: Renova Toilet Paper - Case Study Example

Case Study: Renova Toilet Paper Central Problem The problem of Renova Company, a privately owned firm in Portuguese paper industry, is to choose a toilet paper brand that would sell competitively in the toilet paper industry. Renova is facing numerous challenges in choosing between introducing black toilet papers or producing the conventional white ones. However, the company is reluctant to adopting the black toilet paper due to its sluggishness in the growth, high commoditization, and little innovation. In addition, Renova must also counter competition from medium owned private companies that produce similar products. Such companies include Procter and Gamble as well as Georgia-Pacific and Kimberly Clark. Renova Company must also make proper decisions towards addressing powerful retailers, some of which are customers and competitors. Renova is not finding its challenges easy to resolve despite the fact that they are common problems with every medium size firm. Renova company management has a responsibility towards ensuring that their lack of clear cost advantage in the market does not create a disadvantage. The company also requires distinctive positioning of brands or unique product features. The major problem, therefore, is to expand into new markets. Summary of the Case The article covers a brief history of management of Renova. Seabra de Sousa et al. note that that the company started its operations in 1939 when its brand first came into existence in 1818. It expanded internationally in 1990 after Portugal joined European Union. The case addresses issues surrounding the establishment and expansion of Renova Company. The company seeks to identify the best brand that can offer competition to the rival firms that offer similar products. The case focuses on the year 2005 events in Western Europe when its activities split into hygienic products and disposable tissues. A summary of products revenue is highlighted in details. Raquel reveals in the case study that in the year 2005, Renova had a share of less than 1 percent in the Western Europe compared to its competitors also found in the tissue industry. Renova Company specialized in not only black toilet papers but also covered manufacture of kitchen towels as well as kitchen rolls. The case study also gives highlights on some of the clients to Renova. The clients include Carrefour, Lidl, and Tesco (Seabra de Sousa et al. 1). Raquel also addresses the total sales and revenues that Renova made in the year 2005. The article approximates sales of tissue paper category at €220 million. The study further describes how Renova has universally penetrated the market at above 90 percent despite the limited populations of its market. The article also focuses on the market segmentation of toilet tissue papers in Western Europe that mainly follows price and quality factors. The products give priority to softness, absorbency, and strength. Most Portuguese, however, give priority to tissue prices before making their brand choices. The article also provides an overview of prices of Renova products. It is also vital to note that the article provides time that most buyers take to choose which toilet paper to purchase. Moreover, the study concentrates on private labels of tissue paper brands. Branding has become necessary because following polarization phenomenon of Western Europe accompanied with premium brands high growth. The article also reviews premium brands growth in Spain. There is an expectation of expansion in the toilet paper market despite the humble beginning. Portugal market favors faster growth in private brands than the way it happens with public brands. Retailers make it difficult for competitors to capture the market by typically carrying between three to four leading brands. The article describes the steps national toilet paper brands have taken and experimented to make private brands popular. It also highlights the innovations that the company has made and designed towards improving the most vital attributes of the tissue paper. It is also evident that the innovations brought with it retailers’ strong support over decades. The company introduced both 3-ply and 4-ply papers that improved on absorbency and strength. Consumption habits of tissue paper remained the major determinant of the number of tissue papers the consumers bought. Analysis of the alternative actions There are three options for Renova in its attempt to improve its marketing strategies. It was the first company to fight private labels directly through the reduction of its entry-level paper. Such a method will help the business to produce cheaper products and attract more customers. The advantage for such a case will be that the firm will suppress the specialty that customers attach to brands. The method will ensure that the levels of competition do not rise to overtake the reputation of the company. However, the disadvantage of the move is the fact reducing prices of products will price the company out of the profitable activities. The second alternative for the firm was to collaborate with other retailers and produce private labels. Such a move would benefit the company in realizing more sales because of the prominence of private labels. The prominence of private labels will work to market the business more and improve its sales. On the contrary, the method will leave very little for the enterprise in terms of its levels of innovation in marketing strategies. Second, a merger will not work because the company was relatively young in comparison to the others in the market. The third strategy is to accelerate the firm’s differentiation efforts using innovation, as well as improvement of its existing brands. The firm will be practicing in the corporate codes of ethics and allowing a healthy business environment. However, the method will take a long time before the company realizes the desired profitability. Decision Statement and Its Rationale Differentiation strategy will work best for the company considering the high levels of competition (Exhibit 1). Customers in the market have sensitivity in terms of brands and quality of tissue paper in the market. Differentiation will also continue the company’s trend, which has worked fruitfully from the time the CEO started. The strategy is one of the best approaches because it dictates the level of competitiveness of the firm against others in the industry relies on its innovativeness. The method eliminates unfair competition and unethical business practices. The company can innovate the quality of the tissue through such methods as color and material for use. The company can also come up with one product that will be the market leader in terms of business reputation. Differentiation will also make the company innovate and produce other products that will supplement its line of products (Exhibit 3). For instance, the method will offer a variety of products for the customers and capture a broad market base. Implementation Plan for the Decision The implementation of the program should work in steps because the company should strategize its pricing and management strategies. The first step will involve a market survey that will determine the market. The study will help the company to identify the patterns of preference for tissue paper products. After the survey, the company should then proceed to implement its chosen strategy accompanied by intensive advertisements (Exhibit 2). Analysis of Facts By 2005, Renova had disposable hygiene and tissue of up to $26 billion around Western Europe. This excellent representation reveals great potential of the company. Indeed, firms that trade at over $20 billion have a consideration as world’s leading companies in terms of working capital. The worrying trend in the company history is that between 2002 and 2005, the company only realized a growth and expansion of 2.5 percent, which is quite insignificant. The toilet paper company shows that it has the capability of achieving greater growth in not only Western Europe, but also in the entire globe (Exhibit 4). The population of most parts of the world has shown significant growth. Consequently, the global market for quality tissue papers by Renova will enjoy wider market. Works Cited Seabra de Sousa, Raquel., Bart, Yakov., Chandon, Pierre, and Sweldens, Steven. Renova Toilet Paper: Escaping the Commoditization Trap. European Competitive Initiative: INSEAD, 2005. Print. Appendix Exhibit 1: Differentiated toilet paper brands The company adopted differentiation model of competition to make the company more competitive in the market. Exhibit 2: Appealing advertising The use of appealing advertising will help the company to market its differentiated products Exhibit 3: Differentiation provides more products for the market Exhibit 4: The status of Renova in 2005 The company invented ways that helped it to grow and expand its market share Read More