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One report per group is required (no individual report is needed unless you do the simulation by yourself).
The document should be “MS Word” format (not PDF). Or, you can upload both Word version and PDF version to be safe.
Again, your report should contain answers to “why” questions.
CMS Final Report_Example 1.pdf
Download CMS Final Report_Example 3.pdf
Final tips:
Your simulation progress report can be used as the initial draft for the final written report, especially the STP part.
Again, marketing is about understanding (target) consumers. Try to explain “why” you made certain decisions based on consumers’ needs and wants, shopping habits, etc.
International Marketing 465-001
Allstar Toothpaste Country Manager Simulation
Market Entry:
During this Country Manager simulation our team explored the option to join multiple countries,
all of them had some appeal in different ways. But after some discussion and some in-depth
analysis we decided to enter China. Once we entered china, we kept our focus on growing the
market so we only stayed in China for the duration of the 8 periods. We decided not to expand
into other countries because it would cost more money to enter a smaller market, with all the
marketing and promotions expenses that would come with expanding into another country and to
build another manufacturing plant in another country would cost millions of dollars. We decided
not to take those risks with the potential of our brand equity falling. The Chinese Market was
appealing to us because it has the largest population among all Asian countries, along with
having the largest population, China is still a growing country with GDP Growth as shown in the
table below along with a very small percent of people below the poverty line. With that
information we realized that more people would be able to afford the toothpaste with the 2.8% of
the population below poverty line.
When entering China, we decided the channel we wanted to sell our product through was mainly
hypermarkets, because getting a product in a larger store where most people do their daily
shopping will increase the chances of more sales. Along with hypermarket the other channel we
sold our product through independent channels. The last six years China has dominated the sales
of toothpaste throughout Asia, as shown in the table below. This current year being a great
example with China having 2094 manufacturer toothpaste sales while Japan has half of that with
1190. China is always an attractive country to enter because of the endless opportunities for
growth. China is one of the biggest markets in the world, and big markets lead to big profits.
Plant:
We built our plant in China during the first period because our focus was the Chinese market. In
the final period of our simulation the shipping cost per unit from our home plant were $0.040,
while the shipping cost from our foreign plant in China was $0.010. With that information we
learned that we saved 3 cents per unit which saves our company Millions of dollars every period.
The initial capacity of our plant was 500.0 Million units. We felt like this was a good starting
point for production because it was enough to cover the demand for toothpaste throughout all of
China. We didn’t want to produce too much product, because we didn’t want our products to be
sitting in stores inventory for weeks before selling. The only change we made throughout the 8
periods took place in the final period when we added another 10.0 Million units to the capacity.
We thought by adding the extra capacity in the last period could set us up for further success in
the future. And if you look at the image below you can see the China Plant information, that
shows the initial and changes made throughout the periods.
Some factors that should be considered when constructing a manufacturing plant in a foreign
country include several things, starting with labor cost. Labor cost is one of the biggest reasons
why most companies move manufacturing facilities to foreign countries because they can hire
experienced workers for a fraction of the price. Another big factor to consider when moving into
another country would be stability in that country, because if the country isn’t stable you could
end up in an economic nightmare that could jeopardize the company.
Segmentation, Targeting, and Positioning:
While identifying possible markets to enter and segments within markets to identify, our team
was focused on segments that would create the most potential for massive brand exposure. The
most important key elements to our decision was weighing out; Population, Number of
competitors, Decrease in manufacturing costs, Annual GDP growth, Advertising expense, and
the country’s manufacturer toothpaste sales within the past 6 years. Based on the results of
weighted distribution matrix measuring the attractiveness of 6 different potential markets to
enter, China achieved the highest score under our hexagonal selection criteria.
According to the criteria listed above along with the weighted rating of each segmented market,
India came in second for the most attractive market to enter. Their market had huge potential for
brand exposure with regard to their massive population and high manufacturers toothpaste sales
within the past 6 years. Over the course of the 8 periods we did decide to focus strictly on the
Chinese market to try and establish and grow our brand within one region; so not to complicate
any business practices with too many moving parts. However, in retrospect considering how our
company grew exponentially each year it would have been advantageous to enter a new market
around the 4th or 5th period to help redistribute segments and elevate our overall brand equity.
Entering a new market would have given us the opportunity to diversify our product line, help
proliferate our brand and create a global presence across market segments.
Within the Chinese market, the most valued aspects of consumers’ decision criteria were Price,
which initially accounted for 52.5% of decision making. The second most valued criteria in
decision making was Effect, which initially contributed 25.5% to their overall purchasing
decisions when shopping. Throughout the 8 periods these two steadily remained the highest of
all the 5 criteria, with fluctuations from a lower bound of 22.4% and 51.9% to a higher bound of
25.5% and 56.4 for Effect and Price, respectively. These two criteria had an almost an inverse
relationship as the periods progressed. Price increasingly became more important while Effect
decreasingly became less important.
Based on the consumer purchasing habits, we chose to segment our brand into the markets that
primarily focused on Chinese families and younger consumers that desired economically sound
options. The campaigns for AllSmile were initially allocated budgets of $100 million for younger
consumers, and $200 million for families. These segments were campaigned through
Independent and Hypermarket channels based on the Chinese population’s shopping habits, as
these were the two most popular. Throughout the 8 periods we adjusted our positioning and
targeting in order to adapt to changing preferences in consumer buying habits. As our overalls
sales grew and we became more valued as a brand, we expanded our focus to include health
conscious consumers to avoid pigeon-holding our brand into one product channel.
Product Management:
After completing a thorough analysis of our market segments, how we would position our brand
within China and which consumer we would target we developed a set of products for
distribution. These decisions were determined by the acute buying habits of Chinese consumers
and how profitable certain product lines were in these respective categories. While a cost-
effective approach was a core concern, profit margins played a larger role in product
management.
With an initial approach of capturing economically sound consumers we focused half of our
SKU’s on Encm/Med/Tube/Pst and Ecnm/Sm/Tube/Gel and the other half on Wht/Sm/Tube/Pst
and Hlth/Med/Tube/Gel. In the results of the first period, we actually managed to achieve a
negative profit margin of –4.8% on Encm/Med/Tube/Pst products while the rest gained higher
gross margins of 6.9%, 13.6% and 11.0% in the aforementioned order.
Based on the historical sales of the Health and White products we eliminated Economy brands
from our product lines to pivot our focus on the more profitable channels. We chose to split the
offered products down the middle between Health and White with variations in size, packaging
and toothpaste type to help diversify our offerings to consumers. As our sales grew larger and the
periods progressed, our total gross margin spanned from a 30%-34.4% with an average of about
32%. By the 4th period we reintroduced Ecnm/Med/Tube/Pst to accommodate our growth and
recognition within China, but we later removed the product in period 6 due to its poor gross
margin of 19.4% in relation
While our margins never fluctuated too much, our 2nd period achieved the highest total gross
margin of 34.4%, and unfortunately we weren’t able to break this ceiling in subsequent periods.
to our other products.
From the chart above you can see that our total gross margin for China decreased after the 2nd
period and remained fairly constant until a slight uptick in period 6, which then was followed by
another dip into a low of 30% (excluding the 1st period due to the high cost of market entry)
Pricing:
Team 3 decided to price our SKUs based on the cost-plus pricing strategy. The chart below
shows a breakdown of our unit costs and MSRP:
Our goal was to achieve an average profit margin of 30%. As you can see in the next chart, we
did a good job meeting this goal. We were able to achieve a high profit margin keeping our
prices close or below the competition. This wouldn’t have been possible If we didn’t create a
factory in the first period. Not only did building the factory allow us to avoid tariffs and shipping
costs, it also benefitted us because we were able to take advantage of the lower wages because
we manufactured in China.
Promotion:
Our goal for promotion was to capture as much of the market as possible by effectively
marketing and communicating our product to our target market. In order to try and capture as
much of the market as possible, we entered China, as we felt it was the best market to gain
market share. We started out with a small salesforce and advertising budget. Early on in the
simulation, we were focused more on price and product, rather than promotion. The goal was to
see what our competitors were doing and what our target market was buying, and make our early
decisions based on these factors. Specifically, from rounds one to five we kept our advertising
budget constant, along with our salesforce. In hindsight, this is one aspect that we believed
should have been changed. A possible solution that would have brought increased results and
brand equity, would have been to steadily increase the amount spent on advertising and the
amount of salesforce. Doing this would have given our targeted customers better awareness of
our brand, thus theoretically resulting in increased brand equity and sales. Starting in round six,
we increased our advertising budget and salesforce substantially. Increasing by such a large
amount seemed required, after not increasing either aspect in the earlier rounds. We believed
that by doing this, we would see our brand equity and sales rise by a fair amount. Looking back
on this decision, however, we found that our brand equity and sales did not increase by the
amount we predicted.
As you can see from the graph, from period five and onward, our cumulative return on marketing
percentage plateaued. Even though we increased our spending on marketing by an immense
amount, our results remained relatively stagnant. We believe that this was a result of deciding to
increase spending at too late of the simulation. Another possible mistake we made that had an
effect on promotion, was choosing not to enter another country. By staying in China the entire
simulation, our plan was to capture as much of the Chinese market as possible. Due to this
decision, our advertising was done solely in Chinese throughout the simulation. In retrospect,
entering another country would have had a positive effect on our brand awareness and
equity. Entering a new market could have evaded the plateau from rounds five to eight and had
a positive effect on our percentage return on marketing.
Place:
We distributed in China through independent channels and hypermarket channels. The Chinese
shopping habits are 48.2% use independent channels and 29.7% use hypermarket channels. We
chose these two channels because they were the most popular for the Chinese population. We
initially placed 5 sales people working for the independent channel and then 3 sales people for
the hypermarket channel. We figured that since we were providing a product that has many
competitors and is fairly standard, we would not want to distribute through the drug store
channel nor any other channel, considering it only had a 17.3% and 4.7% shopping habit
outcome, respectively. It makes more sense to get more exposure through a channel that people
widely use. Initially we received more sales through independent channels than hypermarket
channels through the first two periods; however, every period after that we received greater sales
through hypermarket channels (as can be seen in the graph below). We should have placed more
sales workers in the hypermarket channel after the switch to maximize our sales effectiveness.
We only allocated 8 people to work in sales because we wanted to keep our initial costs low. By
period number 7, we decided to increase our sales force to 80 salespeople working in the
independent channel and 50 working in the hypermarket channel. This increased our sales force
expense from 1.9 million CNY to 31.9 million CNY, but we expected our push in sales force to
also increase our revenue. Looking at the sales we received in period 7 and 8, it further solidifies
that we should have shifted more of our sales force into the hypermarket channel, where our
sales jumped considerably, and taken some workers out of the independent channel where we
had a slight dip in sales. By period 8, 70.2% of our sales were through the hypermarket channel,
while only 29.8% were through the independent channel. 011
1
Executive Summary
I had three goals before starting this simulation, such as perfect BEI, the highest
profits, and the highest market share. To achieve these goals, I chose to enter India because
this was a very attractive market to sell my products in the aspects of population, population
growth rate, number of competitors, tariffs, duties, and fees. The second attractive country
was China. However, I got out of China because I wanted to focus on the Indian market so
that I can make the best outcome.
The segment was done basically, but targeting and positioning were a bit timeconsuming. I targeted younger people who care about the economy, white, and healthy, and
families who care about the economy and health of the Indian market. Because they had the
majority of the population and demand in the market. Target in China was decided in the
same technique.
For both countries, I positioned myself to be the same for less. This has attracted
customers to purchase my products in both countries.
I built my plant in India to minimize the shipment fee and tariffs. However, it was not
the best choice because building a plant in the home country requires firms a higher unit cost.
My 4P strategy has been done by checking customers’ behaviors and competitors’ 4P
strategies.
In advertising, I made a big mistake. I missed a detail, and this decreased my BEI.
This even affected my pricing.
Finally, I achieved my goals, such as getting the highest profits and market share, but
I failed to get the highest BEI, which is still the highest in the class.
2
Main Goals
The main goal I had was to get 100% on BEI. Outside of that, I aimed to win the
competition in countries I enter by making the highest profits and market share and building a
positive company image and consumer awareness. To achieve my goals, I have focused on 4P
decisions, consumers’ shopping habits and decision criteria by segments, and the competitors’
decisions, profits, and market shares. So, I mainly have dealt with pricing and promotion. I
offered my products at affordable prices and advertised my products a lot. I want to talk about
what decisions I have made to achieve the goals and why I have made the decisions.
Market Entry
The countries I entered are India and China. I entered India at the start year. Also, I
entered China in year 1 and exited in year 3. Initially, I felt that China is the most attractive
country for my business to enter. This is because China had the biggest population and the
highest GDP growth rate among the 6 country options. Also, the current GDP was the highest
among the countries. At the same time, I thought that India is also an attractive market
because India also had a huge population and the population growth rate was very high. Also,
India had the second-highest GDP, but it was less than China’s one. So, the most attractive
market was China and the second one was India. (Chart 1).
However, I realized that GDP would not be a huge factor of success for companies in
the toothpaste industry. This is because toothpaste is a cheap product and most people need
one. So, I chose to consider population, population growth rate, number of competitors,
tariffs, duties, and fees. Considering these factors, India became the most attractive country
because India had the least number of competitors and a huge population, and the population
growth rate was very high. As a result, I entered India first and China after that. (Chart 2)
3
Basic Segmentation
To recognize possible segments, I have checked the customer parts. There were 4
criteria, such as economy, white, healthy, and kids, and 3 target markets, such as younger,
older, and families. The segmentation has already been done by the simulation, so I had
nothing to do with this.
Targeting
To target the best segments, I checked customer decision criteria and
competitors’ market share.
For India, as chart 3 shows, the demand for families was the biggest and the demand
for older was the smallest. Also, as chart 4 shows, the order of customers’ criteria choice is
economy > healthy > white > Kids. Also, the market share part showed that the economy
section was dominated by Local 1, and the white section was dominated by Caremore and
Eversmile. The manufacturer sales in the economy section were the highest and the next one
was white. However, all others had 0 manufacturer sales. So, I have chosen to target younger
people who care about the economy, white, and healthy, and families who care about the
economy and health. For older, I decided to target only customers who care about the
economy. In sum, I have targeted 83.8% of customers in population, and 84.5% of customers
in demand. We didn’t target customers who cares about kinds because the market was too
small to enter.
For China, Older and families were the main target segments because the demand for
them is 80.9%. As chart 5 shows, the order of customers’ criteria choice is economy > healthy
> white > kids. Also, as chart 6 shows, the market share part showed that 3 companies were
competing in the section of the economy, 2 companies were competing in the section white,
4
and 2 companies were competing in the section of healthy. The manufacturer sales of the
economy were the highest and the next one was white, and the healthy had the smallest sales.
So, I mainly targeted younger people who care about the economy, white, and healthy, older
people who care about the economy and health, and families who care about the economy,
white, healthy, and kids. It is 94.8% of customers in population and 94.6% of customers in
demand.
Positioning
For both countries, I have tried to position my product as a similar quality to
competitors, but cheaper than their products (Same for Less). Since the majority of customers
care about the economical aspect, I wanted to attract their attention to maximize my profits.
Plant Location
Since I planned to enter both India and China, I had to choose where to build my
plant. When I checked shipping fees and tariffs, building a plant in India was cheaper. Also,
the average unit cost of the India plant was cheaper. This was my huge mistake. As we can
see in figure 1, the home plant shows the average unit cost of $1.31, but I checked only
numbers under India, not home. So, I successfully reduced my shipping fee, but I failed to
reduce my average unit cost. The average unit cost was much bigger than the shipping fee.
So, this increased the cost of goods sold. Because I believed that the home plant was the best
option for me, I didn’t change my plant location at all.
5
4P Strategy
To make the decision on place, I have looked up the consumers’ shopping habits. For
India, all segments shop in independent and drug stores. Hypermarket is also popular for
younger families. So, I have concentrated on independent, hypermarket, and wholesale. I
used wholesale because independent has a low percentage of direct sales, which means that
wholesalers are very important. So, for the start and first year, I allocated 330 sales force to
independent, 50 sales force to hypermarkets, and 40 sales force to wholesales. Then, I started
to increase my sales force to make bigger profits. So, I allocated 300 sales force to
independent, 450 sales force to drug stores, 310 sales force to hypermarkets, and 40 sales
force to wholesale. As I advanced my simulation, I increased the sales force for independent
and hypermarkets. As the independent sales force increased, I increased the wholesale sales
force as well.
For the place for China, I made the same decision for the 2 periods in the Indian
market because, as we can see in figure 3, the shopping habits of customers in India and
China were very similar.
For promotion, I pegged the promotion budget to $300 million. Also, I chose to
allocate the budget based on total channel sales. The budget was mostly allocated to
hypermarkets and independent stores. Figure 2 and figure 3 show us that the majority of
customers in both countries purchase toothpaste at independent stores, drug stores, and
hypermarkets. However, the most budget has been allocated to hypermarkets and drug stores.
This is because the sales in drug stores had exceeded the sales in independent stores, as we
can see in figure 4. So, I kept the sales force to drug stores.
For the price, I have mainly focused on competitors’ prices. As I chose to use the
same for less strategy, I priced my products at lower prices. As we can see in figures 5 and 6,
6
there are just one or two competitors who have cheaper prices than my product. For the
allowance, I kept my allowance lower than average because I realized that a lower allowance
increased my gross margin. For India, I chose to have an 8% allowance, whereas most
competitors have an 11% allowance. For China, I chose to have a 10% allowance, whereas
most competitors have an 11% allowance. Also, for MSRP, I set those lower than others to
keep my product price lower. These allowed me to be placed at the economical and normal
quality on the positioning map, as we can see in figures 7 and 8.
Finally, as we can see in figures 9 and 10, most customers prefer to use medium tube
gel toothpaste. So, based on the information, I chose to offer my products based on my
targets’ preferences. For India:
Economy
Whitening
Healthy
Kids
Small: paste
All sizes: paste
Small: paste
Medium: paste and gel
Medium: paste and gel
and gel
Medium: paste and gel
Large: paste and gel
Large: paste and gel
(All tube)
Large: paste and gel
(All Tube)
(All Tube)
(All Tube)
Also, for China:
Economy
Whitening
Healthy
Medium: paste and
Small: paste
Medium: paste and gel
gel
Medium: gel
Large: paste and gel
Large: paste and gel
Large: paste and gel
(All Tube)
(All Tube)
(All Tube)
Kids
None
For India, I started producing products for kids in the 7th year. This is because I felt
that I will be able to extend my business to kids because the number of customers under the
segment was not too small.
7
Advertising
I believe that advertising was one of the most important factors that decides my BEI
in this simulation. This is because of the 5 factors that decide my BEI, 4 factors are affected
by advertising, such as benefit positioning, creative execution, sales leadership, and share of
mind. To make the highest brand equity index, I have spent huge money on advertising. In the
first year, I targeted my core consumers. I spent $1,905 in the year. I advertised familieseconomy, younger-economy, younger-whitening, families-whitening, families-healthy. I
allocated my budget mainly to families-economy and younger-whitening. Also, since most
customers in India speak Hindi, I set the language Hindi. I kept it to year 4 and increased the
budget for advertising. This is because my BEI started decreasing, as we can see in Figures
11 and 12.
Figure 12 has increased in comparison to the first period, but it has decreased in
comparison to the previous period. So, I added advertisements targeting younger-healthy and
older-healthy. Also, I have increased the budget for advertising to $4,580. This was not
helpful to increase my BEI. So, I asked the professor what he thinks is wrong with my
advertising, and he told me that my advertisements are too old, so I have renewed all my
advertisements. Before I was told, I created 14 advertisements because I didn’t know about
the advertising renewal. My benefit position, creative execution, and sales leadership
decreased dramatically. However, after the advertising renewal, I got 100% creative
execution, and the benefit position and sales leadership increased. Also, the share of mind has
increased with the factors. So, finally, I reduced my advertisements to younger-economy,
families-economy, younger-whitening, families-whitening, families-healthy, younger-healthy,
older-healthy, and families-kids. I mainly focused on economy parts and whitening parts,
where there are many customers. This resulted in a 100% of benefit position and creative
execution as we can see in figure 13.
8
For China, I advertised targeting the older-economy, families-economy, familieswhitening, older-healthy, and families-healthy. I chose to use Chinese because China tends to
change international companies’ names in their language. Also, I spent $200 each, so I spent
$1,000 in total. My competitors have spent about $200 on their advertisements. So, as it was
my first entry to China, I wanted to make sure the budget I spent was reasonable. This
resulted in 100 creative execution and 89 benefit position. However, sales leadership and
share of mind parts were not high enough to increase my BEI. I believed that this is because I
just entered the new market. So, I chose to keep the advertising. As a result, my creative
execution extremely decreased and my sales leadership and share of mind increased. At the
same time, my creative execution and sales leadership for India decreased. Also, the share of
mind in India extremely increased. So, I chose to stop working in China to achieve my goal,
which is getting the best BEI.
BEI
First, I entered China for 2 years. The BEI for the first year was 64, as can be seen in
figure 14. Benefit position, creative execution, and price position were fairly high, but the
sales leader and share of mind were too low. So, first, I checked the pricing strategy. For the
pricing strategy, I set my price at a lower level in comparison to my competitors. However, it
was a similar level of prices, as figure 16 shows. So, my position on the positioning map was
not economical, as figure 17 shows. To solve this problem, I chose to decrease my product
prices more. After successfully reducing my prices, as figure 18 shows, I was able to place
myself on the economical side of the positioning map. However, it made my BEI even worse.
The price position part experienced 12 points decrease. Also, outside of the part, I thought
that low BEI was created because I just entered the market. So, I maintained my advertising
9
decision, and it worked. The sales leadership and share of mind part increased extremely.
However, creative execution decreased by 10 as well. At the same time, my BEI for India was
increasing more than the China market. So, I decided to focus on the Indian market. This
made my exit from the China market.
For BEI of India, my final BEI came up as 87. In this process, I made a huge
mistake. As it was said in the advertising part, I didn’t know that I should renew my
advertisement. By missing the detail, I experienced a continuous decrease in BEI. I have tried
to increase my BEI, but it was impossible with the old advertisements. I activated new
advertisements with the old ones, as we can see in figure 20. As a result, my BEI kept
decreasing as we can see in figure 21. When I updated and created my advertisements, I was
able to get a high score on my BEI, as we can see in figures 22 and 23. As mentioned in the
pricing part, I used the same for less strategy. This allowed me to maintain my price position
section over 80. I checked my competitors’ pricing strategies and positioning maps to set my
SKUs and prices appropriately so that I can maximize my price position part. However,
because of my mistake in advertising, I lost my focus on the pricing part, as we can see in
figure 13. So, the price position part decreased by 5.
In my opinion, if I knew the detail about advertising, I would have gotten BEI over
90%. However, this failure brought me a huge lesson. I will always focus on the detailed
parts of my business. While doing that, I won’t lose focus on any other side of my business.
Aimed Goals
I had 3 goals, such as getting 100% of BEI, making the highest profits, and taking the
biggest market share.
For the BEI, I failed to get 100% of BEI in my simulation, but I got the highest BEI
10
in my class, which is 87, as figure 24 shows. Also, I have learned huge lessons, such as taking
care of details in a business and not losing a focus on any parts are very important.
For the profit part, I achieved my goal. As figure 25 shows, I had 84 manufacturer
sales. However, my cost of goods sold was fairly high, but there are 2 companies that have a
similar level of cost of goods sold as my company. So, it was not too negative to me. So, I
had the biggest gross margin in India. This shows that I made the biggest profits in the
market.
I took a huge market share in India. As figure 26 shows, I took 41.8% of the total
market share. The part I made the biggest success in the health field. I took 79.8% of the
market share in the section. I opened 5 SKUs at cheap prices. Also, I spent the biggest money
on healthy advertisements. So, I was able to get this huge market share. So, this part was
successfully done.
To sum up, I failed to achieve 100% of BEI, but I achieved the highest profits and
market share. I got 87 BEI, 25.76 gross margin, which is the highest, and 41.8% of the total
market share, which is also the highest in the market.
11
Appendix
Chart 1: Market Entry-Climate
Chart 2: Market Entry Exercise- Market Evaluation
Chart 3: India Customer Decision Criteria
Chart 4: India Market Share
12
Chart 5: China Customer Decision Criteria
Chart 6: China Market Share
Figure 1: Production Cost Comparison Analysis
13
Figure 2: India Consumer Shopping Habits
Figure 3: China Consumer Shopping Habits
Figure 4: Sales Report
14
Figure 5: Pricing Competition in India
Figure 6: Pricing Competition in China
Figure 7: Positioning Map- India
15
Figure 8: Positioning Map-China
Figure 9: Target Segments’ Product Preferences
16
Figure 11: BEI- India: First Year
Figure 13: BEI-India: Eighth Year
Figure 14: BEI-China: First Year
17
Figure 16: Brand Pricing for China- First Year
Figure 20: India Advertising Failure
Figure 21: India BEI- After Advertising Failure
18
Figure 22: New Advertising
University of Wisconsin – Milwaukee
Country Simulator
Final Report
Bus-Adm 465 – International Marketing
Summary
We started by researching potential countries within the Asian market to gain a better
understanding of which country was most attractive. The main factors we considered when
deciding a country were Population, GDP Growth and GDP/Capita. We decided to enter China
based on its extremely high population along with its high GDP Growth as well as its attractive
GDP/Capita. Although we had the option to enter multiple countries we decided to focus
primarily on China since it provided so much potential for success.
Once we decide on China being the country to enter, it was time to figure out who we
would target specifically. Based on China’s overall population and demand we came to find that
Family/Economy consumers made the most sense to target. Not only did this category of
consumer represent the largest population they also possessed the highest demand. Another key
factor that contributed to this decision is overall and competitive manufacturing sales. The total
economy manufacturing sales are 8.1 million which is the highest when compared to White,
Healthy and Kids.
We then weighed out our five main decision criteria; Price, Effect, Size, Texture and
delivery, to find out which was most important to our market. After assessing each of the
segment we discovered that Price had a weighted average of 62.5% when compared to the other
4 factors.
We used all relevant information on our market to create a SKU for the product. The
Chinese market showed that they preferred a product with these characteristics: Economy Large
and or medium size, Tube, and paste or gel. We decided to start simple with a single SKU and
introduce more into the market over time. Once we finalized our tactics for entering the Asian
market, we were ready to run the simulation. Next we will look at what resulted from the
decisions within the simulation
Period 0:
We decided to distribute our product through hypermarket, wholesale and independent
channels. We Started our production in china with 500 million units.
We started by introducing a single SKU to the Chinese market.
Our plan was to start simple with a single SKU and build upon it in the rounds to come
Based on our research we decided that a Large economy tube paste would be the ideal
option for our consumer.
Here are a few more specifics we set for our SKU:
MSRP – 7.00
Allow. – 8.0%
Sales forecast – 0.0
We introduced our first campaign for our product in this period
Families/Economy/Chinese/China/New
Adapt. – 1,355.7
Budget – 90M
Period 1:
Our major concerns dealt with the Net contribution and gross margin
We decide to our shift of distribution and lower the price of the paste
Price per tube went from 5.08 to 3.19 while keeping our MSRP at 7.00.
We noticed that the Hypermarket was maxed out at 463 and the other channels of distribution
were too large, therefore we adjusted to:
Our changes in round 1 resulted in an increase in sales
We were also able to cut our sales force expenses in half
Period 2
After addressing the size of distribution and altering the price of the SKU our results changed
Addressing the issue of net contribution and gross margin, we increased both aspects by nearly
100 million through our actions.
We realized that our net contribution and gross margin were affected through limiting our sales
force expense and expanding our market to more affordable customers.
We kept most of our distribution channels the same and only changed the price/channels
minimally:
The only major differences in this period were the increase of MSRP to 8.5 and the Hypermarket increased
by 20 people, which increased our sales expense slightly.
Period 3:
Following the small increase in MSRP, price, and sales people in Hyper market .
We realized quickly that our gross margin was decreasing for the first time.
Despite a decrease in both the net contribution and gross margin, we still were seeing an increase in
sales in all three channels:
The major distinction in the first three periods compared the 3rd is the number of SKU’s
introduced.
While we were set on the Economy/Large/Tube/Paste due to our demographics and
research, we felt it was best to give our consumers a little more variety.
After period 3 since we were gaining market share in the Economy just having
one product, we decided to introduce 3 new SKUs which were:
Economy/Medium/Tube/Paste
Economy/Medium/Tube/Gel
Economy/Large/Tube/Gel
Period 4:
The results acquired from the addition SKU’s in period 3 are:
The 3 new SKUs served as a 15% increase in Gross margin for China.
We noticed that our competitors were lowering their prices, so we lowered our prices by 50 cents
We also ended up running the same advertising campaign as the last 3 years
Our performance in period 4 was better:
Our BEI went from 44 to 54
We grew our sales by 7.9%
Market share by 5.3%
Gross Margin experienced 149.9% Growth
Period 5:
Since we were starting to do better, we decided to keep our prices at the same level and keep the same
4 SKUs of:
Economy/Medium/Tube/Paste
Economy/Large/Tube/Paste
Economy/Medium/Tube/Gel
Economy/Large/Tube/Gel
The Changes we made before we started period 5 were to create a new advertising campaign
We began to focus more on how many sales people we had so we changed hypermarket from
100 people to 250 people.
We also were over producing so we lower our production capacity by 97 million.
Our changes proved to be successful:
Our BEI went from 54 to 62
Our sales grew by 24.5%
Market Share grew by 6.4%
Gross Margin grew by 35.8%
Period 6:
Major decisions we made in period 5 for period 6
Adding 70 million units to the already 500 million units for our capacity.
This was in response to the rising GDP growth and a relatively low inflation rate
We continued with our 4 SKUs of
Economy/Medium/Tube/Paste
Economy/Large/Tube/Paste
Economy/Medium/Tube/Gel
Economy/Large/Tube/Gel
But we changed raised the prices 50 cents for the pastes and 60 cents for the gels
We did this to try and counteract inflation and because we had a pretty low price in
comparison to our competitors.
We also ended up running the same advertisement campaign as the year prior.
Our performance for year 6 was bad. Our BEI went down from 62 to 55. We believe that it had to
do with the what we were charging. We raised our prices too aggressively, and we still were only
offering one benefit for our product.
Period 7:
To compensate for our costs being too high we lowered the price of each one of our SKUs an entire Yuan.
We also changed the amount of sales people in the three distribution channels we were using.
Independent went from 250 to 100
Hyper market went from 250 to 350
And wholesale went from 500 to 450
We figured that lowering the amount of sales people down, we could increase the amount of
profit we were making and lower our overhead costs.
In round 7 our unit sales went up around 100 million
But our COGS continued to increase
And our gross margin decreased by around 75 million
Period 8:
Going in to period 8 we decided to change our SKUs.
We dropped our Economy/Large/Tube/Gel and Economy/Large/Tube/Paste
we added White/Small/Medium/Paste and White/Medium/Tube/Paste
we made this decision because we realized that our Large tubes were costing us too much money,
and consumers were not as interested in buying them. we also wanted to move into another
market that we hadn’t yet. White seemed like the logical choice because it was very popular with
consumers.
Looking back, we should have gone with a kid’s product because it was the only market with one
competitor at the time.
For advertising, we adapted our economy ad for the new year, and we started a new ad targeting
families for our new line of White tooth paste.
And finally, we once again changed the amount of sales people in two of the channels we were
using. Sales people went up from 100 to 200, hypermarkets went from 350 to 300 and wholesale
stayed the same
We also increased the capacity of our plant by 100 million in order to meet the demands of our
consumers.
All these decisions were in vain however, our sales for period 8 were between period 4 and 5.
But that could have been because we changed our product line.
With that being said, our gross margin went back up to round 5/6 levels
And our COGS went down approximately 150 million
