PRACTICE CASE (PART 2)
(REVISED)

MGT 487 - Rothschild

Issues, Alternatives, Recommendations, Implementation

You’ve just completed an External and Internal Analysis of your company - you’ve looked at industry characteristics and the company situation. Based on your analysis you should have discovered some strengths, weaknesses, opportunities, and threats facing the company.

In this Practice Case Part 2, you’re going to turn your attention to identifying the critical strategic issues for your company. Once you’ve identified those issues, you’ll come up with alternatives to address that issue, make a choice and tell why, and design implementation plans. Here are the directions.

1. Identify the critical strategic ISSUES facing your company. (You may have started identifying such issues at the end of Practice Case Part 1). Be sure to state both WHAT the issue is (which includes a description of the current situation) and WHY you see it as an issue. Typical issues are critical weaknesses that need to be corrected; opportunities that the company wants to take advantage of with its strengths, distinctive competencies the company wants (or needs) to develop; or possibly threats that the company wants to steer away from. Supporting "why" you see something as an issue will usually come from the information you've covered in your PRACTICE CASE PART 1, paying particular attention to the SWOT analysis. As far as "number" of issues that you need to find, there is no magic number. But, you can bet there’s probably more than one! And if you get over five or six, you could probably lump some issues together.
   
   Notes: Prioritize your most pressing issues and consider the impact one issue will have on the other. If you’ve identified that Company A “must reduce their indebtedness”, be careful about also suggesting that Company A “must develop and launch a new product line.” Be sure the data suggests this, and is one of the three most pressing issues. You can clarify, by suggesting a timetable, or discussing prerequisite conditions
2. Once you’ve identified these issues, you need to develop strategic ALTERNATIVES (at least two) for each issue. In your alternatives, be sure to identify the following: WHAT the alternative is (have they attempted this before or done something similar; if where do they currently stand in terms of x - brand recognition); HOW the alternative will be done (you do the preliminary research) – be VERY specific and thorough in this part; WHO will do it; WHEN it will be done; and WHERE it will be done. In typing up this section, be sure to use these headings. Two alternatives you CANNOT use: firing someone and going bankrupt.   
   
   Notes:

3. When considering alternatives, don’t forget to refer to your textbook for discussions on possible strategies given a “mature industry” (p. 258) or given a “weak business”. Chapter Eight provides both “dos” and “don’ts” –given certain kinds of industry characteristics and company situations.

4. Let the research drive the identification of issues. Avoid the finding a place for your “favorite” solution

5. Consider viability of alternatives –

1. “country notebooks,”

2. “better communication with competitors” – would it be logical for McDonalds to share information with Burger King?

3. “open retail operations” without concern for financial position of company.

Alternative can not be – hire a consulting firm to determine which international markets to enter into. Do more research is not acceptable.

While you may not be able to determine exactly which company you should acquire, you should be able to narrow it down to one or two options – and for these reasons.

Second guess the feasibility of the alternatives you recommend. If it’s such a great idea, why didn’t the smart people at Company A already think about it.

If alternative is unconventional, or rare, provide strong rationale or evidence that it has been used in another industry.

6. Now, you’re ready to make a decision - RECOMMENDATIONS. You can choose as many of your alternatives to "solve" your issue as you want, as long as they’re not mutually exclusive! (That is, you can’t decide to change and also decide to not change.) Look at your strategic alternatives. Which are you choosing and which are you rejecting? Tell WHY you chose the alternative(s) you did and WHY you rejected the other(s). Explain how your recommendation(s) will resolve the issue and the risks/benefits associated with the recommendation.
7. Describe your IMPLEMENTATION PLANS and risks/benefits to be considered. For my approach, this involves describing what changes need to be made in the following: Use the eight implementation issues from Chapters 11-13 - a summary is found on page 348). You may not need to address each of these issues. But do not avoid financing and budgets (you MUST tell where funding is coming from for the implementation of your chosen alternative(s) – either internal funding [expected increase in sales revenue from selected alternative, cash or other reserves, or taking from another budget area] or external funding [short-term debt, long-term debt, issuing stock]) and any other areas. Again, use appropriate subheadings.

8. Format should be as follows: Do one issue, its alternatives, its recommendations, and its implementation. Then move on to the next issue and do its alternatives, recommendations, implementation, etc. etc. for as many issues as you have. Use the subheads found in ALL CAPS above.

Sample Format for
Issue, Alternatives and Recommendations
from Quaker Oats Case

Please note the organization and structure of this sample. I also want you to notice the team’s attempt to substantiate their claims or recommendations, by citing sources.

I’ll show you how to format your citations in a document like this.

Strategic Issue 1: Quaker must improve brand awareness.

We’ve determined that a critical issue Quaker must address is …..
As our external analysis reports, brand awareness and sustaining a high quality image is a marketing-related key success factor that is vital to maintaining Quaker’s current market share in the cereal and the sport beverage industries. A SWOT analysis reveals that while Quaker is strong in …., their weaknesses among seem to be related to consumer’s perceptions and recognition of ….. This is a critical issue because…. In fact, Jack Neff reported in Food Processing that Kellogg’s fell from being the market leader as a result of slashing their ad spending in order to hit quarterly earning forecasts, which supports the importance of the following alternatives.

Alternative 1:

What: Expand the new Toasted Oatmeal television ad into a full cereal line campaign that encompasses all of Quaker’s ready-to-eat cereals. The new Toasted Oatmeal campaign brings a more contemporary look to the brand; additionally, the ads will update the “Quaker Man’s” image that has become stuffy and outdated. “The whole idea is to bring a little bit of entertainment value, fun and humor” according to Kurt Fries, the creative director at FCB Worldwide. Mr. Fries also said the cereal is returning to the brand’s heritage, rather than the previous taste-focused, “You haven’t loved a cereal this much since you were a kid” campaign. The tagline returns the focus on the brand and will build brand value, which in turn will increase Quaker’s cereal sales and Gatorade’s sales by 10% to 20% (the average sales objective for a brand awareness campaign).

How: Based upon the objective to build brand awareness, the campaign would employ television, radio, and print medias. Two 30 second and four 15 second TV spots that are ran primarily during early evening programming is recommended. This has been Quaker’s strategy in the past, as stated in Advertising Age, May 8,2000, to reach their target market of 40 plus adults. More short television ads are suggested in order to gain a higher frequency, which aids in building brand awareness.

Utilizing radio in conjunction with the television spots is suggested because it is a good reminder media. It also results in image transfer, which is when the audience replays the TV commercial in their mind as they hear the radio ad. Radio advertising has the second lowest cost per thousand, as stated in Advertising: Principles and Practice, and would allow Quaker to more efficiently reach the target. The radio commercials would be ran during morning and evening drive times, the optimal time to reach the target market.

We highly recommend the use of newspaper advertising as well, which is also an excellent media to achieve high frequency and reach the target market. Coupons are a call to action type of advertising that provides an incentive for consumers to purchase the product initially. Many of them will repurchase without the incentive because they had positive results with Quaker’s cereal. This would contribute to the objective of increasing sales by 10 to 20 percent. The coupon offer would only be ran in local papers during the first month of every quarter to ensure that Quaker did not tarnish it’s image and have to compete based on cost. The newspaper print ad will be ran in papers that hit large markets first, such as the East and West coast, and will then be ran in newspapers serving smaller markets, such as the Midwest.

Who: FCB Worldwide would be responsible for creating the campaign elements. It is recommended that Quaker request the creative team that worked on the Toasted Oatmeal campaign be assigned to this campaign as well. This will allow the contemporary look and feel to be consistent with the original ad. The advertising agency will continue to work with their current client contact at Quaker, as a relationship has already been established. However, the Marketing Director would give final approval for all elements. FCB Worldwide would also be responsible for arranging all of the media needs. The advertising agency would create an estimate that outlines the budget for each element of the campaign; the Marketing director would then approve the budget.

When: The campaign start date would be based on the advertising agencies schedule. Preferably, creative concepting would begin as soon as Quaker approved a budget. It is recommended that the campaign be implemented over a one-year period. The television ads would be ran intensively the first six months and then less regularly the remaining six months. The radio ads are to be ran during the last six months of the television commercials in order to aid image recall. As previously stated, the coupons will be placed in Sunday papers one time in every quarter.

Where: This would be a national campaign, which is supported by the use of prime time television advertising. After evaluating the success of this campaign, an analysis of taking it internationally would be done. However, intensive research must be done on each country considered in order to avoid any self-reference criteria bias or cultural misunderstanding.

Alternative 2

What: Create an advertising campaign with the objective of positioning Quaker cereal as a snack or lunch substitute. The competitive pressures on the snack and lunch day apart from cereal are strong. This is based on the three factors that Thompson and Strickland provide on page 81; (1) Cereal is competitively priced compared to many snack foods, such as granola bars and snack size portions. It is also priced lower than most lunch alternatives. A box costs around $3.00 and would provide about 10 servings; compared to a fast food lunch that is rarely less than $3.00. (2) In terms of quality, Quaker’s cereal is made of high quality ingredients that meets or exceeds snack and/or lunch quality. Cereal is also a good source of many essential vitamins and minerals and a low fat alternative to many high fat snacks. One issue to consider, cereal may not be high enough in calories to substitute a large lunch. (3) Most consumers are familiar with cereal and buy a box at least once a month. Therefore, the ease of switching is very low because the substitute is already available in most cases.

This advertising campaign will increase Quaker’s brand awareness by increasing the uses that it is considered for. The desired belief for the target market to have of Quaker’s cereal is that it is more than just a breakfast option. Also, it will target those who do not eat breakfast.

How: The main objective of this campaign would be to educate consumers about the value of using cereal as a substitute for snacks and lunch. Therefore, it is highly recommended that print be the primary media utilized. Body copy can be used to inform consumers of the details; such as the nutritional value or that it is a low fat alternative. It is also a media that can target selected audience, which would result in the most efficient use of the budget. Another benefit of print media is the ability to create excellent food shots by utilizing the magazines high quality printing abilities.

Based upon the target market that was stated in advertising age, TV Guide and People are recommended. TV Guide has 35 million readers per week, according to www.tvguide.com. They also stated that 41 percent of their readers are parents. People is also a magazine to consider because their target audience is 30 plus, which encompasses our target of 40 plus. Additionally, it is recommended that an ad be ran every other month, for three months and then replaced with a new ad. This will achieve the frequency needed to convey all of the details to the target audience.

Who: It is recommended that FCB Worldwide would be used in this campaign, based on the success Quaker has achieved with their past campaigns.

The same responsibilities described in the previous alternative would be assigned to FCB Worldwide, the client contact, and the Marketing director. However, because this is not an image changing campaign, the Marketing director would be less involved.

When: Estimated, based on other advertising agency norms, time from conception to publication would be 4 months. It is suggested that the ads be ran every other month for 5 months.

Where: The ads would be run nationwide, but it is not recommended that they be taken global. Each culture will vary in eating habits, and the ad would not be efficient for other countries because of these differences.

Alternative 3

What: Develop a line of Gatorade clothing and accessories to strengthen the brands image and to sustain market leadership with the sports drink industry. The apparel line will consist of everything from hats and t-shirts to embroidered ankle socks sporting their brand mark, the lightening bolt. The implementation of clothing and accessories will not only help generate a growth in sales, but will help the overall brand awareness of Quaker Oats.

Who: The target market for Gatorades line of clothing and accessories will range from those persons involved in professional sports to those who partake in physical activities to increase a healthier lifestyle. Like Nike’s Swoosh logo, Gatorade will sponsor professional athletic teams to gain exposure of their brand mark. The placement of the lightening bolt on jerseys, helmets, and hats will help produce the trickle down effect. If athletes and persons enduring physical activities see professional athletes sporting the logo, it may greatly influence their buying decision.

When: Production for Gatorade clothing will begin in 12 months. The company will have to conduct tests and research professional athletic teams seeking sponsorship in turn for exposure. Negotiations with these teams will begin prior to the end of their sponsorship contract. The process will take 8 months to complete, and then research will be conducted for possible retail locations. Once Quaker has signed on at least 20 professional teams, the printing of the logo will be begin. This stage of production will take a week and a half to complete. The remaining time will be spent on distributing the products to the teams. The company will begin distribution of their sports clothing in retail outlets 2yrs. prior to the launch of their logo on professional gear.

Where: Gatorade clothing will be a nationwide approach to gaining brand awareness. If the sports line of clothing is a success in the United States, the company may begin researching possible outlets internationally.

How: The placement of the logo on professional jerseys, helmets, and hats will begin the companies advertising launch of clothing. After the exposure received on television for the company’s logo, the lightening bolt, the promotions within the retail outlets will begin. The line of clothing will be advertised in a majority of sporting good stores and specialty stores. The company will not offer coupons or discounts on their products unless sales are declining. For the most part, the majority of the companies advertising will be through the sponsorship of professional teams.

Recommendation

Our recommendation is to implement Alternative 1: Expand the new Toasted Oatmeal television ad into a full cereal line campaign that encompasses all of Quaker’s ready-to-eat cereals. While both ad campaigns (Alt 1 and 2) would build Quaker’s brand name, the first also achieves a needed image change. It is also a larger campaign, using more medias that will reach a greater percentage of the target market. In addition, Bob Swientek states “Strong brands, product innovation, and operational efficiencies propel Quaker Oats to the top tier of food companies,” in this years September issue of Prepared Foods. Mr. Swientek’s statement provides additional support to implement the larger, more encompassing campaign.

The second alternative is suggested as a campaign for the future but it is not recommended that it be ran previous to or in conjunction with the image campaign. Implementing the campaigns at the same time would be too great of an expense. It is more efficient to run the campaign six months to a year after the first alternative is implemented. However, a full evaluation of the industry and company is suggested before the campaign is implemented, as there will most likely be changes within the industry during that time period. Therefore, the implementation is based solely on the first alternative and it is recommended that the second campaign be noted as a possibility for the future.

Implementation

Changes in Organizational Structure

Quaker uses an external advertising agency; which means that there will only be one organizational change within the company. The recommended change is to add another client contact for the agency. This is based on the fact that the campaign is a large project with various elements; all of the elements contribute to the important issue of building Quaker’s image. The additional client contact will not only allow the current contact time to continue to handle their other responsibilities, but will also aid in creating and producing the campaign’s elements in the most timely manner.

It is also recommended that Quaker continue to outsource it’s advertising to FCB Worldwide. As Thompson and Strickland state on page 279, “What makes outsourcing attractive is that an outsider, by concentrating specialists and technology in its area of expertise, can frequently perform these service as well or better and usually more cheaply than a company that performs the activities only for itself.” This is especially true in the case of advertising agencies. According to Wells, Burnett, and Moriarty’s textbook, Advertising: Principles and Practice, agencies can offer objective advice, draw on the collective experience and training of its staff, maintain morale, and build spirit more effectively among creative people that corporations can.

Changes in Organizational Culture and Leadership

It is recommended that a company wide meeting be held before the campaign is launched. This will provide an opportunity for employee’s to share their ideas and suggestions about the campaign. As Thompson and Strickland report on page 58, “A company’s values and culture can dominate the kinds of strategic moves it considers or rejects.” It is important that everyone in the organization agree with and is excited about Quaker’s new image campaign and the results it will have on sales due to increased brand awareness. A company meeting will generate a feeling of involvement in the new strategy, which will assist in its success.

Changing in Funding, Budgeting and Other Areas

According to Thompson and Strickland on page 311, “Depriving strategy-critical groups of the funds needed to execute their pieces of the strategy can undermine the implementation process.” Therefore, we recommend increasing the advertising budget by 15% in order to support the key success factor of increased brand awareness.

The funding for the increase will come AS A RESULT OF from the CEO and president, Robert Morrison’s three strategic goals, as listed in Prepared Foods September 2000. First, Morrison simplified the company’s operations by flattening the organizations structure. This also included selling a number of businesses that were not earning their cost of capital and had no reasonable prospect of doing so. The second strategy was to develop a more focused and rational approach to its international operations. This resulted in getting Quaker’s profits up in Europe and cutting their losses in Asia. The last strategy is to vigorously attack costs. Basically, it involved cutting procurement costs, manufacturing costs, distribution costs and inefficient deal spending. Morrison stated that he would “reinvest the bulk of these saving in new product and brand-building programs behind our most attractive brands,” which would include the new advertising campaign to create a more contemporary image for Quaker.