Term Paper on "Global Pricing Decisions II Proctor and Gamble Always Russia"

Quoted Instructions for "Global Pricing Decisions II Proctor and Gamble Always Russia" Assignment:

Guidelines for Case Analysis

The goal of the case an*****s is to help you reason like a marketer.

The most important requirements are thorough preparation and analysis of the case

It is essential that you mentally become a *****part of***** the case situation. You need to become a participant, not an observer of the situation. This is different from the way you would approach a book or a magazine article. If a case centers on a decision that needs to be made, put yourself in the shoes of the decision maker; feel the frustration he or she feels with respect to data limitations and feel the pressures he or she feels with respect to difficult tradeoffs, limited resources, political conflicts, etc.

In some instances, the case may represent a good example of a marketing strategy and you are expected to learn what makes this a good example. Other cases may present a situation where the strategy is failing or has failed and the purpose is to learn from such failures. Cases seldom represent examples of absolutely perfect or totally flawed marketing strategies.

You may use bullet points and you are encouraged to use charts, diagrams or graphs. Be as business-like in your report as possible.

Recommended Approach to the Cases

It is not necessary to search for data beyond what is available in the case.

Gather information from the case. Read the case carefully. Reread it. Make notes. Perhaps read it again.

Conduct a situational analysis. A SWOT chart is often helpful. (included in doc.). Remember, analyze, don*****t describe. What are the key variables of interest? How do they relate to one other? What is your model of what is happening in the case?

Now that you have thoroughly evaluated the company and its situation, what do you think is the challenge for management and how did this arise? Define the main issue(s) or problem(s) in the case. Note that sometimes the issues presented in a case are not problems in the negative sense of something being wrong or impending doom for the company. Often the greatest challenge facing an organization is recognizing or acting upon an opportunity rather than solving a problem.

What key facts in the case should be used to solve the problem/tackle the issue? What do we need to know that we don*****t know?

Create some alternative courses of action for the company. What are the possibilities? What could be done, by whom and how?

Evaluate the strategic alternatives. What are their pros and cons? On what basis should the alternatives be compared? What criteria? What are the implications of one alternative versus another? What are the consequences? Which is your best idea? Why? What do you reject? Why?

Remember to adopt a managerial posture in analyzing cases. Your answer should highlight what you, as a manager, see as the strengths and weaknesses in a given situation.

Also remember that there is no single correct solution to a case study. There are however, many wrong solutions, as well as solutions that are inadequately supported with analysis, and solutions and an*****s that are ineffective because they are not presented in an orderly and persuasive fashion.

During your analysis, you might find it helpful to refer to page numbers or exhibit numbers in a particular case (e.g. Case, page 15).

Criteria

Problem Definition Clear, concise definition of the problem(s)/issue(s) in the case. 10 points

Situational Analysis Utilization of key facts in the case to analyze the situation; perceptiveness and creativity of analysis; use of concepts from the readings/handouts to analyze the case; avoidance of merely describing the case facts but organizing them in some way to support your opinions of the situation. 15 points

Identification of Possible Alternatives Building the alternatives from the analysis; logic and creativity in developing alternatives. 20 points

Evaluation of Alternatives Development of criteria upon which to base your evaluation. Clear and concise presentation of the evaluation. Discussion of the implications of each alternative. 30 points

Choice of an Alternative Explanation of the rationale for your final recommendation. Persuasiveness of recommendation. Where an alternative involves decisions about several variables of interest (e.g. brand image, price, and distribution method), the degree to which your recommendation is internally consistent and holistic. 15 points

Overall Taking an *****integrative approach.***** This means the use of a market orientation or marketing perspective throughout while also recognizing of the importance of other managerial functions. Communicating clearly and concisely.

10 points

Discussion Questions for Cases

Below are questions to help you to prepare for the class discussions. Although these questions might give you some general ideas about the content or focus for your write-up or class presentation, your written analysis must use the "problem definition, situation analysis, evaluation of alternatives approach etc." explained in the preceding pages.

Proctor & Gamble: Always Russia

1. How successful has P&G been in building this business? What has been done differently from usual practice in (a) developed Western markets and (b) other emerging markets?

2. What are the strategic options facing P&G Russia and the Always brand? What is the market potential for this brand?

3. What do you recommend with regard to the three decisions highlighted in the introduction (Always pricing, the localization of marketing strategy in different Eastern European countries, and the product range offered in Russia)?

4. The conclusion to the case (p13) describes the emergence of a parallel importing problem? How serious is this problem? Why has it arisen? What can P&G do about it?

Pick out important issues and analyze. Indicate of the two strategies which one would be picked a or b? 2 alternatives in solving the problem. Evaluate alternatives. What is the cause of action for the particular alternatives?

After working through this handout, you will have achieved the ability to:

*****¢ Use a SWOT chart to analyze the internal and external marketing environments.

*****¢ Discuss the importance of marketing resources and show their relationship to company performance.

*****¢ Identify marketing resources that can be used to create value.

Conducting a Situational Analysis for Marketing using a SWOT Chart

In order to analyze the marketing environment, managers must analyze the 4Cs: Company (or organization), (environmental) Context, Customers, and Competitors. The most frequently used tool for such an analysis is the *****SWOT Analysis.***** This involves appraisal of the:

Internal Environment (Company): Strengths, Weaknesses

and the

External Environment (Context, Customers, Competitors): Opportunities, Threats

Strengths are internal capabilities that can help an organization achieve its objectives. Examples are special skills of managers or employees, a strong brand, efficiency of operations, and a good network of partners.

According to a Datamonitor SWOT analysis published in 2003, Flextronics***** strengths are a well-differentiated business model, highly effective cost and investment management, and flexibility in spreading risk across a well-diversified services portfolio. Note that each of these strengths are capabilities or skills, rather than, for example, *****access to large capital resources.***** Financial resources are necessary, but the key to success is how managers use their skills in investing and utilizing those resources.

The strategic resources that generate sustained competitive advantage are valuable, rare and difficult to imitate. Hence, as emphasized by Jay Barney in the Academy of Management Review, intangible resources are more likely to result in a competitive advantage than are tangible resources. Capabilities (such as collective learning in the organization which might include, for example, a specific capability to innovate) are the key intangible firm-specific resources that allow firms to achieve a core competency, that is, the ability to convert a key success factor into a practice.

Core competencies of Flextronics are lean manufacturing and skills in customer relationship management.

Weaknesses are internal characteristics that can prevent an organization from achieving its objectives. Examples are a lack of trained employees, weak implementation abilities, and poor levels of service to customers or clients.

Datamonitor includes among Flextronics***** weaknesses, risks arising from an aggressive acquisition strategy and over-dependence on a few customers.

Opportunities are external circumstances that an organization might be able to take advantage of in order to achieve its objectives. Examples are growth markets in new regions and new product or service introductions.

Among Flextronics***** opportunities are growth in the outsourcing trend, its first mover advantage status in the rapidly growing original design manufacture (ODM) sector of the market, and the chance to leverage its wide geographical spread in over 30 countries.

Threats are external circumstances that might hurt an organization*****s performance. Examples are changing legislation, increasing competition, or a negative image because of a lack of corporate social responsibility.

In Flextronics***** case, the threats include increasing competition from other original design manufacturers and low cost manufacturers, and shortening product or technology life cycles which mean that the company has to refocus continually to stay ahead of the competition.

When analyzing a Company (or organization), consider the following:

*****¢ The fundamental purpose or mission of the organization.

*****¢ Resources available: human resources (skilled employees with high morale), financial resources, informational resources (information about customers, competitors, and the environmental context) and supply resources (material, components).

*****¢ The organizational culture: market orientation, leadership, quality of internal communication networks, and work processes that might lead to competitive advantage (logistics, service, manufacturing, new product development, database management).

*****¢ The combination of products and services offered. Are some products or services more important than others at present? Are these products and services being marketed efficiently and effectively?

*****¢ Partnerships and strategic alliances with other organizations.

*****¢ The organization*****s performance to this point.

Consider the marketing implications of the following elements of the external environmental Context (PEST):

*****¢ Political-legal trends: are any changes/likely changes in national/foreign governmental regulations applicable to the marketing of a product or service?

*****¢ Economic trends: how might the organization be affected by any developments in the national or global economy?

*****¢ Social-cultural trends: how might changing social, cultural or demographic trends in society affect the organization? What are the implications of marketing a particular product or service to organizations or individuals in countries with varying cultural norms, beliefs, and languages?

*****¢ Technological trends: are there any new technological developments which might affect the marketing of a particular product or service?

Instead of PEST, if you wish, you can use DEEPLIST: the Demographic, Economic, Ecological, Political, Legal, Informational, Social, and Technological environments

For a Customer analysis, answer the following questions:

*****¢ Who are the customers in the market in which the organization operates? Are the primary customers organizations or individuals?

*****¢ What are the general characteristics of these customers *****“ demographics, location, preferences?

*****¢ What specific benefits are these customers seeking? Why do they want the product or service offered?

*****¢ How do the customers make the decision to buy or use a particular product or service? Who is involved in this decision?

*****¢ What information sources do the customers use? What criteria for evaluating various alternative products or services do they use?

*****¢ How price-sensitive are the customers?

*****¢ What is the customers***** knowledge of, and attitudes towards, other offerings in a specific product/service category, i.e. the competitors***** offerings? And what can be learned about customers***** behavior with respect to substitutes from other product/service categories that might also fulfill the customers***** needs?

The following questions are useful for Competitor analysis, to be asked for each competitor identified:

*****¢ What are its objectives?

*****¢ What are its strengths and weaknesses?

*****¢ What are its current strategies?

*****¢ What are its likely future strategies?

*****¢ How does the organization match up against this competitor?

When completing a SWOT chart, make sure to include only the internal strengths and weaknesses in the top two boxes. External issues go in the opportunities and threats boxes at the bottom. In particular, be sure to make the distinction between an environmental or external threat and an internal weakness. Also, look for trends in the 4Cs; a static picture in time is inadequate.

Marketing Resources and Their Importance

Marketing resources contribute to the creation of competitive advantage. Srivastava and colleagues defined marketing resources as *****any attribute, tangible or intangible, physical or human, intellectual or relational, that can be deployed by the firm to achieve a competitive advantage in its markets.***** Among these resources, intangible assets are especially important because they account for the difference between the book value of the firm (as reported on its balance sheet) and its market value (or what someone would be willing to pay for the firm). ***** Haigh and Jonathan Knowles of Brand Finance observe that the sources of value creation in business have moved increasingly from tangible assets (such as plant and machinery) to intangible ones (such as brands, patents, customer databases, and skilled workforces). Today*****s business environment is one in which scarce resources are not factories and goods, but rather talented people, good ideas, and differentiated brands.

WEB LINK Visit the Web site: www.brandfinance.com

In support of their observation, Haigh and Knowles report that the market-to-tangible-asset ratio for the S&P 500 (the broad-based index of the 500 largest companies in the U.S.) rose from 1.3 in 1982 to 4.6 in July 2004. Therefore, the tangible assets recorded on the balance sheets of these 500 companies that used to account for over 75 percent of their stock market value in the early 1980s now explain less than 22 percent of these companies.

Examples of important marketing resources as outlined by Srivastava and colleagues in the Journal of Marketing and Hooley and colleagues in the Journal of Business Research are listed below. These are some of the intangible assets that are crucial for value creation.

1. Relational Assets.

Relational assets are the outcomes of the relationship between a firm and key external stakeholders, such as distributors, retailers, customers, other strategic partners, community groups, and governmental agencies. One of Flextronics***** marketing resources is its close relationship with Microsoft. This alliance is an important *****relational asset***** that can be exploited in the marketplace. For example, Peabody, a GSM/GPRS mobile phone platform based on Microsoft Windows Mobile software, is a low-cost, feature-rich Original Design & Manufacture (ODM) platform developed by both Flextronics and Microsoft. Mobile phones are becoming increasingly customized consumer products and OEMs are under pressure to produce low-cost, feature-rich phones that address the demands of this growing market. Through its alliance with Microsoft, Flextronics can use the Peabody mobile phone platform to provide its industrial customers (OEMs) with a cost-effective way to quickly expand their product lines and respond to market demands.

A specific relational asset is the company*****s Customer-Linking Capabilities. According to George Day, these include the ability to identify customer wants and requirements together with the capabilities to create and build appropriate relationships with those customers. Customer-linking capabilities take time to develop, rely on the complex interplay of supporting resources within various departments and functions of a firm, are primarily based on tacit knowledge and interpersonal skills, and are difficult for competitors to imitate. Therefore, George Day believes these capabilities are among the most valuable of any organization.

2. Reputational Assets.

Reputational assets concern the organization*****s reputation among its customers, suppliers and distributors. Reputational assets are revealed through the value of an organization*****s brand.

*****Basically, [brand value] is the power of the brand to deliver an earnings stream that is robust and generates shareholder value.*****

Shailendra Kumar, Head of Brand Valuation at FutureBrand, as quoted by Robin D. Rusch in *****World*****s Most Valuable Brands: A Closer Look at Measuring Brands***** at www.brandchannel.com

*****If every one of the 19,000 McDonald*****s restaurants around the world were to burn to the ground overnight, the cost of replacing them would be $17 billion. Yet the market cap of McDonald*****s on the New York Stock Exchange is $33 billion. The $16 billion difference is the value of the McDonald*****s brand.*****

Kevin Roberts, CEO, Saatchi and Saatchi

in a speech to the Advertising Agencies Association

www.saatchikevin.com

A strong brand can be the source of competitive advantage because brands take considerable time and effort to build, add value for customers, and are difficult or impossible for competitors to duplicate.

WEB LINK Visit www.interbrand.com and search for the *****Best Global Brands,***** a survey of the world*****s most valuable brands conducted annually by Interbrand.

3. Ability to Innovate Successfully.

A very important marketing resource is the ability to innovate successfully, with respect to either products or services that have value to customers. Superior innovation capabilities are complex and require intangible linkages across functions, and rely on tacit skills and learning.

3M is well known for its long and successful history of innovation. Innovation is embedded into 3M's corporate culture and consciousness and is an essential part of the corporate motto*****”*****Leading Through Innovation.*****

WEB LINK To examine 3M*****s history and approach, visit: http://solutions.3m.com/wps/portal/_l/en_US/_s.155/123515 to read *****A Century of Innovation,***** and view related videos, published in commemoration of the company*****s 100th anniversary.

4. Intellectual Market-Based Assets.

Intellectual market-based assets are of two types. The first type of intellectual market-based assets is the knowledge a firm possesses about the environment. Examples include market trends, knowledge about competitors, customers, channels, suppliers, and social and political interest groups. The second type of intellectual market-based assets is the knowledge the firm develops over time, such as unique knowledge about customer preferences, manufacturing processes, or ways of responding to competitors***** moves in the marketplace. Intellectual market-based assets are human resource capabilities and thus also include employee knowledge, implementation skills, an organizational culture that reflects a market orientation, and managerial capabilities such as leadership. Because many of these assets are tacit, they take time to build through training and development.

[WEB LINK Visit www.buckman.com, the Web site of Buckman Laboratories International, Inc., a leading manufacturer of specialty chemicals for aqueous industrial systems. Follow the links to *****Customer Value***** and then to *****Knowledge-Nurture Website***** to learn more about knowledge management.]

Summary

This handout demonstrated how managers analyze the marketing environment (company, context, customers and competitors) using a SWOT Chart. Search for any skill-based strengths of an organization, as these are less easy for other organizations to duplicate. Remember that resources (financial or other types) might be viewed as strengths, but the real strength is how the organization uses those resources. Marketing resources play a particularly important role in creating business value because today, intangible assets are more salient than the more imitable tangible assets. Examples of intangible marketing-related assets are relational, reputational, innovation, and intellectual assets.

Key terms:

SWOT analysis

Core competency

Marketing resource

Intangible asset

Quick knowledge check!

1. When conducting a SWOT analysis, internal and external company weaknesses should be included. True/False

2. Reputational assets are comprised of:

(a) employees***** knowledge

(b) knowledge about competitors

(c) the opinion of others about the company

(d) customer-linking capabilities

Practice your marketing reasoning:

Complete a SWOT chart analysis for your organization or for one with which you are familiar. You may choose to do this for a particular product area. What market-based resources can you identify? What is the organization*****s core competency? What are the key implications (list three recommendations) of your SWOT analysis?

*****