Mars Strategy

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  • 1. Mars: Starburst Sports Drink Launch Strategy By: Joshua S Neeper Senior Management Seminar January 5, 2011
  • 2. Introduction My internal and external analysis of Mars has expressed very impressive information about the industryand operations that Mars runs today. They are not the last players to adapt to a changing economy orimplement new technologies that serve them and the environment positively. They are considered the leadersand are on the forefront of manufacturing innovation, global distribution and green energy implementation.While deciphering through their internal and external environment, I concluded that there is always room forimprovement when your number one. Theyve been able to foresee trends in all economic realms and adaptaccordingly. However, I had to think outside the box and determine what Mars could do to maintain marketshare and increase cash flows, assuming that they allocate the necessary resources to implement a strategywithout second guessing. Their operations are streamlined and every aspect I examined; I determined that Marscould implement one of three strategies I consider to be notably profitable, sustainable and most all, efficient. Strategies 1. Starburst Sports Drink 2. VO2 Performance Bar 3. Green Energy InitiativeAll three strategies should be, without a doubt, implemented. However, to stay competitive in a global marketand use economies of scale to your advantage, a company must look at implementation times, rate of return,profit margin fluctuations and PE ratios if the company is publicly traded (Mars is Privately Owned). I stronglyfeel that the initial capital requirements are far more favorable for strategy one more so than strategy three.Strategy-Idea & Selective ReasonsThe concept and purpose of the Starburst Sports Drink Strategy Launch is to enter into a new market ofmanufacturing but targeting most of the existing consumers that use Mars products. This market only has twocompetitors: Gatorade and PowerAde, that compete for the same target market but no attempt has been made tothreaten their market share, until now. Selective reasons are listed below.Starburst Sports Drink - Enormous market and opportunity - 2 competitors: Gatorade and PowerAde - Gatorade does not have money or resources to compete with Mars or the Mars family regarding cash - Low manufacturing investment - Product distribution partnership with BudweiserIndustry Supportive & Unshakable Facts(all information below attained from http://researchwikis.com/Sports_Drink_Market)Sports Drink Market Share Break Down $300 billion sales worldwide in 2005 Market increased 10% to 9.71 million liters in 2005 North America accounted for roughly 49% consumption in 2005 Asia Pacific region accounted for a 38% share in global consumption in 2005 Japan ranked second to the U.S. in terms of per capita consumption, but China is assumed to overtake Japan as Asia Pacifics leading consumer by volume in year 2010 2003, Germany was the leading market for sports drinks in Western Europe followed by Italy then the U.K. 2
  • 3. Market Metrics(all information below attained from http://researchwikis.com/Sports_Drink_Market)Global functional drink volume (millions of liters)CATEGORY 2006 FORECAST 2011SPORTS DRINKS 9,870.6 13,301.70ENERGY DRINKS 2,429.4 3,534.10ELIXIRS 320.7 366.10TOTAL 12,620.7 17,201.9(Source: Euromonitor International, 2007)Sports Beverage MarketWholesale Dollars (in US billion)1997 $1.481998 $1.691999 $1.872000 $2.012001 $2.182002 $2.41(Source: Closing the gap? Beverage World, January 15, 2003)Industry Players(all information below attained from http://researchwikis.com/Sports_Drink_Market) PepsiCos Gatorade is the leader, holding eight spots in the Top 10 brands, according to data from Information Resources Inc. (IRI), Chicago. The PepsiCo brand now has nine categories which are brand names for different flavor profiles of Gatorades proprietary formula. The largest gainer is Gatorade Rain which was introduced in 2006, with a 376% increase, according to IRI data. Coca-Cola Two PowerAde formulations also feature in the top 10. PowerAde and PowerAde Option registered as the No. 2 and No. 8 sellers, respectively. Cadbury Schweppes They entered into sports drinks with their acquisition of Accelerade, from Pacific Health Laboratories. The brand is popular in fitness conscious regular exercisers. In contrast to other brands that replenish electrolytes, Accelerade uses a protein-based formula, which Gatorade has implemented into their new product line Recovery. 3
  • 4. 2006 Market Share % Based on Sales (in billions) 50 40 30 47 20 34 10 19 0 Cadbury Gatorade Powerade 2006Strategy Implementation ProcessStep 1Divisions throughout the entire organization should synchronize the vision and goal of the purpose throughteams. Divisions should consist of members from top management, R&D, legal, finance, accounting,engineering, sales, and marketing. After all representatives are present, a complete business plan and productlife cycle needs to be constructed in accordance with a TOA (Team Operating Agreement), which sets forthdead lines, weekly agenda schedules, and expectations.Step 2Assuming that everything is done accordingly to schedule and a proto-type Starburst Sports Drink is made; allsales representatives need to hit the road and the phones. They need furnish samples to sports teams in soccer,football, Nascar and baseball. Sales contracts should be signed and ready to enforce by the delivery time stated.Step 3Top management needs to contact top management of Budweiser to develop and agree on a discrete productdistribution contract so the public doesnt affiliate the two companies together. Mars doesnt distribute theirproducts; they outsource logistic operations. Therefore, Budweiser would allow them distribution to sportingevents all across the world and increase both companies leverage in the grocery stores. Budweiser is the mostconsumed beer in the world and have the highest market share in the entire world. Their beverages,international manufacturing and bottling processes possess one the most envied distribution models in the entireworld. This completing represents the competiveness of their economies of scales and economies of scope. 4
  • 5. The number one distribution model belongs to Starburst Sports Drinks new competitor, Gatorade which isowned by Coca Cola but holds the number one spot for weakest profit margin in the industry.Step 4After a contract is signed and the first sales are made, contact Marss top rated customers such as Wal-Mart tomake sales arrangements.Step 5Implement the marketing plan which was constructed in the original business plan immediately as the producthits the grocery stores. The plan should consist of endorsements after the first two months, commercials, radio,ads and sponsoring sporting events. There should also be a detailed planned in creating a new bowl game incollege football called the Mars Bowl or the Starburst Bowl played at the Dallas Cowboys stadium in Dallas,Texas.Step 6Sit back and reap the rewards. No body can stop you now.Wrap UpThere is opportunity, a new market and limited number of competitors in this strategy. A new plant must beconstructed in order to implement this new product launch. The engineering is simple and streamlined. Theleading expense is initial sales traveling and continuous marketing. The profit margin should generate 50-75cents for every dollar minus 10-15 cents for Budweisers services. First year sales should be projected at$200,000,000 in the North America market with a steady but controlled growth rate of 5-10% per year(coinciding with population distribution). Europe, Russia and Asia Pacific should have the same projections ifnot higher. The marketing plan should be allocated no less than $50,000,000 which should consist of sub planstailored to the geographical demographics such as different countries and different sports. Expense accounts fortraveling sales representatives should not be less than $5,000,000 (includes food, transportation, hotels, cellphones, lap tops and product samples). Bear in mind that all sales reps will be sent on a two month excursionthrough Europe, Asia, Russia, Australia, South America, and North America. The bottom line should net 50%of sales. The implementation of this strategy should increase overall sales for all of Marss products. I wouldstrongly encourage Mars to implement this st