Prepared for:




             Phoenix
             Consulting

Big Ten Case
Competition4/17/2010
Vision For Transformation
 • What: J&J Brasil’s Aspiration
    – To once again become welcomed and
      trusted in both t...
3C Plan for J&J
How:
Champions                         Clients
    By becoming a consumer driven
 •Identification         ...
Current to Future State

              REACTIVE           PROACTIVE

    “White dinosaur, even rarer and more
    old-fash...
Champions

Champions                                     Clients
•Identification                                  •Local
•...
Champions
 • Leadership team must select
   individuals who will guide J&J into
   future
 • Will act as a guiding coaliti...
Champions
 • Incentive structure must change to
   encourage involvement in all levels
   of organization
                ...
Champions
 • Create open channel for
   communications between all levels of
   organization
                             ...
“Water Cooler”
             “Water Cooler”




        Champs   Clients   Consumers         Phoenix
Intro                 ...
Champions
 • Initiate Group Incentive
     – Improved buying process for retailers
     – Increased accountability
       ...
Champions
 • HR practices must be altered to
   emphasize commitment at all levels
   to customer driven mentality
       ...
Clients

Champions                                     Clients
•Identification                                  •ERP & CRM...
Clients
 • Create a network with all retailers
   to capitalize on efficiencies
                          • Relationship M...
Clients
 • Information sharing: From
   manufacturing to the consumer
                                  Manufacturing and ...
Clients
 • Customer Relationship
   Management (CRM)
    – Sales teams have more transparency
      and information sharin...
Clients
                                           $10,086
 • Brasil GDP Per Capita by Region
                            ...
Clients
 • A fundamental switch
    – Price promotions shifted to local
      retailers
        • Price elastic demographi...
Clients
                       • Owns a small family
                         convenience store in São
                   ...
Consumers

Champions                                     Clients
•Identification                                  •Local
•...
Consumer
 • Functional research and insights
    – Focus groups – Outcome-based interviews
    – Live-ins
    – Collages
 ...
Consumers
 • Product development and R&D
    – Identifying customer pain points in regards
      to baby care, health care...
“Trus
t”




        Phoenix
        Consulting
“Mamã
             ”




Phoenix
Consulting
3C Plan for J&J


Champions                                 Clients
•Identification                              •Local
•E...
Thank You

What questions
do you have?
      Phoenix
      Consulting
Ju     Ju   Aug    Se   Oct Nov     Dec „0      „02   „03     „04   „05   „06   „07
n      l           p                  ...
Additional Slides
•   3C Plan Recap
•   Brasil Demographics
•   Additional Marketing Posters 1
•   Additional Marketing Po...
Table of Contents
•   Vision for Transformation
•   3C Plan for J&J
•   Current to Future State
•   Champions
•   Clients
...
Brasil Demographics
• Population - 170 Million
   – Age Structure (Approximate)
             Year 2000      % of Total Pop...
“Addition
”




      Phoenix
      Consulting
“Trio”




         Phoenix
         Consulting
Entry Barriers    Buyer Power      Supplier Power              Threat of           Industry
                              ...
Marketing Channel Choice
• Television watching is concentrated in
  urbanized areas…but those areas are
  home to over 80%...
Innovation Canvas
                                         Product Use




      Competitive Agility                      ...
ERP Discounted Cash Flow

              $15
              $10
                $5
   Millions




                $0
      ...
Promotional Discount DCF

             $40

             $30
  Millions




             $20

             $10

          ...
Promotional Discount DCF
                  thru year end
             $4.5
             $4.0
             $3.5
           ...
Ad Spend Discounted Cash Flow

                    $10
                    $8
                    $6
         Millions



...
ERP DCF
($Ms)                         2001          2002        2003         2004       2005      2006        2007
       ...
Yearly DCF for Promotion Discount
         ($Ms)                  2001         2002           2003             2004       ...
DCF for Ad Promotion thru Year End

        (000s)              May        June          July         August     Sept     ...
Ad Spend
       ($Ms)          2000      2001       2002       2003       2004      2005        2006        2007
  Ad Spen...
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Big Ten Case Competition

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Case Prompt: How to improve J&J Brazil

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  • Big Ten Case Competition

    1. 1. Prepared for: Phoenix Consulting Big Ten Case Competition4/17/2010
    2. 2. Vision For Transformation • What: J&J Brasil’s Aspiration – To once again become welcomed and trusted in both the hearts and minds of Brasilian families Vision for Transformation • Why: J&J Credo 3C Plan – Emphasizes corporate responsibility in regards to Current to Future State customers, suppliers, distributors, empl oyees, communities, and shareholders. Champs Clients Consumers Phoenix Intro Map Consulting
    3. 3. 3C Plan for J&J How: Champions Clients By becoming a consumer driven •Identification •Local organization that facilitates Retailers •Empowering Vision for Employees •Information Transformation innovation, empowers employees to •Restructuring Sharing/CRM Sales 3C Plan take risks, and collaborates with local Current to retailers Future State •Product Development Consumers •Focused Marketing Plan Champs Clients Consumers Phoenix Intro Map Consulting
    4. 4. Current to Future State REACTIVE PROACTIVE “White dinosaur, even rarer and more old-fashioned than a white elephant” Vision for Transformation • From products in search of a problem 3C Plan to solutions developed with a purpose Current to Future State • From telling customers what we have to having a conversation with them Champs Clients Consumers Phoenix Intro Map Consulting
    5. 5. Champions Champions Clients •Identification •Local •Empowering Retailers Champions Employees •Information Identification •Restructuring Sharing/CRM Sales Employee Empowerment Sales Structure HR Practices •Product Development Consumers •Focused Marketing Plan Champs Clients Consumers Phoenix Intro Map Consulting
    6. 6. Champions • Leadership team must select individuals who will guide J&J into future • Will act as a guiding coalition, with each member working within the team Champion Identification • 1st task will be to communicate vision Employee to all levels of mgmt within J&J Brasil Empowerment • Leverage initial wins to capitalize on Sales Structure momentum to instill permanent and HR Practices lasting change Champs Clients Consumers Phoenix Intro Map Consulting
    7. 7. Champions • Incentive structure must change to encourage involvement in all levels of organization Champion Identification Risk Aversion Innovation Employee Empowerment Sales Structure Centralized Decentralized HR Practices Champs Clients Consumers Phoenix Intro Map Consulting
    8. 8. Champions • Create open channel for communications between all levels of organization Champion • Offering bonus incentives rewarding Identification quality idea generation Employee Empowerment (financial rewards & recognition) Sales Structure • Place posters around J&J work space HR Practices to stress employee value Champs Clients Consumers Phoenix Intro Map Consulting
    9. 9. “Water Cooler” “Water Cooler” Champs Clients Consumers Phoenix Intro Map Consulting
    10. 10. Champions • Initiate Group Incentive – Improved buying process for retailers – Increased accountability Champion Currently, “large retailers could see as many as 15 different people” Identification Employee • Must be conscious of Brasilian laws Empowerment Sales Structure Design commission structure so that high incentives pay does not HR Practices automatically become part of the salary Champs Clients Consumers Phoenix Intro Map Consulting
    11. 11. Champions • HR practices must be altered to emphasize commitment at all levels to customer driven mentality Champions Identification • Looking for young, promising Employee Empowerment entrepreneur-types Sales Structure – International talent HR Practices Champs Clients Consumers Phoenix Intro Map Consulting
    12. 12. Clients Champions Clients •Identification •ERP & CRM •Empowering •Local ERP & CRM Employees Retailers •Restructuring Local Retailers Sales Meet Papa Pedro •Product Development Consumers •Focused Marketing Plan Champs Clients Consumers Phoenix Intro Map Consulting
    13. 13. Clients • Create a network with all retailers to capitalize on efficiencies • Relationship Mgmt. Sales Processes Practices ERP & CRM Local Retailers • Better Scheduling Manufacturing Meet Papa • Longer Production Runs Pedro Distribution • LTL to FTL Champs Clients Consumers Phoenix Intro Map Consulting
    14. 14. Clients • Information sharing: From manufacturing to the consumer Manufacturing and ERP & CRM Sales Trends Distribution Local Retailers ERP Meet Papa Pedro Product Development Marketing Mix Champs Clients Consumers Phoenix Intro Map Consulting
    15. 15. Clients • Customer Relationship Management (CRM) – Sales teams have more transparency and information sharing capabilities ERP & CRM – Responsiveness to retailers Local Retailers – Best practices in relationship Meet Papa Pedro management Champs Clients Consumers Phoenix Intro Map Consulting
    16. 16. Clients $10,086 • Brasil GDP Per Capita by Region $9,157 $8,166 $4,939 ERP & CRM $3,694 Local Retailers •Population - 170 Meet Papa Pedro Million •Largest national economy in Latin America Champs Clients Consumers Phoenix Intro Map Consulting
    17. 17. Clients • A fundamental switch – Price promotions shifted to local retailers • Price elastic demographic ERP & CRM • Top line growth Local Retailers • Long-term implications for similar Meet Papa markets in other countries Pedro Champs Clients Consumers Phoenix Intro Map Consulting
    18. 18. Clients • Owns a small family convenience store in São Paulo • Yearly Sales: $100,000 or 176,000 BRL ERP & CRM Local Retailers • Promotional pricing to the distributors which will lower Meet Papa Pedro cost for him so Pedro can offer lower price to customers and •For J&J, this promotion provides anmargin. keep the same NPV of $3.25 M (1yr); $210M for (7yrs) Champs Clients Consumers Phoenix Intro Map Consulting
    19. 19. Consumers Champions Clients •Identification •Local •Empowering Retailers Identify Employees •Information customer needs •Restructuring Sharing/CRM Sales Focused product development Marketing campaign to •Product Development Consumers •Focused Marketing Plan regain trust Champs Clients Consumers Phoenix Intro Map Consulting
    20. 20. Consumer • Functional research and insights – Focus groups – Outcome-based interviews – Live-ins – Collages • Packaging research and insights Identify – Simulated shopping experience (grocery aisle) customer – Usage tests needs • Consumer psychology research and insights Focused – Understand current brand perceptions product development • Zaltman Metaphor Elicitation Technique (ZMET) – Focus groups for media and print ads Marketing plan to regain trust Champs Clients Consumers Phoenix Intro Map Consulting
    21. 21. Consumers • Product development and R&D – Identifying customer pain points in regards to baby care, health care, and personal care Product Consumer Identify customer needs Focus Focus Focused product • Create products that address development consumer issues Marketing plan to regain trust NOT products in search of problems Champs Clients Consumers Phoenix Intro Map Consulting
    22. 22. “Trus t” Phoenix Consulting
    23. 23. “Mamã ” Phoenix Consulting
    24. 24. 3C Plan for J&J Champions Clients •Identification •Local •Empowering Retailers Employees •Information •Restructuring Sharing/CRM Sales •Product Development Consumers •Focused Marketing Plan Phoenix Consulting
    25. 25. Thank You What questions do you have? Phoenix Consulting
    26. 26. Ju Ju Aug Se Oct Nov Dec „0 „02 „03 „04 „05 „06 „07 n l p 1 Small Retailer Promotions Identify Champions of Change Marketing Plan Development Marketing Plan Rollout Product Development ERP/CRM Implementation and Rollout Product Development Rollout Employee Empowerment Plan Development Sales Restructuring Plan Development Sales Restructuring Rollout Top Priority Secondary Priority Phoenix Consulting
    27. 27. Additional Slides • 3C Plan Recap • Brasil Demographics • Additional Marketing Posters 1 • Additional Marketing Poster 2 • Marketing Channel Choice • Innovation Canvas • ERP Discounted Cash Flow – Assumptions • Promotional Discount DCF – Assumptions • Promotional Discount DCF thru year end – Assumptions • Ad Spend Discounted Cash Flow – Assumptions Phoenix Consulting
    28. 28. Table of Contents • Vision for Transformation • 3C Plan for J&J • Current to Future State • Champions • Clients • Consumers • Implementation/Priorities Phoenix Consulting
    29. 29. Brasil Demographics • Population - 170 Million – Age Structure (Approximate) Year 2000 % of Total Population 0-14 Years 28% 15-64 Years 66.5% Over 65 Years 5.5% • Largest national economy in Latin America • Labor Force – Approximately 85 million • Current GDP per capita - $7,704 Phoenix Consulting
    30. 30. “Addition ” Phoenix Consulting
    31. 31. “Trio” Phoenix Consulting
    32. 32. Entry Barriers Buyer Power Supplier Power Threat of Industry Substitutes Rivalry Low High Low High High High margins Drop in J&J Raw materials Due to the breadth Combination attracted KC brand equity needed are of products offered, of these and P&G after and low plentiful and the threat of forces results the market switching costs lack products offering in a was opened yield high power distinguishing similar benefits is competitive in 1989. to buyers. characteristics. always present. industry. Internal External Strengths – Opportunities – •Access to capital and customer base •Untapped retail potential •Organization committed to core values •Relatively short product implementation •Positive cash flow period •Enables Innovation Weaknesses – Threats – •Docile marketing and sales organization •Further infringement on market share •“Safe” culture stymies innovation from KC and P&G •Lack of effective internal communication •Increasingly price sensitive customer base •Loss of customer trust Phoenix Consulting
    33. 33. Marketing Channel Choice • Television watching is concentrated in urbanized areas…but those areas are home to over 80% of Brazilians. – Television remains most effective driver of brand loyalty • Television watching is a social activity in Brazil…reaching out to families, which is our target demographic. • $1.32b ad spend in 2000 • $29.139b in revenue; $12.139b int’l sales • 4.5% of revenue = ad spend Phoenix Consulting
    34. 34. Innovation Canvas Product Use Competitive Agility Product Quality New J&J Old J&J Financial Solvency Solutions Dencentralization Brand Perception Phoenix Consulting
    35. 35. ERP Discounted Cash Flow $15 $10 $5 Millions $0 ($5) ($10) 01 02 03 04 05 06 07 ($Ms) 2001 2002 2003 2004 2005 2006 2007 Net ($7.1) ($0.7) $2.9 $6.3 $9.3 $11.1 $12.7 Income Phoenix Consulting
    36. 36. Promotional Discount DCF $40 $30 Millions $20 $10 $0 01 02 03 04 05 06 07 ($Ms) 2001 2002 2003 2004 2005 2006 2007 Net Income $33.2 $32.8 $31.9 $30.6 $29.1 $27.2 $25.2 Phoenix Consulting
    37. 37. Promotional Discount DCF thru year end $4.5 $4.0 $3.5 $3.0 $2.5 Millions $2.0 $1.5 $1.0 $0.5 $0.0 May June July August Sept Oct Nov Dec ($Ms) May June July August Sept Oct Nov Dec Discounted Value $0 $0.22 $0.94 $1.66 $2.36 $3.06 $3.74 $4.41 Phoenix Consulting
    38. 38. Ad Spend Discounted Cash Flow $10 $8 $6 Millions $4 $2 $0 00 01 02 03 04 05 06 07 ($Ms) 00 01 02 03 04 05 06 07 Net $0.00 $7.47 $7.68 $7.89 $8.10 $8.32 $8.55 $8.78 Income Phoenix Consulting
    39. 39. ERP DCF ($Ms) 2001 2002 2003 2004 2005 2006 2007 Revenue Total $500.00 $545.00 $594.05 $647.51 $705.79 $769.31 $838.55 Current Pipeline/Buffer Inv. $48.75 $53.14 $57.92 $63.13 $68.81 $75.01 $81.76 Inventory Savings (5yr Implementation) $1.95 $4.25 $6.95 $10.10 $13.76 $15.00 $16.35 Current Manufacturing Cost $100.00 $109.00 $118.81 $129.50 $141.16 $153.86 $167.71 Manufacturing Savings (7yr Imp.) $3.57 $7.79 $12.73 $18.50 $25.21 $32.97 $41.93 Capital Cost 0 0 0 0 0 0 0 Yearly License/Training Cost $12.80 $13.31 $13.84 $14.40 $14.97 $15.57 $16.20 Employees (not Ms) 2400 2496 2596 2700 2808 2920 3037 Cost $12.80 $13.31 $13.84 $14.40 $14.97 $15.57 $16.20 Cost Savings -$7.28 -$1.28 $5.84 $14.20 $24.00 $32.40 $42.08 Discounted Value -$7.28 -$1.12 $4.49 $9.59 $14.21 $16.83 $19.17 Net Income -$4.80 -$0.74 $2.96 $6.33 $9.38 $11.11 $12.65 Assumptions Current Pipeline/Buffer Inv. 10% Inventory Improvement 20% Manufacturing Improvement 25% Initial Cost $ 3,500,000 Head Count/Year Cost $ 16,000 Employee % 33% Phoenix Employees 2400 Consulting
    40. 40. Yearly DCF for Promotion Discount ($Ms) 2001 2002 2003 2004 2005 2006 2007 Total Market Share 10.5% 11.3% 12.0% 12.6% 13.1% 13.4% 13.6% Promotional Investment $5.37 $6.18 $6.91 $7.63 $8.34 $9.01 $9.59 Yearly Revenue/Store $110,500 $114,920 $119,517 $124,297 $129,269 $134,440 $139,818 Average J&J Takehome $686 $768 $848 $926 $1,002 $1,066 $1,125 Cumulative Total $205.89 $230.44 $254.50 $277.91 $300.50 $319.68 $337.42 Increased Revenue $196.46 $221.01 $245.07 $268.49 $291.07 $310.25 $328.00 Increased Revenue - $191.09 $214.83 $238.16 $260.85 $282.73 $301.23 $318.41 Invest Discounted Value $167.62 $165.31 $160.75 $154.44 $146.84 $137.24 $127.25 Net Income $33.22 $32.76 $31.86 $30.61 $29.10 $27.20 $25.22 Assumptions Promotional Local Retailers 300000 Investment <- Instituto Household Brasiliero de Existing Market Share 6% Share of Target 9.10% Geografia e Retailers Estatistica J&J Products in WACC 9% 65% category Initial Market <-Lower than 6% Share normal 13% Phoenix Montly Yearly Increase .5% 0.50% Consulting Increase
    41. 41. DCF for Ad Promotion thru Year End (000s) May June July August Sept Oct Nov Dec Market Share 6.0% 6.5% 7.0% 7.5% 8.0% 8.5% 9.0% 9.5% Promotional Investment $0.00 $565.62 $612.76 $659.89 $707.03 $754.16 $801.30 $848.43 Monthly Revenue/Store (not 000s) $8,854.17 $8,854.17 $8,854.17 $8,854.17 $8,854.17 $8,854.17 $8,854.17 $8,854.17 Average J&J Takehome $31.42 $34.04 $36.66 $39.28 $41.90 $44.52 $47.14 $49.75 Cumulative Total $9,427.03 $10,212.62 $10,998.20 $11,783.79 $12,569.38 $13,354.96 $14,140.55 $14,926.13 Increased Revenue $0.00 $785.59 $1,571.17 $2,356.76 $3,142.34 $3,927.93 $4,713.52 $5,499.10 Increased Revenue - Invest $0.00 $219.96 $958.41 $1,696.87 $2,435.32 $3,173.77 $3,912.22 $4,650.67 Discounted Value $0.00 $218.33 $944.20 $1,659.25 $2,363.61 $3,057.38 $3,740.70 $4,413.67 Assumptions Promotional Local Retailers 300000 Investment <- Instituto Household Brasiliero de Existing Market Share 6% Share of Target 9.10% Geografia e Retailers Estatistica J&J Products in WACC 9% 65% category Initial Market <-Lower than 6% Share normal 13% Phoenix Montly Consulting 0.50% Increase
    42. 42. Ad Spend ($Ms) 2000 2001 2002 2003 2004 2005 2006 2007 Ad Spend Increase $0.00 $20.00 $23.42 $27.43 $32.12 $37.61 $44.04 $51.58 Increased Revenue $0.00 $63.00 $73.78 $86.39 $101.17 $118.48 $138.74 $162.47 Revenue Total $500.00 $585.52 $685.67 $802.94 $940.28 $1,101.10 $1,289.44 $1,509.98 Increased Revenue - Invest $0.00 $43.00 $50.35 $58.97 $69.05 $80.86 $94.70 $110.89 Discounted Value $0.00 $37.72 $38.75 $39.80 $40.89 $42.00 $43.14 $44.32 Net Income Assumptions Ad Spend 8.0% Old Ad Spend 4.0% ROI Ad Spend 215.0%<-Revenue Phoenix Consulting

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