Case Study Analysis Bush Boake Allen Marketing Essay

1. Introduction

Since its foundation in 1966 by merging of three British companies, Bush Boake Allen had been outstanding and known to one of the leading firms in the flavor and fragrance industry. The firm seemed to be in a stable industry as such food and fragrance are closely associated with people’s daily life.

However, BBA had to be coped with the cost pressure and high risk given the traditional business model. On the top of that, by using new technologies, some firms can analyze production cost information of flavor and even chemical components as well. That made flavor prices in the market might be forced to decrease (Stefan Thomke and Ashok Nimgade 2000). For the above reasons, Julian Boyden, CEO of BBA is about to begin new business strategy called “Mercury Project” which allows their customers to actually participate in flavor development process via online-based application software. In a setting where customers can handle flavor, there may be some advantages in terms of time-saving and high-rate acceptance by customers themselves who manipulate flavors in the development. This may bring about substantial change not only to the firm’s business model but also relationship between the firm and customers. The thing is, however, not absolutely optimistic to the firm, as senior managers of BBA countered the new approach may be somewhat challenging and controversial on following several issues.

First and foremost of all, the firm may be concerned with how much they give customers authority to control flavor development. This is related to where the flavor sample product machine should be located. For example, if customers get an authority to control the flavor development in their sites, they had to pay half million dollar for machine which may be not very affordable to the customers. Secondly, even if the customer has an opportunity to manipulate the new machine, they could be frustrated if they have difficulty operating the machine and software or fail to get the flavor they initially wanted. What is more, even customers who take advantage of the new software might underestimate flavorsists of the firm. Thirdly, the role of marketing is doubtful in the new business model. Traditionally, division of marketing had significant impact on the firm performance due to the fact that marketers closely had relationship with their customers from the flavor development to delivery of finished sample. On the other hand, as customers can directly involve in flavor development, task of marketers may decline.

This paper will begin with the overview of the company and market environment of that time period. Then the paper will continue with the analysis of the business strategy and present managerial recommendations for Bush Boake Allen in the end.

2. Company Overview: Bush Boake Allen

Since its foundation in 1966 by merging of three British companies including Bush Ltd., A. Boake Roberts Ltd., and Stafford Allen Ltd5), Bush Boake Allen, Inc had provided flavors and fragrances to the consumer products companies for use in foods, beverages, soaps and detergents, and so on. The BBA’s key global strategy had been “maintaining a decentralized structure. They tried to give empowerment to regional subsidiaries to locally make their decision (Stefan Thomke and Ashok Nimgade 2000). Especially in 1980’s, through a “Gaps in Maps” strategy, they started to launched global sites to accomplish consistent supply to customers and meet the local preferences. By 2000, BBA had 6 major sites Montvale, Dallas, London, Chennai, Singapore, and 13 minor sites worldwide.

In 1982, BBA was merged by Union Camp. In 1994, the company went for public with a seven-year $240 million capital investment program. After that the firm emphasized on production innovation by launching a new “creativity center”. The firm spent $25 million on research and development to worldwide sites each year in order to get global prominence. During the 1990’s, the company steadily grew, and the company’s main sector became flavor business, which is accounting for 58 % of sales in 1997.5)

In 2000, BBA conducted operations on 6 continents, had locations in 38 countries worldwide.

Three main facilities are in New Jersey, London, and India. Annual revenue is half-billion dollar (flavors and fragrances accounted for 80%). With strong overseas presence, it is part of top 10 leading firms in the flavor and fragrance industry (Stefan Thomke and Ashok Nimgade 2000).

3. Market Environment

Flavor development is extremely complex, and the developed flavor may be not easily imitated by other firms. As a result, most of companies are contingent on “trade secrets” but not “patent”, so the industry is surround with mainly trust-based environment (Stefan Thomke and Ashok Nimgade 2000).

While flavor and fragrance industry had steadily grown, the feature of flavor and fragrance industry is very intense with as much as three hundred competitors. Only a few multinational firms are existed, and they account for over three-fourth of international market. Annual growth of flavors and fragrances worldwide in the industry are each 3.2% and 2.5% (Stefan Thomke and Ashok Nimgade 2000). The three major markets are North America, Western Europe, and Asian Pacific. In especial, India was considered highly growing flavor market; BBA had taken advantage of India market since British colonial time.

BBA has relationship with several suppliers to get raw materials to keep stable supply. Each has account for less than 4% of the raw material requirements in 1999 (Stefan Thomke and Ashok Nimgade 2000).

Flavor seeking customers in the industry generally have relationship with multiple flavor companies, and they traditionally select only a few flavor firms to accept the flavor output (Stefan Thomke and Ashok Nimgade 2000).

4. Business Strategy Analysis

1) Flavor development and customer relation

Flavor development is a key to success in the flavor industry. Especially, innovation risk mostly affects flavor development Thus, highly-skilled and competent flavorists who are not only technically skillful, but also have intuition and creativity from their own experience are essential in the flavor development, and effective flavor development process is essential Stefan Thomke and Ashok Nimgade 2000).

To attain this, BBA spent about $ 300,000 on the entire research and development cost for flavor development. This includes sales, marketing, analytical and synthetic chemicals, flavorists, regulatory and quality control (Stefan Thomke and Ashok Nimgade 2000). Also, to increase productivity, BBA launched a new technical and sales “creativity center” near Rotterdam (Stefan Thomke and Ashok Nimgade 2000). Flavors need wide range of technical, analytical, and service backup. Bush Boake Allen was steadily making new compounds in order of meeting the various characteristics of its customers’ needs.4)

However, in flavor industry, capturing customer’s needs for flavors is very not a piece of cake. This is mainly because the gap of perceived flavors between flavorsists and customers can be totally different. Even though a flavorist perfectly imitates based-flavor for food, feedback from customers is not satisfying. As a result, traditionally flavor development is lengthy, complex, and reiterative to settle the gaps between flavorists and customers. Therefore, in this traditional process, role of marketing is crucial. BBA has four Sales force operated in the United States, and fifty offices in all over the world. Marketing representatives of BBA are in charge of not only getting order flavor specification of customers, but also open communication with their customers while in flavor development process by informing about new flavors coming out from BBA’s lab. Thus, salespeople are play an important role within the flavor development process.

However, given the business model is needed to change in some ways. Through the technology development, customers themselves can analyze production cost, and even components of flavor. This was significant impact on the firm faced with cost pressure from the flavor market (Stefan Thomke and Ashok Nimgade 2000). Most importantly, the flavor development is usually lengthy and reiterative, and a lot of cost is needed to meet the customer flavor needs. To overcome those difficulties, BBA considered using e-commerce to strengthen creativity, and had started automating certain parts of operation by the year 2000 (Stefan Thomke and Ashok Nimgade 2000).

2) Customer Participation Strategy – Project Mercury

As mentioned before, traditional flavor development process has some disadvantages to the firm because it is hard to interpret the customers’ flavor needs. To be specific, especially, secondary flavor characteristics, such as “peely”, “Juicy”, “fruitiness”, “smoky”, or, “gutsy” et cetera are differently recognized by both customers and flavorists. In addition to the secondary flavor, regional preference to flavor can be various. As a result, due to those varieties of flavor characteristics perceived by customers, the development process can be lengthy and reiteration to match the customers’ needs. Due to such a subtle flavor discrepancy between flavorists and customer, that may result in low rate of flavor acceptance of its customers

– Project Mercury –

Thus, Julian Boyden, CEO of BBA, became interested in how to translate the customers’ needs. After brainstorming, he got an idea that customer may be allowed to take part in flavor development via internet-based software relied on new technology machine. The customers are only permitted to tweak secondary flavor based on basic flavor already developed by flavorists. This new approach will promote the better communication between the customers and BBA, so it may reduce the time to create the flavor customers are satisfied. Moreover, it can directly reflect customers’ needs, so BBA will be able to gather information on customers’ preference to flavors. In sum, project mercury may enable BBA to more quickly respond to their customer.

However, the firm can be faced with some problems on the new strategy. If customers get authority to control flavor development, locating flavor production machine should be considered. For example, if they had to pay half million dollar for the machine, not many customers will enjoy the new software program. Also even if the customer has an opportunity to control the secondary flavor, the degree of difficulty on operating the machine and software was not proved. Thirdly, the role of marketing is doubtful in the new business model. However, above concerns may be offset by the advantage of customer participation strategy. This is because via the unprecedented approach to the customers, the company will enjoy the cost leadership. More details are continuing on below the managerial recommendation part.

5. Managerial Recommendation

First of all, although the new approach of internet-based software based on the new technology machine had never been proved, BBA has to take “Mercury Project” to take advantage of customer participation to flavor development. This is important, because BBA, like other competitors, had annually spent a lot of budget on flavor development process; including R&D, sales force, and quality control and so on (Stefan Thomke and Ashok Nimgade 2000). By adopting the customer participate strategy, they will reduce substantial cost on flavor development as its process will be shorten. It is true that initial investment of state-of-art equipment can be expensive. However, once achieved, the low-cost position will guarantee high profits over their competitors, and they will enjoy cost-leadership strategy (Poter, 1980).

Secondly, the new approach has to be applied to some large customers first, and then it opens to any customer in the flavor industry. This is because BBA has no experience of customer participation strategy. Obviously, before launce the new project, it is hard for BBA to guess whether the customers fully understand and successfully manipulate the internet-based software. Also, as the new machine are not cheap, only large firms more likely to be able to place the flavor sample production machine to their sites than small firms. It is suitable opportunity to prove customer participation strategy by applying those large firms first. This is important because increased experience in the market enables firms to have confidence to enter the new market (M. Krishna Erramilli, 1991). Open the new business strategy to any customers is highly uncertainty. Thus, adopting large customer who relatively more efforts to develop products (Stefan Thomke and Ashok Nimgade 2000) can be advantageous to prove the mercury project, and after accumulating experience and knowledge of the strategy, BBA may open to the entire customers.