Gaining and understanding of markstrat

MARKSTRAT provides an effective framework for visualizing and understanding strategic marketing concepts like segmentation, positioning, targeting etc. These concepts are important in marketing management. It is a game played in the group of four competing with other six participating teams in the same industry. All the six participants have to manage their simulated firms in direct (peer-to-peer) competition.

Markstrat world is an imaginary world in which the currency used is Markstrat dollar. This is unreal market but while playing we have to assume that it’s a real market where 6 competing firms play with their own range of products in the same market. There are two products fall into distinct categories of consumer durables which are Sonites and Vodites.

Participant works in groups of four to six other participants. Each team competes against each other to successfully pilot their industrial company over a multi-year period. The game of Markstrat isn’t just superficial tactics, but it’s about long-term strategy of the product because decisions are made over a six-to-twelve year period. All the teams are forced to plan for their short-term profits and also for their long-term objectives.

The decisions which they take have a solid impact on the bottom line of the company which is hence reflected at the end of the period, after the simulation has run.

We have to assume here that it is not a hypothetical situation. Each and every aspect i.e competitive forces to the effects of sales and distribution, R&D and advertising, every aspect is real like it is in market. Teams get their results at the last when all the respective teams have submitted their decisions and then simulation has to run. We use it to refine our decisions over time.Each team’s actions taken while playing directly influence the market, so competitive analysis is a must. Competitor actions and reactions while taking decisions, new product launches if any, sales and distribution strategies all defines how teams manage their own PP (product portfolio), R&D projects, positioning strategies, pricing and distribution channels. It is necessary to play the game accordingly assuming that the competitive force is huge. The markstrat market is unreal but we assume it’s real because it decides the long-term strategy of the company. Teams participant perform as marketing managers for up to twelve simulated years in a highly competitive environment where there is multiple markets with consumer segments and different distribution channels. As we know that Consumer is the king so consumer needs are at the heart of decision-making at every period. The game is played by using all the concepts of marketing, finance, research and design, consumer behavior etc.

There are basically four key roles assigned to participants while playing the simulation game. They are as follows

Research & Development – They specify new research projects. They decide on physical characteristics of the product and target unit cost for future products.

2. Brand Portfolio- They use finalized R&D projects given by the respective departments to launch new brands targeting new segments in existing markets or in order to enter entirely new markets.

3. Production, Price & Advertising – They plan production to avoid stock out while minimizing inventories and also price reduction in order to increase profits. They set price and communication plan according to brand. Brand positioning, product life cycle, sales potential etc are also handled by this department.

4. Sales Force & Distribution – They allocate Sales force for each brand in the targeted distribution channels in their respective market.

CHEETAH TEAM A- COMPANY OVERVIEW

We participated in Markstrat simulation game as team A of the industry Cheetah. The industry had five other companies competing with us which were: E, I, O, U and Y respectively. The market comprised of durable consumer goods which had products of two broad kinds among which the other teams were competing, Sonite and Vodite. The entire simulation was taken through eleven rounds to give us the scope to exercise decision-making for our company through analysis and strategy. Based on our understanding of the various areas of marketing, pricing, industry analysis and strategy, we took various decisions through the rounds which had impacts on our company’s standing in the industry in the different rounds, which were sometimes great, while sometimes not so good. On the whole, at the end of eleven rounds, our company stood sixth unfortunately in the industry in terms of stock price index (SPI) and sixth in terms of market-share. The main strategy pursued was of analyzing the competitive performance each round and taking decisions based on this. We had two products in products in market which were basically

1.SAMA

2. SALT

The main strategy pursued was of analyzing the competitive performance each round and taking decisions based on the following.

When we began Markstrat, all the companies had the same base SPI of 1000. This was also the lowest SPI we had, the highest being 2485 at the end of period 6. At the end of period 11 our SPI was 850, while company I had the highest SPI at 3244.

The Overall Market Share of our company initially was 11.9% (Sonite & Vodite). Cheetah Team A had market cap of K$ 252,106. Our net contribution in the durables market was K$ 12,450. The stock price index was 1000 and return on investment was 2.2.8 respectively.

When we started the game we had two products in the market which were SAMA and SALT. SAMA had highest market share in terms of volume which was 12.2%. SAMA was targeted towards others. It was the highest selling brand in others category which was 37.9%. There were two other brands present in the market which were the main competitors in others category and were threat to SAMA. They were SIRO and SUSI respectively.

Our other product was SALT in the sonite market. The mediocre market share of SALT in terms of volume was 5.1 %. The product was targeting to singles segment which was 12.4%. SALT was not the leader in its category but it was doing pretty good in market. There were two other brands in the market which were our competitors in singles category and were threat to SALT. They were SIBI who was the market leader in this category followed by SYGU. We had no product in Vodite market in period 0.

When we started playing the simulation game we had no idea how to apply logics and play with figures. We randomly filled figure initially but after period 2 we started applying concepts of marketing, finance etc but unfortunately it didn’t helped us much. We took decisions like launching new product in Sonite market targeting Hi-earners and buffs which were SAMN and SALN but our product was unable to capture market. We also launched VAMN in vodite market. At the end of period 11 SAMA had market share of 1.0%. SAMN had market share of 3.0% and SALN had 2.3% market share. VAMN had market of 1.8%.

COMPANY FIGURES at Period 11

Overall Market Share: 4.7% (Sonite & Vodite)

Market Cap: K$ 152,271

Net Contribution: K$ 3,262

Cumulative Net Contribution: K$ 119,970

SPI:596

Cumulative ROI: 0.99

ROUND WISE ANALYSIS

Round 1- 3:

Sonite market was a very price sensitive market. Then the important parameter was convenience followed by performance. We had two products, SAMA and SALT, in Sonite category.

SAMA had maximum market share in Others segment and SALT was 2nd in terms of market share in Singles segment. But the physical characteristics were not aligning with what the segment wanted. Also, the perceptual map didn’t give us clear picture as to on which category these brand should be positioned.

Thus, SAMA and SALT initially didn’t have clear positioning. For Singles and others the most important parameter to position the product was Economy (price) followed by Performance (power). According to market share SAMA should be targeted at Others and SALT should be targeted at Singles. So we positioned our product accordingly with Sales force targeting Singles and Others. But we didn’t completely neglect Hi earners with some amount of Sales force targeted at Professionals and High earner segment too.

But the Singles and Others were low profit market which didn’t generate positive net contribution in the market. In Singles and Others segment, volume sales was very important as these were low profit markets. And because of poor positioning and physical characteristics not aligning with the segmented targeted at, our volume sales kept on decreasing. So we also thought of launching a brand in High Earners and professionals to increase the profit margins which in turn will increase our net contribution and hence will increase our stock price index. Thus, a new product, SAMN, was launched in period 3 for High earners.

Even though SALT had high brand awareness in Singles and Buffs and SAMA had high brand awareness amongst Singles and Others but still SALT lost considerable market share in Singles segment. This was mainly due to lack of proper positioning strategy and physical characteristic of SALT were not in alignment of what Single segment demanded.

Also, for first 3 periods we had huge inventory costs incurred which needs to be brought down. And there were costs also which were eating our contribution from the brands.

Round 4:

Because SALT was incurring huge losses, so we decided to withdraw the product from the market. Also, PSAM1 was launched on the basis of SAMA considering the parameters power and design which were important purchasing elements for High earners and Professionals.

SAMN was positioned extremely well towards High Earner segment which helped us increase our net contribution.

SAMA’s performance also started to improve with better positioning strategy and it reflected in the contribution from the SAMA brand.

We also decided our advertising budget should be in line with our competitors. So we zeroed in on the amount as our competitors were spending.

One of our competitors launched a product in Vodite market.

Round 5:

We also launched R & D for a product in Vodite market. We thought it was the perfect time to enter Vodite market as the positioning of most of the products was not clear. We thought the lack of clear positioning can be used to our advantage if we can position our product in Vodite market in a much better way than our competitors. The time when we were entering Vodite market, the right segment to target was Adopters followed by Followers followed by Innovators.

With better positioning, SAMA started to perform extremely well in Others segment. So we increased the production of the brand. Also, to promote sales the prices were reduced.

SAMN’s price was reduced and newer product, PSAN1, was launched on the basis of SAMN with improved power ad lower cost to target Professionals.

Round 6:

We reduced the price of SAMA very low so to save our market share and volume sales. We also decided to position our brand SAMA on price and power. We also decided that in next round we will launch a modified SAMA brand targeting only at Others.

SAMN brand had increased competition in Hi earners segment. So we increased the expenditure on advertisements and ad research to have better communication. We also tried to position our brand SAMN close to high earners with better positioning strategy.

We also thought of launching SALT again at much lower price in the next round targeting Singles.

Vodite brand VAMN proved to be excellent product with high net positive contribution.

Round 7:

SAMN lost in high Earner segment because of increased competition and poor positioning.

Market forecast suggested that Singles market has huge growth potential with decline in growth in Professional and Hi earners segment. Hence we decided to re-launch SALT in the Singles category.

We lost considerably in the net contribution and hence our share price index plummeted.

In the Vodite market, the competitors reduced the price and tried to target followers as they had maximum potential in terms of growth rate. We tried to position our product on efficacy and flexibility to focus on followers.

Round 8:

SALT was re-launched positioned at Singles segment. We also increased advertisement spend on Others to increase our brand awareness in this segment. Also, SAMN started performing abysmally in Hiearners segment. So we decided to upgrade our distribution channel to cater to the Hiearner segment . We decided to upgrade our distribution benchmarking our sales force according to our competitors.

Our net contribution kept on declining because of poor positioning and our own products cannibalizing each other’s market shares.

VAMN had started to face competition. SO we decided to launch new product on the lines of VAMN with decrease in physical characteristics to match followers. We decided to position this new brand on frequency and price which are the two most important purchasing parameters for the followers. The price was reduced to gain market share in the followers segment.

Round 9 -10:

All the products in Sonite market kept on losing market share and hence revenue. Our communication and positioning in the minds of consumers was bad. All the products kept on losing market share all throughout.

In Vodite also, VAMN lost considerably. When the product was launched we had decent market share but eventually our poor positioning and targeting led to our decline in this market also.

Overall Strategies adapted by our team

R&D to enter new markets

Price revisions to compete with rival firms with better physical features.

Modified products with changed featured to cater to the needs of its potential/targeted customer segment.

The gap occurred

No ideal positioning for any brand

Marketing money wasted on non-performing brands

Not sufficient efforts towards R&D or repositioning strategies.

Market Share Evolution (Overall) – Period 0 – 11

There were no noticeable peaks of growth in durables market share over the length of the period(0 to 11) and the distance between rival firms between period 4 to period 8 grew drastically. Hence Company A could not capitalize on the market opportunities in this period realizing the situation of the market.

Market Share growth.jpg

Market Share Evolution (Sonite) – Period 0 – 11

The Company A in sonite market did not sustain its strong growth potential and market share in the SONITE products.There was a footfall of Market share from 17% to just above 7%.The strong brand in the market in this category like SAMA could not be leveraged satisfactorily. The situation of market was disturbed as it became difficult for the products in Company A to sustain and survive in market.

sonite market share.jpg

Market Share Evolution (Vodite) – Period 0 – 11

Company A was never a strong player in the Vodite Market. The Vodite market which is usually a high margin market with technologically aligned products degenerated into a price competitive market thereby affecting Company A It affects Company A with low capital flexibility.

vodite market share.jpg

Total Contribution (post marketing) and SPI evolution

There is no significant impact of marketing expenses on revenue generation for Company. There is lack of proper positioning for products affected brands with potential (viz SAMA).Also there is lack of capital affected A’s investment avenues and possibilities. Company A charted a dismal course in its SPI trend – drop to 0.99 from 2.28.

Tol Contri.jpg SPI growth.jpg

APPLYING THE LEARNING TO A COMPANY- GENRAL MILLS

General Mills, Inc. “is an American Fortune 500 corporation, primarily concerned with food products, which is headquartered in Golden Valley, Minnesota, a suburb of Minneapolis. The company markets many well-known brands, such as Betty Crocker, Nature Valley, Yoplait, Colombo, Totinos, Jeno’s, Pillsbury, Green Giant, Old El Paso, Haagen-Dazs, Cheerios, Pillsbury, Lucky Charms and Wanchai Ferry. Their brand portfolio includes more than 100 leading U.S. brands and numerous category leaders around the world” – wikipedia.

BRAND PORTFOLIO- In India, General Mills mainly entered into the market with very few products like Nature Valley, Pillsbury Chaki Fresh Atta, Pillsbury Multi grain atta, Pillsbury frosting, Pillsbury cake mixes, Pillsbury Custard powder, Green giant, Betty Crocker and Haagen Dazs respectively. When GM entered Indian market they were into B2B marketing. They supplied flour, apices, frozen food, frozen meat; cake mixes to the popular food chains like Pizza hut, dominos, KFC, Mc Donald’s etc. They were doing very well in B2B market but they realized that the company is growing without having brand awareness within customers (general public). Then they realized that there is demand in food segment. Finally they identified the need of Indian customer. So they launched Pillsbury Chaki fresh atta and Pillsbury multi grain atta as Indians consumes it every day. Slowly and steadily they launched other products like custard powder, cakes mixes etc.

SWOT ANALYSIS OF PILLSBURY CUSTARD POWDER

STRENGHTS

1. Good brand awareness

2. Product superiority through quality

3. Convenient to use

4. Strong Brand Equity in Mumbai region

5. Top of the mid recall among customers

WEAKNESS

1. Damages – Leakage of powder

2. Market return due to damage in carton

3. Single SKU available

4. Single flavor available

5. Lacks visibility at Kirana Stores

6. Not present at many small Kirana stores

THREATS

1. Price competition

2. Cheaper imitations by local players

3. Dependence on modern trade.

4. Copy of packaging by other local players

OPPORTUNITIES

1. Category expansion through innovation

2. Emergence of Modern Trade

3. Changing consumer profile and behavior

4. TOM advantage

5. Incremental brand equity for parent brand

6. Different SKU can be introduced

7. Different flavors can be introduced.

R&D- Pillsbury custard powder had good customer base during its introduction stage but it while it was at growth stage the demand fell down drastically .Customers started switching the brand. After the Market research GM found that base of the carton of the PCP becomes very weak and the powder keeps falling. Also the carton is not strong enough because it also absorbs moisture and becomes sticky in few days. The customers have to use the powder as soon as possible and dispose the box or else it results in getting lice if kept unattended. They usually use the powder within 10 days. So GM came with the concept of launching PCP in zip plastic pouches. These pouches will also have a leaflet of different innovative recipes and other products by GM which must be tried.

STRENGHTS

1. Good brand awareness

2. Product superiority through quality

3. Convenient to use

WEAKNESS

1. Low awareness

2. Low visibility

3. Big boxes are overshadowed by small ones

4. Only 2 flavors available.

5. Not able to blanket cover the market.

THREATS

1. Cheaper imitations by local players

2. Dependence on modern trade.

OPPORTUNITIES

1. Different SKU can be introduced

2. Different flavors can be introduced.

SWOT ANALYSIS OF PILLSBURY FROSTING

CONSUMER BEHAVIOR- Pillsbury Icing has almost low market base. The people who once had our product feel that it’s very good and they usually buy it. Many people also derived few innovative ideas. The people who do not use it are mainly because they were not aware of the product, customers saw it but it didn’t attract them to purchase it, some of them feels that it’s not healthy, many of them don’t know its purpose. Here GM realized that many of them they how to use it so their discovered innovative idea to use it like many of them used it as spreads on bun or bread, girls liked gifting it to their friends as it became cool quotient for them etc. GM knew that Pillsbury frosting lacks awareness but they didn’t had the budget for marketing so they came out with the innovative idea of just changing the place of the product. Earlier Frosting was kept near the cake mixes so that when customer picks up the cake mixes they will get attracted to the readymade icing but this strategy didn’t work well..So they changed the place of frosting to the other shelf where other spreads like cheese spreads, butter, sweet yoghurt etc are kept. This attracted people to purchase it and try it out once. This increased their sales rapidly. Many customers who were totally unaware of the product thought that it’s a new product in the spreads market. Later it was used in many household as spreads on croissants, buns, muffins, bread etc. Many of them also started using it in preparation of salads, dressing on dishes and kids liked consuming it directly. Later on Pillsbury Frosting customer base widened rapidly. It also helped other products of Pillsbury to establish its base in B2C markets.

Nature Valley bars are made of 100% natural ingredients like whole grain oats, fruits and nuts and have no added preservatives. It is a wholesome, delicious and well balanced snack with carbohydrates, proteins, minerals and fibers that gives natural energy to keep one going right through the hectic schedule. It is easy to carry and snack that can be had anytime, anywhere. Nature Valley is a great accompaniment and is an ideal fuel for one’s active lifestyle. Nature valley-Crunchy Granola Bars are made with wholegrain rolled oats. Each portion is at least 52% wholegrain rolled oats and each represents a serving of wholegrain. The problem raised when Nature Valley was globally a USD 1 Bn brand, still at its nascent in India. There is a challenge of category creation and education of a non-existent health snack bar category and also it has to compete with brands like Horlicks, Ritebite and other snack bar. In India they wanted traditional snacks to be overtaken by NV which was a very superficial thought. They just wanted people to consume healthy snack bar but they failed to position it the way they wanted it in market so they started looking for different brand champions. Soon they identified that India has a huge military base where people are very much health conscious. So they launched the product in CSD. All the military people buy their stuffs from CSD. Soon Nature valley picked up market and it is largely consumed by military people.

Relative market shareBCG MATRIX

Market

Growth

rate

STAR

Pillsbury Chaki fresh atta

Pillsbury Multi grain atta

QUESTION MARK

GM frozen food

CASH COW

Pillsbury custard powder

DOG

Nature Valley

Pillsbury cooker cake mix

PRODUCTANSOFF MATRIX

NEW

PRESENT

MARKET PENETRATION

PRESENTPillsbury chaki fresh atta

Pillsbury custard powder

MARKET

PRODCUT DEVELOPMENT

Pillsbury frosting

Cheerios

NEWMARKET DEVELOPMENT

Pillsbury multi grain atta

Pillsbury roasted semiya

DIVERSIFICATION

Haagen dazs (in India)

Green giant

Nature Valley

MY LEARNINGS FROM THE ASSIGNMENT

As a student and a participant in this game I learnt a lot. This game brought me closer to the real time scenario which sometimes a classroom lecture may not do. While playing this game i got a very broader perspective of the business world and got a chance to experience actual market situations. Many skills like decision making, working under pressure, understanding group dynamics, facing real like situations, competition analysis, and efficient use of resources were experienced while playing this game. It is important for a business school student to learn these techniques and know how to use them. This game gave me an opportunity to apply all the theoretical knowledge and constructs (different managerial models) in practical scenario. launching a new product, or withdrawing the existing product, deciding to do R&D at a right point of time, allocating budgets on different areas are different things that were done while plying which tells us that different areas like marketing, finance, sales force management, distribution strategy are covered in this. Under different managerial models we have market research, consumer behavior, R&D, 4p’s, BCG matrix which was also covered in this game. Working in a team and acting as a part of team was learning from this game.

There is a great learning from this course. The key learning’s are as follows

Brands need to be developed keeping a long term strategy.

Brands need to be modified and positioned according to the changing customer preferences for brand characteristics.

Strong market share should be leveraged by constantly staying competitive on all fronts – price, brand awareness, purchase intentions, strong segment focus.

Care should be taken that company’s own brands do not cannibalize each other’s sales.

Positioning is a premium and advertising monies should be spent wisely.

Price wars most often leads to losing sight of actual customer requirements and commoditize the entire industry.

Competitive benchmarking in price is not always a good idea unless there are a sufficient number of good brands in the market for the company.

R&D projects and modifications should be done with a strategic perspective of a minimum of 4-5 years.

Attempts should be made to consistently scope for unexploited customer needs, price points etc.