This Document Contains Cases 7 to 12 Case 7: Mistine: Direct Selling in the Thai Cosmetics Market* Synopsis: This case summarizes the growth of Better Way (Thailand) and its highly successful Mistine brand of cosmetics. From its meager beginnings in 1991, Mistine has risen to become the dominant brand in Thailand’s direct selling cosmetics market. The brand’s value-based positioning (high quality at affordable prices), along with successful target marketing and a tightly integrated marketing program, has kept the company at the top of the market despite strong competition. Mistine’s success has allowed Better Way to expand its efforts into other countries, most notably in Asia, Europe, the Middle East, and Africa. Better Way is now looking to further expand its operations, perhaps into Western countries and China. Themes: Direct selling, global marketing, branding strategy, value, positioning, distribution strategy, integrated marketing communication, marketing implementation Case Summary Better Way (Thailand) Company Limited was founded in 1988 by Thailand’s “king of direct selling,” Dr. Amornthep Deerojanawong and Boonyakiat Chokwatana. Dr. Amornthep had worked as a medical doctor at Avon in Thailand where he got the idea to start his own Thai-based cosmetics company. The company has become highly successful in Thailand using direct sales to launch its Mistine cosmetic brand. Although Thai people were not very familiar with the direct sale of cosmetics, within six years Mistine had become the leader in the consumer cosmetics market in Thailand. The company primarily targets women who have a high school, occupational certificate level, or high occupational certificate level of education, and have a monthly income of about U.S. $125–200 as well as working women who have a monthly income of about U.S. $200–300. Mistine’s core target group—housewives with low-to-medium incomes—accounts for 70 to 80 percent of its total sales. The company is expanding its customer base by targeting working people, men, and vocational school students, especially working people who have high purchasing power. Mistine positions itself as an Asian company marketing products developed and formulated specifically for the Asian woman. They are designed to blend well with the Asian skin tone and complexion. They are also made to better suit the warmer, more humid climate of the Asian region, so that the product stays on longer and looks fresher. Direct selling companies normally depend on word of mouth to develop brand awareness, recruit salespersons, and encourage product purchases. Better Way decided to do things differently by being the first direct selling company in Thailand to use mass media advertising. The company’s continuous and award-winning advertising campaigns have been executed to build brand image and positioning in the customers’ minds. Due to its extensive marketing campaigns, the Mistine brand is one of the best-known brands in Thailand. In 2011, the brand won a Superbrands award as the “brand most accepted by Thai consumers.” Mistine’s direct sales system is a simple, single-level marketing (SLM) approach. The company recruits district managers who in turn recruit as many salespersons as they can manage. This approach meshes well with Thai culture and lifestyle. The benefit of this approach is that each salesperson earns full commission without having to share his/her earnings with others. Thus, the more sales a salesperson makes, the more income he/she receives. Despite Mistine’s great success with direct cosmetic sales, the company continues to strategize to maintain its market share amidst intense competition. To increase revenue, the company has started to increase prices. Historically, 80 percent of Mistine’s sales were for products that cost an average of $3 (U.S.) each. By boosting the average price to $6 (U.S.), Mistine expects the average order to increase from $27 (U.S.) to $45 (U.S.). Along with price increases, Mistine plans to increase its marketing budget. Company executives believe that Mistine’s double-digit growth will continue over the next few years. Their main concerns are primarily related to political situations in the countries where it does business, and to the worldwide volatility of oil prices (oil is a key ingredient in many cosmetics). Teaching Overview The Mistine case provides an example of an international company competing against a well know brand: Avon. It follows the company from small start-up to one of the largest Asian direct sellers. It gives students an excellent opportunity to see and understand how a company can develop and grow through a direct selling model. SWOT Analysis A SWOT analysis is provided in the case. Problem/Decision Statement Considering the relationship of Thailand to its neighboring countries, its geographic proximity, and Thailand’s position in Asia, foreign markets are an extremely interesting prospect for Mistine. The company opened manufacturing sites in the Philippines and Vietnam, and has successfully offered products for sale in Cambodia, Laos, Myanmar, as well as several Middle Eastern and African countries. How can Mistine continue this successful expansion? Strategy Alternatives 1. Expand into countries that are receptive to the direct selling model (i.e., Hungary and Russia). 2. Expand worldwide, focusing on Asian women living in Europe, North and South America. 3. Look at other modes of distribution such as selling to Asian women through department stores in more economically developed countries. Strategy Recommendations Either strategy one or two could be defended. However, based on classroom discussions, strategy two focusing on Asian women around the world has the strongest support among students. For example, many Asian women in the U.S. have difficulty finding products that match their skin tones. Implementation Issues Implementation issues include lowering turnover rates and developing a management team that can implement international expansion. Mistine may have to bring in outside experts to successfully grow international markets. Teaching Questions 1. Based on the SWOT analysis provided in the case, what are the two or three factors that Mistine should stress in its strategic planning as it looks to continue its growth and dominance in the Thai market? How can Mistine match its strengths with its market opportunities to create competitive advantages moving forward? Student answers will vary based on the strategy they recommend. However, key factors such as Mistine’s business model, its corporate partnerships, and expanding purchasing power in developing countries will apply to any strategy that the company might pursue. These factors make strategy two above very likely to be pursued. 2. How can Better Way stay on top in Thailand while it looks to expand internationally? Better Way needs to ensure it does not focus all of its attention overseas, as the company must maintain a dominant presence in Thailand to ensure that it can support its expansion elsewhere. Mistine should continue its advertising campaign, continue to actively seek new recruits for selling its products, and implement the company’s objectives in Thailand as mentioned in the case. 3. What specific marketing program initiatives would you recommend over the next five years? Better Way needs to continue to keep up with the trends and focus on new actors and actresses to ensure that their products continue to appeal to younger markets. Case 8: BP Struggles to Repair Its Tarnished Reputation* Synopsis: In the wake of the Deepwater Horizon disaster in the Gulf of Mexico, BP faces a monumental task in reestablishing its sustainability-based branding strategy and repairing its tarnished reputation. This case examines the history of BP, its efforts to rebrand the company to focus on sustainability, and its environmental and ethical lapses preceding the Deepwater Horizon accident. BP had realized the need to become more environmentally responsible and was the first energy company to recognize the presence of global warming and launch initiatives to produce cleaner forms of energy. Unfortunately, the company’s questionable safety and environmental record effectively undermined its branding initiatives. To move beyond the Gulf oil spill, BP must find ways to repair its damaged reputation through a commitment to integrity and an authentic concern for both the environment and the company’s many stakeholders. Themes: Ethics and social responsibility, sustainability, corporate branding and positioning, corporate affairs, stakeholder engagement, strategic thrust Case Summary BP has experienced a lot of ups and downs over its hundred-year history—from nearly bankrupting its founder William D’Arcy to becoming one of the world’s largest energy companies. BP has also experienced its fair share of controversies regarding business practices, environmental damage, hazards to workers, and greenhouse gases. For some time, BP has attempted to turn a page in its history book toward a more environmentally friendly future through investments in renewable energy and ethics initiatives. British Petroleum changed its name to BP and then tried to rebrand itself as Beyond Petroleum. This rebranding was a signal to stakeholders that it was focused on sustainability and the need to move beyond nonrenewable energy sources. Changes in demand patterns for energy products require that firms respond to the value desired by a target market. BP was trying to position its products as not just commodities, but as differentiated products that support sustainability and other social responsibility concerns. One of the key concerns when such claims are made involves maintaining a product that is authentic and trustworthy. By using the Beyond Petroleum positioning, BP presented itself as being committed to investing in renewable energy, which has gained a great deal of popularity among consumers and other members of society concerned about the planet’s future. A marketing strategy has to be built on a solid foundation of supportable claims about the true nature of the product. However, BP’s efforts backfired on April 20, 2010 when the explosion of the Deepwater Horizon oil rig, operated under the oversight of BP, created one of the greatest offshore oil disasters in history. This case provides an opportunity to observe the past efforts of BP to improve its image, along with how these efforts were eclipsed by the oil spill. Certain disasters resulting from company negligence are detailed in this analysis, and although BP made efforts to establish itself as a socially responsible company, the recent oil spill crisis undid many of BP’s marketing initiatives. While BP has experienced other disasters related to its social responsibility, before the 2010 oil spill, BP was garnering a better reputation as a socially responsible oil company. It became the first oil company to recognize the presence of global warming and to launch initiatives to produce cleaner forms of energy. This one disaster has tainted BP’s brand image, causing the company to lose billions of dollars and the reputation it worked so hard to build. Teaching Overview In teaching this case, a major theme has to be BP’s rebranding efforts and how the company must strive to repair its damaged reputation in the wake of the Deepwater Horizon incident. While BP is not the only major energy company to suffer a reputational crisis, BP did realize more quickly than other companies that being perceived as an environmentally concerned energy company is far better for business than being seen as a big, dirty oil company. In 2005, BP was the first company in its industry to publicly state that climate change is real, and that it presents a dilemma for oil companies. Around the same time BP also launched its Alternative Energy division, which is devoted to renewable energy sources. Another important element in BP’s rebranding was its Code of Conduct—titled “Our Commitment to Integrity”—which gives legal expectations in five key areas: (1) health, safety, security, and the environment, (2) employees, (3) business partners, (4) government and communities, and (5) company assets and financial integrity. Any headway that BP was making in its rebranding efforts came to an abrupt end on April 20, 2010. The findings from the resulting investigation revealed that BP cut short procedures and quality testing of the drilling equipment and pipes. A government panel investigating the crisis also concluded that BP, Transocean, and Halliburton—some of the major firms involved in the drilling—failed to adequately consider risks or communicate with one another on major decisions involving the well. SWOT Analysis Internal Strengths • Strong commitment to improving its corporate reputation • Strong commitment to alternative, renewable energy sources • Strong commitment to ethics as demonstrated in the company’s Code of Conduct • Strong commitment to stakeholder education • Exceptional profit potential (now and in the future) Internal Weaknesses • Weak risk management strategies • Past ethical violations still tarnish BP’s image • Current and new efforts to improve image may seem somewhat disingenuous • The company earns an enormous profit each year, causing some to think BP is greedy External Opportunities • Strong market demand for renewable energy sources • Consumers increasingly prefer to do business with ethical and socially responsible firms • Continued growth in demand for all forms of energy External Threats • Competitors are developing strong renewable energy programs of their own • Consumers and society in general have negative opinions about energy companies • Concerns over global warming continually threaten operations regarding fossil fuels • Geopolitical issues constantly threaten supplies of crude oil Problem/Decision Statement The damage to BP’s Beyond Petroleum marketing strategy is not easy to repair. The development of trust is based on a firm’s commitment to integrity, transparency, and a concern for all stakeholders. Now, BP needs to develop a marketing strategy that begins to repair the damage caused by the Deepwater Horizon incident. BP also needs to develop a strategy that is seen as authentic in the face of the socially responsible corporation that it claims to be. Strategy Alternatives/Strategy Recommendations Students will be hard pressed to develop strategic initiatives that are better than those currently used by BP. Many students will argue that the company needs to do more of the same, such as doubling its commitment to renewable energy. Some students will suggest that BP drop certain efforts, such as biofuels, and instead focus all of its efforts on wind or solar energy. Others will argue that BP cannot claim true commitment to the environment until it completely gives up fossil fuels as a source of energy and profitability. The company’s stakeholder education efforts are quite good, and could potentially be expanded. Implementation Issues Without a doubt, the most critical implementation issue is the continuing commitment of BP’s leadership team. The current team understands the issues and the need to improve the company’s image. Future leaders should maintain these efforts, rather than cut expenditures in these areas in order to improve the bottom line. Another key issue involves continual employee training in order to fully promote the BP Code of Conduct throughout the company’s operations and into the daily fabric of its organizational culture. Teaching Questions 1. Analyze BP’s efforts to improve sustainability and its reputation prior to the Deepwater Horizon disaster. Was the company on the right track? Why or why not? Sustainability can be a tricky concept to nail down, with every individual and corporation supplying a meaning that best serves their purpose. A good working definition of sustainability is “a systematic approach to achieving human development in such a way that the earth’s resources are preserved for future generations. It is an approach that acknowledges that the earth’s resources are finite and that human consumption is occurring at a rate beyond Earth’s capacity to support it over the long term.” Given this definition, very few of BP’s activities are truly sustainable, as they involve extracting a dwindling supply of a non-renewable resource, with only a small portion of company revenues going to renewable energy research. Students should supply reasons for their answer—whether they think BP has done enough to improve the sustainability of its operations. Instructors should remind students that sustainability is not the only relevant aspect of this question. Students should also think about the sustainability of BP the company. Is BP doing enough to ensure its own existence over the long-term, and how do these activities affect sustainability in terms of the planet? 2. Because most BP products can be viewed as commodities, do you think consumers will avoid purchasing from BP because of its track record and the Deepwater Horizon disaster? Why or why not? Most students will say “yes” to this question, especially students who live in the Gulf Coast states affected by the disaster. However, most will also admit that consumers have very short memories. Unless they or their families were directly affected by the oil spill, most consumers will return to old habits after a while. If a BP station is more convenient, you are more likely to shop there than at a competitor that is less conveniently located. 3. How can BP prove to its stakeholders that it is serious about social responsibility, sustainability, and ethics, and that its efforts are not just a public relations ploy? What strategic issues would you focus on in trying to repair the company's reputation? Although actions speak much louder than words or money, one way for BP to prove its seriousness is to significantly increase its investment in these areas. The company currently spends just over $4 billion per year on renewable energy research. Given the company's more than $52 billion in gross profit for 2011, students will argue that BP should clearly invest more. Another key way to prove its intentions is to take dramatic steps to prevent any additional ethical violations or environmental disasters. This might mean investing in new plant and equipment, or simply fully maintaining the equipment in place. Finally, BP could solidify its seriousness by expanding its stakeholder education efforts. Case 9: Chevrolet: 100 Years of Product Innovation* Synopsis: This case examines Chevrolet’s history of product innovation, branding strategy, and successful product mix in connection with its relationship to parent General Motors and its rivalry with Ford. Chevrolet has a long history of success in developing and marketing cars, trucks, and SUVs that are practical, sporty, and affordable. The brand’s relationship with General Motors is both a strength and a weakness, especially in the aftermath of the federal government’s financial bailout of General Motors in 2008. Government demands for improved fuel economy and ever changing customer needs and preferences will be constant challenges as Chevrolet looks toward its next 100 years. Themes: Product innovation, product mix, branding, product strategy, competition, corporate reputation, evolving technology, customer loyalty, government regulation, international marketing Case Summary General Motor’s (GM) Chevrolet brand celebrated its 100th anniversary in 2011. Throughout its history, the Chevrolet brand has been associated with almost every type of vehicle on the road. The brand’s broad portfolio of products falls under the Chevrolet brand because of the strong brand equity that Chevrolet has developed over the last century (see Case Exhibit 9.1). The case discusses several Chevrolet models that represent the diversity of the Chevrolet product mix that exists today. Case Exhibit 9.1 Chevrolet Models Sold within the United States Cars SUVs/Crossovers Trucks/Vans Electric Vehicles Sonic Cruze Malibu Corvette Camaro Impala Spark Equinox Traverse Tahoe Suburban Colorado Avalanche Silverado Express Volt Over the years, the company has transitioned from an American icon into a worldwide brand known for quality and durability. Despite numerous successes and failures in its history, including the recent bankruptcy and bailout of parent company GM, Chevrolet is still going strong after a century of product innovation. Although the Chevrolet brand has evolved over the years, it maintains many of the same themes that it started out with a century ago: a quality vehicle with deep roots in America’s past. As Chevrolet vehicles became more popular with Americans, minus a dip during the Great Depression, the company wanted to firmly entrench the brand as a key part of American culture. It found part of this solution by associating itself with American sporting events, such as auto racing. On the promotional side, Chevrolet adopted a patriotic theme with taglines such as “America’s Best Seller, America’s Best Buy” and “Baseball, hot dogs, apple pie and Chevrolet.” One of its most popular taglines “Like a Rock” began in 1991 to describe its Chevrolet pickup truck. The tagline imbued the brand with a sense of strength and durability. Chevrolet would continue its American theme with its “An American Revolution” tagline adopted in 1994 and its most recent “Chevy Runs Deep” campaign. Teaching Overview This case provides a history of Chevrolet, a review of its product line and marketing program, and a discussion of Chevrolet’s competitiveness against its rivals. There are many ways to approach this case: branding, product portfolio management, promotion, bankruptcy, etc. One interesting angle is to discuss the wide discrepancy of brand images within the Chevrolet portfolio. For example, The Avalanche, Silverado, Camaro, and Corvette hold very different brand attributes/images when compared to other products such as the Sonic, Impala, or Equinox. Given these difference, students should discuss whether using the overall Chevrolet branding is a good idea. Is Camaro or Corvette hurt in any way because they hold the same branding as Impala? It is also constructive to discuss the depth of the Chevrolet portfolio, especially in comparison to other GM lines such as Buick or GMC. Should GM contract the Chevrolet portfolio and dedicate any savings toward more innovation in its remaining lines? SWOT Analysis Internal Strengths • Strong brand image connected to U.S. culture • Large portfolio of products • Highly effective advertising and promotion • Growing international presence • Growing reputation for energy efficient vehicles Internal Weaknesses • Tarnished image due to bankruptcy and government bailout • Heavily unionized workforce and its associated costs • Inconsistent image among products in the portfolio External Opportunities • Strong market potential in foreign markets, especially Asia and South America • Customers demand mobile technology in their automobiles • Increasing U.S. government regulations on fuel economy • Slowly growing market for electric vehicles External Threats • U.S.-based competition is vastly improved, especially Ford • Foreign competition is vastly improved, especially Kia and Hyundai • Relatively weak U.S. economy • Increasing U.S. government regulations on fuel economy Problem/Decision Statement How can Chevrolet continue to seize market opportunities, constantly modify its products, and adapt its brand to changing customer tastes in order to succeed for another century? Strategy Alternatives 1. Chevrolet should drop some of its products and rededicate those efforts toward better innovation in its marquee labels. This would match GM’s strategy in other divisions, reduce costs, and solidify brand image across all Chevrolet products. 2. Chevrolet should double-down on hybrid and electric technology. The Chevy Volt is widely recognized as the leading EV on the road today. Chevrolet should do this before competitors steal this positioning (Nissan has been especially aggressive). 3. Chevrolet should move more aggressively into foreign markets. Its strong American-made branding would resonate well in many markets around the world. Strategy Recommendations All three alternatives are viable options for Chevrolet. Politically, however, GM is not likely to adopt the first alternative as it would mean restructuring plant operations and could lead to layoffs. Most students will argue that hybrid and electric vehicles are the future, so Chevrolet should move aggressively in that area. The company could also work with the government to increase subsidies for consumers who purchase hybrid and electric vehicles. Implementation Issues Chevrolet’s key implementation issue is controlling costs and how executive leadership can work with its unionized workforce. When compared to foreign manufacturers, GM (and other U.S. automakers) is disadvantaged with respect to costs and productivity. It is absolutely vital that GM not take another government bailout, as it would cause irreparable harm to its reputation and brand image. Teaching Questions 1. Evaluate the diversity of vehicle types and sizes that are sold under the Chevrolet brand name. What strengths and weaknesses are evident in Chevy’s product mix? Student responses to this question will vary. It is clear that diversity gives Chevrolet a strength in that it can serve the needs of a wide variety of consumers. However, it is equally clear that a Chevy Impala does not hold the same brand image as a Corvette or Camaro. 2. How has Chevrolet strategically managed its brand and reputation over the last 100 years? What opportunities and threats will affect Chevy’s branding and reputation in the future? Chevrolet has managed its brand and reputation by strongly tying them to American culture. This is done through cultural connections such as motorsports, as well as with highly effective, and memorable, promotion. Opportunities and threats are discussed in the SWOT section of this teaching note. 3. What specific marketing strategies would you recommend that might help Chevrolet last another 100 years? How important is Chevy’s legacy of innovation to the brand’s future? Some strategies are discussed in this note. Many students will argue that Chevrolet’s legacy of innovation is not that important to the brand’s future. Rather, cost control, profitability, and competitiveness will be key drivers. While Chevrolet can continue to innovate in products such as the Corvette, Camaro, and Volt, students may be hard pressed to see how innovation can continue in small cars like the Cruze or Sonic, or midsize cars like the Impala. Chevrolet faces incredibility strong competition in these sectors from companies like Kia, Hyundai, Honda, and Toyota. Given their cost advantages, students could argue that Chevrolet should cede this portion of the market to foreign manufacturers and instead focus on more profitable SUVs, trucks, and EVs. Case 10: Wyndham Worldwide Adopts a Stakeholder Orientation Marketing Strategy* Synopsis: From its founding in 1981, Wyndham Worldwide has emerged as a global powerhouse in the lodging, timeshare, and rental industry. Along the way, Wyndham struggled through several mergers and acquisitions and an inconsistent branding strategy. After struggling through the recession of 2008, Wyndham moved quickly to reinvigorate its core brands and launch new lodging concepts, all with a laser focus on a stakeholder orientation marketing strategy. This case briefly reviews Wyndham’s history and challenges that the company faced in becoming the powerful brand that it is today. Wyndham’s multifaceted stakeholder orientation marketing strategy is also reviewed with consideration for how Wyndham’s brands have become synonymous with quality, ethical leadership, customer satisfaction, and sustainability. Themes: Stakeholder orientation, marketing strategy, branding strategy, ethics, sustainability, social responsibility, corporate reputation, customer satisfaction, international marketing Case Summary Wyndham Worldwide, headquartered in Parsippany, New Jersey, is a leading global provider of travel-related services, including lodging, timeshare exchange, and rentals. The company can be broken down into three components: Wyndham Hotel Group, Wyndham Vacation Ownership, and Wyndham Exchange & Rentals. Each of these parts is comprised of different companies and brands that are well known in their own right (see Case Exhibit 10.1). Despite the many services the organization offers, Wyndham Worldwide is best known for its hotel chains. Wyndham Hotel Group consists of more than 7,200 franchised hotels, including well-known brands such as Days Inn, Howard Johnson, Super 8, Ramada, and Planet Hollywood. Since Wyndham Worldwide became an independent company in 2006, the company has achieved a solid reputation for quality and strong stakeholder management. Many different stakeholders view Wyndham Worldwide as a company that truly cares about their needs and concerns. The company’s stakeholder initiatives and strong ethics and compliance programs are role models for practices within the hotel and resort industry. Wyndham has achieved great success with its stakeholder orientation marketing strategy. The company’s ability to adapt its marketing strategies to suit its various chains has provided it with unique advantages that make it a formidable competitor to rival hotel companies. Teaching Overview While most students will know of Wyndham’s separate brands, many will not know of Wyndham the company. This case can be approached from two (related) angles: branding and social responsibility. With respect to branding, Wyndham suffered through most of its history without a solid brand identity. After a rebranding effort was launched, the 2008-2009 recession hit Wyndham hard. However, the company continued to work toward a more consistent brand image and expanding its international reach—both strategies for the long haul. With respect to social responsibility, Wyndham has used a stakeholder orientation marketing strategy as a major part of its rebranding effort. Wyndham is aware that a stakeholder orientation is connected to market share performance, financial performance, reputation, and employee commitment. The company works “to maintain social responsibility, as a way of living, working and playing that fully encompasses the vision and values that Wyndham Worldwide has incorporated.” Wyndham Worldwide has therefore adopted five core values of corporate social responsibility including integrity, respect, individual opportunity and accountability, improving customer lives, and community support. These values guide how Wyndham interacts with its stakeholders. SWOT Analysis Internal Strengths • Strong stakeholder orientation and associated core values • Strong ethical initiatives • Winner of many top awards • Well-known brands that span the luxury-to-budget spectrum • Strong focus on branding and corporate reputation Internal Weaknesses • Inconsistent branding history • Reputational issues when part of the Cendant group • Wyndham is not as well known as many of its brands External Opportunities • Strong growth potential in emerging economies • Slowly strengthening U.S. economy • Consumers increasingly value companies that are ethical and socially responsible External Threats • Unstable conditions in many international markets • Strong, aggressive, and widely admired competition (Marriott, Starwood, Wynn, MGM) • Still somewhat weak U.S. economy Problem/Decision Statement As consumers become increasingly concerned with value and a quality experience, Wyndham’s strong stakeholder relationships and reputation will likely prove a valuable asset that gives it a competitive edge over its rivals. With that in mind, how can Wyndham leverage its competitive advantage in ethics and social responsibility to enhance its reputation? Strategy Alternatives 1. As Wyndham’s reputation grows, it should consider adopting a family branding approach. This could breathe new life into mature brands like Super 8 and Travelodge. For example, Travelodge could be rebranded as Wyndham Express. Other midlevel brands could adopt the “by Wyndham” branding that is currently used by Wingate, TRYP, Hawthorn, and Microtel (i.e., Wingate by Wyndham). 2. Several of the budget brands could be merged to prevent brand dilution. For example, Super 8, Travelodge, and Knights Inn could all come under the Howard Johnson branding (given its iconic status in the industry). 3. Continued international expansion in emerging economies is an obvious alternative. However, the issue should be one of balance. How far should Wyndham push into emerging markets? How can they do this without losing focus on core U.S. brands? Which brands should lead the international effort? Strategy Recommendations The third alternative should clearly be pursued. However, it is unsure how Wyndham’s branding and reputation will play out in emerging markets. For this reason, Wyndham cannot lose site of its U.S. lodging operations. Domestically, the first or second alternatives could work to reinforce Wyndham’s branding strategy. This is a good point to discuss the pros and cons of family vs. individual branding. Implementation Issues CEO leadership has always been a key implementation issue for Wyndham. The company’s current branding strategy was part of CEO Stephen Holmes’ vision for Wyndham. Eric Danziger has reinforced this in the hotel division. What happens of Wyndham gets new leadership? Will the next CEO continue the strong stakeholder orientation? Teaching Questions 1. How does Wyndham’s stakeholder orientation create a strategic marketing advantage? Wyndham has adopted a stakeholder orientation that considers the needs of each of its stakeholder groups. Wyndham meets customer needs through programs such as Wyndham ByRequest and the Women on their Way programs to increase customer loyalty. Wyndham offers a number of perks to its employees as well. It believes that knowledge is one of the best benefits it can offer employees and has created the Employee Value Proposition to help them embark on long-time careers in the hospitality industry. Wyndham contributes to the communities in which it does business by adopting a Human Rights Policy Statement and contributing to several charities. The firm considers the environment to be an important stakeholder and has strived to incorporate sustainability processes and technology into every aspect of its operations. These strong stakeholder initiatives are rather unique in the lodging industry. 2. How do Wyndham’s diverse brands contribute to customer satisfaction and marketing performance? Wyndham clearly understands the benefits of offering a large portfolio of brands. Different consumers have different needs and budgets. Wyndham offers a lodging solution for every need and budget. 3. Do the awards and recognition that Wyndham has received for social responsibility and ethics contribute to its financial performance? If so, how? Students’ answers will vary. Some will argue that awards and recognition enhance Wyndham’s reputation, make employees happier (which can improve customer service), and enhance customer perceptions. Others will argue that Wyndham’s strategy wastes money on socially responsible activities that could be used to increase the firm’s profitability. Case 11: NASCAR: Can’t Keep a Good Brand Down* Synopsis: This case discusses NASCAR’s successful branding strategy and how it became one of the top sports in America. The history of NASCAR is reviewed, followed by an overview of NASCAR’s marketing and branding strategies. Despite its unparalleled success, NASCAR has faced a number of challenges and criticisms over the past decade, most notably the loss of revenue stemming from the 2008 recession. The case examines many of the challenges that NASCAR must address if it is to sustain its branding juggernaut and retain its top spot in the motorsports arena. Themes: Branding strategy, branding alliances, brand image, pricing strategy, integrated marketing communication, sports marketing, differentiation, social responsibility Case Summary In the past 60 years, the National Association for Stock Car Auto Racing, better known as NASCAR, has become the top auto-racing series in the United States and the number one spectator sport in America. It has also become well known for its branding alliances, with drivers sporting everything from coffee to deodorant logos. The sport is currently comprised of three national series: the NASCAR Nationwide Series, the NASCAR Sprint Cup Series, and the NASCAR Camping World Cup Series, along with some regional and international series. Although primarily a U.S. sport, NASCAR has held races in Mexico, Canada, Australia, and Japan. It currently sanctions over 1,500 races on 100 tracks in 39 U.S. states and Canada. NASCAR’s popularity soared over the past ten years, partially due to extensive media coverage. Drivers like Jeff Gordon and Dale Earnhardt, Jr., have become heroes of the auto racing industry, and many NASCAR drivers have made appearances in movies and television. NASCAR’s growth has been so dramatic that it is now second only to the National Football League (NFL) in popularity. Despite its immense success, the sport has had to overcome challenges in its 60-year history and will likely have to face many more because of declining attendance and other difficulties such as diversity, safety, and its impact on the environment. Still, its strong brand image and brand alliances with other companies will likely keep the sport afloat through these tough times. Teaching Overview This case gives students an opportunity to learn about branding from a company that is a shining example of an organization that successfully embraces the branding mantra. Throughout its 60 years of existence, NASCAR has developed and implemented a branding strategy that encompasses a wide range of marketing initiatives. Brands are built on powerful emotional connections through an extremely wide variety of touch points. NASCAR delivers these connections through event marketing, emotional branding, brand communities, customer understanding, brand drivers, differentiation, co-branding, and the understanding that once a brand has been created, it must be monitored and allowed to continuously evolve. However, in spite of NASCAR’s highly successful branding strategy, the future of NASCAR is uncertain. The most recent economic recession has hit NASCAR hard. The majority of sports are suffering as sponsors pull their endorsements. Yet for NASCAR, which depends so much on its brand alliances and partnerships with other companies, the pullout of sponsors has had an even greater impact. Automaker support has been a crucial component to NASCAR’s success, and as the financial situation of key automakers remains in doubt, so does their funding of NASCAR events. Still, experts foresee that manufacturers will continue to play a major part in NASCAR. The lower attendance at NASCAR events is also borne of the recession. As consumers strive to save money, discretionary spending on entertainment is one of the first budget items to be cut. NASCAR has taken a proactive stance toward the issue by lowering ticket and concession prices, changing the racing structure, and working with communities to offer incentives to get fans to travel to the events. Whether these actions will be successful remains to be seen, but the intense brand loyalty of fans certainly lies in NASCAR’s favor. SWOT Analysis Internal Strengths • NASCAR is the #1 motorsport and the #1 spectator sport in the United States • International appeal—NASCAR has expanded beyond its Southern roots • Lucrative television contract • NASCAR fans are exceptionally brand loyal, especially to the drivers • Strong corporate support offers unlimited sponsorship and co-branding opportunities Internal Weaknesses • Dominating control by the France family worries many drivers, sponsors, and fans • Struggles of the Big Three automakers weakens NASCAR • Co-branding has caused NASCAR to become flooded with sponsorships (brand clutter) • Median income of NASCAR fans is below the national average • Somewhat expensive sport for fans to attend • Vehicle safety remains a concern • NASCAR is not known for environmental responsibility • Lack of diversity among drivers and owners External Opportunities • Numerous Fortune 500 companies continue to look for targeted marketing opportunities to reach potential customers • Motorsports fans in international markets are interested in stock car racing External Threats • Economic conditions threaten the spending power of sports fans and corporate sponsors • Many companies are dropping or curtailing sports-related sponsorships • The motorsports industry, in general, is quite mature. This makes continued growth difficult to achieve. • Recent resurgence of open-wheel racing in the United States (i.e., reunification of the IRL and Champ Car to form IndyCar) • Continued popularity of Formula 1 racing in international markets Problem/Decision Statement Throughout its history, NASCAR has been successful by integrating multiple marketing initiatives into a well-organized branding strategy. Part of this strategy dealt with partnering and co-branding with other companies. At the same time, NASCAR has successfully differentiated its own brand and effectively marketed its brand throughout the world. However, in spite of NASCAR’s highly successful branding strategy, the future of NASCAR is uncertain. The most recent economic recession has hit NASCAR hard. The majority of sports are suffering as sponsors pull their endorsements. And, as consumers strive to save money, discretionary spending on entertainment is one of the first budget items to be cut. NASCAR has taken a proactive stance toward the issue by lowering ticket and concession prices, and working with communities to offer incentives to get fans to travel to the events. Whether these actions will be successful remains to be seen. Strategy Alternatives 1. Create a Regional Racing Series—As NASCAR has now grown beyond its Southern roots, the company could promote a regional racing series that would create more fan interest and natural rivalries among regions. This could potentially interest other types of sponsors, and could be a natural tie in with NASCAR’s smaller racing series. 2. Create a NASCAR Fan Membership—NASCAR could create a membership package that includes a number of benefits at a lower price than if purchase separately. This might include tickets, trackside discounts, online access (called TrackPass), newsletters, hotel discounts, behind the scenes access, or other amenities. The goal would be to offer a package of services at a price low enough to entice a large number of fans. 3. Create Niche Racing Events—To increase fan interest in race weekend activities, NASCAR could create niche racing events and hold them days before the major races on Sundays. For example, a hybrid-only racing event could draw interest from fans and sponsors and could be used to enhance NASCAR’s environmental image. Likewise, single-brand races (such as a race where nothing but Kia Optima’s run), could be incredibly attractive to sponsors for brand building purposes. Strategy Recommendations Any of the alternatives presented above are viable. The key to any strategy, however, is to encourage more fans to attend races, or watch races via television or online. This should be combined with creating more targeted marketing opportunities for corporate sponsors. Some students will argue that brand clutter has become a serious issue for NASCAR—so much so that the company has essentially destroyed any notion of prestige for corporate sponsors. Some students may argue that NASCAR races have become too commercialized, too safe, and too politically minded (focus on diversity and environmental issues). Fans just want the excitement of the race without all of the baggage. Implementation Issues For any of the strategic alternatives selected, the key implementation issue will be the control of the France family. The needs of the drivers and team owners are also an important consideration. Teaching Questions 1. Evaluate NASCAR’s branding strategy in relation to its overall marketing strategy. Could NASCAR have done anything differently to insulate itself against the economic downturn? It is hard to argue with the overall success of NASCAR’s branding strategy. However, students should be encouraged to consider other elements of the marketing program (after all, branding is primarily a product issue). Has NASCAR lost sight of pricing, promotion, and distribution in its overall marketing strategy? Students will suggest that prices have increased to the point where many fans can no longer afford to attend. Distribution is a lesser issue as NASCAR has expanded beyond its Southern roots. However, fans still have to travel great distances to attend most NASCAR events. Students should also discuss the role of value in this discussion. Is NASCAR’s value equation out of line with the needs of race fans and corporate sponsors? 2. Conduct a strategic SWOT analysis for NASCAR at this point in its history. What opportunities are available for NASCAR to take advantage of given its many significant strengths? A SWOT analysis is presented in the SWOT section of this teaching note. 3. What strategies do you recommend to counter the criticisms leveled against NASCAR? Should the company become more involved in sustainability initiatives? If so, how might that be tied in with NASCAR’s branding strategies? This is a tough question to answer because going further down the road toward sustainability pulls NASCAR away from more pressing issues such as fan attendance and corporate sponsorship. Students may suggest that sustainability is not likely to be an issue with NASCAR’s core race fans. However, the Fortune 500 companies that sponsor NASCAR are very much concerned with sustainability issues. And, NASCAR does not want to earn a reputation for being bad for the environment. Perhaps NASCAR could showcase alternative fuels at race events or even promote the world’s first race for alternative fuel or electric vehicles. 4. What strategies can you offer to move NASCAR to the next level in its evolution? How can the company maintain, or even increase, its sponsor and fan base? Some suggestions are given in the Strategy Alternatives section of this teaching note. An additional strategy is to partner with IndyCar or Formula 1 to combine both types of races into a single event. For example, IndyCar could hold a Gran Prix in Daytona on Saturday, followed by the Daytona 500 NASCAR race on Sunday. Similar tie-ins could be promoted in additional U.S. or international cities. Case 12: IndyCar: Seeking a Return to Motorsports’ Fast Lane* Synopsis: Auto racing is the fastest growing spectator sport in the United States. Unfortunately, open-wheel racing has experienced a period of decline while other forms of auto racing—most notably NASCAR—have grown. After years of damaging competition, the Indy Racing League and Champ Car (CART) have finally reunified. New sponsors, new business opportunities, and a new television contract are positive signs for IndyCar, but the league remains a distant third to NASCAR in terms of popularity in the motorsports market. In addition, the death of driver Dan Wheldon in 2011 casts serious doubts on the safety of IndyCar racing. IndyCar must address this issue and several other concerns in order to strengthen its standing in the American motorsports market, continue the task of reconnecting with former fans, and build connections with new fans and sponsors. Themes: Competition, market segmentation, product and branding strategy, sports and event marketing, sponsorship, global marketing, corporate governance, marketing implementation Case Summary IndyCar is a major U.S.-based auto-racing league that holds races in the U.S., Canada, and Brazil. IndyCars are open-wheel racecars that have wheels located outside the body of the car rather than under the body or fenders as found on streetcars. The origins of IndyCar can be traced to an organization known as Championship Auto Racing Teams (CART). CART was a major force in auto racing and dominated open-wheel racing in the United States from its inception in 1978 until the early 1990s. The increased popularity of stock car racing led by NASCAR posed a serious threat to CART. At the time when CART should have been addressing this threat, the league instead had to deal with a split within open-wheel racing. The Indy Racing League (IRL) was formed out of frustration with CART’s global focus. This created two open-wheel racing leagues vying for the same audience. Consequently, both CART and IRL had small fan bases, while NASCAR’s popularity grew at astounding rates. Open-wheel racing’s situation deteriorated in the years following the split into two leagues. Driver talent, team ownership, media interest and sponsor dollars were diluted as both leagues vied for the same resources. Meanwhile, NASCAR was growing at a staggering pace and eclipsed open-wheel racing as the most popular form of auto racing in the United States. The two open-wheel leagues reunified prior to the 2008 season, but damage had been done already. The league, rebranded IndyCar, had assets upon which to build, namely the Indianapolis 500 and emerging stars such as Danica Patrick, but it had a long way to go to equal NASCAR in terms of race attendance and television ratings. A new CEO, Randy Bernard, came on board in 2010 and immediately energized IndyCar’s marketing. Some strides were made to build the business, but setbacks including a canceled race in China, the departure of Danica Patrick to NASCAR, and the death of popular driver Dan Wheldon offset much of the success IndyCar enjoyed in Bernard’s first three seasons as CEO. Teaching Overview This case offers students the opportunity to develop and analyze strategic alternatives to IndyCar’s weaknesses relative to NASCAR. A concept that can be emphasized in this case is positioning. Competition for the attention of auto racing fans is intense as NASCAR is more popular than IndyCar in the U.S. Formula 1 is a formidable competitor in global markets. IndyCar must find a way to appeal to fans. Its decision to hold more races on road and street courses enables it to differentiate itself from NASCAR. Another point of difference for IndyCar is that it has a broader reach globally in terms of race markets and drivers’ nationalities. Despite its troubles, IndyCar possesses strengths that it can leverage as it attempts to emerge stronger following reunification. Other issues in this case pertain to the product and distribution elements of IndyCar’s marketing strategy. Is the shift toward more road/street courses a way to differentiate from NASCAR, or will it alienate fans further that prefer oval track racing? Can IndyCar adopt the successful street festival approach developed by Champ Car, transforming events from auto races to entertainment experiences? A distribution issue exists in the decision of which markets should IndyCar pursue to hold races? Is the decision to hold races outside the U.S. appropriate, or should IndyCar look to expand to domestic markets it currently does not serve? SWOT Analysis Internal Strengths • Indianapolis 500 is premier auto race in the United States • Randy Bernard, IndyCar CEO • Geographically diverse driver roster • Offers mix of road, street, and oval races • Price competitive with NASCAR • TV contract with NBC Sports Network provides unprecedented amount of exposure • Thematic fan experience at all IndyCar Series races (fan village) • Festival concept; race is only one part of fans’ experience • Izod as title sponsor for IndyCar Series Internal Weaknesses • Television partner (NBC Sports Network) not as strong of a partner as ESPN • 16-race schedule means less market penetration compared to NASCAR • Less attractive than NASCAR to most sponsors • Less star power among drivers than NASCAR • Perception that Indy Cars are a Midwestern U.S. phenomenon • Safety concerns; Perceived danger of running cars at high speeds on oval tracks External Opportunities • Increasing popularity of auto racing in the United States • Auto racing fans are extremely loyal to the sport • Increasing popularity of auto racing in global markets • Many potentially lucrative markets are not familiar with auto racing (e.g., China) • Entertainment properties such as movies and TV are looking for integration partners External Threats • Decreased interest in open-wheel racing in U.S. • NASCAR dominates fans and sponsors in U.S. • Formula 1’s presence in Europe and China • U.S. racing fans prefer oval track racing • Defection of drivers to NASCAR • Weak economy may deter companies from investing in sponsorships Problem/Decision Statement How should IndyCar proceed? Should it attempt to carve out a niche as a street and road course racing league? Should it take NASCAR head-on in an attempt to gain market share? Strategy Alternatives 1. IndyCar could differentiate itself through the variety of race courses that make up the IndyCar schedule. While NASCAR is almost entirely an oval track league, IndyCar has a nearly equal mix of ovals, road courses, and street races. 2. IndyCar could challenge Formula 1 for supremacy as a global auto-racing league. The 2012 IndyCar schedule plans races in four countries (although the race in China was canceled). Nearly a dozen nations are represented by drivers competing in the IndyCar Series. Formula 1 might be a less formidable competitor to battle than going head-to-head with NASCAR in the United States. The risk being that if IndyCar took this approach, it might experience weaker fan support in the U.S. The global emphasis could be achieved through race locations and driver nationalities. IndyCar’s drivers have little star power compared to those in NASCAR. A strategy that focused on driver nationalities could help in developing personalities in the league. 3. IndyCar could pursue a market expansion strategy within the United States, adding events in cities in which it currently has no presence. With only 16 races on the current schedule, new markets could be considered as possible stops for the IndyCar Series. Is simply adding new cities to the schedule sufficient to compete against NASCAR? Which cities would best fit the IndyCar business model? Students may also take a different perspective and look at the hard questions facing IndyCar’s management: 1. What should be the mix of formats for future IndyCar races use (oval tracks, street/road courses)? 2. Where should future IndyCar Series races be located (U.S. or foreign markets)? 3. Can IndyCar successfully differentiate its offering from the NASCAR and Formula 1? If so, how? 4. How can IndyCar prove to potential sponsors that its events are valuable entities? Strategy Recommendations Students are likely to argue that IndyCar should try to reposition itself and make a run at regaining relevance in the auto racing industry. Two avenues seem possible for these efforts: focus on road courses (strategic alternative #1) or expansion into foreign markets (strategic alternative #2). Strategic alternative #3, expansion of IndyCar in the U.S. by adding more events to the schedule, is difficult because the league and its teams lack the resources to compete in many more events than the current number of 16 per season. While it might help IndyCar to have races in cities like Denver or Houston, it does not have the financial resources to pursue extensive market expansion. Implementation Issues Ultimately, the main implementation hurdle will be generating quick success from which future activities can be planned. IndyCar must convince sponsors that its events are worthwhile and persuade fans that today’s version of IndyCar racing is exciting. Given the league’s weak position compared to NASCAR, it is not in a position to go head-to-head with the dominant league. IndyCar should look to grow by offering a product that NASCAR does not have (i.e., mix of race courses). Teaching Questions 1. Identify the external factors that have impacted and continue to impact the IndyCar and its marketing efforts. Which factors appear to be IndyCar’s greatest opportunities and threats? Students should realize that an internal split that formed the IRL is responsible for the negative external factors. Rather than being able to capitalize on the growth of motor sports, the IRL was forced to deal with market dilution. Fan preference for oval tracks and Midwestern U.S. markets has also been a lingering problem. However, IndyCar’s greatest threat is easily the competition it faces from NASCAR and Formula 1. NASCAR dominates the U.S. racing market, and Formula 1 is the leader in open-wheel racing globally. Despite these threats, IndyCar’s greatest opportunities may lie outside the U.S. 2. What are IndyCar’s greatest strengths? Which weaknesses would you recommend IndyCar attempt to convert into strengths? How might these weaknesses be converted? IndyCar’s strengths are listed in the SWOT analysis section of this teaching note. Student answers on which weakness to convert will vary. Of IndyCar’s weaknesses, enhancing the star power of drivers might be one that is targeted for conversion. IndyCar might also convert the market penetration weakness by expanding its North American footprint. 3. What advantages does IndyCar possess over NASCAR? How should these advantages be used by IndyCar to compete with NASCAR? Students will argue that IndyCar possesses few advantages compared to NASCAR. However, the league’s major advantage is the recognition of the Indianapolis 500 as the premier auto-racing event in the U.S., if not the world. The festival concept is another strength IndyCar could leverage to add value to fans’ experience at races. Also, the mix of race courses offered is a strength that could be potentially used to IndyCar’s advantage. 4. What can IndyCar learn from NASCAR's success? Are there elements of NASCAR's marketing strategy that IndyCar could adopt? Student responses to this question will depend on their knowledge of NASCAR and its marketing success. However, even novice students will recognize that NASCAR is a master of promotion and branding. One key to NASCAR’s success has been the ability of the association to brand individual driver personalities, racing teams, and cars. Driver personalities, in particular, are a major reason for NASCAR’s incredible fan support and loyalty. IndyCar began to have individual personalities emerge, particularly Danica Patrick, before her departure from the league. Overall, IndyCar has done little to create distinct driver personalities that are recognizable beyond the league’s hardcore fans. Students might suggest promotion strategies that would help in this area. 5. What steps should IndyCar take to move beyond the death of Dan Wheldon and reassure both fans and drivers about the safety of IndyCar racing? IndyCar should probably follow NASCAR’s lead on this issue. After the tragic death of NASCAR legend Dale Earnhardt in 2001, NASCAR moved swiftly to improve driver safety. NASCAR improved car design and added safety equipment, and also tweaked the structure of the races to improve safety. Then, NASCAR ensured that fans knew about the changes. Instructor Manual for Marketing Strategy, Text and Cases O. C. Ferrell, Michael Hartline 9781285073040, 9781285170435
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