The Markstrat Challenge II

1. The Markstrat Challenge II STRATX Licensing Division

2. Strategy Positioning R&D Your success in Markstrat will greatly depend on your ability to manage the development and positioning of brands

3. Customers make purchase decisions based on their perception of your brands Your Perception of Brands Brand A Brand B Brand C Brand D Technical quality Their Perception of Brands ? Brand B Brand D Brand C ? Brand A

4. +20 SONO SELF Bu SEMI SULI Pr Hi SOLD -20 +20 Si SALT SUSI Ot SIBI SAMA SIRO -20 The "Perceptual Map" is a valuable tool for visualizing brand positioning Need 2 Perceptual Map based on MDS Study Need 1 Key Segment ideal Point Ot Perceptual positioning of Brands

5. There are two key ways to re-position brands in Markstrat Perceived Performance Advertising Perceived Economy R & D

6. Customer Needs Economy Performance Convenience Physical positioning involves matching brand characteristics to customer needs Price Power Max. Freq. Weight Volume Design SAMA Brand characteristics

7. Positioning with advertising requires setting "Perceptual Objectives" Perceived Performance 20 10 Si 9 5 Perceived Economy 0 5 11 -10 -20 -20 -10 0 10 20

8. Your success will greatly depend on your ability to manage the development and positioning of brands Strategy Positioning R&D

9. R&D success demands long-term thinking and the ability to identify evolving opportunities... Hi Si New target segments Changing segment needs Pressure onmargins Pr Ot Competitor entry

10. R&D = Profit Center • Provide sufficient budgets • Set realistic expectedunit costs . . . and also requires working effectively with your R&D department Number of Projects Experience Similarityof Projects

11. SONITE Weight Design Volume Max. Freq. Power • Market Needs • Competitive Brands • Feasible Range • Project Budget When doing R&D, keep in mind both positioning and economic factors C Base Cost (at 100K units of production) Most important physicalcharacteristics • Target Margin • Cost in other projects • Project Budget • Impact of physical characteristics Economic Factors Positioning Factors

12. Base cost TheHIGHERthe requested characteristic the LOWERthe base cost • Volume • Weight • Diameter Requested characteristic Impact of physical characteristics on base cost Base cost The HIGHER the requested characteristic the HIGHER the base cost • Design • Max. Frequency • Power • Autonomy Requested characteristic

13. to find out more: accuracy feasibilitystudy vs speed on-linequery The budget required to complete an R&D project is a function of several factors R&Dexperience R&Dbudget requiredfor completion physicalcharacteristics Requestedbasecost

14. Project submitted to R&D: Minimum base cost is calculated at an early stage in the project. Minimum base cost = $110 weight design volume max. freq. power 17 6 85 35 70 Case A1 Case A2 Case B1 Case B2 Budget allocated by team for this period: Budget allocated by team for this period: $ 1,000 $ 300 $ 1,000 $ 300 Project is available at base cost = 110 Project unsuccessful Project is available at base cost = 130 Project unsuccessful There are two possible outcomes of any R&D project Case B Requested Base Cost = $130 Budget required for completion = $ 550 (at base cost = $ 130) Case A Requested Base Cost = $80 (requested base cost is below minimum, but the R&D will try to develop the project at the minimum base cost) Budget required for completion = $ 800 (at base cost = $ 110) Budget required for completion is also calculated at an early stage in the project

15. A completed R&D project may be used to modify existing brands and/or introduce new brands Performance Bu Si Pr Hi Economy New Brand "SAMY" New SAMA more performance Ot Old SAMA

16. Bringing successful R&D projects onto the market may result in obsolete inventory I'll buy any product at a given % of its transfer cost Brand modification (name kept) Inventory disposal SAMA Obsolete inventory SAMA SAMA SAMA SAMA SAMA Brand withdrawal TRADING COMPANY

17. Cost reduction projects should be weighed against experience curve effects Transfer cost A Base cost A Current product (initial experience curve) Base cost B B A1 Current transfer cost A1 cost reduced product (new experience curve) 225 KU 100 KU Cumulative production

18. The MDS study measures brand perception along three composite dimensions... SONITE market Influence of brand characteristics on MDS dimensions in P0 Perceived Economy increases if Max. Freq. increases Perceived Economy increases if Price decreases Weight Design Volume Max. Freq. Power Price Product charac. Composite dimensions moderate moderate Economy slight slight slight strong Performance slight slight slight strong strong moderate Convenience moderate strong moderate slight slight slight

19. ... which are more or less influenced by the various brand attributes VODITE market Influence of brand characteristics on MDS dimensions in P0 Perceived Efficacy increases if Max. Freq. increases Perceived Flexibility increases if Weight decreases Autonomy Max. Freq. Diameter Design Weight Price Product charac. Composite dimensions moderate slight Efficacy slight very strong slight slight Flexibility strong slight moderate slight moderate slight Economy slight slight slight slight slight very strong

20. New decisions introduced in Period 2: • Brand portfolio • Perceptual objectives (on semantic scales or MDS) • R&D

21. You can now extend your portfolio by introducing new brands ... click here to display all completedR&D projects and their features

22. Keep the same name select a new R&D project ... you can also modify existing brands

23. To convey the right message to the market, you can set perceptual objectives for each of your products 1 Do you want to communicate on the semantic scales or on the MDS composite dimensions? 2 On which dimensionsdo you want to communicate? 3 Input the coordinates of the point that you want to reach on the map

24. click here to obtain a safe estimate of the minimum base cost and budget required for completion of this project You can initiate up to five R&D projects per period and per product type (five Sonite and five Vodite)

25. You now know everything. From here on, it's down to your strategy...

26. Don't delete this page: Company Report in 'note page'

27. Don't delete this page: Company Report in 'note page'

28. Don't delete this page: Company Report in 'note page'