This document is a 1997 word research paper analyzing whether Abbott's strategy of continuous line extensions of their Pediasure product will maintain and increase their market share in Singapore. The paper includes an abstract, table of contents, introduction, SWOT analysis, analysis of identifying the product through the Boston Matrix and examining Singapore's baby food market. It also analyzes Abbott Pediasure's performance, uses investment appraisal techniques, and provides a conclusion and recommendation with limitations noted. The student conducted interviews and research to analyze the benefits and challenges of Abbott's line extension strategy for their leading Pediasure brand in Singapore.

1. Overseas Family School (0763)
Assessment: Business IA
Subject: Business and Management
Title: Will Abbott’s decision for
continuous line extension of their
Hallmark product “Pediasure”
maintain and increase market
share in Singapore?
Name: Khadija Ahmed
Word Count: 1997 words
Candidate No: 000763- 006

2. Acknowledgements:
Special thanks to:
Magdalena Pang (Product Manger)- For taking out the time for a one- on one
interview and also answering other questions through e-mail. She was particularly
helpful in guiding me along the key areas of the research, and provided lots of
valuable information.
Yasir Riaz(Mindshare Team- Unilever)- For his expertise and provision of important
articles not available online.

3. ABSTRACT:
This essay focuses on “Will Abbott’s decision for continuous line extension of their
Hallmark product “Pediasure” maintain and increase market share in Singapore?”
This strategy of introducing, new or renovated products under the same product
name is a long term strategy, but must be assessed short-term. Market share is the
measure of the size and dominance of a business- and Abbott is one of the leading
companies in Singapore, and its brand Pediasure has also expanded to readymade
drinks for children.
The essay will come to the conclusion whether or not Abbott Singapore can continue
to increase sales through this strategy, and as a result increase market share. The
topic was particularly interesting because it will discuss the different techniques used
by the company and also do an assessment of their financial performance.
The essay first analyzes the SWOT of undertaking this strategy, and this will help in
separating all the positive and negative possibilities of extending the Pediasure
product line. By determining the product through the use of the Boston Matrix and
Product Placement it will be easier to assess the importance of the type of strategy
used and what should be done. Through the use of Investment Appraisal techniques
it is safe to conclude that generating profit and gaining back the initial investment is
not an issue for Abbott, and that they can achieve their goal to increase market
share.
(Word count; 197 words)

4. Table of Contents
Research Proposal……………………………………………………………………………………………………………………………..1
Introduction............................................................................................................................................ 2
Swot Analysis ...................................................................................................................................... 3
Identifying Product……………………………………………………………………………………………………………………..5
Examining Singapore’s baby Food market..................................................................................... 7
Analyzing Abbott Pediasure’s Performance in Singapore .................................................................... 8
Investment Appraisal Techniques....................................................................................................... 8
Conclusion…………………………………………………………………………………………………………………………………………9
Recommendation……………………………………………………………………………………………………………………………10
Limitations………………………………………………………………………………………………………………………………………11
Bibliography……………………………………………………………………………………………………………………………………12
Appendixes……………………………………………………………………………………………………………………………………..13

5. INTRODUCTION:
Will Abbott’s decision for continuous line extension of their Hallmark product
“Pediasure” maintain and increase market share in Singapore?
This question will be dealing with Abbott’s infant led emerging market expansion
strategy through product line extension and its impact on demand and sales, which
has a tendency to show a positive correlation with market share. Line extension is
“the addition of a new item to an established product category under that same
brand name” (Hoang 500). This can also be seen as an extension strategy to
“extend the product’s life cycle and delay its decline” (507).
Line Extensions occurs when a company introduces additional items in the same
product category under the same brand name, beyond its current range such as new
flavors, forms, colors, added ingredients, package sizes. This is different from brand
extension, which is the addition of a new product in a new product category. By
improving the product the company can not only make it popular and thus increase
the demand but also increase the market share as a result.
This question will be focusing on the line extension of the Hallmark brand Pediasure
product line and Abbott Singapore’s decision for continuous line extension through
the consistent improvement in the formulas complies with their policy ““Turning
Science into Caring” (Abbott Singapore official website). At Abbott they have
stringent safety, regulatory and quality standards in place to ensure that all nutritional
products are safe. The new plant reaffirms Abbott's commitment to providing their
customers with products of the highest quality. Abbott people are driven by a
constant goal; “to advance to medical science to help people live healthier lives”
(Abbott official Singapore website).
I have decided to use market share as the major factor to analyze because it
measures the size and dominance of a business. By establishing and consolidating
their position, Abbott can continue to enlarge its brand portfolio and maintain
relevance in today’s competitive Singaporean market.

6. SWOT Diagram:
Strengths
 First pediatric Complete and
Balanced nutrition supplement
 Highest market share in Singapore
 Well thought out strategy (refer to
appendix 1.3)
 Promotional and Advertisement
strategies online including:
“Earn 50% MORE Abbott Family
Rewards Points with every purchase
of PediaSure 900g or 1.8kg!”
 Strongly health focused portfolio
 High health credentials.
Recommended by US Dietary DRIS
International recommendation-
reliability
 Science;
Over 20 clinical studies; 1568
pediatric subjects
 Traditionally a power range but
with innovating new strategy to
push liquid by emphasizing new
product line despite it only being 3
% of Pediasure
 In 2010, PediaSure launched its
most advanced formula ever with
NEW TripleSure System.
 Extension strategy includes
redesigning; Improved packaging-
launching a reclosable bottle was
met with approval and contributed
to its overall sales growth.
 Different flavours are likely to lead
to more sales; more availability of
choice Pediasure products are
appealing buy
 Active R&D product development
operations and a global market
reach.
Weaknesses
 30-40% price premium.
 Price is one of the marketing mixes
they are not willing to accommodate
 Financial Crisis. Right of stocks.
Netherlands
 “Ready to Drink” is only 3% of their
total Pediasure brand; however they
invested lots of money in launching
the product in June and continue to
extensively promote.
 Expensive advertising Budget. The
expensive advertisements with
famous actress may have increased
popularity of the product but not
necessarily enhanced the sales.

7. Lewin’s Force Field Analysis
Opportunities
 New Paediatric Nutrition Manufacturing
Facility in Singapore
In addition to Abbott's rich science
heritage, the Singapore plant will tap into
the company's R&D capabilities to bring
the highest level of process control and
hygiene to every step of the
manufacturing and distribution process.
 Company's Largest Nutrition
Manufacturing Facility Will Serve Up to 1
Million Asian Infants and Children Each
Year
 Agreement to Open a New Nutrition
Science Research and Development
Center
 Watsons joins Abbott Family Rewards
Program
 Powder toddler milk formula is expected
to achieve the fastest constant value
growth rate over the forecast period; less
stay at home moms who associate good
quality with expensive products; Abbott
Pediasure considered one of the best
Threats
 Competition from:
1. Eli Lilly and Company
2. Nestle Johnson
3. Dumax Marmaade.
 Psyche of children; there will always be a
continuous extensive research and never-
ending findings on the discovery of the
brain. Children from different cultures and
different backgrounds react differently; have
different tastes and expectations.
 Growth in developed market will be
constrained by a number of factors;
1. characteristics of mature, saturated
markets,
2. declining birth rates; less demand of
Pediasure products
3. Slow recovery in consumer spending power
in the wake of the global economic
recession.
 Recession highlights need for geographic
market diversifications

8. Due to the prominent advantages of continuing the strategy outweighs the
likely problems that can be faced- the sales of Pediasure products are bound to
increase. With manufacturing prices decreasing, with the introduction of the new
plant, Pediasure can afford to spend more money on advertisement to promote the
new products. Maintenance of Pediasure’s market share can also be attributed to the
substantial consumer confidence because of the guaranteed health and vast
advertisement which proved effective in terms of promotion. “As a result, local
operators in Singapore remained insignificant as they found it difficult to gain a
foothold within baby food because of immense international competition- especially
from Pediasure” (Euromonitor International 2010).
Pediasure continues to introduce improved and fortified milk formula, which
will further increase with the opening of the Nutrition Science Research and
Development Centre. Consumer demand is rapidly rising; achieving lower input cost
through locally sourced raw materials and labour; and working closely with the local
economy. However Raw material costs are also expected to rise, further contributing
to unit price increases. However, these will be moderated by price promotions for
baby food, which are anticipated to remain prevalent throughout the forecast period.
Identifying Strategy and Products
Existing Product New Product
Market penetration Product development
Market development Diversification
Abbott Pediasure’s continuous line extension is a low-risk growth strategy which
focuses on selling existing products in existing markets. As discussed in the SWOT
above, the market penetration is achieved through the strengths of the company
mainly through better advertising (refer to appendix 1.5) to increase desirability of the
product. They know that it is important not to create a negative image by promoting
Pediasure as a substitute so they are careful and stress on its importance as a
supplement. The effective taglines appeal to both children and mothers. In addition
the company also offers membership loyalty schemes.
New Market
Existing market

9. With the introduction of new products such as “Ready to Drink” Pediasure is using
the strategy of Product Development. This extends the life cycle of products that
have reached the saturation point. Considering that Abbott Pediasure, is already
leading in market share, but wants to expand the business, this is an appropriate
decision. This will also allow the business to spread its risks, because in case the
new product is not successful it can still rely on its established market of Pediasure
Triple Formula.
The continuous line extension to increase market share is also an example of
Product innovation. “Product innovation refers to new creations or radical
development of existing products” (Hoang 686).
Boston Matrix/ Growth Share Matrix (Product Type)
High Market Share Low Market Share
Pediasure Ready to Drink is in its growth stage in the Product Life Cycle and
can be considered a cash cow for the time being. It is the sole supplement health
product that specifically appeals to ages 1-10. However it is too early to tell whether
or not it can grasp a high market share but is definitely not a risk product.
According to the Position/perception map Abbott Pediasure has correctly
identified its products as premium brands of high quality which are highly priced.
STAR
“Businesses with high relative share in
high-growth markets usually wild require
large amounts of cash to sustain growth
by have a strong market position that will
yield high reported profits.”(Porter 363)
Pediasure Triple Formula
Problem Child
Businesses with low relative market
share in rapidly growing markets require
“large cash inflows to finance growth and
are weak cash generators because of
their poor competitive position” (363).
CASH COW
Businesses with high relative market
share in low growth markets will produce
“healthy cash flow, which can be used to
fund other, developing businesses”
(363).
Pediasure Ready To Drink (RTD)
DOG
Businesses with low relative share in
low-growth markets will often be modest
cash users. “They will be cash traps
because of their weak competitive
position” (363).
High market
growth
Low market
growth

10. Examining Singapore’s baby food market (Place);
“Euromonitor International: Country Sector Briefing BABY food Singapore October 2010.” Euromonitor International.
2011.Euromonitor Reporting Company
As the economy in Singapore began to recover from the recession, people had more
disposable income available and hence many couples decided to start a family. In
addition, parents continued to spend on quality products that benefited their children.
With families generally having very few children, parents were willing to spend extra
for products of the highest quality. Powder toddler milk formula was the fastest
growing category within baby food during 2010. With a growing number of parents
trading up to baby food of superior quality, overall unit prices experienced an
increase during 2010. “There were no new brands launched within liquid format that
year, the only existing brand being PediaSure Complete from Abbott Laboratories
(S) Pte Ltd” (Gaining Share through Scale and Brand Equity in Baby Food July 2011)
Selective Baby Food brands in Singapore
“Gaining Share through Scale and Brand Equity in Baby Food July 2011.” Euromonitor International.2011. Euromonitor
Reporting Company
Abbott dominates the market with highest company shares.

11. ABBOTT PEDIASURE’S PERFROMANCE IN SINGAPORE:
Source; Magdalena Pang (Product Manager)
Notice how the market share of Pediasure is steadily increasing in Singapore and
thus Abbott’s future performance looks promising. Despite a slight dip in their Gross
profit margin, Pediasure was able to jump back up in 2011. However the correct
percentage will be revealed in December 2011.
Investment Appraisal Techniques
(Refer TO APPENDIX 1.2)
Payback Period “refers to the period of time for an investment project to earn
enough profits to repay the cost of the initial investment” (Hoang 350).
All values in (S$) Cumulative Cash Flow
1 (2011) 653 000
2 (2012) 744 000 1397 000
3 (2013) 812 000 2209 000
4 (2014) 857 000 3066 000
5 (2015) 927 000 3993 000
As we can see break-even occurs in the 2nd
year.
Step 1=difference between cumulative net cash inflow in year 1 and amount invested
= 858000- 653000
= 205000 =a
Step 2= average monthly cash inflow in year 2
=744000/12
=62000= b
Step 3= a/b= no. of months
=205000/6200
=
Payback period = 1 year and 3 months
The payback period helps assess projects which will “yield quick return to
shareholders” (Hoang 352). Pediasure has 1 year and 3 months for it to gain back
its initial investment. However the company’s projections up 2015 are sufficient
because by then they will need to replace or update RTD.

12. Accounting Rate of Return
Total Net Cash Flow= 3993000
Projected Profit = Cumulative Bet Cash Flow + Initial Investment
=3993000- 858000
= 3135000
3135000/5 = Annual Profit
= 627 000/ yr
ARR= 627000/858000 * 100
Approx 73 %
This means that Pediasure will receive an annual of 73% profit for the amount
invested in this project.
This figure is unbelievably high because realistically the ARR is usually below 20 %.
This entices the viewer to believe that Pediasure makes sufficient profit. However it
is important to note that Abbott Pediasure is not a start-up company-rather an
established one in Singapore, and the introduction of RTD is a way to boost sales in
order to dominate the market.
CONCLUSION:
Pediasure can increase market share through continuous line extension. Their
effective budgeting and ability to maintain its premium branding image; where it is
no.1 in Singapore (refer to appendix 1.4) will allow Pediasure Ready to Drink to
become a “Star product.” With this regional advantage, Pediasure RTD has
untapped a market gap and thus because of the inexistence of competitors in the
Ready To Drink formula industry for the time being- it can be considered a pure
monopoly. Singapore’s fast growing economy and certain trends also demand the
need of such products.
After calculating with investment appraisal techniques, it is confirmed that Pediasure
recover the investments almost instantly and the ARR generated from net income of
the proposed capital investment seems very promising indeed. This justifies the
business’ capital expenditure. The company’s investment in increasing
manufacturing capacities in Singapore allows it to continue to integrate large-scale
new assets into their operations. As a result, they have consolidated and established
a strong market position and enlarged their brand portfolio.

13. Pediasure remains frequently engaged in price promotions in order to stay
competitive during the recession and to encourage price-sensitive consumers to
purchase their products. They also ran advertisements on television and in the
printed media to remind people of their existence or to promote new formulations.
Price promotions will continue to be a key strategy used by Abbott as they seek to
remain competitive.
According to SWOT analysis and the Lewin’s Force Field Diagram constructed, the
strengths and opportunities outweigh the threats and weaknesses as there are more
driving factors then restraining factors for the new product development strategy;
launching a “new product in an existing market” (Hoang). The company’s diverse
product portfolio is also important for the firm’s cash flow since selling to more
market segments will increase the sales revenue. By analyzing the 4Ps individually
as well, it can be assessed that not only will Pediasure remain profitable, but relevant
in the competitive industry through continuous line extension, boosting sales, and
thus market share as a result.
RECOMMENDATIONS;
The company can focus on enhancing their scale of operations, like increasing
availability of flavour options for the RTD, their latest addition the Pediasure brand. It
should avoid marginalisation in the competitive landscape and continue to optimize
their operational infrastructure.
Pediasure must maintain a diverse portfolio covering a wide range of price platforms
which has become a central pillar to all pricing strategies. It can also continue to
build strong brand equities through intense innovation. Science-driven, intense
innovation activity builds high health credentials. Thus strong brand equity should
remain the central theme in the companies' brand development strategies.

14. Pediasure will also have to align their portfolio development with the dominant trends
in their target markets. This is because in the baby food market there are a number
of key growth-driving trends, including health and wellness, rising demand for
fortified/functional attributes, ethical value added and organic products. Prototype
testing may prove effective because it enables customers to try out milk formula
samples before deciding whether it suits their children’s tastes. Keeping up to date
and complying with consumer demands in order to achieve success with new
product launches must be continued. It is important that the company not only
focuses on the sort-term development of products, but also the long term
development.
Abbott may want to consider repositioning some of its products, or introducing some
products that are more affordable in general- however this may cause customers to
switch from their premium brands to their bargain brands and reduce the quality of
the brand name as a whole.
LIMITATIONS: Given confidentiality issues the report may be influenced by apparent
subjectivity of some financial data. The inability to conduct surveys in Singapore was
also an issue because I was unable to gather primary data from supermarkets, and
was thus unable to get personalized feedback regarding consumers’ response
Pediasure RTD.

15. Bibliography
“Euromonitor International: Country Sector Briefing BABY food Singapore October
2010.” Euromonitor International. 2011.Euromonitor Reporting Company
Hoang, Paul. Business & Management. [Melton, Vic.]: IBID, 2007. Print.
Porter, Michael E. Competitive Strategy: Techniques for Analyzing Industries and
Competitors. New York: Free, 1980. Print.
“Gaining Share through Scale and Brand Equity in Baby Food July 2011.”
Euromonitor International.2011. Euromonitor Reporting Company
Abbott Singapore. Web. 5 July 2011.
<http://www.abbott.com.sg/abbott_ams/ams.asp>.
Abbott Singapore. Web. 22 Aug. 2011. <http://www.abbott.com.sg/>.
Family Ties." Abbott Singapore. Web. 1 Sept. 2011.
<http://www.abbott.com.sg/family/default.asp>.

16. Appendix 1.1
INTERVIEW WITH PRODUCT MANAGER; Magdalena Pang
Can you please elaborate on the Hallmark Pediasure product portfolio?
1. Regular Pediasure
No symbiotic
Pro-biotic
2. Pediasure Triple Sure
Triple Sure Powder
3. Convenience Ready to drink
What makes Pediasure the most successful product line?
Strengths;
 The Science behind the manufacturing.
 Lots of money is invested in research etc.
 We also attempt to educate the public on the benefits of using Pediasure. For
e.g. there is lots of information included in consumer leaflets at hospitals etc.
 Online studies are also available, thus making Abbott a reliable source of nutrition
because our products are recommended by US Dietary DRIS.
 Traditionally Pediasure was a powder range but now with the use of a new
strategy, Abbott is pushing the “Ready to Drink” liquid which is only 3% of
Pediasure Line.
 CONCEPT; Gain weight. Promote Consumerism. Educate doctors and moms
who are the first target before the consumers; infants and children come in.
 Over 20 clinical studies
 1568 pediatric subjects
Weaknesses;
 Price Premium; 30-40% price premium. 9% more than Gain.
 Price is one of the marketing mixes they are not willing to accommodate.
 Financial Crisis
 Right of stocks
 Previous plant was in Netherlands; high cost. Too many issues.

17. Opportunities;
 Promotion and education through doctors,
 consumer marketing
 introduction and expansion of drink range.
 With the opening of a new plant- there will be easy accessibility to ingredients.
 Priority for production will be renewed and the plant will also be subject to
supply a chain market, and thus Abbott will be able to cater to China.
Threats;
 Competitors; Nestle Johnson, Dumax Marmaade.
 Sensitivity stages; – psyche of children.
What is Abbott Singapore’s stocking method?
Inventory Level planned and monitored. Arrangement is done according to:
 Country of manufacturer
 net weight
 Flavours
 Standard dilution
 Price
Stock report not really a major issue or area of concern.
When was Pediasure launched?
1988- worldwide.
1990s- Singapore. The workforce in the office is relatively new and there is no one
present or access to any specific record to confirm the exact year.
Can you please discuss the various activities Abbott Singapore uses to
promote its Pediasure line?
 Commercial advertisements
 Consumer leaflets
 Facilitate education
 Reinforce selling message
 Doctor endorsement
 Celebrity “keep on trying” television commercial. Pediasure is promoted as a
supplement not as a replacement to everyday food.

18. How is the price of Pediasure products determined?
Abbott must maintain premium pricing strategy so deciding on ultimate price Is not
an issue because price compensation is something that cannot be afforded.
To what extent do employees have control over decisions?
Ideas are shared, discussed and approved or rejected. There is a management
dipstick atmosphere.

20. Appendix 1.3

21. Appendix 1.4
Sunday Times cut-out (Primary Resource)
’

22. 1.5
Straits Time Creative Buy
“SUPPLEMENT HIS DIET WITH COMPLETE NUTRITION ANYTIME ANYWHRE”
“MUMS CAN ALWAYS BE SURE WITH PEDIASURE”