Chapter 3 - Chapter 3 Marketing Decision Making and Case...

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Unformatted text preview: Chapter 3 Marketing Decision Making and Case Analysis In this chapter, you will learn about… 1. Decision­Making Process Define the Problem Enumerate the Decision Factors Consider Relevant Information Identify the Best Alternative Develop an Implementation Plan Evaluate the decision and decision process 2 In this chapter, you will learn about… 2. Preparing and presenting a case analysis Approaching the case analysis Formulating the case analysis Communicating the case analysis 3 Decision Making “Decision making is a rational and systematic process. Its organization is a definite sequence of steps, each of them in turn rational and systematic.” - Peter Drucker 4 Decision Making Define the Problem Enumerate Decision Factors Consider Relevant Information Identify the Best Alternative Develop a Plan for Implementing the Chosen Alternative Evaluate the Decision and the Decision Process 5 Define the Problem A well­defined problem outlines the framework within which a solution can be derived. It includes: Objectives of the decision maker Recognition of constraints Clear success measure or goal for assessing progress toward solving the problem e.g., El Nacho Foods 6 Sample Problem • • As an integrated beverage company, RefreshNow! leads its own brand design, marketing and sales efforts. In addition, the company owns the entire beverage supply chain, including production of concentrates, bottling and packaging, and distribution to retail outlets. RefreshNow! has a considerable number of brands across carbonated and non-carbonated drinks, 5 large bottling plants throughout the country and distribution agreements with most major retailers. RefreshNow! is evaluating the launch of a new product, a flavored non-sparkling bottled water called O-Natura. The company expects this new beverage to capitalize on the recent trend towards health-conscious alternatives in the packaged goods market • Analyze the major factors surrounding the launch of O-Natura 7 Enumerate the Decision Factors Factors to be enumerated Controllable Alternative Courses of Action Uncontrollable Uncertainties in the Competitive Environment e.g., Arrow Shirts 8 Consider Relevant Information “The truly successful managers and leaders of the [twenty­first] century will…be characterized not by how they can access information, but how they can access the most relevant information and differentiate it from the exponentially multiplying masses of non­ relevant information.” 9 Consider Relevant Information Characteristics of the industry and competitive environment Characteristics of the organization Characteristics of the alternatives under consideration 10 Consider Relevant Information Points to Remember 1. Resist the temptation to consider everything in a case as a “fact” 2. Create relevant information, if not available, by blending together data given in the case 11 Identify the Best Alternative Decision analysis Matches each alternative identified by the manager with the uncertainties existing in the environment and assigns a quantitative value to the outcome associated with each match. 12 Identify the Best Alternative Identify the Best Alternative Sample Decision Tree Company Action Competitive Response Financial Outcome Maintain price $150,000 Reduce price further $110,000 Maintain price $175,000 Reduce price Maintain price Reduce price further $90,000 Identify the Best Alternative Expected Monetary Value The Expected Monetary Value (EMV) of a decision alternative is: Outcome of Uncertainty1 x P(Uncertainty1) + Outcome of Uncertainty2 x P(Uncertainty2) + … + Outcome of Uncertaintyn x P(Uncertaintyn) 14 Identify the Best Alternative Sample Payoff Table Uncertainties Alternatives Competitors reduce Competitors maintain price (Probability=0.1) price (Probability=0.9) Reduce Price $150,000 $110,000 Maintain Price $175,000 $90,000 Expected value of reducing price: (0.9) ($150000) + (0.1) ($110000) = $146,000 Expected value of maintaining price: (0.9) ($175000) + (0.1) ($90000) = $166,500 Identify the Best Alternative Expected Value of Perfect Information Uncertainties Alternatives Competitors reduce Competitors maintain price (Probability=0.1) price (Probability=0.9) Reduce Price $150,000 $110,000 Maintain Price $175,000 $90,000 Expected value of certainty: (0.9)($175000) + (0.1)($110000) = $168,500 Expected value of perfect info: EMVcertainty– EMVbest alt.: $168500 - $166500 = $2,000 Familiarity with decision analysis is important for FOUR reasons: 1. It is a fundamental tool for considering “what if” situations 2. It forces the case analyst to quantify outcomes associated with specific actions 3. It is useful in a variety of settings – product, communication, channel, or pricing decisions 4. It can be used in determining the value of “perfect” information 17 Develop a Plan for Implementing the Chosen Alternative Resource allocation and timing Strategy formulation Strategy implementation 18 Evaluate the Decision Was a decision made? Was the decision appropriate, given the situation identified in the case setting? 19 Evaluate the Decision Process 1. Did I define the problem accurately? 2. Did I identify all pertinent alternatives and uncertainties? Were my assumptions realistic? 3. Did I consider all information relevant to the decision? 4. Did I recommend the appropriate course of action? 5. Did I consider how my recommendation could be implemented? 20 Case Analysis Approaching the Case Become familiar with the issue(s) at hand Identify key “facts and assumptions” Do not rush to a conclusion Do not “work the numbers” until you understand their meaning Do not confuse supposition with fact 21 Case Analysis Formulating the Analysis Framework for Analysis Nature of the industry, market, and buying behavior The organization A plan of action Potential outcomes 22 Formulating the Analysis Nature of the Industry, Market, and Buying Behavior What is the nature of industry structure, conduct, and performance? Who are the competitors, and what are their strengths and weaknesses? How do consumers buy in this industry or market? Can the market be segmented? How? Can the segments be quantified? What are the requirements for success in this industry? 23 Formulating the Analysis The Organization What are the organization’s mission, objectives, and distinctive competency? What is its offering to the market? How can its past and present performance be characterized? What is its potential? What is the situation in which the manager or organization finds itself? What factors have contributed to the present situation? 24 Formulating the Analysis A Plan of Action What actions are available to the organization? What are the costs and benefits of actions in both qualitative and quantitative terms? Is there a disparity between what the organization wants to do, should do, can do, and must do? 25 Formulating the Analysis Potential Outcomes What will be the buyer, trade, and competitive response to each course of action? How will each course of action satisfy buyer, trade, and organization requirements? What is the potential profitability of each course of action? Will the action enhance or reduce the organization’s ability to compete in the future? 26 ...
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This note was uploaded on 03/05/2012 for the course MKGT 465 taught by Professor Mr.ghosh during the Spring '12 term at South Carolina.

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