After taking over Canada Dry's mixers account in 1966, Grey Advertising assembled a successful ad campaign that increased ginger ale sales significantly. But Canada Dry's market share for ginger ale and its other mixer products had remained the same or declined during this period. A consumer research study, using psychographics and various demographic and attitudinal techniques, is commissioned by Canada Dry as a prelude to a $2 million ad campaign designed to arrest the market share trend. Various consumer behavior, research, and managerial issues are raised by the study. Grey Advertising must now develop a strategy based on the results of this study.
Bonuses and incentive compensation encourage management's preoccupation with short-term financial results. This emphasis is an important contribution to the United States's lag behind other countries in research and development investment and capital spending. Federal tax policies have failed to provide incentive for investment to further economic growth. Restructured management incentives would reintroduce entrepreneurial spirit without sacrificing the systematic cost-benefit approach to decision making.
A company should acquire another business only when the skills and resources of the two businesses can produce an income, or reduction in the variability of income, greater than what can be realized from a portfolio investment in the two businesses. Seven common misconceptions illustrate fallacies about diversification through acquisition. Acquisition-minded companies may use a set of seven suggested methods to obtain returns greater than those obtainable from simple portfolio diversification.
In order to maintain commitment to ethical standards, companies must foster professional pride and honest business practices in their employees. Examination of the paper industry price-fixing conspiracy in 1976 indicates that a crowded and mature market, declining demand, and absence of product differentiation can create a ripe climate for price collusion. To avoid this, top managers must recognize these dangerous conditions, clearly communicate their intentions, and by their conduct set a good example for their subordinates.
A survey of 380 companies in 34 industries throughout the United States and Canada examined the three basic kinds of compensation plans and found: 1) Salary plans pay fixed rates of compensation and are appropriate when measurements of performance are difficult to ascertain. 2) Commission plans pay salespeople in direct proportion to their sales and are appropriate for maximizing incentives or for predicting sales costs in direct relationship to sales volume. 3) A combination plan includes all variations of salary plans plus other monetary incentive plans. This plan is more complex to administer; however, it allows for greater incentive and flexibility.
Understanding the basic differences between service businesses and manufacturing businesses is essential to the strategic management of a service business. Most managers of service businesses continue to think of strategy in product-oriented terms, despite the fact that much of this approach is actually irrelevant to their companies. Six suggested questions focus on topics these managers should consider about strategic management.
Discusses several changes in the motorcycle industry: the emergence of Japanese competitors; the growth in demand for light motorcycles; and the emergence of recreational uses; and how these changes have affected older United States and British manufacturers.
A study of a number of companies employing some form of matrix reveals nine pathologies to which the matrix design is particularly vulnerable, along with prevention and treatment methods. Often there is a mistaken belief that matrix management is the same as group decision making, and there are tendencies toward anarchy and power struggles. The layering of a matrix can frequently result from the dynamics of power rather than from the logic of design, and there is a tendency for matrixes to sink to group and division levels.
Traditional achievement and objective-achievement compensation systems either fail to account fairly for sales territories which have different potentials, or induce salesmen to provide the company with low forecasts in order to meet their quotas. The objective-forecast-actual (OFA) system is a combination of three measurements: the company objective, the forecast of the salesman, and the actual results the salesman achieves. It is an approach that accounts for unequal territories and makes good forecasting possible by rewarding a salesman according to how close his forecasts and actual results are to the company's objective. The system brings about sales volume, payment for performance, and good field information for company planning.
Studies show the positive correlation between profitability and market share. Yet, businesses with low market shares may not be at a disadvantage and can profit by exploiting their smallness. Low market share businesses must replace broad strategy with specific and far-ranging strategy. Burroughs, Crown Cork & Seal, and Union Camp all hold small shares of their industries, yet they compete with the largest corporations in their average returns on equity. Their strategy involves four major points outlined here.
Abrasive personalities frequently prevent young, high-powered, and capable executives from gaining top positions in companies. A profile of the problem personality reveals a generally intelligent, analytical, hard worker who exhibits impatience with others and reluctance to delegate assignments. These highly competent people become key to the organization yet their political insensitivity makes them unpromotable. They tend to overorganize and oversupervise and often demoralize their subordinates. Their problems must be approached in a forthright manner.
A survey of Fortune "1000" companies shows that many companies deal with the problem of soaring interest rates by establishing investment centers and using return on investment (ROI) to measure their performance. Profit centers measure their own profitability with net income, pretax income, or net contribution. Investment centers determine profitability in relation to the unit's own investment base. Many companies use both ROI and RI (residual income) to calculate performance. The worst problem in using ROI or RI is that they will increase solely with time as depreciation reduces the investment base. The last calculation is to determine ROI budgets for investment centers.
SMIG, a division of G.D. Searle, was a fast growing high market-share company in the field of nuclear medical instruments. It manufactured two basically different product lines, one very successful and the other less so. Although marketing was separate for these product lines, manufacturing was not. As capacity is reached, the issue is how the company ought to expand and/or alter its manufacturing operations.
Illustrates uses of various sources of market and consumer behavior data, including psychographics, product positioning, and market segmentation decisions for a new dog food product. Based on cases by E.T. Popper and L.S. Ward.
Provides the background on Cumberland Metal Industries' entry into the automotive components market as a supplier of emission control equipment parts. Cumberland Metal must decide what bid to quote on Beta Motor's 1978 model year business. The company previously had a three-year contract for 100% of Beta's business, but it is now faced with a competitive situation in which a small market share, yet one greater than 50%, is a virtual certainty.