CASE ANALYSIS ON STRATEGIC MARKETING PLANNING: OSCAR MAYER FOODS Submitted By: Sahil Bhambri (12 DCP-097) Saksham Sharma (12 DCP-098) Sandeep Bedi (12 DCP-100) Sawan Gupta (12 DCP-104) Tanuj Arora (12 DCP-117) Abhishel Bansal (12 DCP-134) 1. IDENTIFYING THE PROBLEM Oscar Mayer was a well-known food company, which had been operating for more than a 100 years in the meat market and was indeed very successful. The major problem it was facing in the recent years was that its sales were declining.
The reasons behind the decrease in sales were increase in market competition, decreasing market share, failure of the newly launched products and the inability to cater to the customer needs. Other companies were coming in the meat market, which in turn increased the competition in the market to supply meat products. These companies had products catering to the consumer needs, including microwaveable products, which helped them attract and steal Oscar Mayer’s customers. The result of this was that Oscar Mayer’s market share was dropping and thus it was witnessing a gradual fall in its sales.
Also the demand started to shift towards consumption of white meat & more healthy food products, it happened not only because of their sudden desire of becoming health conscious but also because of the rising prices of the red meat being offered majorly by Oscar Mayer. Their main products included Hotdogs, Bacon and Bologna. These products were made out of red meat, which had a high fat count, making people to favor the healthier white meat products. The consumer’s wanted products that could cater to their breakfast, lunch and dinner needs.
Their want was meat, be it red or white but healthy & full of nutrition. Their target audience was working mothers and children. Packing food early in the morning for five days a week was a tiring job, which was never appreciated. Also packed food dint taste that well. So working women required products, which could be consumed on the go, and just heating them in a microwave would be all the effort required. The corporation thus faced the problem of investment in a manner, which would get the corporation back on track & help it recapture its market share & sales. The central roblem concentrates on the decision-? making about the investments so that all these problems can be removed and the demand and sales can be increased. There are basically four solutions being considered and a management decision has to be taken as to which solution would benefit the company the most given all the constraints. These solutions would be discussed further on in the case analysis. 2. FORMULATION OF ALTERNATIVES Marcus McGraw was given four alternatives from each of his four managers and he has to choose either one among them or a combination of these alternatives.
The key points of each alternative are described below: THE FIRST ALTERNATIVE: The first alternative has two key points. • Adopt the marketing strategy. Increase the investment in advertising to boost the brand awareness and use the “Switch to Rich” campaign. • Introducing the new products being developed by R&D like LR Turkey Bacon, Great Roast Turkey etc. This strategy will require huge budgets for both A&P and R&D. Thus, although short-term profits will be reduced but would provide huge volumes and profit in the long run.
THE SECOND ALTERNATIVE: The second alternative focused on acquiring new companies that focus on healthy and convenient products- the three companies suggested (Chicken Rite Inc. , Turkey Time Ltd. , Crabbies Inc. ). Turkey Time was the company suggested by Jane Morely to be focused on as its plant might support further LR expansion. THE THIRD ALTERNATIVE: The third alternative was launching a fourth major category within processed meats that will be catering to consumer’s changing lifestyle.
The fourth major category as suggested can be either: Zappetites or Lunchables. These will be basically compact in size and address the convenience of the consumers and target an important part of the market. THE FOURTH ALTERNATIVE: The fourth alternative was going back to the basics in order to improve the company’s share in market. The key points suggested were to reduce the prices of product by 10%, increase the advertising budget and use R&D resources to develop low fat OM products as OM brands account for 82% of total profits. 3. ANALYSIS OF ALTERNATIVES
ROB GOODMAN’S PLAN: STRENGTHS • Louis Rich has shown a higher growth rate and as such the company should focus on leveraging this to meet its objectives of higher market share. • “Switch to Rich” campaign can increase the brand awareness, and showcase the company as an innovator to meet the higher nutritional level of consumer demand. • Focus on R&D to increase its product line and provide better diversification to the same. WEAKNESSES • The plan requires heavy investments in A&P and R&D, which would lead to lower shortterm profits. • Focus on white meat exclusively, would lead to negative publicity of the Oscar-Mayer red meat product line.
OPPORTUNITIES • White meat market is not saturated as of now, and R&D can come up with new products to capture more market share. • The new products shelved, can enter the market and may turn out to be profitable if properly backed by A&P. THREATS • • Competition may come up with new products before the R&D pays off. Intra firm competition (between red and white meat) may hamper the overall profits. JANE MORLEY’S PLAN: STRENGTHS • Integration of already established production units, through acquisitions, will lead to quick profitability and improved products. The sales volumes of these to be acquired companies will add to the market share. WEAKNESSES • • Heavy investments will lead to less money for R&D High risk involved in the process OPPORTUNITIES • • Turkey Time has an excess capacity plant, which can be used for long term expansion. Ready to eat products developed by these companies can be the next big thing, in sync with the changing consumer lifestyle. THREATS • The balance between existing products and new incorporations may not be as smooth as hoped for. JIM LONGSTREET’S PLAN: STRENGTHS • • New product line, in sync with consumer demand.
Gestation period is low. WEAKNESSES • • Consumers apprehensive about the quality of pre packed lunch. Products easy to copy. OPPORTUNITIES • • The brand name of Oscar Mayer can be leveraged to promote these products. The growth in microwave’s demand, can be used to launch products accordingly, providing better value to the consumers. THREATS • • These products can be easily copied by the competition. Long term growth not targeted. ERIC STANGER’S PLAN: STRENGTHS • • Price cuts, backed by the OM brand will lead to higher market share.
Reinvigorating the OM brand might lead to better sales. WEAKNESSES • • Reliability only on the OM brand backing Sole focus on OM products will hamper the growth of the Louis Rich line. OPPORTUNITIES • R&D resources can lead to better innovation and low fat products. • OM brand backing may preserve the market share. THREATS • The value received by the customers is dipping and this may hamper the success of future products. • The plan does not provide with a clear-cut solution to foreseeable problems. 4. OUR SOLUTION AND ITS ACTION PLAN
Taking into account all the proposed plans, we have decided to select the one that provides better long-term profits and increases the market share. • We believe that to increase the long-term profits the company has to innovate, its product line and provide better value in terms of quality and price, to the customers. This can be achieved by investing in R&D and price cuts in already established OM brands. • To leverage the growth rate of Louis Rich line, the company should opt for better promotion of their brands, without negatively projecting the red meat products of existing OM brands. The company should advertise in such a way, as to cater to both market, the taste sensitive red meat market, as well as the nutrition dependent white meat market. The balance if maintained will let the company retain its share of the red meat market, while increasing the share of the white meat market. • The acquisition of existing companies should be done if and only if Oscar-Mayer is sure of the quality of their products and their subsequent demand, because the investments in R&D will be cut down, if it acquires new companies. Introduction of new products such as Lunchables and Zappetites, which cater to the increasing needs of convenience and Ready-to-eat Products. • The Share of Advertising and R&D fund to be allocated to OM Brand and LR brand will be according to their profitability share i. e. 82%-18%, so as to not let the LR Brand products be overtaken by other competitors due to lack of innovation. If however the company has to acquire, it should acquire “Turkey Time”. This would benefit the company in the following ways: • • Their plant may come in handy for further LR development.
It is known to produce Ready to eat meals such as frozen sandwiches. Hence, should diversify the product line up. They have a new plant with an excess capacity production to support Zappetites and Lunchables when they are introduced. 5. CONTINGENCY PLAN As we have discussed in the solution, that the research and development in the field of developing low-fat red meat will be able to replace the white meat completely as the former one is tastier. Now if our implementation plan fails due to some reason then we have to implement our contingency plan, which is discussed below.
According to the contingency plan proposed by us: • Since the new product developed will require a lot of investment in R&D ,so the price will be on a slightly higher side. The consumer market for low-fat red meat can be reluctant on buying due to this. Therefore the contingency plan includes reducing down the price of our newly developed low-fat product, which will obviously encourage the target market of low-fat product consumers to go for our new product and will help in boosting up the sales in case our implementation plan fails.
SWOT ANALYSIS OF CONTINGENCY PLAN: STRENGTHS: • OSCAR MAYER has a strong brand image in market. So consumers will prefer buying our product when available at low price as compared to other brand products. WEAKNESS: • This will have a negative impact on the brand value. Since OSCAR MAYER is capable of producing best quality product through its R&D. So once lowering the price boosts the sales up then there is a very good opportunity to capture large share of market through this new product. THREATS: • Cutting down of price can harm short-term profits of company. OPPORTUNITIES: •