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P&G Scope Case Analysis

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by

Jacri Stubbs

on 16 September 2011

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Transcript of P&G Scope Case Analysis

P&G Case Study Analysis Option 2: Scope Improvement Key Challenges & Current Situation Option 1: Do Nothing Armirita Nelms
Jacri Stubbs
Steven Tyler
Khalid Abujbara Option 3: Extending product line Advantages
Penetration of a new market segment
Long-term profit maximization
Uphold statetement of purpose
Approx. 6.5% mkt. share in 2 years
Disadvantages
2 to 9% cannibalization of existing Scope brand
$50,000 per SKU fee if not seen uniquely different
$20,000 product testing required
Finance concerned about capital and marketing costs MARKET
5% growth rate
Plax created niche market
Expected new entrants to the "plaque-fightng mouthwash" segment
SCOPE
Nonusers have an overall better perception than actual users. (1990 Survey)

Only 75% of Candaian households use mouthwash
Need to attract remaining households

How should P&G capitalize on the emerging market segment? ADVANTAGES
Avoids risk of strategies backfiring
Uphold familiarity in the brand; not confusing consumers
Tactical effort: maintan business stability short-term
DISADVANTAGES
Long-term: suffer risk of declined share as market becomes segmented
Declined sales ADVANTAGES
-Prevent current users from switching
-Avoids added cost risk as opposed to launching a new product
-Product development believes that it will be better in protecting the business P&G is already in
DISADVANTAGES
-Reassurance in market research did not seem to increase competive users' desire to purchase Scope
-No additionvolume; increase in sales
-Confuse current consumers
-Advertising believe it would be too difficult to communicate both benefits effectvely together.
-Market research says that adding reassurances takes time for consumer to accept & try
Product reverts to 'drug' status and all advertiing is scrutinized
Success may be contingent upon CDA approval Net Sales $62.00
Ingredients 11.35
Packaging 5.40
Manufacturing 7.00
Delivery 4.12
Miscellaneous 2.55
COGS $30.42
Gross margin $31.58 Brand 'X' Financial Estimates ($/Unit) Total market size (Units) (000) 1,497
Brand 'X' market share 6.5%
Brand 'X' volume 97

$(000) $/Unit
Sales 6,014 62.00
COGS 2,950 30.42
Gross margin 3,064 31.58 Brand 'X' 1992 Financials Scope 1992 Financials Total market size (Units) (000) 1,497
Scope market share 25.4%
Scope volume 380

$(000) $/Unit
Sales 15,675 41.25
COGS 9,853 25.93
Gross margin 5,882 15.32 Total market size (000) 1,497
Market share 32.4%
Sales Volume 485,028
$/Unit $41.25
COGS per unit $25.93
Gross margin/unit $15.32
Gross margin $7,430,629 1992 Scope Financials Conclusion Extending the product line to offer Brand 'X', which will compete in the 'plaque-fighting mouthwash' segment, would, upon achieving 6.5% mkt. share, offer a 21% increase in gross margin for P&G 's total offerings (including Scope) in the Canadian mouthwash market.

Because the listing fees per retailer are contingent on the fail of the launch, they are not included in an initial estimate.

Advertising and capital costs may serve as a setback initially, however, in keeping align with P&G's purpose, we believe that it is a must that we aggressively defend P&G against major competitive challenges despite short-term profit consequences.
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