Term Paper on "Innovation United Beverages"

Term Paper 10 pages (2717 words) Sources: 1+

[EXCERPT] . . . .

United Beverages, Inc.

Summer 2012

GangBusters Interactive Beverages, the flagship beverage product created and marketed by United Beverages, Inc., has enjoyed sustained success over the past 5 years as well as widespread brand recognition including a collectors' following on the level with Pez Candy dispensers. Recently, however, the sales of GangBuster product lines have slowed and in this study, the product development team at United Beverage evaluates new approaches for future growth based on three potential courses of action. The study examines the factors that the product development team must consider when developing future plans and provides a summary of the research and recommendations in the conclusion.

Table of Contents

Introduction

Review and Analysis

Pros and cons of three United Beverage development projects

Factors that should be taken into account when deciding which product(s)

to develop

Development team project recommendations

Analysis of possible scenarios and underlying assumptions

Case Study of United Beverages, Inc.

Introduction

The first product created and marketed by the company, United Beverages, Inc., GangBusters Interactive Beverages, has been a major success and the product has achieved widespread brand recognition and has even acquired a collectors' following on the level with Pez Candy dispensers. During recent months, though, sales of the company's flagship beverage product have languished and the United Beverage product development team must formulate new approaches for the company's future growth. Among other factors, the product development team must take into account the respective costs and anticipated product life cycles of the products, together with market and technical uncertainties as well as resource allocation issues based on United Beverages' product development strategy. To determine which of three courses of action, or combination of approaches, is best suited to achieve United Beverages' goals for future growth, this study identifies the pros and cons of each, a discussion concerning those factors that should be taken into account when deciding which product or products to develop and a summary of the project team's recommendations. An analysis of possible scenarios and underlying assumptions is followed by a summary of the research and recommendations in the conclusion.

Review and Analysis

Pros and cons of three United Beverage development projects

The three ongoing development projects at United Beverages, Inc. (hereinafter alternatively "the company") are (a) the GangBusters expansion program, (b) the kid-energy drink project and (c) the dual-drink project. Each of these projects has some merit (and its champion), but each also has some corresponding drawbacks (and its critics). The respective pros and cons of each of these initiatives is set forth in Table 1 below.

Table 1

Pros and Cons of Three United Beverage Development Projects

Development Project

Pros

Cons

GangBusters Expansion Program

1. Potential new markets exist in foreign countries using expanded flavors and local and regional characters for interactive design.

2. Brand has become ubiquitous and acquired a collectors' following on a level with Pez.

3. Proven track record of success and main source of corporate revenues.

4. Distribution chains already in place.

5. Forty-five major world-class collectible characters currently under licensing agreements.

1. Product may have reached its plateau.

2. Highly vulnerable to competition from major players such as Coke and Pepsi.

Kid-Energy Drink Project

Easy to produce.

Fierce competition.

Dual-Drink Project

1. This market may be four to five times as large as GangBusters' market.

2. Innovative products are congruent with the company's culture, R&D commitment (8% to 10% of revenue) and in-house expertise.

3. Product may be patentable.

1. Market is not well defined and no consumer preference data are available.

2. Substantial development costs.

3. Project would drain scarce resources from flagship product, GangBusters, at a point when it is especially vulnerable.

Factors that should be taken into account when deciding which product(s) to develop

Because the company does not have deep pockets but does have a commitment to innovation, there is little room for experimentation or false starts so the first decision must be the right one. Therefore, the product development team at United Beverages, Inc. has much to consider in deciding which of these three avenues to pursue to fruition based on the highly competitive nature of the industry. For instance, Johnson and Taylor (1999) emphasize that, "Packaging is a crowded, competitive industry. Major beverage producers use all types of packaging even within individual product lines. Aseptics, glass, aluminum, paper, and plastic packaging manufacturers fight tooth and nail for even slight market share gains" (p. 44).

Clearly, first and foremost, to the extent that any corporate resources are diverted from improving and expanding the company's cash cow, GangBusters, will likely be the extent to which the company's revenues are reduced in the short-term. In addition, the target markets for the dual-drink and energy drink projects are ill-defined and uncertain compared to the target market for GangBusters, making the need for further research in this area an essential factor to consider. Consequently, the product development team should determine the size of the target markets for the respective products, what revenues can be reasonably expected, the potential life cycle of the products and what barriers to entry exist. Finally, and perhaps most importantly, the development team must consider current trends in beverage packaging technologies that might allow them to create even more interactive containers that will help them achieve their corporate goals for sustainable growth in the future.

Development team's project recommendations

In some cases, the development team project members merely brainstormed while in others more concrete observations and recommendations were provided. A summary of the development team's recommendations concerning which projects should be pursued is set forth in Table 2 below.

Table 2

Summary of Development Team's Project Recommendations

Team Member

Recommendations

GangBusters Expansion Program

Kid-Energy Drink Project

Dual-Drink Project

Paul Diaz

Ambivalent about expansion program and emphasizes the need for innovation in the face of increasing competition from Coke et al.

Since innovation is consistent with the company's culture, the CEO is highly enthusiastic about the dual-drink project and states this "should be our next product!"

Katja von Robinson

Favors expansion program including new flavors and countries; wants to create new barriers to entry for competitors.

Ambivalent but concedes the market is there and may be four or five times as large as flagship product.

Luis Hernandez

Although easy to produce, the competition in this market is fierce and it is no guaranteed success.

Pragmatic about the initiative and cautions that there may be market-side problems involved and cites the high development costs that will be involved; the results might be worth it though, and the new container might be patentable.

Mary Smith

The GangBusters product line is currently vulnerable and needs additional investment to avoid disruption of revenue source.

Pragmatic and also cautions that diverting substantial amounts of resources away from GangBusters expansion program might jeopardize the company's primary revenue source.

Bill McBride

Recommends pursuing this initiative to maintain revenue stream and avoid spreading the company's scarce resources too thin.

In the alternative to GangBusters' expansion program, recommends this approach based on ease of implementation.

Passionate about uncertainty of the size and consumer preferences in this market.

Analysis of possible scenarios and underlying assumptions

The lack of consensus among the development team members indicates that the company must proceed with caution in formulating the optimal use of its scarce resources in responding to an increasingly competitive marketplace and the erosion of its market position. Clearly, to the extent that resources are diverted from the GangBusters' expansion program for either of the other two initiatives will be the extent which the company's primary source of revenues is adversely affected. Given the company's stated allocation for research and development, the GangBusters' initiative will require the lion's share of the available money but the ease of implementation of the kid-energy drink program makes it worthy for consideration as an addition to the product mix. Likewise, given the company's in-house expertise in beverage container design, the dual-drink initiative also represents a potentially viable use of the company's resources based on the projected size of the target market and the patentability of the resultant containers. Within these various permutations of resource allocation will be the optimal balance that provides the company with the desired outcomes. The company's development team established the assumptions set forth in Table 3 below for these three product initiatives.

Table 3

Assumptions and Preliminary Conclusions for Three Product Initiatives

Assumption/Preliminary Conclusion

Product Initiative

Assumptions

1. Continued growth for GangBusters in target customer segment (consumers aged 9-14 years).

2. Cross-selling opportunities due to product familiarity with GangBusters.

3. Kid-Energy Drink initiative has potential for moderate to successful outcome.

4. Dual-Drink project potentially lucrative but market is uncertain, development time will require about one year and the development costs will be high.

5. Ongoing investment will be required to maintain market share of GangBusters.

Preliminary Conclusion for Dual-Drink

1. Potential market is four-five times as large as GangBusters over the long-term.

2. Potentially slower take-up rate.

3. Just a quarter of focus group participants viewed product with some type of positive feedback; fully… READ MORE

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