ASSESSING THE IMPACT OF CHANGES IN THE ENVIRONMENT – Custom Essay Services

CASE STUDIES

Don't use plagiarized sources. Get Your Custom Essay on

Get an essay WRITTEN FOR YOU, Plagiarism free, and by an EXPERT! Just from $10/Page

Order Essay

THE ENERGY BAR INDUSTRY

In 1986, PowerBar, a Berkeley firm, created the energy bar category with its classic chewy bar. Positioned as an athletic energy food, it was distributed at bike shops and events that usually involved running or biking. The target segment was the athlete who needed an efficient, effective energy source.

Six years later, seeking to provide an alternative to the sticky, dry nature of the PowerBar, a competitor developed an energy bar with superior taste and texture and branded it the Clif Bar. Soon after, another competitor introduced the Balance bar, which offered a blend of protein, fat, and carbohydrates based on the nutrition formula associated with the “Zone Diet.” Faced with these challengers, PowerBar responded with Harvest (a bar with a much more mainstream taste and texture) and ProteinPlus (an entry into the high-protein subcategory closely related to Balance).

The makers of the Clif Bar observed that women athletes or those involved in fitness were approximately half of the market. However, their unique needs in terms of macronutrients, vitamins, and taste were not being addressed. Luna, the first nutritional (not energy) bar for women, was Clif Bar’s answer to this unmet need. The bar had a light crunchy texture, came in flavors like “lemon zest” and chai tea, and contained nearly two dozen vitamins, minerals, and nutrients. The target market consisted of time-strapped women who wanted an energy bar, but one more tailored to their needs.

Both in reaction to Luna’s success and to expand the segments for which the category was relevant, PowerBar focused on the sensitivity of women to calories and portion size. In response, the firm created Pria, which was smaller and had only 110 calories but had superior—almost indulgent—taste and texture.

The energy bar industry exploded over the next few decades exploiting the demand for health and weight control, portable meals, better ingredients, and nutritious snacks. Sales went from $100 million in 1996 to $2 billion a decade later and well over $6 billion by 2016. The growth was fueled by submarkets each driven by a unique “must have.”

These submarkets are defined by different applications, ingredients (consumers are becoming more ingredient sensitive), and value propositions. Over time, there have been nutrition bars, cereal bars (a replacement for breakfast), protein bars, diet bars (brands like Balance or Atkins that followed a popular diet), natural ingredient bars, all with numerous textures, flavors, sizes, and coatings. Over the decades, many hundreds of products were introduced. However, only a few became major players.

One of the successes was KIND, a brand that grew from nothing in 2004 to over $550 million in 2015 (33% of the market). It was driven by a clear vision to be a healthy, tasty, and natural snack in a sea of snacks that look and feel very different. KIND products are composed of whole fruits and nuts using gluten-free, non-GMO, sustainable ingredients with much less sugar than competitors. They are not cheap nor easy to produce given high-quality ingredients and production barriers that required innovation, investment, and commitment to overcome. The brand vision is communicated by a clear package that allows customers to see the ingredients. The tagline “ingredients you can see and pronounce” reinforces this transparency positioning. Reacting to a surge in interest in protein, KIND introduced a line of savory bars with more protein, including flavors such as honey smoked barbeque.

KIND has a higher purpose—to encourage people to reward acts of kindness. There is #kindawasomeness cards handed out to someone doing a kind act for someone else. The card has a website and code on which the card holder can request a packet of KIND bars along with another card to give to someone spotted doing an act of kindness. There have been 1.2 million documented acts of kindness as a result. There is the KIND Causes where, each month, members vote on which customer-nominated causes should be supported with a $10,000 donation. They vote by committing to do an act of kindness. For example, one proposal was to train mentors for Dryhootch, a non-alcoholic rally point for military personnel.

The energy bar market represents how a dynamic fast-changing and innovative marketplace works and the evolving winners and losers over just two decades!

FOR DISCUSSION

Identify the different submarkets or subcategories in the energy bar market. Which have “must haves” that drive a loyal and sizable segment? What are the strategic groupings? To what extent does each submarket represent fads that will peak and decline instead of grow. Why?

To what extent do you think the KIND subcategory is driven by its Kindness initiatives? Are these “must haves”?

What are the environmental trends that will affect this industry? Considering these trends, generate two or three viable future scenarios.

How can brands like Luna, Pria, and KIND be leveraged to other products and categories? What makes these brands extendable?

ASSESSING THE IMPACT OF CHANGES IN THE ENVIRONMENT

The following are three environmental trends that will have a substantial impact on many categories.

Democratization of Education

Thanks to new online platforms and free access to world-class content, people can experience education on any number of topics—anywhere, anytime. Stanford offered three courses in 2011, each of which had over 100,000 attendees. By 2017, MIT offered 118 courses that included complete video lectures. These efforts are termed Massive Open Online Courses (MOOCs). Because of the massive scale of learners, MOOCs require instructional design that facilitates large-scale feedback and interaction. One approach is to leverage learner connection by encouraging peer-to-peer review and crowd source interaction and group collaboration. Another is to use automated feedback through objective, online assessments (e.g., quizzes and exams).

FOR DISCUSSION

What is the business model for MOOCs?

What should a business school do to adapt?

What are the threats and opportunities for a text publisher like Wiley? What changes will they have to make to remain relevant?

What do these education trends mean for corporate training and company hiring?

Changing Payment Forms

Trends toward mobile payments and an increased concern for security is affecting most firms.

FOR DISCUSSION

What companies will be the winners and which will be the losers?

How will these trends affect retailers?

The 3Ps of Digital Health

Applications are enabling a new wave of innovation that is changing the face of the health care industry. The future of health care is personalized, participatory, and preventive with the help of mobile devices seamlessly integrating technology into our daily lives to drive healthy outcomes.

FOR DISCUSSION

How has your own health care been affected by the 3Ps?

How should health insurers act on this trend to influence their bottom lines and the health of their subscribers?

Dream up two new products or services ideas (including apps) that take advantage of these trends.

What types of businesses stand to lose and gain the most from this trend?

CREATING A NEW BRAND FOR A NEW BUSINESS

Contemporary Art

Contemporary art, often defined as nontraditional art from the 1970s, can sell for incredible sums of money. Damien created a square array of colored dots that have been sold for up to $1,500,000. Hundreds of these have been made and sold. While still an unknown artist, Hirst sold a work that consisted of flies being hatched and attracted to a decaying cow’s head only to be zapped by a bug zapper to Charles Saatchi, the advertising executive and prominent collector. It was called “A Thousand Years” and was said to depict life and death. Saatchi, who owns over 3,000 contemporary artworks, is generous about loaning them to museums if they agree to display other pieces (so that they can be said to have been displayed in the museum).

There are dozens of artists who command high prices:

On Kawara paints a date such as Nov 8, 1989 on a canvas. There are approximately 2,000 in existence; one sold for $500,000 in 2006 at a Christie’s auction. Christie’s and Sotheby’s are the two most prestigious auction houses. It has been estimated that a painting will get 20 percent more if sold at one of these two auction houses, in part, because of their brands.

Christopher Wool sold a painting of fifteen stenciled letters that spelled Rundogrundogrun for $1.24 million in 2005.

In 2008 a seven-foot Mark Rothko painting that had been owned by David Rockefeller (who bought it in 1960 for $8,500) sold at Sotheby’s for $72.8 million, nearly three times more than the previous high for a Rothko.

Jeff Koons, famous for making vacuum cleaners an art object, sold life-size a sculpture of Michael Jackson and his pet monkey for $5.6 million despite the fact that there were two other copies of the piece. The fact that the other copies were owned by the San Francisco MOMA and a prominent collector actually enhanced the value of the third piece.

Tracey Emin, an artist with a reputation for taking on taboo topics with an autobiographical flair, established a style and the premium prices that go with it by creating a bad girl image. For example, she posed nude for commercials, created a tent embroidered with names of her past lovers, and appeared on British television so drunk that she had no memory of it.

Why these prices? One hypothesis is that this art is objectively exceptional and its high quality merits a premium price. That is demonstratively false. Consider the following.

There was a painting of Joseph Stalin, worthless until Damien Hirst painted a red nose on the subject and signed his name—it then sold for $250,000. A Jackson Pollack look-alike painting was bought at a flea market. A series of experts could not ascertain if it was an authentic Pollack or not. The same painting was either worth a few thousand or tens of millions depending on whether it was deemed authentic. An auction professional once said, “Never underestimate how insecure buyers are about contemporary art, and how much they always need reassurance.”

What makes these prices even more puzzling is the fact that several of the top artists do not do their own work. Andy Warhol famously did little of his own artwork. Hirst has a staff of 20 or so who do all of his work including the colored spots. So the question is why do these artists attract such prices? And more basically, how does a painter create a brand that will command such fantastic sums? These questions are more general than they might seem. There are many businesses for which it is not possible to objectively know the value of the product or service. Most customers lack the information and often the expertise to evaluate service firms. There are also products, such as motor oil, for which it is not possible to judge the quality. Even products such as cars or computers are difficult to evaluate because they are complex and specifications do not tell the whole story. Furthermore, even if a person took the time to pour through Consumer Reports, it is not clear that its recommendations will reflect the right decision criteria for that customer.

FOR DISCUSSION

Why do people buy contemporary art? Why might the demand for contemporary art increase?

How does an artist develop a brand?

How does an art dealer develop a brand?

Is Damien Hirst famous because of his work and its shock value, because of Charles Saatchi, or is Hirst “famous because he’s famous?

How would you develop a brand if you were a new investment advisory service? Can you use any of the techniques that artists use?

Source: This case draws on material in Don Thompson, The $12 Million Stuffed Shark: The Curious Economics of Contemporary Art, London: Aurum Press, 2008.

COMPETING AGAINST THE INDUSTRY GIANT

Competing Against Amazon

Amazon was started in July 1994 by Jeff Bezos as a company that sold books online. In doing so, they could offer many more titles than the largest bookstore and without the costs of a storefront operation, they could sell them cheaper. It was a good model and was extended by the Kindle book reader/computer launched in 2007. In 2015 Amazon had at least a 65 percent share of the book and ebook market.

But Amazon did not stop at books—Bezos wanted to be the “Everything” store. In 1998 it added music and DVDs/videos and a year later added home improvement products, software, video games, and gifts. Every year Amazon added more categories until there is not much that you cannot buy from Amazon. It even introduced grocery products in some markets. You select the grocery items, a delivery time, and it will be there. In 2015, Amazon with some 50 fulfillment centers in the United States (and another 30 worldwide), passed $100 billion and overcame Walmart as the largest U.S. retailer. And it continued to aggressively add more fulfillment centers.

In 2005 Amazon launched the Prime program, which addressed a desire for even faster delivery speeds. It included free Two-Day Shipping for eligible purchases (grown to some 30 million items by 2015), Sunday delivery, and free same-day delivery on hundreds of thousands of products in more than 35 cities around the world. There is also unlimited streaming of movies and TV shows with Prime Video and the ability to borrow books from the Kindle Owners’ Lending Library for $99 a year or $10.99 a month. Over 50 million people were estimated to be U.S. customers of Prime in 2016.

Amazon is guided by values and a strong culture. First, it starts with an obsession with keeping the customer first. That is a bedrock of company decision making and, in particular, the drive to have low prices, a wide selection, reliable service, a personalized and easy-to-use website, and more. Second, invention and innovation are supported and encouraged. Experimentation is everywhere and failure is accepted because Amazon believes that without failures the big successes will not occur. Third, there is a long-term focus, and short-term profits are sacrificed if investments will result in a long-term payoff. Enormous investments in expansion at the expense of current profits have long been the hallmark of Amazon.

It is not all positive. Amazon with its gigantic size, hold on customers, and scope is a threat to many large and small retailers. It caused Borders to close its 400 bookstore chain and Barnes & Noble to close many of its stores. Weak retail chains and independents throughout the retail world have also had to close. Furthermore, Amazon may take over its own delivery perhaps with drones or self-driving vehicles, which would be blow to services like UPS, FedEx, and the U.S. Postal Service.

When Amazon opened its operation to third-party dealers in 2000, it created another source of competition for retailers because their suppliers now had an e-commerce option where customers could easily check to see if the Amazon price was cheaper. About 50 percent of the volume of Amazon was with third party firms in 2015. Amazon is a lender for many of these firms, thus also competing with traditional lending institutions.

In addition, Amazon has been accused of exploiting workers by unreasonable job pressures and arbitrary dismissal decisions. The acknowledged aggressive-growth culture makes these complaints credible. Amazon does have creative employee programs to help with issues such as moms returning to work after a new baby and offering financial support for post-secondary educational activities. But these do not counter the stress of coping with day-to-day jobs.

It is not impossible to compete with Amazon. Curiously, independent book stores have been on the rise from 2007—offering a personal experience, a sense of community, and diversified offerings. And there are other retailers that have been able to compete on ways that differentiates them from Amazon, including Costco, which is discussed next.

FOR DISCUSSION

Why is Amazon so successful? What are its assets and competencies? What is the role of Jeff Bezos?

What do you think Amazon will be like in 5 years? 10 years?

Is Amazon positive or negative for consumers? For the culture and economy of the countries in which it has become a dominant power?

What type of retailer will be most vulnerable to Amazon’s power? Least vulnerable?

Amazon opened some grocery stores in 2016 with no checkout. Your phone keeps track of what customers buy? Will grocery chains have to also replace checkout personnel with such an automation system?

Consider the Sephora case in Chapter 10. Describe how Sephora has thrived despite the shadow of Amazon? Why does the strategy work? Can Sephora maintain its success?

Consider Costco, which must design a strategy that will lead to success in the Amazon environment.

Costco

Costco has enjoyed healthy sales and profit growth generally in the 6–10 percent range through the Amazon era. In 2016 it had grown to nearly 120 billion in sales with nearly $2.5 billion in profit that come from over 700 stores (up from 600 in 2011).

Costco focuses on low prices and high volume with a target market of small businesses and large families. The low prices in part comes from an operational strategy that leads to a cost advantage. The assortment is limited; there is usually only one brand for any category, which gives Costco significant market power and logistic efficiencies. Where a typical Walmart Supercenter carries over 140,000 products, Costco carries fewer than 4,000. The items are generally bulk-packaged, which means customers buy more of the item on their Costco trips and the brand involved can justify having Costco sell the brand at a sharply lower price. It has a well-regarded house brand, Kirkland, that is sold at a very low profit margin—around 15 percent mark-up—and generates about 12 percent of the sales. Most products are delivered to the warehouse on shipping pallets and these pallets are used to display products for sale on the warehouse floor. Costco does not have a large advertising budget.

Costco has a membership model, which generates a close customer relationship and commitment plus significant revenue since the memberships represent about 15 percent ofSo the question is why do these artists attract such prices? And more basically, how does a painter create a brand that will command such fantastic sums? These questions are more general than they might seem. There are many businesses for which it is not possible to objectively know the value of the product or service. Most customers lack the information and often the expertise to evaluate service firms. There are also products, such as motor oil, for which it is not possible to judge the quality. Even products such as cars or computers are difficult to evaluate because they are complex and specifications do not tell the whole story. Furthermore, even if a person took the time to pour through Consumer Reports, it is not clear that its recommendations will reflect the right decision criteria for that customer.