By: Marco U.Condes

BackgroundCompany:

-Started in summer of 1999 by Genevieve Lim.

-First branch in A Mabini Road, San Juan

-Now with 150 outlets nationwide, has blended more than 20,000,000 servings

-Plant, Warehouse, and R&D located in Capitolyo, Pasig

Case Facts and Background

Founder:

-A then 26-year old Genevieve Lim

-Earned a degree in Food Science from Vancouver

-Inspired by Bubble Teas and Tea Bars

-Currently President and General Manager

Awards & Nomination1st National Shoppers Choice Award, 2004Number One Ice-Blended Drink Award –

Metro Manila

19th Annual National Consumer Excellence Award, 2004

“Outstanding Service – Pearl Shake Store”

16th Annual Parangal ng Bayan 2001People's Choice Award – National

Consumer Excellence Award“Most Outstanding Business Venture” &

“Most Innovative Business Venture”

some Strategies-must be mutually beneficial

-Strict policy on buying yam and tapioca balls, must be from the original maker

-Business options include the ff:*Will carry the well established ZAGU Trademark & Logo

*Special discounted price for purchases exclusive for Authorized Dealers only

*Continuous marketing support through event participation, sponsorship and other marketing approach.

*High Profile National Presence

*No Franchise fee, No Royalty fee

*Exclusive Product Distribution

*Continuous Research and Development

Standard Kiosks include:*Three Power Blenders*Rice Cooker*Tupperware*Chillers / Ice Chest*Built-in Kitchen & Faucet

Competitors-Quickly

*”Taro Ice”; PhP45.00 to PhP65.00

-Greenwich

*”Pearl Coolers” PhP35.00

Buko Pandan, Chocolate, & Melon

-Orbitz

*similar to Zagu

4 Ps: Product and Price

Classico Flavors: Buko PandanCafe LatteChocolateCookies & CreamCreme BruleeHazelnut CappucinoMelonMochaPearl Milk TeaStrawberryUbe VanillaWatermelon

Baby-Z PhP 27.00

RegularPhP34.00

GrandePhP 39.00

Supremo Flavors: Black ForestJamocha AlmondHalo-HaloIced MongoMango ParfaitNatural MangoNatural DalandanNatural Four Season

Add-Ons:Pearl CrystalsRed Mongo BeansCherry JellyCoffee JellyRice CrispiesCorn Kernels

Baby-ZPhP 32.00

RegularPhP 39.00

GrandePhP 44.00

PhP 5.00

Special Flavor: Sago't GulamanPhP 35.00 (available only in Regular)

4 Ps: Place

Location of Stalls / Stores (as of 2006)

Caloocan-10th Ave-Ever Grand Central

Makati-Comembo-Guadalupe-Nuevo-Kal. Masilang-Makati Mini Mall-Park Square-Puregold-Makati

Las Pinas-BF Drive-BF Resort-Puregold-Las Pinas-SM Southmall-Starmall

Malabon-Malabon

Manila-Dapitan-Harrizon Plaza-City Mall Underpass-Masangkay-P. Noval-Park n' Ride-Plaza Fair-Quiapo Underpass-Robinson's Ermita-SM Manila-Stop & Shop-Tutuban Center

San Juan-Greenhills-Unimart

Valenzuela-Puregold-Valenzuela-Valenzuela / Fatima

Mandaluyong-Cherry Foodarama Shaw-EDSA Central Jeepney Park-Maysilo-Robinson's Pioneer-Shangri-la Plaza Mall-SM Megamall A & B-Starmall

Marikina-JK Food House-Marikina Shoe Trade-Riverbanks

Pasig-Ever Ortigas-Kapitolyo-Malinao-Pearl Drive Ortigas-Rotonda

Quezon City:-12th Ave-Anonas Complex-Berkley Square-Cherry Foodarama Congressional-Circle C Mall-Ever Commonwealth-Farmers MRT Ramp-Gloris, Proj 4-Isetann Cubao-Kamuning-Katipunan-Mindanao Ave-Puregold Commonwealth-Shopwise Food Alley Cubao-Shopwise Supermarket-Sikatuna Village-SM Centerpoint-SM North-SM Fairview-UDMC-Victory Liner-Xavierville

Taguig-Global City-Market Market 1 & 2-Taguig

Paranaque-4th Estate Subd.-Betterliving-BF Phase 3-Courtyard Mall-La Huerta-Jaka-Merville-Moonwalk

Muntinlupa-Alabang Town Center-Festival Mall-Metropolis Star-South Central

Pasay-Masagana Citimall-Metropoint Mall-Roxas Blvd.-Savers Square

Provincials-Batangas (5 Stores)-Bohol (1 Store)-Bulacan (7 Stores)-Cavite (8 Stores)-Cebu (1 Stores)-Laguna (11 Stores)-Nueva Ecija (2 Stores)-Palawan (1 Store)-Pampanga (3 Stores)-Quezon (1 Store)-Rizal (2 Stores)-Tarlac (1 Store)

Statement of the Problem

How can Zagu innovate and not lose its relevance?

Factors:-Zagu has not done anything substantially new,

save for few new flavors and its sealed lid. - The look and feel of its products (together with

its kiosks) is still the same.- It offers the same customer experience as it did

when it first started.Effects:-It was not able to maintain its initial surge of

popularity.-Losing on the hype, it has long ceased being hip

and cool (no pun intended).

Objectives

-to elevate the status of the Zagu brand

-to attract emerging target markets (youngsters) and recapture the interest of its former customers (ages 27 to 42)

-to introduce new offerings (may it be in the product, experience, or service)

-to make it appeal to health-conscious customers

-to adopt changes that would promote environmental friendliness

Areas of ConsiderationPorter's Five Forces

Threat of New Competition – Strong (barriers are low)-very easy for other businesses and even individuals

to blend their own concoction affordable, albeit less quality, supplies available

Threat of Substitute Products or Services – Strong-numerous products are already existing(Ex: Halo halo, mais-con-yelo, and dirty ice cream)

Bargaining Power of Customers (buyers) – Moderate-Customers can easily switch at no cost.-no product attachment

Bargaining Power of Suppliers – Lowingredients are pretty abundant; some are even

commoditiesIntensity of Competitive Rivalry – High -numerous firms in the market

SWOT

trengths*Superior product quality*Affordable offerings*Established brand name

pportunities*Global Warming*Consumer spending habits*Improving economy

eakness*Limiting brand name*Unhealthiness of the product*High usage of disposable cups

hreats*Influx of substitutes – both local and international *Malicious rumors *Health-consciousness trend*Changing customer demographics

ACA 1 – Status Quo

-Zagu will simply continue with their current business practice - customers purchase in a kiosk, company offers a new variant

once in a while.

Advantages: Would not entail additional costTried and TestedCan be placed in many locations

DisadvantagesWould not facilitate innovationThe setup is quickly getting passé Not environment-friendly

ACA 2: Augment product and service, Line stretch Upward, and Leverage on existing Brand Equity

-Develop a café-of-sorts that offers premium products for a higher price. Utilized the Zagu

name by associating it with the establishment’s branding.

AdvantagesWill address the much needed innovationsPotential for better profit marginImprove brand image

DisadvantagesWill require a huge capitalSomething the company has not not tried

before; RiskyMore intensive Research and Development has

to be undertaken

ACA 3: Internet Marketing-Launch a highly-engaging website that would aid in promoting the company and its products. Aside from

direct information about Zagu (menu, locations, promos, etc) it will also feature games and other interactive options to captivate a broad range of audience. In addition, health and nutrition tips, environment

education, and other interesting tidbits of information will also be featured.

AdvantagesWill somehow satisfy the need for explicit promotionRelatively effortless and inexpensive to get started and

maintainCan give the company the image of fun

DisadvantagesMight be perceived as generally irrelevant to the productMight not translate to actual brand recallLimited target audience

Conclusion: I recommended that Zagu pursue ACA 2: Augment product and service, Line stretch Upward, and Leverage on existing Brand Equity.

Why were others not chosen: ACA 1 - did not address the problemACA 3 - is superficial given the objectives that

need to be achieved

Why is ACA 2 chosen:will be able to utilize its strengths and downplay its

weaknesses. Moreover, it can capitalize on its opportunities while downplaying threats.

(example: association to the Zagu brand name <Strength>, introducing premium product offerings that would make it healthier <Weakness>, reaching out to their once target customers who are now part of a different demographic group to avoid totally losing them <Threat> by capitalizing on their spending habits <Opportunity>).

Action PlanPlace-Put up a sit down establishment that would cater to

the ‘working urban class’ (their customers during the heyday of their operations - only they’ve grown up), place it within an upscale environment.

-The place will give an air of coziness and the ambiance befitting of its target customers.

-It will be branded with a fancy-sounding name, if possible staring with the letter Z, and the association with Zagu must still be present however subtle.

(ex. Zeta <written with a trendy typeface> and a fine print saying ‘blended by Zagu’).

Product-In addition to existing variants, introduce premium

and unique flavors (ex. Ferrero, cinnamon-rum)

-For the aforementioned varieties, use real ingredient, do away with artificial powdered flavorings, and promote it as healthier (ex. real slices of fruit, real piece of chocolate).

-Offer options for healthy / nutritional add-ons (Whey protein powder, L-Carnitine powder, green tea) <Ingredient Branding>

-Shakes will be served in a glass. Conversely, customers can have the option of bringing and using their own containers. This will minimize if not totally eliminate the use of disposable cups. The place will be able to vouch for their Eco-friendliness.

-To capitalize on the craving for something salty after the consumption of something cold, a

limited number of finger foods will also be available (ex. fries, chips)

Price -Given the target-market and the offering, the

company can afford to have higher markup. Promotion- Social Media, Word-of-mouth

Success of this strategy can bring prominence back to the Zagu brand. In the long run, the original Zagu stalls can piggyback on the success of their upscale establishment by claiming that it is “powered by us, Zagu.”

But the most important thing the success of this endeavour would bring is in the Zagu brand equity and its reputation.