Oscar Mayer Case Study
1. ) At first, Marcus McGraw found the challenge so complex and saw it a difficult task because he had not sat down to put down the ideas on paper and evaluate the situation carefully. He was just thinking of the difficult task ahead and not how to assail the problem.
He was missing parts of the puzzle, he was not evaluating anything as yet or trying to formulate or implement any strategy. He had no option, no solution immediately after he read the McTiernan report. He had not done any ‘strategic planning’ thus, his perspective was different than after he had read the memos.
After reading the memos from his colleagues, he realized that he could count on them since they had great ideas and were persons with great capability for these types of concerns and issues, especially when he read the one of his long time colleague and friend. McGraw pursues that decision making process of gathering information, generating ideas, looking at the ‘pros and cons’ of the situation that Oscar Mayer faces through his associates. He follows them and his mind guides him knowing that he can trust on his department managers. Marcus McGraw purses a decision making that is unbiased.
He does not go for just one department; he follows all four managers. He was unbiased in this way and was a good strategy as well since the managers have that market-driven strategy which is healthy for the firm. They are well market-oriented and are able to distinguish the capabilities of Oscar Mayer just as they are able to match the customer value requirements to capabilities. They were cognizant that the market is more competitive, they also pointed out that introducing new lines of product could bring prosperity to Oscar Mayer, which is one of the suggestions that McTiernan had brought up.
Therefore, McGraw’s decision making process of taking the ideas of all four managers was a wise one. 2. ) If McGraw chooses the favors of only one department then he is risking all other departments. In a business you cannot only favor and invest in one department only. All departments are important components for success of the business. If you only focus on one department, then the other departments will eventually collapse thus the company is losing on other areas in the market where profits can be made.
This also means that the firm no longer has that diversity in products which reflects negatively on the company. McGraw can mitigate the damage by improving each of the departments so that they become more competitive in the market. He could also diversify in products just as was recommended by a couple of his managers thus making him a tough competitor on the market if adequately and carefully strategized. He will surely need to invest quite a lot on advertising and promotion which will reduce their profits in the short term; however, they will experience growth and profits in the long-term.
As mentioned, once each department is improved and with the right strategy, Oscar Mayer will benefit and improve the sectors of quality, quantity and price. They have done it before and the can only be better and will concentrate in satisfying consumers’ needs and wants. 3. ) First of all, let’s list the Strengths and Weaknesses. Strengths: Well-known Brand, Technology Skills in R&D, Strong Distribution Channels, Relatively High Market Share, High Profit Margin, Successful History and Product Diversification. Weaknesses: Relatively High Price, Not Healthy (High fat content).
Oscar Mayer has a relatively high market share already, and a relatively low market growth. Due to its strengths, it already has a high market share and due to its weakness and the new trend in the market which is looking for products with lower fat (healthier), and lower prices, Oscar Mayer is losing its market growth. This is obviously a great threat to Oscar Mayer in terms of competition since the consumers are now looking for lower prices in those products, as well as healthier meats. This is detrimental to the firm on its entirety as fewer products sold would mean fewer sales which mean less profit.
The competition also affects the “second brand” since the decrease in sale of the Oscar Mayer products also affects Louis Rich as it is looked as a total, thus Louis Rich revenues are compensating for the loss in Oscar Mayer. The investment decision then will change. The objectives are to increase annual production growth over the next three years by 4% in volume. Products will need to be reduced due to the competition so this affects how much to invest in quality and on the outstanding strength on Louis Rich in order to keep up the good record.
There is much advertising and promotion to do; therefore they might have to lower the budget figures for this expense if sales decrease. They need to advertise on the already existing products, such as the health aspect of it, as well as on new products that will be produced. Therefore Oscar Mayer needs to ensure that they can prosper in the competition with all the expense that waits. 4. ) From the four departmental options, Jim Longstreet’s advice seems more viable. Not only was Jim’s advice an effective one, but his ideas also passed McTiernan’s wish for improved convenience.
What Jim is doing by this is what is called ‘Differentiation Strategy’. The firm will provide a superior performance product uniquely designed to provide value to their target audience and is well appreciated by them. Oscar Mayer will also use their strengths to make this strategy a successful one. Having used their strong ability of R&D, they are already aware of who the target audience is and what that are looking for. Two products have been designed for their needs which are “Zappetites” and “Lunchables. ” With this innovation, Oscar Mayer has all the potential and resources to remain the leader.
The second best strategy I would say is Jane Morely’s idea. To obtain smaller companies that are competent and provide something Oscar Mayer does not provide is indeed a good strategy. The only disadvantage is that OM would have to increase their debt to acquire these companies not being completely sure if these companies would succeed. Advertising and packaging would also have its cost, however it doesn’t mean it won’t benefit in the longer run. Thos have their benefits; they hold great value when you count on consumer convenience and brand growth.
If the companies succeed then automatically there are great sales increases which bring about profit. The least viable would be Rob’s idea of backing Louis Rich. Having all the strengths and the brand name of Oscar Mayer and just letting it go would be not just a waste but a huge loss. OM has had the majority of the company’s profits for a long time and has been the leading brand. For one, LR is increasing but at a slow pace. Then advertisements will be a huge expense which of course does not mean that it will increase the volume of sales.
Therefore centralizing in just one brand, LR would not be a good idea for Oscar Mayer. 5. ) With the statistics given we can observe that McGraw wants a 15% increase on operating income while the managers are projecting a decrease of 5. 2% from the current year. If McGraw were to keep his A&P budget the same as last years, he would save $32MM over the managers’ projections. Therefore, one solution could be to effectively use the strengths of the product lines and the A;P dollars by consolidating his sub-divisions.
The Division Performance table demonstrates exactly where the successes and failures of each sub-division are, and also shows their strengths and weaknesses. We can see that A ; P for Oscar Mayer has been decreasing and operating income increasing slowly. On the other hand, Louis Rich’s A ; P expense has been increasing while operating income has also been increasing by a great difference. This is also a key factor in the success of LR and partly, although not much, why OM has had a decrease in sales.
Another factor in the decrease of Oscar Mayer brand is due to consumer trend as well as increased competition in the market. Oscar Mayer has so far opted to lose market share rather than lower its price. Based on the analysis, there is more to lose if the Oscar Mayer brand is allowed to wilt over the Louis Rich Brand. Giving up on Oscar Mayer would mean losing its well established, well recognized OM brand name and its equity. May be even future profitability may be lost if the trend towards white meat is only a temporary one.
This can be seen in McTiernan’s Report on consumer satisfaction survey, in which the red meat out performs in overall taste and compares well with respect to convenience. Therefore, another strategy is to build up the Oscar Mayer Brand, to merge the Louis Rich brand under Oscar Mayer, for example co-brand, and to introduce new packaging of their products (e. g. Lunchables and Zappetites), some white and some red meat to recapture the lost market share. To consolidate the distribution and A&P spending around the Oscar Mayer’s well established brand.
Actions In accordance with the above strategy we would suggest that Oscar Mayer and Louis Rich Brand modify and develop an integrated strategy which would require altering the existing branding strategy to accommodate the consumer trends, to extend the product line and to competitively price the OM products. Oscar Mayer needs to also not lose the taste when improving the quality of the product healthier, which is another step that would be taken and at the same time be convenient. By maintaining the quality it already is contributing its part to success.
Another strategic goal is to achieve is long term gains and accelerate brand growth. With all this said, we need not to forget to invest in LR in order for the brand to grow as well. 6. ) Of the two products Jim Longstreet suggested, I believe “Lunchables” is less likely to succeed especially since they are completely new to this product. Unlike Zappetites they had previously done Stuff ‘n Burgers so they do have an idea of how to approach the new product. Zappetites would create certain products that could also be used for lunch by certain consumers who desire hat ready to eat product. Lunchables would be more difficult to succeed due to all the details that a lunch entails and the different wants of the consumers. They are already thinking of packing a chocolate treat with it as well; not everyone eats or likes chocolates. Another issue with Lunchables is the ingredients. Some of the ingredients they would want to use have a short shelf life which would turn away many consumers. We need to keep in mind that everyone is different and have a different taste, many individuals are ‘picky. ’