has also been noted that there has been a significant increase in retail sales (n.p.). For this reason the company will need to consider means to increase these sales further. It has been reported that Allround’s MSRP was significantly higher than competing brands (James, Deighan and Spotts 24).
It would appear that to improve the company’s competitive position a reduction should be made on the MSRP and some incentives such as increased promotional allowances and volume discounts.
Finally it would appear that the company will need to increase the number of mass merchandisers on its sales force. This comes in light of the fact that there was significant increase in the sales volumes from mass merchandisers (n.p.). To maintain a competitive position would thus require that the company increase the numbers involved in mass merchandising.
It is also crucial that the company continue research on new products and release them into the market as soon as possible. This comes in light of the fact that competitors are constantly producing new products to compete with existing company products (n.p.).
Resources and Capabilities: Based on the results from the previous year it was reported that the company made a net income of slightly over $50 million. Using the available resources to improve the company position to allow it be profitable in the coming years requires some adjustments to be made.
It was observed that an increase of funding for promotion was required and after calculations it was reported that promotion would now be worth 19% of the budget. Advertising expenditure also had to be increased to meet the current demands. This saw the expenditure on advertising rise to 38% of the budget. It was also observed that the company required adjustments on its sales force in order to meet the demands of the market.
The sales force adjustments suggest the sales staff will now consume 41.3% of the budget. In addition to this it was observed that the company needed to work on production of new products. This required a budget allocation of 1.7% to finance research. The total amount for this budget came to $29.1 million.
The previous budget for the period was $28.3 million (James, Deighan and Spotts 30). Given the amount of net income made from the previous period it would appear that the company has the resources to finance this budget and the associated increments.
Segmentation, Target, Positioning
Segmentation options and final analysis: The industry selected is basically divided into segments based on the way products are branded (James, Deighan and Spotts 28). There are three standard product categories in the OTC market namely cold, cough and allergy.
As earlier mentioned since the company currently has only one product in the market the segment that it will operate in is the cold segment. This segment produces 59% percent of the revenue from sales of OTC drugs (James, Deighan and Spotts 28).
This represents a very large segment of the OTC market. Within the segment the company has to compete with 5 competitors. Of the five competitors currently only one company has a product that generated more revenue than Allround (James, Deighan and Spotts 28).
Target: The target group for the company represents 59% of the current OTC market (James, Deighan and Spotts 28). However, since the company is only selling a single product the remaining 41% of the market also exists as a potential target market for the company’s future products.
Based on the sales in relation to brand awareness it would appear that if the company increases expenditure on advertising there is bound to be a significant increase in sales. This is based on the fact that all the companies that report greater brand awareness than Allround also report greater sales (James, Deighan and Spotts 29).
Positioning options: As it has been mentioned above all the companies that have reported greater brand awareness have also recorded greater sales than Allround (James, Deighan and Spotts 29).
The positioning strategy for Allround therefore is to spend more on advertising to create greater brand awareness and greater sales. In addition to that the company also intends to spend an increased amount on increasing the sales force to improve overall sales.
Marketing Mix
Product: It has already been observed that the company’s strength stems from the fact that it has the only cold liquid product currently available. All the remaining competitors either produce a cold capsule or a nasal spray (James, Deighan and Spotts 20).
For this reason the company intends to take full advantage of this position to market its product. It is the only product that alleviates several symptoms with one drug. This fact has been reported to be the reason many consumers prefer the brand (James, Deighan and Spotts 22). At the same time the company also intends to increase expenditure on research aimed at producing new products to be released in the near future.
Promotion: Another essential aspect catered for in the marketing plan was the promotional approach. The approach that will be used with regard to advertising will be the same as before just that there will be more spending on each segment.
It has been observed that the previous budget allocated 25% for primary demand adverts, 25% for benefits approach adverts, 25% for comparison approach adverts and 25% for a reminder approach adverts (James, Deighan and Spotts 25). The marketing plan suggests similar allocations for the new amount.
However, the message of the advertisements needs to be changed to reflect greater maturity than those of the previous period. The increased retail sales suggest that there should be an increase in the amount of promotional material within the stores.
Price: Based on the significant increase observed in retail sales the marketing plan suggests price reductions for the coming period (n.p.). Due to the trends within the market it would appear that there is a need to encourage sales to increase further.
To achieve this there is going to be a reduction in the MSRP to reflect this need. In addition to that there are going to be reductions made in the promotional allowances and volume discounts. This is aimed at increasing the revenue earned from sales of Allround and act as an incentive for sellers of the product.
Place: In addition to the increased advertising in retail stores and incentives to sell the product the marketing plan will also include shift of focus on the marketing place.
In the analysis of the business for the next period it was observed that sales from mass merchandisers reported a significant increase (n.p.). It has been suggested that an increase is made in the number of mass merchandisers.
Works Cited
James, Stuart W., Michael Deighan and Harlan Spotts. MarketShare: The Marketing Principles Simulation. Virginia: Interpretive Simulations, 2005. Print. n.p. The MarketShare Case. Interpretive Simulations. n.d. Web.