SOLO and SOFT Strategies - Research Paper Example

Strategy Paper A company may have a variety of brands under the same but with a little differentiation. Marketing these brands may cause confusion to consumers and may lead to increase in marketing expenses. Hence, a brand portfolio strategy is developed to give the specific roles or use of the different brands. It clearly gives a distinction between the brands and ensure that they are clearly positioned and marketed to the target consumers (Kristijan 13). From the financial statement, it is evident that the contributions before marketing have significantly decreased for period 3 as compared to period 2. The increase in returns has been accompanied by a significantly higher increase in the proportion of the cost of goods sold for period 3. This has led to a decrease in contribution and; hence, profit after tax. To increase contribution, the cost of goods sold has to decrease or the goods have to be sold at a higher mark up. Period 3 Period 2 Period 1 Period 0 Revenues 71,356 67,727 55,468 43,744 Cost of goods sold -40,447 -23,902 -21,879 -21,823 Inventory costs -223 -7 -8 -14 Contribution before marketing 30,687 43,818 33,581 21,907 An analysis of the individual brands shows that SOLO has a higher contribution as compared to SOFT. Furthermore, it can be observed that SOLO has higher sales to contribution ratio as compared to SOFT. This is an indication that SOFT incurs significantly high costs to sell. This in turn affects the overall company performance. Based on this, SOLO being more profitable, the company should focus more resources to marketing and in its research and development. From an analysis of the market share, it can be observed that SOFT has a higher volume market share as compared to SOLO. However, SOLO has a higher value market share. This means that more funds should be allocated to SOLO’s marketing and to increasing its value market share. To add to this, more money should be allocated to marketing SOFT as an increase in the sales volume will lead to an increase in contribution. SOFT should be given priority in budget allocation in marketing as it has a higher sales contribution ratio. From the analysis of distribution and sales volume of the two brands, Mass Merchandisers sells more of SOFT followed by specialty stores and then online stores. More resources should be allocated to supplying SOFT to mass Merchandisers as they sell more. For SOLO, more resources should be allocated to supplying specialty stores as they sell more units as compared to the other distribution channels. SOLO should be supplied to more specialty stores and SOFT to mass Merchandisers, as they are the biggest sellers of the respective brands. The cost of developing and distributing both SOLO and SOFT should be decreased or the efficiency of production improved as the recommended brand price is higher. This may lead to loss of customers, thus, reducing the market share. The unit cost per product should be lower to have prices that are competitive for both product while at the same time maintaining their profitability. From the production report, it is observed that all the produced units of SOFT are sold. This means that more resources should be allocated to the production of the product. More units of the product should be produced as it has a higher demand and it is cheaper to produce as compared to SOLO. In addition, SOLO should be produced on demand as its production exceeds sales. The units to be produced should be decreased. Additionally, a minimum inventory should be maintained for SOLO, as it is expensive to hold inventory. From the market report, it is observed that TOLL was introduced in the third period and already has a 20% market share. This shows that there has been a change in the consumer tastes and preferences. Resources should be allocated to market research to be able to ascertain the current needs of the consumers. There should be more aggressive marketing of SOFT to increase its retail sales. This accompanied by market research can increase the volume of sales. The retail sales for SOLO have decreased from period 2. This is a sign that the brand is losing its appeal in the market. This may necessitate marketing that is more aggressive or improvement of the product. The decrease in sales of SOLO can also be an indication of better competitor prices. The brand should be improved and marketed more aggressively as it is the more profitable of the two products. The total market share for the company brands decreased from 22% to 19%. This has been due to the decrease in sales volume of SOLO and the introduction of new brands into the market. This shows that there was a gap in the market that the other brands now do occupy. Resources should be allocated to market research to foresee the consumers’ future needs or the new group of consumers entering the market. The company should also differentiate the two products; SOLO and SOFT, to meet the requirement of the different consumers. This is based on the fact that explorers, shoppers, professionals, highs earners and savers have different requirements. Professionals and high earners prefer SOLO. The main competitor is TOLL. Hence, more advertisement and market research should be done. More awareness of the brand will promote sales and s will improvement of the product to meet new expectation and anticipation of future needs. Savers and shoppers prefer SOFT. An analysis of their buying trends can help forecast their future needs and have a better market share. Advertising to professionals should be minimised, as they do not buy the brand. Advertising resources should be allocated to each brand depending on the demand of the brand by the different consumer group. The firm should allocate resources in the investment of vodite products and establish a foothold in that segment. This can improve the company’s overall performance. Research and development of vodite can bring better insight that may be useful in further improvement of the sonite products. The analysis of the company’s performance in the third period has shown that SOFT is performing better in the market; hence, the firm should dedicate more resources to the market and improve it. Works Cited Kristijan, Petkoski. Brand portfolio strategy: The interactive effect of perceived fit, brand portfolio strategy, and differentiation on brand extension evaluations. Saarbrücken, Germany: VDM Verlag Dr. Müller; 2008 Read More