EA_5 Sem_Markenführung & Strategie_Strebitzer Tobias_Oscar Mayer Case Study

Case study: Oscar Mayer

Strategic Marketing Planning

Brand management & strategy Author: Course of Studies: Year: Major:

Tobias Strebitzer Business & Management 2009 Marketing & Sales

Tobias Strebitzer

Marketing & Sales

February 16, 2012

Contents 1

Situation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Question 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Question 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Question 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Question 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Question 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Question 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Tobias Strebitzer

1

Marketing & Sales

February 16, 2012

Situation

Marcus McGraw is the president of Oscar Mayer Foods, a subcompany of Kraft foods and a big player in the market of processed meat products. His challange is to to create a strategic plan for the company to face some major challenges coming up in the processed meat market. His four trusted managers each provide him memos, containing solutions on what’s best for the company, and each of them being quite different to the others.

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Question 1

In the beginning of the case McGraw thinks he has n¨ ever encountered such a complex business challenge¨as the one he currently faces. By the end of the case, after he has read the ideas listed in the four memos, McGraw cant believe he ever thought the investment ¨ issue was g¨ oing to be a hard one.What changed the presidents perspective? What strategic decision-making process does McGraw pursue? At a first glimpse, struggling with four totally different solutions from very different managers seems to be a challenge, but looking closer at it, this just means that a lot of work of his decision- making process is already done: Due to the different positions and opinions of the four managers, decisional range of opportunities is already widely spread and many facts, clues, problems and benefits have been worked out from his managers. Summarizing the proposals for each memo, and bringing them all together, McGraw realized that the problem wasn’t a hard one. As stated by McTiernan, he can rely on his team of managers who are eager on pushing oscar mayer back on the horse.

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Question 2

If McGraw chooses a strategic direction that favors only one department, what negative effects could this have on other departments? How can McGraw mitigate the damage? Favoring and focusing on a specific direction while neglecting the others, McGraw would definitely harm all the other departments. The diversity of products is not only a benefit to his customers, but also strengthens his own company against competitors by providing profit- makers in different competitive fields. Another point is, that each memo is reacting to specific problems that the company has. Neglecting the solutions to these problems of course means ignoring them and facing them later. 3

Tobias Strebitzer

Marketing & Sales

February 16, 2012

To best mitigate this damage, McGraw needs to find a broader strategic direction, which will take account of the various situations, improving one or more departments, without damaging the others.

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Question 3

What effects is the change in the strengths and weaknesses of competition having on the Oscar Mayer Division? How does this impact the investment decision? Oscar Mayer’s strengths are its well-known brand, the high market share, its long-time experience in the branch and quite high profit margin. Oscar Mayer stands for traditional products, which has partially positive as well as negative impact: Their clients brand awareness and trust is solid, but due to their traditional way of thinking, they were missing some important trends that are currently happening in the market, like the rising demand for healthier and more convenient products. Looking at the Oscar Mayer brand from a strategical point of view, it currently serves the company as a cash cow having a high market share in a market of relatively poor market growth. Here, competition may be able to outpace Oscar Mayer products by improving convenience and providing healthier products, or by offering products at a lower price. The investment decision should therefore account for these mechanisms. As the goal is set to achieve a growth in volume by 4%, the Oscar Mayer segment needs to consider changes in price, convenience and health level, as otherwise a 4% growth can be hard to achieve in a stagnating market.

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Question 4

Absent any resource constraints, which of the four departmental directions do you think is the most viable? Which is the second best strategy? Which is the least viable? Neglecting initial costs, an investment in Luis Rich products seems to be the most viable solution. Demand for white meat rises, which defines a high market growth. Strengthening and promoting Louis Rich products to increase market share would therefore transform them from q¨ uestion mark¨to s¨tar¨. This seems to be the best solution for the long run. The second-best alternative is investing in the Oscar Mayer brand to provide shortrun profits. Missing this opportunity could challenge the existence of the company, as it 4

Tobias Strebitzer

Marketing & Sales

February 16, 2012

provides over 80% of the income. They need to stay high in market share by investing in maintenance of their products, but also plan on lowering costs in the future to stay reasonable. The least decision to make is investing in other smaller companies. I believe that first the already established departments need to be sanitized by it’s own power, as acquisitions tend to potentially bring negative side impacts. When the departments are in line, acquisition investments can be thought of.

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Question 5

Given the information in the case, what strategic course do you think the Division should pursue? In the end, it is also a game of numbers. The idea is to line up the investment alternatives towards their contribution to the company’s goals. One of the major issues seems to be the 15% increase of operating income over all divisions. Currently, his managers calculate with a decrease of 6.9%, which means that he needs to allocate $27 MM. First things to do from here is to forecast the development of each division over the next couple of years, to get an idea of short- to mid-term profit- and cost- contribution. While the OM brand was developed over a long time and has a strong brand name, distribution channels and marketing, it still declined in revenue by 4.5% over the last three years. This can have different reasons: * Continuous reduction of advertising & promotion expenses over the last years. * Louis Rich brand products cannibalize Oscar Mayer products and s¨tealing¨ıt’s market share. * Customer trend preferring white meat. Still, OM products were not yet lowered in price, but instead paid off with market share. Looking at the Louis Rich brand, their rate of growth is currently high. The important thing here is that the white meat trend must not be temporary. Making investment decisions in the product line that loses market share due to an expiring trend would be critical. As seen in the McTiernan report (customer satisfaction), red meat outperforms white meat by taste and convenience. As a strategic course, i would suggest to reinforce the Oscar Mayer brand, as well as carefully developing the louis rich brand, as explosive investments in LR could lead to business failure in case of trend expiry. Additionally, the portfolio should be backed up by a new, convenient product line, for long-run orientation.

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Tobias Strebitzer

7

Marketing & Sales

February 16, 2012

Question 6

Which of Jim Longstreet’s new product ideas is less likely to succeed? Why? ¨ I believe that the Lunchables -¨ product is too risky, as it involves several properties and criteria that the company has no experience with. The product is explicitly designed for a ¨ ¨target a broader customer group. very limited customer group, while the Zappetites

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