This Document Contains Cases 1 to 6 Case 1: USA Today: Innovation in an Evolving Industry* Synopsis: As the entire newspaper industry sits on the brink of collapse, Gannett and USA Today work to avoid disaster and transform the nation’s most read newspaper into tomorrow’s best resource for news and information. This case reviews the history of USA Today, including its continued use of innovation to stay on top of the technological and sociocultural shifts that are rapidly changing the newspaper industry. In the face of continual competition across a variety of media sources, the future of USA Today depends on its ability to continually push the envelope of innovation and offer value-added, proprietary content to ensure continued differentiation and the future of the USA Today brand. Themes: Product strategy, innovation, target marketing, distribution strategy, changing technology, changing sociocultural patterns, customer relationships, competition, differentiation, strategic focus, SWOT analysis Case Summary USA Today is the most successful and highly visible newspaper that students have seen and read on a national basis. The case provides an overview of Gannett's strategic marketing approach to launching and growing this unique newspaper. When USA Today debuted in 1982, it achieved rapid success due to its innovative format. No other media source had considered a national newspaper written in shorter pieces than a traditional paper and sprinkled with eye-catching, colorful photos, graphs, and charts. Designed to address the needs of a sound-byte generation, readers found USA Today’s content refreshing and more engaging than other papers. Circulation grew rapidly from roughly 350,000 in 1982 to approximately 5.9 million daily print and online readers today (1.8 million in daily circulation). This compares to approximately 2.12 million for second-place Wall Street Journal and 1.58 million for New York Times. USA Today’s website (www.usatoday.com) is one of the Internet’s top sites for news and information. [Author’s note: Circulation numbers vary from quarter to quarter with USA Today and Wall Street Journal frequently swapping the #1 and #2 positions. Instructors are encouraged to find the most recent circulation numbers.] The case reviews the history of product, promotion, and distribution innovation at USA Today. Although the paper has been very successful, it had difficulty earning a reasonable profit early on. To reverse this trend, Gannett created several USA Today spin-offs including Baseball Weekly, Sky Radio, the international editions of USA Today, and USA Today Online. USA Today continues to grow by enhancing the value-added components of both its print and online versions. It has invested heavily in technology related to podcasting, news aggregation, and online advertising; and developed partnerships aimed at providing news content for handheld wireless devices. Today, that history of innovation must continue if USA Today is to survive during a time when overall newspaper sales, advertising revenue, and readership are declining. The paper faces unprecedented competition from a variety of sources at a time when more and more Americans, especially younger people, are turning away from printed news. That shift has affected the company financially as well. USA Today and other newspapers have struggled with falling revenues and increased costs for several years. Both print and online advertising revenues have been falling steadily, declining by over 51 percent since 2005. Classified advertising has been hit particularly hard, declining by over 71 percent in just six years, most likely due to sites like Craigslist, which host ads for free. Although advertising revenues had been falling before the recession, 2008 and 2009 saw steep declines triggered by a soft ad market, particularly in the automotive, retail, and employment sectors. In fact, 2008 and 2009 were the worst years ever for the U.S. newspaper industry. Although advertising revenues continue to decline today, the rate of decline has slowed in recent years, with total newspaper advertising down 7.3 percent in 2011. The multitude of choices for both consumers and advertisers means that USA Today will have to work harder at innovation, finding a way to differentiate its products from the sea of competition. This will be a challenging task given the continuing decline in newspaper readership and the growing consumer demand for free online news. Teaching Overview As USA Today looks toward its future, a number of issues must be considered. Toward this end, the latter half of the case is written in the form of a situation analysis. Students should be encouraged to update this information as much as possible, and then conduct a comprehensive SWOT analysis for USA Today. After this is completed, students could use this case to develop a marketing strategy for maintaining the company’s dominance in national news. Perhaps the most important issue to consider is the role of the printed paper in a future that is likely to be dominated by wireless news delivery. The inevitable questions about the death of newspapers will come up in the discussion. When this occurs, encourage students to explain their assumptions about the consumption of news in the future. At least 75 percent of the class will predict the demise of printed newspapers. However, the remaining 25 percent is usually quite dogmatic in their belief that printed news is here to stay. The case also gives students an excellent chance to think not only about promotion, sales, and product development, but also the connection between these marketing elements and bottom-line profitability. Students should have no trouble discussing USA Today’s competition and the implications for USA Today’s marketing strategy. The case can also be related to a discussion of competitive growth strategies and the ways that Gannett implemented these strategies during the introduction and growth of USA Today. SWOT Analysis Internal Strengths External Opportunities • Huge Gannett media conglomerate • Marketing know how • Popularity, credibility, and familiarity • Extensive information gathering resources • Clear, concise, and colorful format that subscribers find appealing • Comprehensive sports coverage • Contracts with national advertisers • Consumers desire more timely news and information • The Internet is a highly accessible and low cost distribution outlet • Advertisers are becoming more interested in targeted marketing, especially among a highly mobile population • The Internet allows for customizable content • New technologies exist, besides print media, for reaching consumers • Major news competitors are slow to innovate Internal Weaknesses External Threats • Lack of local news content • High fixed costs associated with the print version • Crowded format of online version • Online version is not as customizable as competitors • Online version uses popup ads that are unpopular with consumers • Some still see USA Today as a “McPaper” • Perhaps some blind faith in the staying power of printed news • Abundance of free sources of news and information on the Internet • Online revenue generation ability is weak compared to hard (printed) materials • The Internet has introduced an interactive and accessible delivery platform that cannot be matched by a printed newspaper • The volatility of newsprint prices • Google and other non-conventional advertising businesses are tapping into the growing online advertising market Problem/Decision Statement Although increasing digital options for news and information have some industry observers bemoaning the death of newspapers, some feel that newspapers do have a bright future and will thrive if they develop a healthy online presence and adapt to evolving media consumption patterns. In the face of continual competition in both offline and online markets, the future of USA Today depends on its ability to continually push the envelope of innovation and marketing strategy. To remain successful, USA Today must continue to use a value-added strategy that can further enhance distribution of its proprietary content and ensure continued differentiation with respect to the competition. Strategy Alternatives 1. Change the format of the USA Today print version to include links to the website while simultaneously cutting the dimensions of the paper. This would increase traffic to the website and save newsprint expense. 2. Present the latest, breaking hard news stories on USAToday.com only, while creating a supplementary, analytical print version that supports the website. The print version might be described as a “diet newspaper” that will analyze those events and topics that are high interest, controversial, or complex. 3. Create a web portal where readers can customize their online newspaper and have audio and video news automatically streamed to their portable electronic devices at specified intervals throughout the day. All news stories will be anchored by customizable, computer-generated personalities, who read the stories to busy consumers. Strategy Recommendations The first alternative is fairly easy to implement in the short-term. However, Gannett should take the lead in developing news content for portable electronic devices beyond their current apps for smartphones. Consumers have demonstrated a desire for online, mobile news and USA Today’s traditional news competitors have been slow to innovate. The third alternative is one option that the company might pursue. This alternative is designed to improve the utility of USAToday.com by broadcasting it too busy consumers. Instead of requiring the consumer to find time to read the product on a regular basis, this strategy reads the news to the consumer by means of a computerized, human-like entity. Consumers could choose among different personalities. For example, a consumer could have a female broadcaster read the top news stories; a male read the sports stories, and a different female read the business news. The news content would be highly customizable, a feature that USAToday.com has already started to develop. News stories might include video clips when available, making the entire presentation much like a television news broadcast. Implementation Issues Gannett has already started to resolve the key implementation issues associated with technology. Its recent acquisitions put the company in a position to become a pioneer in computer-mediated news and information. Another issue is the ability of reporters to write for wireless delivery. There is a potential problem in that news stories could be reduced to “sound bites” rather than true in-depth reporting. USA Today must maintain its journalistic integrity at all costs. Teaching Questions 1. What opportunities in the marketing environment did Gannett seize in launching USA Today? How did the company learn about and respond to these opportunities? Answer these same questions for USAToday.com. It appears that Allen H. Neuharth, chairman of Gannett, had been doing casual marketing intelligence, keeping his eyes and ears open to changes occurring in the marketplace. He was able to creatively link two key trends: a shorter attention span owing to a perceived time crunch plus a growing thirst for information. Neuharth consequently visualized a product that could simultaneously satisfy both of these developments: a newspaper providing more news about more subjects in less time. To check his assumptions, Neuharth did marketing research to identify the target market for his proposed publication. From the start, USA Today practiced the marketing concept; using research to discover unsatisfied reader needs and wants. Gannett did research among target market members, getting their reactions to product prototypes and making appropriate modifications in the product. Gannett’s research had shown that readers get most out their information from snippets in a newspaper, resulting in the many design innovations such as short stories, secondary headlines, subheads, breakouts, at-a-glance boxes, and informational graphics. This market-oriented strategy was in contrast to the practices of most other newspapers, which were more production oriented, fulfilling the wishes of publishers and editors. After the paper’s launch, focus groups were conducted to learn about how the paper was read (at home vs. on the commute or at work), resulting in the launch of a home delivery subscription service. As noted in the case, USA Today’s success came from listening to its readers and giving them what they wanted. The same trends that suggested a need for USA Today in the early ‘80s also suggested a need for an online version in the mid-90s. It is quite likely that the company revisited these trends, along with the trend toward the use of electronic information in the early 90s, to develop USAToday.com. They took advantage of the opportunity to generate revenue from eager online advertisers in this new venue. They also listened to reader requests for archived material in conceiving the idea for the pay-per-view archive service. Keeping their finger on the pulse of society (perhaps through either trend analysis or marketing research, perhaps done by this time via on-line surveys), Gannett launched an online classifieds area. They also studied server logs to learn of improvements they could make to the online paper. 2. How has a continuous strategy of marketing innovation proved successful for USA Today and USAToday.com? Do you believe that USA Today is well positioned for the future? Explain. From day one the newspaper was designed to be like no other: The newspaper has incorporated many quality improvements and added features. Some examples include news layered for easy access and quick comprehension by time-pressed readers; many “gimmicks” such as tight, short stories; no jumps from page to page, except for the “cover story” (stories that jump to another page are one of newspaper readers’ major complaints); splashy, colorful graphics everywhere; a distinctive, casual writing style; a colorful national weather map; an upbeat and positive tone; a space-defying number of stories, factoids, larger-than-usual pictures, bar graphs, and charts, all squeezed onto each page without seeming too crowded; and balanced and fair coverage. The paper incorporated many minor modifications over the years to set it part from competitors and to stay abreast of the market, including: • A shift to more hard news and deeper coverage, especially in the Sports and News sections. This was probably done in reaction to competitive critics who labeled USA Today “McPaper,” in response to consumer surveys, and, as the case suggests, as a result of testing the waters with more serious news coverage. • Various value-added features such as “hot-line” numbers, reader opinion polls, and a high school “Academic All Star” program. Note that these kinds of features are especially suitable for a publication with a national scope. • Internet content to keep the paper contemporary and relevant, a redesign to make handling the paper easier (a common complaint of readers of broadsheet newspapers is that they are unwieldy to handle). • Promotional innovations, including product samples and front-page advertisements. The online version was also not content to rest on its laurels. Changes over its first six years included: • A move from paid to free distribution. The changing nature of the marketplace necessitated this (most websites are free or at least allow certain portions of their site to be open to everyone instead of just paying subscribers) • A pay-per-view archives service. Not only did this meet an important consumer demand; it also was a revenue generator for Gannett. • Partnering with other online websites. This was a smart way to increase site traffic, as other publications’ viewers would surf to USAToday.com. • Adding an online classifieds area. (This has been one of the biggest growth areas for newspapers in recent years.) It provided a service to readers and additional revenue for Gannett. • Adding a “Quick Question” area to the website. This provided a convenient forum for readers to speak out on the issues and compare their opinions with the views of other readers. • A redesign on the website to make it user-friendlier. Gannett’s recent acquisitions of technology-related companies indicate that the company is looking toward the future. Gannett and USA Today seem well poised for the future. 3. What are the SWOT implications for USA Today as it looks toward its future? What strengths and opportunities can USA Today leverage as it looks for a competitive advantage in the distribution of news and information? This question is addressed in the SWOT Analysis section of this teaching note. 4. Based on USA Today’s experiences with print and online news, evaluate the long-term potential of printed news and the newspaper publishing industry. Do you believe printed newspapers will continue to survive despite digital competition? Whether newspapers will survive is shown in the case to be a debatable topic. Gannett officials seem to be quite bullish on the future of the newspaper medium in general, and of USA Today in particular. The key seems to be constant innovation. Old media have always survived the onslaught of new media. For instance, radio was supposed to doom magazines, and television was supposed to sound the death knell for radio. In each case, the old media reinvented themselves and did fine—magazines and radio both became more segmented and focused, for instance. Some people predict that newspaper readership will shift entirely to tablet devices like the iPad. Enhancements will include audio text (a wireless service that provides information to the reader that is usually related to an advertised product), videotext, and other document retrieval capabilities. Case 2: Apple’s Winning Marketing Strategy* Synopsis: Few companies have been able to master the arts of product innovation, a “cool” brand image, and customer evangelism like Apple. After nearly collapsing under a cloud of bankruptcy in the mid-1990s, late Apple CEO Steve Jobs was able to save the company he created through product innovation, a masterful marketing program, and an entrepreneurial corporate culture. This case reviews Apple’s history and remarkable comeback with an eye toward the marketing strategies that created the company’s success. The case also examines many of the challenges faced by a company that continually pushes the boundaries of marketing practice to stay on top of the consumer electronics and computer industries. Themes: Product innovation, marketing program, prestige pricing, competition, changing technology, differentiation, customer loyalty, foreign sourcing, intellectual property, privacy issues, corporate culture, sustainability Case Summary Few companies can boast that they have fans that sleep outside its doors to be the first to snag its latest products, but such is the case with Apple, Inc. In 2011, Apple surpassed Google to become the most valuable global brand, with an estimated value of $153 billion. Headquartered in Cupertino, California, Apple has transformed itself from a company near bankruptcy in 1997 (with a stock price of $3.30) to the world’s most valuable company in 2012 (with a stock price of more than $600). Many companies have tried to copy Apple’s strategies, but none have reached the iconic status of Apple and its products. Some believe that Apple’s success stems from a combination of several factors, including the leadership qualities of late CEO Steve Jobs, a corporate culture of enthusiasm and innovation, and the revolutionary products for which Apple has become known. While every organization must acquire resources and develop a business strategy to pursue its objectives, Apple has excelled in both leadership and operations. One of the company’s most important resources is its employees, and the company has effectively recruited, trained, and compensated employees to create loyalty. Another resource is suppliers, and Apple has created a highly efficient and effective supply chain with most of its production in China. Apple has also mastered core research and development skills that have allowed the company to translate its technological capabilities into products that consumers want and are willing to pay a premium price to obtain. The capstone of Apple’s strategy is its retail stores that have become a role model for its competitors, both in and out of the electronics industry. Such factors have allowed Apple to revolutionize the technology and retail industries. Teaching Overview This case provides a brief history of Apple and a review of its product line and marketing program. Apple has honed its ability to produce iconic products that consumers desire. The company’s product strategy is based on innovative designs, ease-of-use, and seamless integration. Apple has not only created highly successful products, but also whet consumers’ appetites for yet-to-be-released and rumored products. Since the main theme of this case is product innovation, students should be asked to explain how Apple has managed to reach the pinnacle of innovation and iconic brand status. Most students will suggest that Steve Jobs, and the culture that he created, is the main reason for Apple’s success. If true, students should be pushed to explain how Apple’s track record could continue without Steve Jobs at the helm. The case can also be approached from a competitive point of view. Though Apple is currently on top, the quality of competing products (most notably those from Amazon and Google) continues to increase. And, competitive products are released at a much faster rate than Apple releases new products. At the time of this writing, articles are beginning to appear in the popular press that consumers have become fatigued with Apple’s products. Likewise, when the iPad Mini was finally released in late 2012, many experts panned it for its poor camera and lack of retina display. These issues have caused Apple’s stock price to drop well below $600 as concerns mount that Apple may not be able to continue its pace of innovation. Internal executive changes have also heightened this concern. Given the rapid pace of change in the technology sector, instructors should thoroughly update themselves on Apple’s current products and strategies before discussing this case. SWOT Analysis Internal Strengths • High quality, innovative products • Strong brand cache, customer satisfaction and brand loyalty • Unparalleled supply chain partners/processes • Strong corporate culture • Highly profitable store-based retail operations • Tight control over the Apple ecosystem • Massive cash reserve Internal Weaknesses • Loss of Steve Jobs • Products are seen as expensive • Tight control over the Apple ecosystem (not open) • Pace of innovation is slowing • Recent leadership changes • Massive cash reserve (perception that Apple is greedy) External Opportunities • Emerging markets are more profitable than the U.S. market • Continuing expansion of mobile technology • Consumers insatiable desire for the latest, greatest products • Slowly strengthening U.S. economy External Threats • Competition is vastly improved (especially Amazon and Google) • Consumers in emerging markets do not replace technology as often as U.S. consumers • Large consumer base for low-priced electronics • Many Chinese suppliers have questionable labor practices • Consumers are fed up with high profile patent lawsuits Problem/Decision Statement How can Apple stay on top by continuing its marketing program based on product innovation, premium pricing, tightly integrated supply chains, and catchy advertising? Strategy Alternatives 1. Apple could continue to vertically integrate its supply chain by purchasing a major components supplier, such as Sharp (Sharp makes LCD panels for Apple). This would allow Apple to achieve further cost reductions and insulate itself against potential problems with Samsung (also an Apple supplier and a frequent litigant). Apple has already achieved success using this strategy in processor chips. 2. Apple could move horizontally by purchasing a major content provider (a music label, movie studio, Netflix, etc.) or a major network provider (such as a telecom company). Many have speculated that Apple would like to offer its own mobile phone service to compete against AT&T and Verizon. 3. Apple could invest its cash reserve in emerging technologies, such as flexible displays or wearable technology. The last version of the iPad Nano created a cottage industry around wristbands that turned the Nano into a watch-like device. Google has already demonstrated wearable technology with its Project Glass. Strategy Recommendations All three alternatives are viable options for Apple. Students should be cautioned that innovation does not necessarily translate into “wow” technology for consumers. Apple can innovate on the backend and continue to provide quality products to customers. Apple’s massive cash reserve (sitting at $120 billion as of this writing) has prompted a lot of speculation that the company plans to purchase one or more companies that allow them to expand either horizontally or vertically. Implementation Issues Apple’s key implementation issue is executive leadership and how the team can perpetuate Apple’s culture of innovation. Despite the loss of Steve Jobs, current CEO Tim Cook has demonstrated that he can effectively lead the company. Recent leadership changes have consolidated a great deal of authority under 3-4 senior executives, most notable Jony Ive, who is responsible for the design of all Apple products. Apple would be at great risk if any of these senior executives left the company. Teaching Questions 1. How has Apple developed extreme loyalty among consumers that has resulted in an almost cult-like following? Most students will suggest that product design and brand cache are the reasons. Some experts argue that Apple’s cult following began with the white ear buds introduced along with the original iPod. The company’s advertising at the time made those ear buds, and the iPod, a status symbol among younger customers. Those design aesthetics later translated to the MacBook, iPhone, and iPad. Other students will suggest that Apple’s mantra of “It Just Works” has a lot to do with consumer loyalty. Apple’s products are generally easier to use than competing products, especially Windows-based computers. 2. Describe the role of Apple stores as an important part of its marketing strategy. Apple’s retail stores are all about branding and creating touch points with consumers. Apple has always believed that consumers only need to pick up and play with an Apple product to “get it.” From this perspective, the Apple Stores are absolutely vital to the company’s marketing strategy. They are also a highly effective distribution mechanism. 3. What will Apple need to do to maintain product innovation and customer loyalty? This is a difficult question and student answers will vary. The main thing Apple needs to do is to prevent consumer boredom and fatigue. Apple customers are used to being blown away by the latest product introductions. Of late, however, Apple has not hit the homeruns of the past (the iPhone 5 was a disappointment for many, as was the iPad Mini). Another issue is that Apple’s innovation is no longer head-and-shoulders above the competition. Google and Microsoft have both created and delivered innovative products of late. Apple’s innovation used to shine because it was better than the competition. Today, Apple’s products are beginning to blend in with the crowd. Case 3: Monsanto Balances the Interests of Multiple Stakeholders* Synopsis: This case focuses on Monsanto’s desire to balance the many significant benefits that its products bring to society (and the company’s resulting profits) with the interests of a variety of stakeholders. The case examines Monsanto’s history as it shifted from a chemical company to one focused on biotechnology. Monsanto’s development of genetically modified seeds and bovine growth hormone are discussed, along with the safety and environmental concerns expressed by a number of Monsanto’s stakeholders around the world. Some of Monsanto’s ethical and patent-enforcement issues are addressed, along with the company’s major corporate responsibility initiatives. The case concludes by examining the challenges and opportunities that Monsanto may face in the future. Themes: Ethics and social responsibility, sustainability, product strategy, product liability, corporate affairs, stakeholder relationships, product labeling, government regulation, legal environment, global marketing Case Summary The Monsanto Company is the world’s largest seed company, with sales over $11.5 billion. It specializes in biotechnology, or the genetic manipulation of organisms. Monsanto scientists have spent the last few decades modifying crops, often by inserting new genes or adapting existing genes within plant seeds, to better meet certain aims such as higher yield or insect resistance. Monsanto products can survive weeks of drought, ward off weeds, and kill invasive insects. Monsanto’s genetically modified seeds have increased the quantity and availability of crops, helping farmers worldwide increase food production and revenues. Today, 90 percent of the world’s genetically modified seeds are sold by Monsanto or by companies that use Monsanto genes. Monsanto also holds a 70 to 100 percent market share on certain crops. Yet, Monsanto has met with criticism from sources as diverse as governments, farmers, activists, and advocacy groups. Monsanto supporters say the company creates solutions to world hunger by generating higher crop yields and hardier plants. Critics accuse the multinational giant of trying to take over the world’s food supply and destroying biodiversity. Because biotechnology is relatively new, critics also express concerns about the possibility of negative health and environmental effects from biotech food. However, such criticisms have not deterred Monsanto from becoming one of the world’s most successful companies. Teaching Overview This case deals with the ethical implications involved in producing and selling a product with unknown health and environmental side effects. Monsanto claims that its products are safe, even beneficial for society. However, critics are not convinced. A major issue in this case pertains to the debate over whether genetically modified plants and substances (milk) are safe both for the environment and for human consumption. Other issues Monsanto faces have to do with intellectual property and patent protection, and the question of whether seeds can be proprietary goods. Traditionally, farmers save seeds from one year to plant in the next year, but Monsanto wants introduce a “kill gene” to force farmers to purchase new seeds from the company every year. The case also covers Monsanto’s long history of ethical misconduct, including instances of hiding illegal pollution and taking bribes. Finally the case goes on to cover Monsanto’s corporate responsibility initiatives, charitable giving, and how its genetically modified seeds may actually help farmers in less developed countries. The case concludes by asserting that Monsanto claims to have realized the errors of its ways and is on the path to greater corporate responsibility in the future. The question to students remains: Do they believe Monsanto, or is it just lip service to avoid further criticism? SWOT Analysis Internal Strengths • World’s largest seed company • Known specialist in biotechnology with huge worldwide market share • Patented seed technology • Products have increased worldwide food production and revenue for farmers • Roundup herbicide is well known and widely distributed in both agricultural and consumer markets Internal Weaknesses • Known reputation for creating environmental problems in the past • Known reputation for past ethical violations • The company’s stance toward farmers and its patented seeds (i.e., the seed police) casts doubt on Monsanto’s motives External Opportunities • Continuing shortages of food and inefficient food production in many lesser developed countries • Increasing pressure on agriculture industries to increase production at lower costs • FDA maintains posture that biotech crops are safe External Threats • Unknown potential health and environmental effects from genetically modified food products • Extreme consumer backlash against genetically modified foods in many parts of the world • Third-party research casts doubt on safety of continued use of herbicides Problem/Decision Statement This is a very complex and contentious case, and students should be encouraged to conduct further research at Monsanto’s website (www.monsanto.com). Students should find the exercise of perusing the website interesting, as much for what is left out as for what is included. The instructor should point out that such websites, which are designed for all stakeholders, often only contain positive information on the company and do not address any negative press. Strategy Alternatives/Recommendations This case does not necessarily pose a challenge or dilemma to be solved by offering strategic solutions. Instead, the case is designed to promote discussion on a number of fronts. The overall theme should be gauging Monsanto’s true dedication to ethical and socially responsible business, and how to best alleviate stakeholder concerns. Three potential avenues for fruitful discussion include: 1. Charitable Donations—Many students will note that Monsanto’s philanthropic efforts are anemic at best. The average small business in the United States contributes roughly 6 percent of its profits to charity. Discussing these numbers and Monsanto’s true level of interest in charitable donations should result in a lively debate. 2. Intellectual Property—The issues surrounding the firm’s “seed police” can lead students into a discussion of whether patents on food products, particularly seeds, are socially responsible. Within the U.S., patent infringement lawsuits are increasing, especially within pharmaceuticals and gene therapy for specific diseases. At the heart of this issue is whether seeds, no matter how scientifically manipulated, should be considered technology, considering how essential they are to the basic necessities of agriculture and food markets. Does Monsanto have any sort of moral obligation to farmers and consumers to make its seeds available at prices affordable to even the poorest of farmers? Students should also debate the question of piracy and lack of intellectual property protection in less developed countries. How do they think large multinational corporations should handle this problem? 3. Sustainability—While Monsanto is the first to assert that it has increased food production wherever its seeds are planted, many ask at what cost? Sustainability is an increasingly popular word in the business community. While Monsanto claims that it has helped farmers grow more food in less space using less water, no one can make the argument that what Monsanto sells is a natural product. Students should discuss the products introduced in this case, and whether they think they offer advantages and hope to farmers. Is it problematic that farmers have become dependent on Monsanto for their seeds, pesticides, and herbicides? Or do they think there are better solutions out there? The case touches on the growing importance of organic farming, which purports to be a more thoughtful, sustainable solution to food problems that takes care of the land instead of maximizing output. Students can discuss the pros and cons of Monsanto’s products, and what they think the long-term costs to people, animals, and society will be. Teaching Questions 1. If you were Monsanto’s CEO, how would you best balance the conflicting needs of the variety of stakeholder groups that Monsanto must successfully engage? Students will provide a variety of answers to this question. However, most will probably agree that, while the company may have made strides in terms of its corporate responsibility, Monsanto does not maintain the most ethical culture possible. Monsanto is in a difficult position, as it produces products that many people do not understand or trust. The corporation also does much business in very poor countries where it is very easy for critics to accuse Monsanto of taking advantage of people who do not know any better. Monsanto’s low levels of charitable giving and history of ethical lapses do not help the company’s case that it is seeking to improve the lives of the people of the world. However, Monsanto has poured considerable energy into publicizing its efforts to produce seeds that generate higher yields, use less water, and are hardier—thereby serving and improving the lives of stakeholders around the world. 2. Companies, like Monsanto, that can offer technology to improve human lives are often said to have a moral obligation to society. How can Monsanto best fulfill this moral obligation while also protecting society and the environment from the potential negative consequences of its products? While this is a difficult question, parallels can be drawn with the pharmaceutical industry. Most research-based pharmaceutical companies give away their medicines to people who cannot afford them (both in the U.S. and in other nations). In matters of life and death, rational people will agree that companies that offer life-saving products have a moral obligation to society. Food, like medicine, certainly falls into this category. Students are likely to argue that Monsanto’s “seed police” policy does not fulfill this moral obligation. With respect to the potential negative effects of genetically modified food, students should be encouraged to provide better answers to the problems of hunger and inefficient food production in less developed nations. 3. Monsanto has developed a differentiated, patent-protected product that produces superior yields when compared to traditional seeds. How has this successful marketing strategy been impacted by the potential negative side effects and the potential negative environmental impact of genetically modified seeds? One way to approach this question is to make comparisons with other products. In other words, how are Monsanto’s seeds any different than other patent-protected products? Astute students will recognize that virtually all products have some negative consequences. Apple, for example, has experienced its fair share of criticism with respect to supply chain issues, labor conditions in emerging economies, and issues of how to dispose of obsolete electronics. The difference is that people do not eat electronics. In this vein, Monsanto is much more like Pfizer, Merck, or other pharmaceutical firms. In each case, the firm has experienced much success despite any potential negative side effects. In some respect, these negative effects could be seen as a cost of advanced technology and the many benefits that it provides. 4. What can Monsanto do to alleviate stakeholder concerns? How could these actions be woven into the marketing strategy for the company’s products? The answer for Monsanto is simple: trust. Students will argue that Monsanto’s past lapses put them in a precarious position. Why should stakeholders trust Monsanto? In this case, actions speak louder than words. Unfortunately, Monsanto’s current actions, such as weak charitable giving and the seed police, do not give stakeholders a basis for trust. Monsanto should revisit its policies and marketing programs in order to build trust. Biotech food may be a good solution to problems in less developed nations, but why should developed countries trust that Monsanto has their best interests in mind? Case 4: New Belgium Brewing (A): Gaining Competitive Advantage Through Socially Responsible Marketing* Synopsis: From its roots in a Fort Collins, Colorado, basement, New Belgium Brewing has always aimed for business goals loftier than profitability. The company’s tremendous growth to become the nation’s third-largest craft brewery and ninth-largest overall has been guided by a steadfast branding strategy based on customer intimacy, social responsibility, and whimsy. The company’s products, especially Fat Tire Amber Ale, have always appealed to beer connoisseurs who appreciate New Belgium’s focus on sustainability as much as the company’s world-class brews. Despite its growth and success, New Belgium has managed to stay true to its core values and brand authenticity—the keys to its marketing advantage in the highly competitive craft brewing industry. Themes: Customer intimacy, competitive advantage, social responsibility, sustainability, branding strategy, product strategy, distribution strategy, marketing implementation, customer relationships Case Summary Small companies sometimes make big contributions to surrounding communities and become leaders as they set social agendas and enact initiatives to address community issues. Such is the case for the New Belgium Brewing Company (NBB), which has gone to great lengths to incorporate environmentally sensitive and energy-saving alternatives into its brewery operations. Beyond its commitment to the environment, New Belgium has become a model for social responsibility as a result of its philanthropic efforts in many states. The company focuses on producing world-class craft beers and having fun, but strives to maintain its reputation of being an environmental steward. NBB competes against domestic and microbrews in both bars and liquor stores, but feels it has a loyal following due to its personal relationships with customers. The beer maker’s target market consists of environmentally considerate, activity-based consumers of all ages and demographic backgrounds. Besides the popular Fat Tire, NBB also brews a unique collection of standard, seasonal, and one-time varieties that are distributed to 28 states (plus the District of Columbia) from the Pacific coast, throughout the Midwest, and most recently into the Southeastern United States. Priced around $8.00 per six-pack, NBB microbrews are competitive with other microbrews, but convey a message of superiority over domestic beers. NBB strongly believes in social responsibility as its main strategic priority (the case summarizes NBB’s beliefs and its responsibilities to the environment, society, and employees). The company’s efforts to live up to its own high standards have paid off with numerous awards and a very loyal following. Despite the accolades, there are still many ways for NBB to improve as a corporate citizen. For example, the manufacturing process is a fair distance from being zero waste or emission free. Although all electric power comes from renewable sources, the plant is still heated in part by using natural gas. Additionally, there will always be a need for more public dialogue on avoiding alcohol abuse. Practically speaking, the company has a never-ending to-do list. NBB executives acknowledge that as its annual sales increase, so do the challenges to remain on a human scale and to continue to be culturally authentic. How to boldly grow the brand while maintaining its humble feel has always been a challenge. Additionally, reducing waste to an even greater extent will take lots of work on behalf of both managers and employees, creating the need for a collaborative process that will require the dedication of both parties toward sustainability. As NBB looks ahead, its most important asset is its image—a brand that stands for quality, responsibility, and concern for society. Defining itself as more than a beer company, the brewer also sees itself as a caring organization that is concerned for all stakeholders. Teaching Overview This case does not present a challenge, but rather focuses on the positive impact that a company can make on its community. This is important and distinctive within the industry because many people feel the production and promotion of alcohol is immoral and naturally contradicts the desirable traits of business and society. Although many students will not have tried these products, some may be familiar with the brand. New Belgium should stand as an example of how a business can refute negative prejudices by exemplifying the ways in which a business can be environmentally and socially responsible. SWOT Analysis Internal Strengths • NBB is active in community affairs where it brews and distributes its beers. • By remaining small, NBB can focus all its efforts on customer service and quality products. • NBB leads the industry in innovative ways to reduce waste and conserve energy. • Fat Tire and other brands are wildly popular among consumers. • NBB is willing to experiment and develop new flavors on a regular basis. • NBB will open a second brewery in Asheville, NC Internal Weaknesses • New Belgium loses some brand recognition as the name is used interchangeably with Fat Tire, its signature ale. • NBB’s local focus may prevent it from becoming a national favorite. • NBB’s advertising budget is insignificant compared to other producers. • NBB has a higher cost structure due to its environmentally friendly brewery. External Opportunities • Microbrews and craft beers are extremely popular and growing rapidly. • Many areas of the country have not been fully exposed to craft beers and microbrews. • Certain sporting and community events are excellent vehicles for product promotion. • Consumers who enjoy microbrews and craft beers are typically quite loyal. As a result, they are much less price sensitive than typical beer consumers. External Threats • Many other microbreweries exist in Colorado and other Western states. Some of their brews, such as Pyramid, Anchor Steam, and Sierra Nevada are very popular. • Microbreweries outside of the Western region may begin to target NBB’s home base. • National domestic producers have started to develop their own specialty beers to compete against microbrews. • Consumption of beer could decline, as consumers become more health and safety conscious. Problem/Decision Statement How should New Belgium respond to competitive threats from other microbreweries and domestic producers who are slowing enter their market niche? Will NBB be able to increase its market share while maintaining a high quality product at a relatively high price? Strategy Alternatives 1. Maintain a penetration strategy—New Belgium can continue to focus on producing high quality beers for its faithful fans. This is a low risk option that holds potential for very slow growth. A penetration strategy limits NBB to reactive responses instead of taking a proactive stance to fight against competitive threats. 2. Follow a product development strategy—NBB could expand upon its ability to create one batch brews by simultaneously testing new varieties. Popular varieties could then be mass-produced and become a standard part of the product line. These new brews would be marketed to current customers. 3. Follow a market development strategy—Based on the popularity of its current brews, NBB can expand its target market to include different types of beer drinkers. NBB’s stated target market limits the company to local adventure, sporting, entertainment, and environmental enthusiasts. Strategy Recommendations Based on the SWOT analysis, it appears that New Belgium should pursue a market development strategy. By targeting new customers, NBB will be able to maintain high quality and a strong customer focus. Additionally, NBB can uphold its environmentally and socially responsible practices. Implementation Issues New Belgium’s success depends on its ability to serve the needs of niche markets. The company’s current size inhibits its ability to compete head on against domestic brews for the price conscious heavy consumer. The addition of the Asheville, NC brewery will help expand NBB’s nationwide footprint. However, NBB will still need to target higher income markets that normally drink wine and champagne. These consumers seek gourmet beverages and better resemble the profile of NBB’s current market. Teaching Questions 1. What environmental issues does the New Belgium Brewing Company work to address? How has NBB taken a strategic approach to addressing these issues? Why do you think the company has taken such a strong stance toward sustainability? Students should be able to provide specifics to support their responses, such as the firm’s investment in a wind turbine, use of a steam condenser, use of sun tubes, recycling and reusing supplies, and providing employees who have been with the company for one year with a “cruiser bike” to ride to work. The company has chosen a focus on sustainability because of its owners’ interests, the natural link between manufacturing and environmental concerns, and many consumers’ beliefs and expectations for environmentalism. Additionally, setting out to establish itself as a socially responsible firm may help NBB gain a competitive advantage in the increasingly competitive craft beer industry. Going to such lengths to ensure minimal environmental damage wins favor with the public and has led to national recognition for the company. 2. Do you agree that New Belgium’s focus on social responsibility provides a key competitive advantage for the company? Why or why not? The company has such a strong focus on social responsibility that it permeates everything that they do. Their values are deeply embedded in the company. It is also forward thinking of New Belgium to be environmentally responsible because it is less wasteful, could help the company to adjust to stricter environmental legislation in the future, and because having a green image has become a competitive advantage for many companies. Its socially and environmentally responsible image undoubtedly has gained New Belgium a competitive advantage in the growing craft beer industry. 3. What are the challenges associated with combining the need for growth with the need to maintain customer intimacy and social responsibility? Does New Belgium risk losing focus on its core beliefs if it grows too quickly? Explain. NBB management acknowledges that as their annual sales increase, so do the challenges of keeping the brand both humane and culturally authentic. It has always been a challenge for NBB to grow while keeping true to its core beliefs. However, to serve customers demands for NBB brews, the company must continue expanding. New Belgium has taken great efforts to ensure that it doesn’t compete against large domestic brewers. Instead, NBB focuses on its image of producing high quality and handcrafted brews worthy of a premium price. Further, NBB focuses on meeting the needs of its customers by building personal relationships. The company’s continued use of local events and local philanthropy help to support this goal. 4. Some segments of society contend that companies that sell alcoholic beverages and tobacco products cannot be socially responsible organizations because of the nature of their primary products. Do you believe that New Belgium’s actions and initiatives are indicative of a socially responsible corporation? Why or why not? This question challenges students to consider whether a company can be socially responsible when its primary product has the potential for abuse or irresponsible use. There is no correct response. Many students will argue that NBB is a model corporate citizen because of its social initiatives and efforts to minimize its negative impact on the environment. These students will likely concur that NBB does not promote excessive beer consumption, but rather advertises it as part of a healthy lifestyle where alcohol is enjoyed in moderation. Other students may feel that, no matter how strong NBB’s social responsibility initiatives are, it is still selling a product that is widely abused. However, these students will likely be in the minority. Few people will likely object to or find fault with the firm’s efforts to demonstrate ethical and socially responsible conduct. Case 5: New Belgium Brewing (B): Developing a Brand Personality* Synopsis: This case, a follow up to New Belgium (A), discusses how New Belgium Brewing expanded its branding and communication strategy from a focus on word of mouth and event sponsorship to include television advertising, web-based communication, and social media. The development of New Belgium’s “Brand Manifesto” is reviewed, along with the company’s decisions regarding media selection, messaging components, and advertising production. Despite the company’s continued growth in terms of both distribution and promotional complexity, New Belgium has remained focused on its core values of customer intimacy, sustainability, whimsy, and fun. Themes: Integrated marketing communication, branding strategy, positioning, advertising, customer intimacy, distribution strategy, sustainability, marketing implementation, customer relationships Case Summary This case examines New Belgium’s foray into mass media advertising and the development of the company’s brand image. Until 2005, NBB’s most effective form of advertising had been its cus¬tomers’ word-of-mouth. Indeed, before New Belgium’s beers were widely distributed throughout Colorado, one liquor-store owner in Telluride is purported to have of¬fered people gas money if they would stop by and pick up New Belgium beer on their way through Fort Collins. Although New Belgium’s beers are distributed in 28 U.S. states and the District of Columbia, the brewery receives numerous e-mails and phone calls every day inquiring when its beers will be available elsewhere. With expanding distribution, the company recognized a need to better reach its far-flung customers. It consulted with Dr. David Holt, an Oxford professor and branding expert. After studying the young company, Holt, together with former Marketing Director Greg Owsley, drafted a 70-page “manifesto” describing the brand’s attributes, character, cultural relevancy, and promise. In particular, Holt identified in New Belgium an ethos of pursuing creative activities simply for the joy of doing them well and in harmony with the natural environment. With the brand thus defined, New Belgium went in search of an advertising agency to help communicate that brand identity. It soon found Amalgamated, an equally young, independent New York advertising agency. Amalgamated created a $10 million advertising campaign for New Belgium that targeted high-end beer drinkers, men ages 25 to 44 and highlights the brewery’s image as being down to earth. The grainy ads focus on a man rebuilding a cruiser bike out of used parts and then riding it along pastoral country roads. The product appears in just five seconds of each ad between the tag lines, “Follow Your Folly … Ours Is Beer.” The ads helped position the growing brand as whimsical, thoughtful, and reflective. In addition to the ad campaign, the company maintained its strategy of promotion through event sponsorships. Today, New Belgium uses new forms of media to promote its brand while still maintaining its overall branding philosophy. Although the company has not ruled out new television advertisements, NBB has focused on other forms of “new media” such as social networking sites in order to attract new consumers to the brand. NBB abandoned its newsletter in exchange for a blog, to which viewers can subscribe and receive news articles and feeds. It also created a digital marketing campaign incorporating its own microsite and Facebook to encourage the information to go viral. Digital videos have also been an important part of NBB’s marketing strategy to reach consumers from various parts of the nation. Many of its videos can be viewed on the company’s YouTube channel (www.youtube.com/user/nbbfilms). Although New Belgium may vary the types of media it utilizes, the company’s goals to be a truly sustainable brand have remained the same. Its message is, and always has been, that consumers can be environmentally conscious and still have fun. Some people scoff at the idea that a company that sells alcohol can be a socially responsible brand, but with each new social and environmental initiative, New Belgium seeks to prove its critics wrong. Teaching Overview The New Belgium Brewing B case gives students an excellent example of a small company entering into the world of mass media marketing. It follows the company through the process from building a brand manifesto, to producing advertisements, to shifting toward more social forms of communication. Problem/Decision Statement How can New Belgium expand market share and improve brand management through a new promotional program—all while maintaining the customer intimacy and beer culture that have made it so successful? Strategy Alternatives 1. Continue to reinforce the brand image through advertising in major target markets, and the continued use of social media. 2. Manage growth by using less advertising and placing more emphasis on point-of-purchase promotions. 3. Focus more on philanthropic, environmental, and social responsibility issues in promotion and focus less on the brand culture. Strategy Recommendations Based on the success of NBB’s advertising to date, it appears that the most profitable course of action would be to continue to implement the first alternative. One key issue for students to consider is where should NBB go to next? Will the NBB beer culture sell well in the Deep South, the east coast, or New England? Implementation Issues Developing the right promotional strategy to reach new markets is a strategic issue. The key implementation issue is to ensure that production and distribution can keep up with demand. Teaching Questions 1. New Belgium has effectively used integrated marketing communications over the last 20 years. Evaluate the use of one major advertising campaign to fortify and enhance the company’s brand image. Although student viewpoints will vary, most will state that one ad campaign was probably enough to launch NBB into the national discussion. The culture and ethos of the brand do not lend themselves well to television advertising. Instead, local promotions and events, along with very strong word-of-mouth communication, have served NBB very well. 2. NBB seemed to agonize over the use of the word “folly” in its advertising campaign. What do you make of the company’s struggle with this decision? Also, how do you personally feel their use of the word? This question should encourage discussion among students and their answers will vary. However, if one considers the definition of the term, it is easy to see why it was a difficult decision for New Belgium. Folly can be defined as (a) the state or quality of being foolish; lack of understanding or sense; (b) a foolish action, practice, idea; absurdity; or (c) a costly and foolish undertaking; unwise investment or expenditure. Perhaps it is the unexpected use of the term that has made NBB’s advertising so successful. 3. New Belgium’s focus on sustainability, whimsy, and fun is clearly rooted in its Colorado-based culture and the ethos of its founders and employees. As New Belgium’s distribution continues to expand away from that locale, how can the company make its branding and messaging resonate with consumers in different parts of the country? Student answers will vary, most likely based on where they call home. Most students will recognize the NBB culture as being more prominent among Western states. The case questions whether the NBB culture and brand will play well in the Deep South or on the east coast. Part of the answer depends on the craft beer culture that exists in these areas. For example, Atlanta, GA is home to Sweetwater Brewing, while Boston is home to Sam Adams and other brands. Some students will suggest that the only thing that matters is the quality of the product—a test that NBB has passed over and over. [Author note: Fat Tire has recently become available in the Southeast, and the word-of-mouth buzz is exceptionally strong. Many Tallahassee residents, for example, will drive into South Georgia to purchase Fat Tire.] 4. Currently, New Belgium has been much more successful using social media than competitors Boston Brewing Co. and Sierra Nevada. Evaluate how social media has contributed to the firm’s marketing strategy, and make suggestions for the use of social media in the future. It’s not so much that the use of social media has been significantly different from the competition, but rather than NBB has such a unique brand culture and a cult following. In this regard, Boston Brewing and Sierra Nevada are much more mainstream than NBB. Another point is that NBB’s culture and focus on social responsibility (see the New Belgium Brewing A case) set them apart from other competitors, especially Boston Brewing and Coors. Some students will argue that the company’s social focus will prevent them from ever becoming mainstream. Case 6: Mattel Confronts Its Marketing Challenges* Synopsis: As a global leader in toy manufacturing and marketing, Mattel faces a number of potential threats to its ongoing operations. Like most firms that market products for children, Mattel is ever mindful of its social and ethical obligations and the target on its corporate back. This case summarizes many of the challenges that Mattel has faced over the past decade, including tough competition, changing consumer preferences and lifestyles, lawsuits, product liability issues, global sourcing, and declining sales. Mattel’s social responsibility imperative is discussed along with the company’s reactions to its challenges and its prospects for the future. Themes: Environmental threats, competition, social responsibility, marketing ethics, product/branding strategy, intellectual property, global marketing, product liability, global manufacturing/sourcing, marketing control Case Summary Over the past fifty years, Mattel has grown to be the world’s largest designer, manufacturer, and marketer of toys. Well-known for brands such as Barbie, Fisher-Price, Disney, Hot Wheels, Matchbox, Tyco, Cabbage Patch Kids, and board games, the company boasts nearly $5.9 billion in annual revenue. Headquartered in El Segundo, California, with offices across the world, Mattel markets its products in over 150 nations. However, despite its many successes, Mattel has had its share of losses over its history. During the mid to late 1990s, Mattel lost millions to declining sales and bad business acquisitions. In January 1997, Jill Barad took over as Mattel’s CEO. Barad’s management-style was characterized as strict and her tenure at the helm proved challenging for many employees. While Barad had been successful in building the Barbie brand to $2 billion by the end of the 20th century, growth slowed in the early 2000s. Declining sales at outlets such as Toys “R” Us marked the start of some difficulties for the retailer, responsibilities for which Barad accepted and resigned in 2000. Robert Eckert replaced Barad as CEO. Aiming to turn things around, Eckert sold unprofitable units and cut hundreds of jobs. In 2000, under Eckert, Mattel was granted the highly sought-after licensing agreement for products related to the Harry Potter series of books and movies. The company continued to flourish and build its reputation, even earning the Corporate Responsibility Award from UNICEF in 2003. Mattel released its first Annual Corporate Responsibility Report the following year. In 2011, Mattel was recognized as one of Fortune magazine’s "100 Best Companies to Work For" for the fourth consecutive year. Today, Mattel faces many opportunities and threats, including the rate at which children are growing up and leaving toys, the role of technology in consumer products, and purchasing power and consumer needs in global markets. The continuing lifestyle shift of American youth is of particular concern. Today, many children, tweens, and teens prefer to spend time with music, movies, or the Internet. Children and teens are also more active in extracurricular activities (sports, music, volunteerism) than ever before. Consequently, these young consumers have less time to spend with traditional toys. These shifts have been challenging for Mattel, as the sales growth in its key brands has been relatively flat for some time. Barbie’s worldwide sales, in particular, have been declining over the past several years due to changes in the youth market and intense competition from the Bratz line. Mattel also faces continued issues with respect to potentially unsafe products manufactured in other countries (particularly China). Several high-profile product recalls have somewhat tarnished Mattel’s reputation for product safety. Despite these concerns, Mattel has a lot to offer both children and investors. Barbie remains the number one doll in the United States and worldwide. And Barbie.com, the number one website for girls, routinely gets over 50 million visits per month. Furthermore, all of Mattel’s core brands are instantly recognizable around the world. Hence, the ability to leverage one or all of these brands is high. A few remaining issues include Mattel’s reliance on major retailers, such as Walmart, Target, Toys “R” Us, and Amazon (which lessens Mattel’s pricing power), volatile oil prices (oil is used to make plastics), and increasing competition on a global scale. However, analysts believe Mattel has a great growth potential with technology-based toys, especially in international markets, in spite of changing demographic and socioeconomic trends. Teaching Overview This case focuses on a company that has traditionally enjoyed success with its marketing efforts rather than one that is struggling to gain market share. Mattel must develop a strategy to maintain its position and enhance its already well-known and trusted brands. Most students will be familiar with Mattel’s products. This case will interest students as it allows them to relate personal experience and memories from childhood with the company that likely was behind many of them. Information is provided about a variety of marketing topics, which allows you to focus on the issues you deem most important. How has the numerous changes in marketing strategy impacted Mattel’s bottom line, effectiveness, or culture? How do you determine whether (and to what degree) to alter products before entering foreign markets? What are the benefits and drawbacks of relying heavily on one customer or product line? How do ethics and social responsibility affect marketing strategy? How should a company handle widely publicized product recalls? How does legal activity affect marketing strategy? The following SWOT analysis and questions will explore some of these possibilities. SWOT Analysis Internal Strengths • World’s leader in the design, manufacturing, and marketing of toys • Unrivaled brand recognition • Important alliances with NASCAR, Disney, and others • Strives to meet customer demands—what they want and when they want it • Socially responsible on many different platforms—voluntarily recalling an unsafe product, advocate for children’s online privacy protection, etc. Internal Weaknesses • Managerial turnover and financial difficulties in most recent history • Flat sales growth in key brands • Heavy reliance on Toys R Us, Walmart, and Target • History of trouble with technology related products • Too much reliance on Barbie? (a great debate question) External Opportunities • Societal changes dictate changes in toy products • More consumers are interested in doing business with socially responsible companies • Brand awareness and loyalty is often developed at young age, which helps firms to expand the ages of their target markets • Toys are becoming more real and interactive External Threats • Fluctuation in consumer preferences—traditional toys are not as popular • The tween market is especially challenging to reach • New products can become fads and disappear quickly, leaving any company at a disadvantage in their marketing and production efforts • Intense competition in the toy market • Time frame to attract children to toys is shrinking Problem/Decision Statement How should Mattel conduct strategic planning to synchronize its corporate and marketing strategy to changing target markets? What are the environmental factors that will influence these decisions? Strategy Alternatives 1. Focus on international markets, especially Europe and Japan. Significant investments in product development and promotion would be needed to expand brand awareness in these markets. Additionally, distribution decisions will be needed to ensure proper exposure of the products to these markets. 2. Continue to focus on Mattel’s core products, such as Barbie, Hot Wheels, Fisher Price, and American Girl. View international sales as a secondary strategy and take an opportunistic approach to expand into international markets when possible. 3. Develop a new strategy to focus on interactive toys that take advantage of children’s and parent’s interest in accelerating information technology. The Learning Company acquisition was designed to meet this demand, but failed to meet its goal. Mattel will need to invest in marketing research, product research, and development in order to serve this expanding market. Strategy Recommendations From the SWOT analysis, it appears that the third strategic alternative to develop interactive toys is not appropriate at this time. Mattel has a history of difficulty with technology related products. Based on current market conditions, it appears that increasing the size of the toy market could be achieved best by expanding into Japan and Europe with existing core products. Implementation Issues Students should bring in responsibility at Mattel as a key component of implementation. The fact that Mattel is an international toy manufacturer committed to ethics and social responsibility, especially in the areas of international awareness and marketing to children, should give parents confidence in Mattel’s products and commitment to children. Mattel should take steps to inform both children and adults about its socially responsible philosophies, especially regarding Internet based marketing and global manufacturing principles. Teaching Questions 1. Do manufacturers of products for children have special obligations to consumers and society? If so, what are these responsibilities? It is obvious that Mattel has a differential advantage in the area of responsibility to consumers and society. Mattel is meeting these responsibilities and it is a source of internal strength. Mattel not only encourages, but also insists on its manufacturers’ ethical and legal conduct. The company has a written code of conduct—global manufacturing principles—that are distributed to each manufacturer, as well as other principles relating to safety and wages in adherence to all local laws. Mattel does not appear to have any major weaknesses in the area of responsibilities to consumers and society. They seem to be a role model in all areas. On the other hand, some members of society critique the company because Barbie is often viewed as an inappropriate role model for young girls. Because Mattel primarily markets children’s products, it has a special level of integrity and accountability to maintain. 2. How effective has Mattel been at encouraging ethical and legal conduct by its manufacturers? What changes and additions would you make to the company’s global manufacturing principles? Students should be encouraged to explore the Mattel website to learn more about the company’s manufacturing principles. Although Mattel was clearly lax about these issues before the recalls occurred, the company seems to have improved since that time. Students should be encouraged to think about the inherent difficulties in managing operations on the other side of the world. Also, since the principles were created in 1997, much has changed in the world. Students should think about issues that could affect manufacturing principles in the future. 3. To what extent is Mattel responsible for issues related to its production of toys in China? How might Mattel have avoided these issues? Most students will argue that Mattel was not responsible. The Chinese manufacturer was trying to cut costs by sourcing paint from an unauthorized supplier. Once Mattel discovered the problem, the company moved to quickly recall all affected toys. The issue of blame is harder to pinpoint with respect to the magnet issue. Instructor Manual for Marketing Strategy, Text and Cases O. C. Ferrell, Michael Hartline 9781285073040, 9781285170435
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