This case discusses Toblerone chocolates' pricing strategy at duty-free shops in international airports and entails 15-20 minutes of reading time. It analyses how the world-renowned Swiss chocolate brand Toblerone created a successful market strategy for duty-free shopping, and why it is considered one of the most iconic brands in duty-free stores worldwide. Central to the case is the assessment of Toblerone's variable pricing strategy across different airports, and whether duty-free prices are lower than local store prices. What is the rationale behind Toblerone's pricing strategy? Is duty-free shopping actually cheaper? Adding depth to the analysis, the case also evaluates the pricing strategy of other products such as duty-free favourites like alcohol brand Johnnie Walker and electronics brand Apple iPhone, providing valuable comparisons. The Teaching Note supplements the case by comparing Toblerone prices to Dairy Milk, fostering a more comprehensive discussion. The goal is to offer insights into Toblerone's strategic approach to pricing within the unique context of duty-free markets and to stimulate thoughtful discussion on its sustainability and effectiveness in meeting consumer expectations.
Set in 2021, this case describes how Amazon and Walmart have been two of the most successful retailers in history and are responsible for changing the rules of the game in the retail industry in the US. Over the years, the two firms had perfected contrasting business models to enable their dominance on the respective offline and online retailing. Walmart's model of low prices and strategic partnerships with suppliers had redefined supply chain practices and lowered system costs through the adoption of information technology. Amazon's online model of convenience of shopping from anywhere, anytime comprised a high-quality user-friendly platform with a large product catalogue, and a widespread and reliable fulfilment infrastructure to deliver the orders quickly to the shopper. In recent years, the growing customer preference for omni-channel retailing, an integrated experience that seamlessly comprised digital and physical retail, had compelled the two companies to make substantive investments in developing capabilities and acquiring resources in what was hitherto the other's domain. This leads to several questions that engage students. With Walmart and Amazon racing to add online and offline retail respectively, would their distinctive business models morph to become similar to each other? Or should each focus on its core strength, while offering the other service (online for Walmart and offline for Amazon) as complementary? Were online and offline retail more suited to different customers and product categories? And did their respective future prospects truly justify the dramatic difference in market capitalisation between the two retailers?
This case describes the journey of Gucci, a hundred-year-old luxury fashion brand, and how over the years it has reinvented its designs and marketing strategy to grow its market dominance world-wide. In 2015, Gucci's dismal performance over two successive years led the fashion house to rejig its top management, and bring in Marco Bizzarri, as the new President and CEO, and Alessandro Michele as the new creative director. By end-2019, the duo had achieved a remarkable turnaround, having tripled Gucci's sales and quadrupled its profits over 2015. In the process, they had redefined 'luxury', transformed the high-end fashion industry and contemporised the Gucci brand by being avant-garde and embracing new paradigms such as purpose-driven, gender-neutral, cross-generational and digital-oriented strategies. However, despite regaining its position as the world's fastest growing luxury brand, Gucci had clocked a much lower annual growth in 2019 than 2018 and 2017. Did this indicate that the brand was losing its relevance and needed to reinvent itself again? Could Gucci's recent foray into beauty products, making it more accessible and affordable, be diluting its brand equity? Additionally, the outbreak of the global pandemic Covid-19 in 2020 had plunged the luxury industry and the fashion house to new lows. The only silver lining was Gucci' strong digital capability, which helped the brand recover some of its lost ground through an increase in online sales. With the pandemic relenting in China, the luxury market in the country had begun to revive since March 2020. However, it was difficult to predict how other markets would behave post-pandemic. Would consumers be driven by the need to compensate for the lost opportunity to consume, or would the pandemic induce in them values that encouraged cutbacks in discretionary spending? Moreover, if the other markets did not pick up, what would be the effect of an increased dependence of the luxury brands on Chinese consumers?
This technical note explores the concepts of marketing as a ploy, promotion and position. To build a sustainable business, where customers return and spread positive word of mouth, one must satisfy customers as well as ensure an adequate profit margin for the firm. This is simpler said than done. From this perspective, marketing is fundamentally about seeking a unique competitive position in the industry for the firm's offer.
It is a two part case, set in 2018. Case A describes how Amazon and Walmart have been two of the most successful retailers in history and responsible for changing the rules of the game in the retail industry in the US. In their wake, they have driven many retailers out of business while transforming how suppliers manage their relationship with powerful retailers. Case B presents India, one of the most attractive e-commerce market globally, as the next battleground for the two retailers. The unique trajectory of each retailer, Amazon through online and Walmart through offline, has endowed these companies with different and distinctive capabilities. For the most part they have managed to avoid each other in the competitive marketplace by serving different consumer needs. However, as consumers and markets have been increasingly demanding an omni-channel presence, both retailers have been forced to invade the other's turf - with Amazon seeking an offline presence and Walmart seeking a substantial online operation. This leads to several questions that engage students. To grow, how should the two retailers confront each other and build their omni-channel operations? What has been their past success in the playing field of their nemesis (Amazon offline and Walmart online)? How does the marketing strategy of the two retailers differ? What are the distinctive capabilities of each retailer and how do these either help or hinder their ability to evolve for an omni-channel future? What are the financial implications of the omni-channel transformation for each retailer?
The case describes how Amazon and Walmart have been two of the most successful retailers in history and responsible for changing the rules of the game in the retail industry. In their wake, they have driven many retailers out of business while transforming how suppliers manage their relationship with powerful retailers. They have both been widely admired even if the market currently views Amazon as having greater potential. The unique trajectory of each retailer, Amazon through online and Walmart through offline, has endowed these companies with different and distinctive capabilities. For the most part they have managed to avoid each other in the competitive marketplace by serving different consumer needs. However, as consumers and markets have been increasingly demanding an omni-channel presence, both retailers have been forced to invade the other's turf - with Amazon seeking an offline presence and Walmart seeking a substantial online operation. This leads to several questions that engage students. To grow, how should the two retailers confront each other and build their omni-channel operations? What has been their past success in the playing field of their nemesis (Amazon offline and Walmart online)? How does the marketing strategy of the two retailers differ? What are the distinctive capabilities of each retailer and how do these either help or hinder their ability to effectively evolve for an omni-channel future? What are the financial implications of the omni-channel transformation for each retailer?
In 2016, Inditex as a group with worldwide sales of US$24.9 billion, and Zara, as its flagship retail concept store, had recorded significant year-on-year growth in net sales at 11.5% and 13% respectively. However, despite a presence across 93 countries, Inditex's regional sales contributions were skewed. Europe, comprising only 26% of the global apparel market and exhibiting declining growth, accounted for 60.8% of Inditex revenues. The Americas, the second largest market in the world with 30% share, had the least contribution at 15.3%, and Asia Pacific, the fastest growing and largest market with 36% share of the global apparel market, contributed only 23.9%. Unlike other apparel producers, Zara manufactured 60% of its merchandise in the 'near markets' of Europe and North Africa, close to its logistics centres in Spain. The labour costs in these markets were substantially higher than Asia, where the bulk of global apparel production took place. Would this put Zara at a disadvantage in reaching out to the high growth Asian consumer markets of China and India? Moreover, while Zara had been online since 2010, its online sales in 2016 accounted for only 7% of its total sales. As consumers increasingly shopped online, would Zara with its reliance on stores and impulse purchases become another retail casualty of e-commerce?
Despite the rising power of developing economies, few corporations from emerging markets have succeeded in establishing brands in the West. The problem isn't just that they're late to enter the global market; the perception is that they offer poor-quality products, not next-generation ones. Conventional wisdom holds that they'll have to spend huge sums to overcome these obstacles. But some emerging giants, such as the Indian bank ICICI and the maker of the Mexican beer Tecate, are figuring out ways to build global brands on a shoestring. They are learning to outsmart, rather than outspend, their multinational rivals. One powerful strategy they're using: targeting the emigrants who have left their homelands. Regional concentrations of these individuals can provide excellent springboards into developed markets. The key is to target the right segments of emigrants, say the authors. Assimilators, who quickly try to adopt the customs and practices of their new country, are not likely to purchase products made in their homeland. Neither are marginals, who lack economic and educational opportunities and buy mostly functional, affordable products. But two other categories of immigrants hold promise: ethnic affirmers, who cling fervently to their homeland identity, and biculturals, who tend to be affluent and well-educated and move easily back and forth between their home and host countries' cultures. Biculturals are especially attractive; because they're integrated into their local communities, they can influence other consumers and make good conduits to the general population of their host countries.
Chinese Galanz was the world's largest microwave oven manufacturer in 2013. It had sales of 20 million microwave ovens, group revenues of RMB46 billion (US$7.3 billion) and 46,000 employees. Founded in 1978, it started manufacturing microwaves in 1991. Since then it had grown its business rapidly; in the early 2000s, Galanz had become the largest microwave manufacturer in the global market in terms of units, a position it continued to hold in 2013. In addition, it had become the top seller of electric ovens in the world, and established significant presence in the air conditioning (AC), refrigerator, and dishwasher categories. The case outlines Galanz's impressive achievements in just two decades, describing the reasons for its success: the unique market conditions on both supply and demand side, Galanz's successful OEM model and pricing strategy, and its ability to transform the industry dynamics in the process. However, with increasing pressure of competitive threats, it could no longer rely on its business model to ensure continued growth and profitability. Galanz decided that it needed to move beyond its OEM business to become a consumer brand. The case investigates the way that Galanz is seeking to do this, investing in R&D to stimulate product innovation and changing the organisational design to get closer to its customers. It then looks at Galanz's efforts to diversify into other categories. It also explores some of the global market dynamics at play in various white goods industries.
This case traces the rise of Chinese piano maker Pearl River Piano (PRP) from a factory with dirt floors producing just four pianos a month using crude machinery to the world's largest acoustic piano maker in 2012. PRP's success is compelling: it accounted for over 20 percent of the global piano market by unit volume, with 14 percent growth despite tough industry conditions in 2012. In addition to dominating its domestic market (28 percent market share in China), it exported its pianos to more than 100 countries and regions worldwide. The journey was an extraordinary one: PRP was able to overcome major quality issues in order to carve out market share in a mature industry with huge entry barriers, and dominated by established Western and Japanese players. How did PRP earn the trust of consumers purchasing a fine, expensive, musical instrument for their home? How was PRP able to successfully compete on quality with companies that had been making pianos for centuries, while also building the marketing and leadership expertise needed to grow a global piano brand?
The organizational structures of many multinational corporations are inadequate to the task of capitalizing on opportunities in emerging markets. Locating customer-facing processes in each country-and even using transnational structures that exploit location-specific advantages-just doesn't cut it anymore. So argue Kumar and Puranam, of London Business School. The authors show how the growth of China and India as lead markets and as talent pools, coupled with advances in technology, enable companies to optimize their organizations by segmenting R&D both vertically and horizontally, thereby creating T-shaped structures. The greatest challenge of the T-shaped structure is managing integration across countries. The solution is to allow your corporation's center of gravity to shift eastward. That means globalizing the top management team, moving headquarters outside the home country, and genuinely valuing the cultural shifts that those two changes require. Companies such as GE, Intel, and AstraZeneca have had some success in these endeavors, and all multinationals have the potential to secure the advantages of deploying a T-shaped structure.
TelZip, a small mobile-network operator, has decided to shake up the European telecommunications market by offering "free forever" broadband service to customers who sign a long-term contract with the company. Meridicom, the dominant industry player, must decide how to respond. Joe Ulan, the incumbent's new chief marketing officer, gets conflicting advice: The product division heads don't like the idea of discounting their products or even of working together; the sales director wants to kill the competition with a price war. How can Joe turn this attack into an opportunity? Marco Bertini and Nirmalya Kumar, of London Business School, present this fictional case to explore the question, "What do you do when one of your small competitors pulls out its big gun?" Two experts comment on the case in R1007R and R1007Z. Georg Tacke, of Simon-Kucher & Partners, argues that simply matching a small competitor's prices is the worst reaction. Anne Gro Gulla, of Telenor Group, suggests creating offshoots of the main firm that might cannibalize the mother brand but avoid the greater evil of allowing it to be eaten alive by outsiders. HBR's online readers also offer their two cents. You can, too.
TelZip, a small mobile-network operator, has decided to shake up the European telecommunications market by offering "free forever" broadband service to customers who sign a long-term contract with the company. Meridicom, the dominant industry player, must decide how to respond. Joe Ulan, the incumbent's new chief marketing officer, gets conflicting advice: The product division heads don't like the idea of discounting their products or even of working together; the sales director wants to kill the competition with a price war. How can Joe turn this attack into an opportunity? Marco Bertini and Nirmalya Kumar, of London Business School, present this fictional case to explore the question, "What do you do when one of your small competitors pulls out its big gun?" Two experts comment on the case in R1007R and R1007Z. Georg Tacke, of Simon-Kucher & Partners, argues that simply matching a small competitor's prices is the worst reaction. Anne Gro Gulla, of Telenor Group, suggests creating offshoots of the main firm that might cannibalize the mother brand but avoid the greater evil of allowing it to be eaten alive by outsiders. HBR's online readers also offer their two cents. You can, too.
TelZip, a small mobile-network operator, has decided to shake up the European telecommunications market by offering "free forever" broadband service to customers who sign a long-term contract with the company. Meridicom, the dominant industry player, must decide how to respond. Joe Ulan, the incumbent's new chief marketing officer, gets conflicting advice: The product division heads don't like the idea of discounting their products or even of working together; the sales director wants to kill the competition with a price war. How can Joe turn this attack into an opportunity? Marco Bertini and Nirmalya Kumar, of London Business School, present this fictional case to explore the question, "What do you do when one of your small competitors pulls out its big gun?" Two experts comment on the case in R1007R and R1007Z. Georg Tacke, of Simon-Kucher & Partners, argues that simply matching a small competitor's prices is the worst reaction. Anne Gro Gulla, of Telenor Group, suggests creating offshoots of the main firm that might cannibalize the mother brand but avoid the greater evil of allowing it to be eaten alive by outsiders. HBR's online readers also offer their two cents. You can, too.
"Aldi" is a word that strikes fear in the hearts of brand managers across Europe. A chain of low-budget retail stores with sales of $73.5 billion in 2008, Aldi invented what is commonly referred to as the hard-discount store, a format that is destroying between a quarter and a half trillion dollars in brand sales annually. Brand executives at major consumer packaged goods companies have mostly been caught off guard by this success. The authors' research identified four key misconceptions that explain why: (1) Hard discounters can succeed only in Europe; (2) they attract only the poor; (3) they offer inferior quality; (4) their success is a recessionary phenomenon. Aldi, Lidl, and other hard discounters keep costs low in part by restricting as much as 90% of their stock to their own private labels. But, as they are beginning to realize, that practice can gain only so much market share. A judicious mix of store labels and manufacturers' brands will win new customers for both. And brand manufacturers that fear sales cannibalization can take several proactive steps: sell unfamiliar sizes at the discounters, offer brands with a small market share, carefully manage the price gap, make shipping boxes attractive, and keep their brands dynamic.
While Western companies struggle with mergers and acquisitions, emerging giants like Indian aluminum producer Hindalco are using M&A as their main globalization strategy. That's partly because developing economies grew at near double-digit rates in the past 15 years, enabling many enterprises to make acquisitions. It's also because, according to the author's research, those corporations create more value from takeovers. To compete, Western multinationals should change their mind-set and shift the locus of their M&A efforts to regional headquarters in developing countries. U.S. and European companies, inhibited by slow-growing home markets, acquire rivals primarily to become bigger and thus create economies of scale. By contrast, emerging giants buy companies - often Western ones - to gain competencies that will help them become global leaders. They acquire only to meet strategic goals; they don't completely assimilate acquisitions; and their CEOs focus on the long term. Using this approach, Hindalco boosted revenues in seven years from $500 million to $15 billion. It acquired companies to expand its aluminum business, manufacture more value-added products, and extend its global reach. Rather than immediately seek targets overseas, the company patiently executed small takeovers, first in India and later abroad, before making a big global play. With each move, Hindalco climbed what the author calls an M&A competency stairway, gaining the skills it needed to pursue other targets. When it was ready, Hindalco bought Novelis, a North American corporation more than twice its size. Because of the global downturn, Hindalco will not realize the benefits of that acquisition as quickly as it had expected. But the fact that the company developed and adhered to a long-term M&A strategy will help it ride out the storm.
Companies find it challenging and yet strangely reassuring to take on opponents whose strategies, strengths, and weaknesses resemble their own. Their obsession with familiar rivals, however, has blinded them to threats from disruptive, low-cost competitors. Successful price warriors, such as the German retailer Aldi, are changing the nature of competition by employing several tactics: focusing on just one or a few consumer segments, delivering the basic product or providing one benefit better than rivals do, and backing low prices with super-efficient operations. Ignoring cut-price rivals is a mistake because they eventually force companies to vacate entire market segments. Price wars are not the answer, either: Slashing prices usually lowers profits for incumbents without driving the low-cost entrants out of business. Companies take various approaches to competing against cut-price players. Some differentiate their products--a strategy that works only in certain circumstances. Others launch low-cost businesses of their own, as many airlines did in the 1990s--a so-called dual strategy that succeeds only if companies can generate synergies between the existing businesses and the new ventures, as the financial service providers HSBC and ING did. Without synergies, corporations are better off trying to transform themselves into low-cost players, a difficult feat that Ryanair accomplished in the 1990s, or into solution providers. There will always be room for both low-cost and value-added players. How much room each will have depends not only on the industry and customers' preferences, but also on the strategies traditional businesses deploy.
In 2004, Red Bull found itself at a crossroad, challenged with defending its 70% worldwide market share of the €2.5 billion energy drinks category that it had pioneered. Through a combination of buzz marketing tactics, decentralised distribution and sponsorship of extreme sports and pop culture events, Red Bull had managed to build a certain mystique, which was central to building its appeal among its targeted customers, 18-35-year-olds.
Most brands don't make much money. Year after year, businesses generate 80% to 90% of their profits from less than 20% of their brands. Yet most companies tend to ignore loss-making brands, unaware of the hidden costs they incur. That's because executives believe it's easy to erase a brand; they have only to stop investing in it, they assume, and it will die a natural death. But they're wrong. When companies drop brands clumsily, they antagonize loyal customers: Research shows that seven times out of eight, when firms merge two brands, the market share of the new brand never reaches the combined share of the two original ones. It doesn't have to be that way. Smart companies use a four-step process to kill brands methodically. First, CEOs make the case for rationalization by getting groups of senior executives to conduct joint audits of the brand portfolio. Next, executives need to decide how many brands will be retained, which they do either by setting broad parameters that all brands must meet or by identifying the brands they need to cater to all the customer segments in their markets. Third, executives must dispose of the brands they've decided to drop, deciding in each case whether it is appropriate to merge, sell, milk, or just eliminate the brand outright. Finally, it's critical that executives invest the resources they've freed to grow the brands they've retained.