RUNNING HEAD: CAPITAL BUDGETING ASSIGNMENT
7
CAPITAL BUDGETING ASSIGNMENT
Capital Budgeting Assignment –
The Coca Cola Company
I. Introduction
Companies are regularly faced with decisions concerning investments in long-lived assets to promote continuous growth and expansion of business operations. Long-lived assets are expected to return benefits for more than a year (Peterson & Fabozzi, 2002). Capital budgeting is the process of analyzing different investment options and the selection of which identified investment opportunities to pursue (Peterson & Fabozzi, 2002). Having established guidelines and criteria for the selection of projects is crucial for capital budgeting.
The capital budgeting techniques analyzed and used in this paper will be the Net Present Value (NPV), the Internal Rate of Return (IRR), Modified Rate of Return (MIRR) and Profitability Index (PI). The Proposed Capital Budgeting Project – Expansion of Partnership with Keurig Green Mountain, Inc. – will be described and analyzed in an Excel Capital Budgeting Model. The results of the Excel model will be explained and interpreted based on the capital budgeting criteria introduced and a recommendation about the implementation of the proposed capital budgeting project will be discussed.
II. Description of Proposed Capital Budgeting Project
Coca Cola acquired 16% of the Keurig Green Mountain, Inc. (GMCR) in 2014, making it the largest shareholder of the coffee brewer company (Trefis Team, 2014). The Coca Cola Company (KO) purchased these 6.5 million shares for an agreed purchase price of $830 million (Coca Cola, 2015). The announcement of the acquisition raised Coca Cola’s stock by 0.7% (Trefis Team, 2014). The two companies are developing a new brewer system together, the Keurig Cold to be able to tap in the growing demand of ready-to-drink at-home-brewed beverages and expand into the cold drink market (Trefis Team, 2014).
GMCR’s market size has expanded to $19bn and is expected to continue to grow (Trefis Team, 2014). Considering the 16% ownership Coca Cola has of GMCR this is a $3.04bn return for KO on their investment. Considering these impressive numbers an expansion in the partnership between KO and GMCR to a total of 20% of ownership in GMCR should be considered. Based on the purchase price of $830 million for 16% equity, the expansion by another 4% would lead to an initial cash outflow of $207.5 million. Considering the return on the investment of $3bn for 16% equity in GMCR the cash inflows over the next six years after an additional 4% investment is to be estimated at $750 million in Year 1, $700 million in Year 2, $600 million in Year 3, $500 in Year 4, $400 million in Year 5, $300 million in Year 6 and $200 million in Year 7. This estimate is very conservative and considers possible future trends in the beverage market and competitors adapting the new cold brewing mechanism. After a cash inflow of $750 million in the first year, the cash inflows ...
RUNNING HEAD CAPITAL BUDGETING ASSIGNMENT7CAPITAL BUDGETI.docx
1. RUNNING HEAD: CAPITAL BUDGETING ASSIGNMENT
7
CAPITAL BUDGETING ASSIGNMENT
Capital Budgeting Assignment –
The Coca Cola Company
I. Introduction
Companies are regularly faced with decisions concerning
investments in long-lived assets to promote continuous growth
and expansion of business operations. Long-lived assets are
expected to return benefits for more than a year (Peterson &
Fabozzi, 2002). Capital budgeting is the process of analyzing
different investment options and the selection of which
identified investment opportunities to pursue (Peterson &
Fabozzi, 2002). Having established guidelines and criteria for
2. the selection of projects is crucial for capital budgeting.
The capital budgeting techniques analyzed and used in this
paper will be the Net Present Value (NPV), the Internal Rate of
Return (IRR), Modified Rate of Return (MIRR) and Profitability
Index (PI). The Proposed Capital Budgeting Project –
Expansion of Partnership with Keurig Green Mountain, Inc. –
will be described and analyzed in an Excel Capital Budgeting
Model. The results of the Excel model will be explained and
interpreted based on the capital budgeting criteria introduced
and a recommendation about the implementation of the
proposed capital budgeting project will be discussed.
II. Description of Proposed Capital Budgeting Project
Coca Cola acquired 16% of the Keurig Green Mountain, Inc.
(GMCR) in 2014, making it the largest shareholder of the coffee
brewer company (Trefis Team, 2014). The Coca Cola Company
(KO) purchased these 6.5 million shares for an agreed purchase
price of $830 million (Coca Cola, 2015). The announcement of
the acquisition raised Coca Cola’s stock by 0.7% (Trefis Team,
2014). The two companies are developing a new brewer system
together, the Keurig Cold to be able to tap in the growing
demand of ready-to-drink at-home-brewed beverages and
expand into the cold drink market (Trefis Team, 2014).
GMCR’s market size has expanded to $19bn and is expected to
continue to grow (Trefis Team, 2014). Considering the 16%
ownership Coca Cola has of GMCR this is a $3.04bn return for
KO on their investment. Considering these impressive numbers
an expansion in the partnership between KO and GMCR to a
total of 20% of ownership in GMCR should be considered.
Based on the purchase price of $830 million for 16% equity, the
expansion by another 4% would lead to an initial cash outflow
of $207.5 million. Considering the return on the investment of
$3bn for 16% equity in GMCR the cash inflows over the next
six years after an additional 4% investment is to be estimated at
$750 million in Year 1, $700 million in Year 2, $600 million in
Year 3, $500 in Year 4, $400 million in Year 5, $300 million in
Year 6 and $200 million in Year 7. This estimate is very
3. conservative and considers possible future trends in the
beverage market and competitors adapting the new cold brewing
mechanism. After a cash inflow of $750 million in the first
year, the cash inflows are expected to reduce to $700 million,
$600 million, $500 million, $400 million, $300 million and
$200 million in the following four years.
Considering Coca Cola’s declining sales in the carbonated drink
market due to shifting customer preferences, the investment in
GMCR is a strategic approach to diversify KO’s portfolio and
benefit from customers’ increasing demand in coffee beverages.
The explanation of the Excel Capital Budgeting Model used
follows.
III. Explanation of the Excel Capital Budgeting Model
The Excel Capital Budgeting Model (attachment: Capital
Budgeting Model_FINC 430.xls) was developed to analyze the
proposed project with multiple capital budgeting techniques –
the NPV, IRR, MIRR and PI. The model will provide a
framework for further analysis and recommendation regarding
the proposed expansion of an additional 4% in GMCR equity to
an overall investment of 20% in the coffee brewing company.
In the Model only the yellow cells require input from the
company’s Balance Sheet, Income Statement and key financial
metrics (e.g. Beta) obtained through Yahoo! Finance (Yahoo!
Finance, 2016). The light green cells contain Excel Functions
for the calculation of the Discount Rate with WACC [=Cost of
Equity*(Equity/Total Value)+Cost of Debt*(Debt/Total
Value)*(1-Tax Rate)], NPV, IRR, MIRR and PI.
Changes in the Investment Project Box yellow fields for
estimated Cash Inflows will automatically change the value of
the NPV, MIRR, IRR and PI. This allows for an analysis of
multiple possible outcomes of this investment project. The
Model allows a most-likely case, best case and worst case
scenario by changing the input data in the yellow cells. The
Most-likely Case and the Worst Case are presented in the Model
attached to this analysis. The worst case scenario assumes the
investment returns the expected revenue in the first year, but
4. then significantly drop to $200 million in Year 2 and $100
million in the following 5 years until it goes in the negative
(further investments are necessary, techniques is no longer in
demand) in Year 7 to -$100 million.
IV. Explanation and Interpretation of Capital Budgeting Criteria
The four capital budgeting techniques used in this analysis are
the NPV, IRR, MIRR and PI as presented in the introduction
section. The techniques will be explained and interpreted in
detail in the following.
a. Net Present Value (NPV)
The Net Present Value technique considers the Present Value of
all future Cash Flows (Peterson & Fabozzi, 2002). A project
should be accepted if the NPV is larger than $0, because it
increases the value of the firm. The NPV considers all the
criteria important in capital budgeting: the future cash flows,
the time value of money and riskiness of the project and
therefore helps identify the project maximizing the owner’s
wealth. When comparing different projects with each other the
one with the largest NPV should be selected. The NPV is a very
good decision framework as it considers all of the important
criteria and allows to compare mutually exclusive and capital
rationed projects (Peterson & Fabozzi).
The Excel Model for KO expansion of ownership in GMCR
returns a NPV of $2,529 in the most-likely case. This project’s
NPV is clearly above $0 and should thus be accepted according
to the NPV.
b. Internal Rate of Return
The Internal Rate of Return Technique provides a discount rate,
which causes the NPV to equal $0. A project should be accepted
if the IRR is larger than the Cost of Capital – provides a larger
return (Peterson & Fabozzi, 2002). As the NPV the IRR
considers all future cash flows, the time value of money and the
riskiness of the project, however, the IRR does not consider the
maximization of owner’s wealth. As long as only one project is
analyzed and there are no budget limitations the IRR returns the
same result as the NPV.
5. The Excel Model returned an IRR of 353% in the most-likely
case scenario for the expansion. Considering the Cost of Capital
of 7.72% this is clearly a larger return and should thus be
accepted.
c. Modified Internal Rate of Return
The Modified Rate of Return is an adjusted IRR technique that
considers a different reinvestment rate for the cash inflows from
the project (Peterson & Fabozzi, 2002). A project with a larger
MIRR than cost of capita should be accepted. Comparable to the
IRR, the MIRR meets the criteria of considering all future cash
flows, the time value of money and the riskiness associated with
the project. However, as the IRR, the MIRR does not consider
the maximization of owner’s wealth. When the MIRR is used
for one project without budget limitations it returns the same
result as the NPV.
For the MIRR the Excel Model returned a rate of 56% in the
most-likely case scenario. The cost of capital is 7.72% and thus,
even the rate adjusted for a different re-investment rate for cash
flows, the MIRR, is larger and the project should be accepted.
d. Profitability Index
The Profitability Index is the ratio of the Present Value of the
change in operating cash inflows to the Present Value of the
investment cash outflows (Peterson & Fabozzi, 2002). A project
should be accepted if the PI is larger than 1, because it
increases the firm’s value. If multiple projects are considered,
the one with the larger PI should be selected. The PI considers
the following criteria: all future cash flows, the time value of
money and the riskiness of the project. However, as the IRR and
MIRR, the PI does not consider the maximization of owner’s
wealth. When considering one project only, the PI provides the
same result as the NPV.
The Excel Model returns a PI of 13.2 for the most-likely case
scenario, which clearly indicates that this project should be
selected.
The capital budgeting techniques discussed and analyzed
6. provide the framework for an informed and analyzed decision
considering the proposed investment project for KO. The
recommendation about the implementation of the expansion of
ownership by another 4% in GMCR will conclude this analysis.
V. Recommendation About Implementation of Capital
Budgeting Project
The proposed capital budgeting project has been analyzed with
an Excel Model considering the NPV, MIRR, IRR and PI. As
discussed in the above section all of the techniques returned the
same result – Coca Cola should expand their ownership in
GMCR by another 4%.
The Model also offers a worst case scenario analysis and even if
the project should not return cash inflows as high as estimated
most-likely and even go in the negative the capital budgeting
techniques lead to the decision to invest in this project. The
worst case scenario provides these results: NPV - $888.87, IRR
– 290%, MIRR – 33% and PI – 5.28. Since both scenarios
indicate added value to the firm by pursuing this investment
project it is recommended for Coca Cola to obtain an additional
4% in shares of the Keurig Green Mountain, Inc..
7. References
Coca Cola. (2015). SEC 10K. Retrieved from http://www.coca-
colacompany.com/content/dam/journey/us/en/private/fileassets/
pdf/2015/02/2014-annual-report-on-form-10-k.pdf
Peterson, P. & Fabozzi, F. (2002). Capital Budgeting Theory
and Practice. John Wiley & Sons 2002.
Trefis Team. (2014, May 16). Coca-Cola-Keurig Green
Mountain Deal: A Win-Win Situation For Both. Retrieved from
http://www.forbes.com/sites/greatspeculations/2014/05/16/coca-
cola-keurig-green-mountain-deal-a-win-win-situation-for-both-
2/#7f132b1a57ee
Yahoo! Finance. (2016). KO Key Statistics. Retrieved from
http://finance.yahoo.com/q/ks?s=KO
SWOT analysis template
Team: TEAM 4 Date: JUNE 8TH, 2016
Creator: TEAM 4 members E-Mail:
Strengths Weaknesses
1. Brand awareness for TONES
increased from 21.3% to 78%
for the target segment (High
earners)
2. Excellent communication
8. dimensions and message quality
used in brand communication
and advertising for TOSS.
3. Brand awareness for TERM
increased from 30% to 44% in
the followers segment.
4. Brand awareness for TOPS
increased from 6.4% to 56% in
the shoppers segment
5. Purchase intentions of high
earners for TONES increased
from 21.3% to 33.3% which is
the highest in that segment in
comparison to our closest
competitors, SONIC (24.3%)
and LOOP (26.8%)
6. TOSS our new sonite brand was
designed to meet the specific
needs of the target market(
savers segment)
6. Poor communication dimensions
and message quality used in
brand communication and
advertising for TOPS, TONES
and TERM.
7. Purchase intentions for TERM
decreased from 64.6% to 22.9%
in the followers segment of the
vodite market and our closest
competing brands are SEED
9. (22.4%) and MEOW (20.8%).
8. TOSS is our new sonite product
and we did not sell enough units
since we produced 160,000units
but only sold 11,000units.
149,000units are costing the firm
$819,000.
9. TERM is also not generating
enough revenue because the unit
transfer cost is expensive ($248)
which makes cost of goods sold -
$5,530 and revenue $6,048.
10. One of the most important
characteristics for the savers
segment is Design (4.0) but our
new product TOSS is lacking in
this area(2.9)
Opportunities Threats
11. According to the advertising
experiment, there is the chance
to increase the advertising
budget by 20% in the high
earners segment and make
profits of $361,000
12. Modify all brands to suit the
specific needs of our various
target markets and this will help
to reduce cost especially with
TERM’s unit transfer cost.
10. 13. The target segment of
TOSS(savers) is growing by
17.3% in the next period
16. There is the probability of a
decrease in profits by $361,000
and $663,000 in the shoppers and
savers segments respectively if
the advertising budget is
increased by 20%
17. Our competitors SEED and
MEOW in the followers segment
offer better physical
characteristics than our product
TERM. And their prices are also
more affordable.
18. Purchase intentions for TERM
dropped by 41.7% in the
followers segment. There is
14. A new brand that is designed to
meet the specific needs of the
Explorers segment which most
firms have neglected.
15. The growth rate in the target
market for our vodite brand
TERM appears to be increasing
by 157.5% which is a great
opportunity.
16. Display characteristic of TOPS
11. can be improved for shoppers
segment.
intense competition between our
brand and SEED (22.4%) and
MEOW (20.8%)
19. Purchase intentions for TOPS
dropped from 6.4% to 2.8% in
the shoppers and the competitors
have high purchase intentions,
LONG (22.9%) and SOLO
(56.8%)
20. Commercial team size increase
will attract losses such as
$81,000 shopper( high
earners),$122,000(
shoppers),$259,000(savers) and
$199,000(followers)
Action plan
Strengths
1. Monitor changing customer preference of our target segment
constantly.
2. Maintain excellent quality of advertising information.
3. Continue to study customer preferences and improve our
brands.
4. Continue to study customer preferences and improve our
brands.
5. Invest in R&D to continually ensure our brands meet
customer preferences.
6. Modify any of our firm’s product every time to meet the
target segment’s needs.
12. Weaknesses
6. Improve message quality for advertisement to our target
segments.
7. Closely monitor changing preference and invest in R&D to
meet the needs
8. Improve all physical characteristics of TOSS to meet savers
ideal values.
9. Modify characteristics and provide only the ideal needs of
target segment.
10. TOSS will be modified to provide the ideal design for
followers.
Opportunities
11. Increase advertising budget by 20% to gain $361,000 profit
propose.
12. Invest in R&D to modify all our existing brands to better
suit customer
preferences
13. Invest in advertisement and research to increase our
segment growth
14. Launching a new brand for explorers to increase sales and
diversify risk
15. TERM has been modified to take advantage of the growth
and increase sales
Threats
16. Will not increase advertising budget because it will affect
the firm negatively.
17. Modify TERM to perfectly suit followers and consider price
decrease.
18. Monitor changing customer needs and modify products with
that in mind.
19. TOPS has been modified to meet shoppers ideal needs in the
next period
20. Maintain the commercial team sizes we currently have and
13. reshuffle based on
shopping habits of our target segments
SWOT analysis
Team: TEAM 4 Date: JUNE 3, 2016
Creator: TEAM 4 E-Mail:
Strengths Weaknesses
1. TERM our vodite brand is designed to
meet the followers segment of the
market
2. Commercial team allocation for our
brands TOPS and TONES were based
on the shopping habits of their specific
target markets which are shoppers
and high earners respectively.
3. First mover advantage in follower
segment of the vodite market.
4. Advertising expenditure for TERM’s
(1560) target segment is more in
comparison to our competitor MEET
(1150) expenditure which means we
are all out and aggressive.
5. Reasonable quantity of inventory for
our brand TOPS.
14. 6. Brand awareness for TONES decreased
from 80% to21.3% in the high earners
segment and for TOPS it decreased
from 56% to 6.4% in the shoppers
segment
7. Poor communication dimensions and
message quality used in brand
communication and advertising for
TOPS and TONES
8. Huge volume of inventory for
TONES(113,000units)
9.High dependence for revenues on one
brand, TONES so risk could not be mitigated
10. Price for our vodite brand TERM (360)
was not high enough to generate enough
revenue to cover our overall costs. Our
revenue was $4,397 and our net contribution
was $-6,587.
Opportunities Threats
11. Our vodite brand TERM’s target
market is growing from 157.5% to
234.8% which is great opportunity
since no other brand targets this
market
12. No product specifically designed to
meet the expectation of the Explorer
segment by any company so this is a
great opportunity.
15. 13. Purchase intentions for TERM (64.6%)
is better in comparison to our keen
competitor LEAN (19.3%) in the
followers segment.
14. TERM has the first mover advantage
for the followers segment of the vodite
market because all the other brands do
not specifically meet the demands of
this segment
15. Commercial team allocation for TERM
based on the shopping habits of the
followers segment of the vodite
market.
16. MEET (49%) is our direct competitor
in the vodite market for our brand
TERM (30%) with respect to brand
awareness.
17. LOOP (42.9%) and SONIC (26.2%) are
the main threats for our brand TONES
(21.3%) in the high earners segment
with respect to brand awareness.
18. SOLO (21.4%) and LONG (31.0%) are
the main threats to our brand TOPS
(6.4%) in the shoppers segment with
respect to brand awareness.
19. Purchase intentions for TONES
decreased from 53.2% to 21.3% in the
high earners segment and for TOPS it
16. decreased from 7.1%to to 6.4% in the
shoppers segment
20. Overall advertising expenditure for
our vodite brand TERM (2220) is less
in comparison to our competitors
especially MEET (4940).
Action plan
Strengths
1. Make sure to monitor changing consumer preferences and
design our brand to
meet the expectations of the target segment.
2. Commercial teams will be allocated always based on the
shopping habits of
our target segment.
3. We will invest more in R& D to ensure our target segment
preferences are met.
4. Advertising more to endure brand awareness of 70% in the f
followers
segment
5. Our production plan will always ensure a reasonable quantity
of inventory is
available on hand.
Weaknesses
6. Invest more in advertisement and advertising research to
promote brand
awareness because there are numerous brands on the market.
7. Excellent communication dimensions and message quality
will be our focus in
our next period’s advertisement.
17. 8. Production will be decreased in the next period to enhance
reduction in the
huge volumes of inventory.
9. Diversification in the Sonite market to mitigate risk and huge
losses in the near
future.
10. Pricing will take into consideration the costs incurred
during production to
mitigate losses.
Opportunities
11. Ensure that we monitor changing consumer preferences and
modifying
products to suit these preferences accordingly
12. Design and introduce a product to meet the needs of the
Explorers
segment of the Sonite market.
13. Invest in advertisement and R& D to ensure brands meet
customer
expectations
14. Monitor and modify the product to meet the followers
segment which is
our target segment
15. Commercial team allocation will be based on the shopping
habits of the
target market
Threats
16. Increase advertisement and modify brands to suit target
segment
preferences.
17. Increase advertising expenditure to create high brand
awareness
18. Invest in advertisement and R& D.
19. Aggressive advertisement emphasizing the excellent
qualities f our
18. brand that meets the needs of the target market
20. Increase advertising expenditure for TERM because the
segment is
growing rapidly
SWOT analysis template
Team: TEAM 4 Date:1ST JUNE,2016
Creator: TEAM 4 E-Mail:
Strengths Weaknesses
1. Brand awareness for TONES
increased from 77% to 80% and
that of TOPS increased from 51%
to 56%
2. TONES(high earners) and TOPS(
shoppers) are designed to meet
specific target segments
3. Excellent communication
dimensions and message quality
used in brand communication in
advertising for our modified
products
4. Market share for TONES(high
earners) increased from 40% to
60%
19. 5. Increase in revenue for TONES
from 455,724 to $61,011 and for
TOPS revenue increased from
$14,483 to $17,725
6. Commercial team allocation for
TONES and TOPS do not reflect
the shopping habits of the target
segments (high earners and
shoppers segments). Example is
the specialty stores should have
43 people for TONES but we
allocated 32 and for TOPS
,specialty stores required 25 and
we allocated 20 people
7. There is no inventory for both
products at the moment which
means we run out of products and
opportunity was given to
competitors to make sales.
8. Distribution coverage for mass
merchandising is low for TOPS
(3%) compared to SOLO (15%)
our competitor.
9. In period 2, TONE ($87m) was
the leading retail brand but in
period 3, ROCK ($96m) has
overtaken this brand although
TONES increased to$94m.
10. We did not produce enough units
of TOPS and this affected our
sales.
20. Opportunities Threats
11. The purchase intentions for
TONES increased from 1.2% to
53.2% in the high earners
segment and for TOPS it
increased from 6.4% to 7.2% in
the shoppers segment
12. Launch into the Vodite market as
there is great growth opportunity
of 828.4% in the next 5 years.
13. The target segment for
TOPS(shoppers) increased from
28.7% to 35.2% for next period
14. Our vodite product is tailored for
followers as this segment’s
16. Our biggest competitor in the
shoppers segment for TOPS
(56%) is SOLO (76%) and
MOVE (73%)
17. Our biggest competitor for
TONES (60.7%) in the high
earners segment is LOOPS
(24.9%)
18. We have lost the first mover
advantage because SEGA and MEET
have already entered the vodite market
19. Reduction in the price of our main
21. competitor’s brand LOOPS ($520 to 500)
is a major threat.
growth is 132% in 5 years.
15. Less intense competition in the
high earners segment for the
TONES product.
20. Inventory disposal loss is a threat to
the finances of the firm.
Action plan
Strengths
1. More resources will be allocated to advertisement to at least
maintain the brand
awareness
2. Segment needs will be analysed and brands modified to meet
target markets for
each product
3. Advertising research for modified products will concentrate
on the physical
characteristics that appeal to the target segments.
4. Consistent monitoring of changing consumer preferences will
help modify products
to meet their needs.
5. Increase production and marketing mix to enhance sales and
revenue generation.
Weaknesses
6. Commercial team allocation will reflect the shopping habits
22. of the target segments.
7. Production plan will include substantial mark up for
inventory.
8. Resource allocation will be based on distribution channel
coverage for the target
segments.
9. Proper resource allocation to reflect shopping habits of high
earners is our focus.
10. Increased production for TOPS in the next period.
Opportunities
11. Invest in proper resource allocation and harness the major
advantages our brands
have over our competitors.
12. Looking at the vodite market, we will launch any time soon
to ripe the growth
benefits after conducting research studies.
13. Concentrate resource allocation in advertising for TOPS.
14. Launch a vodite product that will be tailored for the
followers segment.
15. Continue to advertise and monitor changing consumer
preferences for the target
market.
Threats
16. Increase advertisement and modify TOPS if it necessary
17. Increase or maintain the advertisement of TONES since the
closest competitor is
not too
18. We have the opportunity to learn from their mistakes and
produce better quality
and advanced products.
19. Price matching is our action in the next period
20. Obsolete inventory was sold to a trading company therefore
we will make sure our
production plan will not lead to losses in the future.
23. SWOT analysis template
Team: T Date: 05/25/2016.
Creator: Group 4 E-Mail: [email protected]
Strengths Weaknesses
1. Top selling brand in retails for
TONE. ($79 Million)
2. Highest Stock Price Index.
3. Leading in specialty stores for
TONE (20%) compare to
competitors.
4. No holding cost for TONE. All
140,000 units sold.
Highest purchasing intent from
High earners for TONE.
5. Total market share in terms of
dollar percentage of the
company has increased from
26% to 28%.
6. Brands awareness relatively
low (TONE 52% & TOPS 49%)
compared to competitors.
7. Low sales for TOPS.
24. 8. Inventory build-up for TOPS
increase from 22,000 to 33,000.
9. Physical characteristics for
TOPS are low except for the
power.
10. Equal resource allocation of
5.24 million for unequal brands
in terms of advertising and
commercial team.
Opportunities Threats
11. Chance to become the leaders in
the purchase intent for TONE,
which is currently 1% less than
the leader MOST.
12. Introduce Vodite products in
future market.
13. GNP growing at 3% every year.
14. Market growth rate is expected
to increase by 16.3%.
15. Opportunity to lead market
shares by channel in online
stores for TONE. Currently it is
only 2% behind the leaders.
16. Growth rate for explorers for
TOPS is on the decline by 2.2%
25. for the upcoming period.
17. LOOP as a direct threat to
TONE in industry retail sales.
18. MOST as a threat in total
market share (% units) and
purchase intention of
consumers.
19. Price sensitivity of the market
as TONE is $510 and TOPS
$395.
Action plan
Strengths
1. Monitor consumer’s purchase intentions for any change in the
environment.
2. Maintain and increase market share by developing product
and advertising.
3. The market share in terms consumer interaction for TONE is
the highest for us
in the speciality stores and only seconded by LOOP. Preference
will be given to
targeting specialty stores because they have higher interaction
with consumers.
26. 4. Since there is no inventory cost for TONES there is no
holding cost and since
the market size is going to increase from 981000 to 1141000.
5. The growth of the firm in dollar percentage has grown by 2%
Weaknesses
6. Brand awareness for both the Sonite products is relatively
low and re only 52%
for TONE and 49% for the TOPS. Hence increasing the brand
awareness through
advertising will be crucial for TONE, which is for now 1920 for
advertising media.
7. Despite having a 49% awareness TOPS which is almost equal
TONE, its sales
are only 69,000 units. Hence we plan to do more research and
development in
terms of reducing the base cost which is 44%, which is highest
in the industry and
putting more importance in the battery life and features. Since
the market
segment of the explorers is expected to decrease, we need to
reposition this
product into another segment.
8. Since period 0 and by the end of period 1 the inventory has
increased from
22,000 to 33,000 units. So the production has to be brought
down a little bit and
the inventory has to be used. Also since the sales need to be
increased there has to
be more expenditure
9. Increase the other physical attributes of the TOPS such as
features and battery
power, which are currently 35(the lowest in the industry) and
10.
10. Allocation of more resources TONE in terms of advertising
media and allocate
27. more on Advertising research for TOPS.
Opportunities
11. Invest more into advertising research and advertising media.
12. As of now there are no products in the Vodite market, hence
investing in the
research and development of the Vodite products will be an
opportunity for the
future.
13. Since the GNP is growing at 3% there is a scope of
increasing the price more
than 2% for the high end users for the TONE.
14. As the market grows by 16.3% the growth in the production
has also to be
increased by 16.9%.
15. Increase the number of commercial team allocated for online
stores from 8.
Threats
16. Divest into shoppers and savers slowly by concentrating on
the features
desired by those segments.
17. Increase brand awareness and target more on speciality
stores and mass
merchandisers. Also monitor any consumer preferences in the
environment.
18. The production needs to be increased to close the gap of that
1% total market
share percentage.
19. The market is price sensitive however for TONE the target
market is high
earners, but for TOPS decreasing the base price from 176 to a
lower value and
provide more characteristics in other areas such as battery and
features.
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Company Dashboard – Firm T – Period 5
SPI Revenues (M$) Earnings Before Taxes (M$)
Total Market Share (%$) Market Share –
Sonites & Vodites (%$)
Brand Revenues (M$) Brand Contribu�on (M$)
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Financial Report – Firm T – Period 5
The financial statements of firm T published for Period 5 have b
een prepared on December 31st, Period 5 in accordance with Int
erna�onal Financial Repor�ng
Standards (IFRS), as adopted in the Markstrat world.
Company Profit & Loss Statement
The table below shows the evolu�on of firm T financial results
29. in thousands of dollars, as well as the cumula�ve results since
Period 0.
Period 5 Period 4 Period 3 Period 2 Period 1 Cumula�ve
Revenues 45,400 43,324 78,736 70,207 64,373 354,189
Cost of goods sold ‐22,516 ‐21,655 ‐31,274 ‐32,140 ‐33,758
‐173,047
Inventory costs ‐2,047 ‐1,034 ‐413 ‐165 ‐413 ‐4,385
Contribu�on before marke�ng 20,837 20,636 47,048 37,901
30,203 176,757
Adver�sing expenditures ‐12,761 ‐6,950 ‐6,185 ‐4,164 ‐4,000
‐38,060
Commercial costs ‐11,115 ‐6,400 ‐3,449 ‐1,957 ‐1,282 ‐25,426
Contribu�on a�er marke�ng ‐3,039 7,286 37,415 31,780
24,921 113,271
Market research studies ‐859 ‐827 ‐780 ‐446 ‐406 ‐3,562
Research and development ‐5,350 ‐1,600 ‐9,420 ‐3,250 0
‐19,620
Loan reimbursed ‐3,795 ‐1,995 ‐200 0 0 ‐5,990
Loan received 22,100 1,700 8,600 200 0 32,600
Loan interests paid ‐1,520 ‐515 ‐440 ‐10 0 ‐2,485
Excep�onal cost or profit 0 0 0 0 0 0
Earnings before taxes 7,537 4,048 35,175 28,275 24,515
114,213
Revenues & EBT Evolu�on
Cost Evolu�on ‐ By Category (%Revenue)
Market Contribu�on
The table below shows a comparison of the net contribu�on gen
erated by the two markets where firm T is marke�ng products.
Sonites Vodites
Revenues 39,352 6,048
Cost of goods sold ‐16,987 ‐5,530
Inventory costs ‐1,379 ‐668
30. Contribu�on before marke�ng 20,986 ‐150
Adver�sing expenditures ‐9,636 ‐3,125
Commercial costs ‐8,075 ‐3,040
Contribu�on a�er marke�ng 3,276 ‐6,314
Market research studies ‐465 ‐394
Research and development ‐3,250 ‐2,100
Net contribu�on ‐439 ‐8,808
Revenues Net Contribu�on
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Brand contribu�on
The table below shows a comparison of the net contribu�on gen
erated by the brands marketed by firm T in Period 5.
TONE TOPS TOSS TERM
Sonites Sonites Sonites Vodites
Revenues 31,536 6,514 1,302 6,048
Cost of goods sold ‐12,602 ‐3,593 ‐792 ‐5,530
Inventory holding cost ‐144 ‐416 ‐819 ‐668
Inventory disposal loss 0 0 0 0
Contribu�on before marke�ng 18,790 2,506 ‐309 ‐150
Adver�sing media ‐3,250 ‐2,600 ‐2,912 ‐2,900
Adver�sing research ‐162 ‐130 ‐582 ‐225
Commercial costs ‐3,765 ‐2,276 ‐2,033 ‐3,040
Contribu�on a�er marke�ng 11,612 ‐2,501 ‐5,836 ‐6,314
31. Revenues
Note: brands with low revenues or contribu�on (< 5% total) are
not shown on this chart
Contribu�on a�er Marke�ng
Marke�ng results
The sec�on below provides key marke�ng results for each of y
our marketed brands
Market Shares
TONE TOPS TOSS TERM
Sonites Sonites Sonites Vodites
Volume Market Share 6.3 % 1.8 % 0.6 % 10.6 %
Value Market Share 8.3 % 1.7 % 0.3 % 9.6 %
Volume sold
The table below provides the volume sold for each of your mark
eted brands in each of the three distribu�on channels. Sales are
given in thousands of units.
Distribu�on Coverage
The distribu�on coverage figures in the chart and table below r
epresent the propor�on of distributors who carry a given produc
t. The report gives the informa�on
for each brand currently on the market. The number of distribut
ors in each distribu�on channel is provided as well.
Specialty stores Mass Merch. Online Stores
Number of distributors 9,111 6,666 1,111
Brand prices
The table below shows the prices in $ of your marketed brands.
32. The Recommended Retail Price is the price that you specified in
your marke�ng mix decisions. The
Average Retail Price is the average end‐user price, taking into a
ccount the discount offered by distributors. Finally, the Average
Selling Price is equal to the Average
Retail Price minus the distribu�on margins.
TONE TOPS TOSS TERM
Sonites Sonites Sonites Vodites
Recommended Retail Price $ 420 $ 305 $ 180 $ 430
Average Retail Price $ 406 $ 294 $ 166 $ 405
Average Selling Price $ 262 $ 190 $ 113 $ 271
Loans and Budget Changes
The le� table below summarizes the loans and/or budget change
s that were granted to your company by the instructor. The other
table provides the past and
future payments made by your company to reimburse the loans.
The first column shows the reimbursement of the capital borrow
ed; the second columns shows
the interests paid in the period; the third column indicates how
much capital remains to be reimbursed at the end of the period.
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Budget
increase (K$)
33. Budget
decrease (K$)
Loan capital
borrowed (K$)
Loan Dura�on
Interest rate
(%)
Period 0
Period 1
Period 2 200 1 5
Period 3 8,600 4 5
Period 4 1,700 1 5
Period 5 22,100 10 5
Period 6
Period 7
Period 8
Period 9
Period 10
Capital
reimbursed (K$)
Interest paid
(K$)
Capital
remaining (K$)
0 10 200
200 440 8,600
34. 1,995 515 8,305
3,795 1,520 26,610
3,957 1,330 22,653
4,155 1,133 18,498
1,937 925 16,561
2,034 828 14,527
2,136 726 12,391
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Produc�on Report – Firm T – Period 5
The report below provides with informa�on on produc�on level
s and produc�on costs for each of the brands marketed in Perio
d 5.
Sales, Produc�on and Inventory
The chart below shows the units sold , the produc�on level and
inventory level for each of your brands at the end of Period 5.Al
l numbers are given in thousands
of units.
The table below provides you with addi�onal details such as pla
nned produc�on versus the actual one, and the inventory levels
at the beginning and at the end of
Period 5.All numbers are given in thousands of units.
TONE TOPS TOSS TERM
Sonites Sonites Sonites Vodites
35. Units sold 120 34 11 22
Produc�on Plan (your decision) 30 90 200 70
Produc�on 24 72 160 56
Inventory at beginning of period 113 14 0 0
Inventory at end of period 17 52 149 34
Unit Cost, COGS and Inventory Holding Cost
The table below shows the unit transfer cost for each of yourma
rketed brands. The “current“ unit cost is the cost of the most rec
ently produced units, while the
“average” unit cost takes into account the units that were
in your inventory at the beginning of the period. Unit
transfer costs are given in $; units sold in
thousands of units.
COGS (Cost of Goods Sold) are equal to “Units sold” x “Averag
e unit transfer cost”. COGS are given in thousands of $. Finally,
this table shows the costs incurred for
holding your inventory(storage cost, cost of capital, …). Invent
ory holding cost is equal to: “Units in inventory” x “Average un
it transfer cost” x 8%. It is given in
thousands of $.
TONE TOPS TOSS TERM
Sonites Sonites Sonites Vodites
Current unit transfer cost 104 101 69 248
Average unit transfer cost 105 105 69 248
Units sold 120 34 11 22
COGS 12,602 3,593 792 5,530
Inventory at end of period 17 52 149 34
Inventory holding cost 144 416 819 668
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R&D Report – Firm T – Sonites Market – Period 5
This report provides informa�on on the ac�vi�es conducted fo
r your division by the R&D department during Period 5.
Projects completed in Period 5
The projects listed below have just been completed and can be u
sed to launch new brands or upgrade new ones
Available Since
Physical Characteris�cs Base Cost in $ Cumula�ve Budget
(K$)Features (1) Design (2) Ba�ery (3) Display (4) Power (5)
Current Minimum
POTOLK Period 5 16 5 78 32 83 173 173 1,600
POTONE_2 Period 5 14 8 52 23 64 145 145 850
POTOPS_2 Period 5 12 8 48 26 65 147 147 800
(1) Features (Number of): From 5 To 20. (2) Design (Index): Fr
om 3 To 10. (3) Ba�ery (Hour): From 24 To 96. (4) Display (In
ch): From 4 To 40. (5) Power (Gflops): From 5 To 100.
Projects completed in past periods
The projects listed below have been completed in past periods.
The ones at the top are currently used as the produc�on pla�or
m of one or several of your
marketed brands. The ones in italic, if any, are either no longer
used or have never been used to produce a brand.
Available
Since
Physical Characteris�cs Base Cost in $ Cumula�ve
37. Budget (K$)
Pla�orm of
BrandFeatures (1) Design (2) Ba�ery (3) Display (4) Power (5)
Current Minimum
POTOSS Period 4 13 6 34 15 26 80 80 1,600 TOSS
POTONE_1 Period 2 11 9 53 26 65 151 151 1,650 TONE
POTOPS_1 Period 2 7 8 48 23 53 127 127 1,600 TOPS
POTONE Period 0 16 7 74 24 75 216 162 1,500 N/A
POTOPS Period 0 10 4 35 38 95 199 177 2,000 N/A
(1) Features (Number of): From 5 To 20. (2) Design (Index): Fr
om 3 To 10. (3) Ba�ery (Hour): From 24 To 96. (4) Display (In
ch): From 4 To 40. (5) Power (Gflops): From 5 To 100.
Projects par�ally developed in Period 5
You have no par�ally completed projects.
Shelved projects
You have no shelved projects.
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R&D Report – Firm T – Vodites Market – Period 5
This report provides informa�on on the ac�vi�es conducted fo
r your division by the R&D department during Period 5.
Projects completed in Period 5
The projects listed below have just been completed and can be u
38. sed to launch new brands or upgrade new ones
Available Since
Physical Characteris�cs Base Cost in $ Cumula�ve Budget
(K$)Resolu�on (1) Energy (2) Carbon (3) Connec�vity (4)
Apps (5) Current Minimum
PETERM_1 Period 5 55 64 22 6 42 262 262 2,100
(1) Resolu�on (L/mm): From 20 To 100. (2) Energy (BC/Wh):
From 10 To 100. (3) Carbon (Kg): From 5 To 50. (4) Connec�v
ity (Index): From 3 To 10. (5) Apps (Number of): From 5 To
100.
Projects completed in past periods
The projects listed below have been completed in past periods.
The ones at the top are currently used as the produc�on pla�or
m of one or several of your
marketed brands. The ones in italic, if any, are either no longer
used or have never been used to produce a brand.
Available
Since
Physical Characteris�cs Base Cost in $
Cumula�ve
Budget (K$)
Pla�orm of
BrandResolu�on
(1)
Energy (2) Carbon (3)
Connec�vity
(4)
39. Apps (5) Current Minimum
PETERM Period 3 51 61 23 5 41 241 241 9,420 TERM
(1) Resolu�on (L/mm): From 20 To 100. (2) Energy (BC/Wh):
From 10 To 100. (3) Carbon (Kg): From 5 To 50. (4) Connec�v
ity (Index): From 3 To 10. (5) Apps (Number of): From 5 To
100.
Projects par�ally developed in Period 5
You have no par�ally completed projects.
Shelved projects
You have no shelved projects.
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Decision Review – Firm T – Sonites Market – Period 5
This report provides a review of the decisions made by firm T at
the beginning of Period 5.
Resource Alloca�on Overview
The three charts below show how resources have been allocated
across markets, func�ons and brands. All numbers are given in
thousands of dollars.
Resource Alloca�on by Market
Resource Alloca�on by Func�on – Sonites Brands
40. Resource Alloca�on by Brand
R&D projects
The table below lists the projects which the R&D Department w
ill develop in Period 5
Project Objec�ve Features (1) Design (2) Ba�ery (3)
Display (4) Power (5)
Requested Base
Cost ($)
Allocated Budget
(K$)
POTOLK Explorers 16 5 78 32 83 0 1,600
POTONE_2 High Earners 14 8 52 23 64 0 850
POTOPS_2 Shoppers 12 8 48 26 65 0 800
(1) Features (Number of): From 5 To 20. (2) Design (Index): Fr
om 3 To 10. (3) Ba�ery (Hour): From 24 To 96. (4) Display (In
ch): From 4 To 40. (5) Power (Gflops): From 5 To 100.
Online Query
The table below lists the online queries made to the R&D Depar
tment while making Period 5 decisions
Query Features (1) Design (2) Ba�ery (3) Display (4) Power (5)
Requested Base
Cost ($)
Requested
Budget
Minimum Cost
41. POTOLK 16 5 78 32 83 0 1,400 172
POTONES 14 8 52 23 64 0 770 145
POTOPS_2 12 8 48 26 65 0 750 146
(1) Features (Number of): From 5 To 20. (2) Design (Index): Fr
om 3 To 10. (3) Ba�ery (Hour): From 24 To 96. (4) Display (In
ch): From 4 To 40. (5) Power (Gflops): From 5 To 100.
Brand Por�olio
TONE TOPS TOSS
Por�olio opera�on Maintained Maintained New
Base project past period POTONE_1 POTOPS_1
Base project this period POTONE_1 POTOPS_1 POTOSS
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Marke�ng Mix
TONE TOPS TOSS
Produc�on planning (in units) 30,000 90,000 200,000
Recommended retail price (in $) 420 305 180
Adver�sing media (in K$) 3,250 2,600 2,912
Adver�sing research (in K$) 162 130 582
Segmenta�on Strategy
TONE TOPS TOSS
Explorers
42. Shoppers 100 %
Professionals
High Earners 100 %
Savers 100 %
Perceptual Objec�ves
TONE TOPS TOSS
Dimension 1 Price Design Design
Posi�on 1 1.0 1.0 1.0
Dimension 2 Design Power Display
Posi�on 2 1.0 1.0 1.0
Commercial Team Size
The table below shows the number of commercial people allocat
ed to each brand in each channel during Period 5.
TONE TOPS TOSS
Specialty stores 62 35 18
Mass Merch. 47 35 50
Online Stores 40 20 12
TOTAL 149 90 80
The two charts below show how your commercial team is alloca
ted across channels and brands. All numbers are given in numbe
r of salespeople.
Market Research Studies – Sonites Market
The table below lists the market research studies purchased by f
irm T in Period 5, as well as the cost in dollars.
Purchased Studies Cost in $
Consumer survey 71,500
Consumer panel 119,250
Distribu�on panel 71,500
Seman�c scales 12,000
43. Market forecast 23,750
Compe��ve adver�sing 35,750
Compe��ve commercial team 18,000
Adver�sing experiment 29,750
Commercial team experiment 41,750
Conjoint analysis 41,750
TOTAL 465,000
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Decision Review – Firm T – Vodites Market – Period 5
This report provides a review of the decisions made by firm T at
the beginning of Period 5.
Resource Alloca�on Overview
The three charts below show how resources have been allocated
across markets, func�ons and brands. All numbers are given in
thousands of dollars.
Resource Alloca�on by Market
Resource Alloca�on by Func�on – Vodites Brands
Resource Alloca�on by Brand
R&D projects
The table below lists the projects which the R&D Department w
ill develop in Period 5
Project Objec�ve Resolu�on (1) Energy (2) Carbon (3)
44. Connec�vity (4) Apps (5)
Requested Base
Cost ($)
Allocated Budget
(K$)
PETERM_1 Followers 55 64 22 6 42 0 2,100
(1) Resolu�on (L/mm): From 20 To 100. (2) Energy (BC/Wh):
From 10 To 100. (3) Carbon (Kg): From 5 To 50. (4) Connec�v
ity (Index): From 3 To 10. (5) Apps (Number of): From 5 To
100.
Online Query
The table below lists the online queries made to the R&D Depar
tment while making Period 5 decisions
Query Resolu�on (1) Energy (2) Carbon (3) Connec�vity (4)
Apps (5)
Requested Base
Cost ($)
Requested
Budget
Minimum Cost
PETERM_1 55 64 22 6 42 0 1,920 282
(1) Resolu�on (L/mm): From 20 To 100. (2) Energy (BC/Wh):
From 10 To 100. (3) Carbon (Kg): From 5 To 50. (4) Connec�v
ity (Index): From 3 To 10. (5) Apps (Number of): From 5 To
100.
Brand Por�olio
45. TERM
Por�olio opera�on Maintained
Base project past period PETERM
Base project this period PETERM
Marke�ng Mix
TERM
Produc�on planning (in units) 70,000
Recommended retail price (in $) 430
Adver�sing media (in K$) 2,900
Adver�sing research (in K$) 225
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Segmenta�on Strategy
TERM
Innovators
Adopters
Followers 100 %
Perceptual Objec�ves
TERM
Dimension 1 Energy
Posi�on 1 1.0
Dimension 2 Price
46. Posi�on 2 1.0
Commercial Team Size
The table below shows the number of commercial people allocat
ed to each brand in each channel during Period 5.
TERM
Specialty stores 40
Mass Merch. 50
Online Stores 30
TOTAL 120
The two charts below show how your commercial team is alloca
ted across channels and brands. All numbers are given in numbe
r of salespeople.
Market Research Studies – Vodites Market
The table below lists the market research studies purchased by f
irm T in Period 5, as well as the cost in dollars.
Purchased Studies Cost in $
Consumer survey 47,750
Consumer panel 83,500
Distribu�on panel 59,750
Seman�c scales 12,000
Market forecast 23,750
Compe��ve adver�sing 35,750
Compe��ve commercial team 18,000
Adver�sing experiment 29,750
Commercial team experiment 41,750
Conjoint analysis 41,750
TOTAL 393,750
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Industry Informa�on – Period 5
This report provides economic and cos�ng data for the current
period as well as es�mates for the next period.
Economic Variables
Current Period Value Next Period Es�ma�on
GNP Growth Rate % 4 % 2 %
Infla�on Rate % 4 % 4 %
Inventory holding cost per annum % Transfer Cost 8 % 8 %
Loss incurred for inventory disposal % Transfer Cost 20 %
20 %
Commercial people opera�ng cost $ 23,874 24,829
Commercial people hiring and training cost $ 3,581 3,724
Commercial people firing cost $ 5,969 6,207
Market Research Costs
All Markets Sonites Vodites
Industry benchmarking 37,250
Compe��ve adver�sing 37,250 37,250
Compe��ve commercial team 18,500 18,500
Conjoint analysis 43,500 43,500
Consumer panel 124,250 87,000
Consumer survey 74,500 49,750
Distribu�on panel 74,500 62,000
Adver�sing experiment 31,000 31,000
Commercial team experiment 43,500 43,500
49. Market forecast 24,750 24,750
Mul�dimensional scaling 43,500 43,500
Seman�c scales 12,500 12,500
TOTAL 37,250 527,750 453,250
(all numbers in $)
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Market Report – Sonites Market – Period 5
This report provides general informa�on on the 18 Sonites bran
ds marketed in Period 5.
Brands introduced this period: TOSS, ROME
Brand Retail Sales & Volume
The two tables below show the marketed brand retail sales (in th
ousands of $) and the volume (in thousands of units), sorted in d
ecreasing order. Shares of market
in value and in unit are also provided
Brand Value Share Retail Sales Varia�on
ROCK 18.3 % 107,191 11,736 Modified
SOLO 14.6 % 85,789 43,478 Modified
MOST 9.0 % 52,952 18,024 Modified
LONG 9.0 % 52,901 17,142
TONE 8.3 % 48,779 6,991
LOOP 6.0 % 35,495 ‐12,720
SOLID 5.7 % 33,543 10,287
SOFT 5.4 % 31,884 3,879
SONIC 5.1 % 29,877 4,569
50. LOCK 3.3 % 19,136 6,718 Modified
ROLL 3.1 % 18,436 3,188 Modified
MORE 3.0 % 17,524 ‐7,084
ROAD 2.7 % 16,093 ‐2,295 Modified
MOVE 2.3 % 13,448 ‐13,079
TOPS 1.7 % 10,098 ‐8,572
ROME 1.5 % 9,042 New
ROSE 0.4 % 2,326 ‐2,524 Modified
TOSS 0.3 % 1,910 New
TOTAL 100.0 % 586,424 79,740 ‐
Brand Unit Share Volume Varia�on
SOLO 15.6 % 300 154 Modified
MOST 15.0 % 288 104 Modified
ROCK 11.4 % 219 25 Modified
LONG 9.6 % 184 64
SOFT 8.9 % 171 21
TONE 6.3 % 120 34
LOCK 6.0 % 115 43 Modified
LOOP 4.6 % 88 ‐30
SOLID 3.8 % 72 23
SONIC 3.3 % 64 10
ROLL 3.3 % 62 16 Modified
ROAD 3.0 % 58 ‐8 Modified
MOVE 2.8 % 53 ‐37
MORE 2.0 % 39 ‐15
TOPS 1.8 % 34 ‐28
ROME 1.2 % 22 New
ROSE 0.7 % 14 ‐15 Modified
TOSS 0.6 % 11 New
TOTAL 100.0 % 1,918 359 ‐
Brand Characteris�cs
The table below lists the physical a�ributes of marketed brands,
as well as their price and es�mated unit cost, both in $.
51. Brand Launched in Features (1) Design (2) Ba�ery (3)
Display (4) Power (5) Price Base Cost ($) Base Cost (%Price)
LOCK Period 0 9 7 35 17 26 180 83 44 %
LONG Period 3 7 8 48 26 62 301 140 45 %
LOOP Period 0 11 8 52 24 64 415 145 33 %
MORE Period 4 14 8 65 33 84 461 182 38 %
MOST Period 0 9 7 36 19 35 199 96 46 %
MOVE Period 0 7 8 45 24 51 264 125 45 %
ROAD Period 4 8 8 48 26 62 289 141 47 %
ROCK Period 0 16 8 78 33 80 505 180 34 %
ROLL Period 0 14 5 79 33 86 300 177 57 %
ROME Period 5 11 8 53 24 64 415 145 33 %
ROSE Period 3 9 6 34 15 26 179 78 42 %
SOFT Period 0 9 7 35 15 26 202 81 39 %
SOLID Period 4 15 8 70 31 78 480 174 35 %
SOLO Period 0 8 8 48 28 72 300 155 50 %
SONIC Period 4 11 8 52 24 64 485 145 29 %
TONE Period 0 11 9 53 26 65 420 151 35 %
TOPS Period 0 7 8 48 23 53 305 127 40 %
TOSS Period 5 13 6 34 15 26 180 80 43 %
(1) Features (Number of): From 5 To 20. (2) Design (Index): Fr
om 3 To 10. (3) Ba�ery (Hour): From 24 To 96. (4) Display (In
ch): From 4 To 40. (5) Power (Gflops): From 5 To 100.
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Market Report – Vodites Market – Period 5
This report provides general informa�on on the 7 Vodites brand
52. s marketed in Period 5.
Brands introduced this period: SEED, MEOW, REACH
Brand Retail Sales & Volume
The two tables below show the marketed brand retail sales (in th
ousands of $) and the volume (in thousands of units), sorted in d
ecreasing order. Shares of market
in value and in unit are also provided
Brand Value Share Retail Sales Varia�on
MEET 37.7 % 36,156 ‐3,863
SEGA 23.0 % 22,024 4,804
TERM 9.6 % 9,041 2,483
SEED 8.9 % 8,374 New
MEOW 8.8 % 8,286 New
LEAN 6.8 % 6,497 1,572
REACH 5.2 % 4,898 New
TOTAL 100.0 % 95,275 4,995 ‐
Brand Unit Share Volume Varia�on
MEET 34.7 % 73 ‐2
SEGA 21.4 % 45 11
TERM 10.6 % 22 3
MEOW 10.4 % 22 New
SEED 10.0 % 21 New
LEAN 6.8 % 14 2
REACH 6.1 % 13 New
TOTAL 100.0 % 210 14 ‐
Brand Characteris�cs
The table below lists the physical a�ributes of marketed brands,
as well as their price and es�mated unit cost, both in $.
Brand Launched in Resolu�on (1) Energy (2) Carbon (3)
Connec�vity (4) Apps (5) Price Base Cost ($)
Base Cost (%Price)
53. LEAN Period 4 65 55 34 6 57 471 252 51 %
MEET Period 3 75 44 30 8 48 506 272 52 %
MEOW Period 5 55 60 21 6 45 400 259 62 %
REACH Period 5 55 64 22 6 43 405 262 62 %
SEED Period 5 57 66 22 6 45 420 268 61 %
SEGA Period 3 72 48 31 7 48 500 262 50 %
TERM Period 4 51 61 23 5 41 430 241 54 %
(1) Resolu�on (1) (L/mm): From 20 To 100. (2) Energy (2) (BC
/Wh): From 10 To 100. (3) Carbon (3) (Kg): From 5 To 50. (4)
Connec�vity (4) (Index): From 3 To 10. (5) Apps (Number
of): From 5 To 100.
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Consumer Survey – Sonites Market – Period 5
This survey ques�onnaire has been administered to 3,000 indivi
duals during Period 5. It gives brand awareness, purchase inten
�ons and shopping habit data for
each consumer segment in the Sonites market
Brand Awareness
The brand awareness figures in the chart and table below repres
ent the propor�on of individuals who have unaided recall of a b
rand name. The report gives the
informa�on for each brand currently on the market, in total and
by consumer segment.
54. Average Brand Awareness (in %)
Brand Awareness by Consumer Segment
Brand Firm Explorers Shoppers Professionals High Earners
Savers
LOCK L 36 % 39 % 33 % 38 % 50 %
LONG L 22 % 44 % 17 % 22 % 17 %
LOOP L 59 % 52 % 62 % 78 % 39 %
MORE M 26 % 21 % 22 % 65 % 19 %
MOST M 47 % 53 % 37 % 45 % 67 %
MOVE M 60 % 71 % 51 % 56 % 38 %
ROAD R 19 % 29 % 14 % 17 % 14 %
ROCK R 59 % 48 % 66 % 63 % 37 %
ROLL R 56 % 44 % 53 % 53 % 33 %
ROME R 12 % 8 % 9 % 25 % 8 %
ROSE R 14 % 16 % 12 % 15 % 29 %
SOFT S 53 % 60 % 48 % 55 % 70 %
SOLID S 19 % 15 % 36 % 19 % 13 %
SOLO S 64 % 72 % 54 % 60 % 51 %
SONIC S 19 % 16 % 16 % 54 % 14 %
TONE T 61 % 52 % 58 % 78 % 45 %
TOPS T 53 % 56 % 49 % 52 % 37 %
TOSS T 10 % 10 % 9 % 11 % 21 %
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Purchase Inten�ons
The purchase inten�ons figures in the chart and table below rep
55. resent the propor�on of individuals who would select a brand as
their first choice, if they were
buying within a year. The report gives the informa�on for each
brand currently on the market, in total and by consumer segment
. Please note that these figures
correspond to the situa�on of the period when the study is done
and does not necessarily represent purchase inten�ons for the f
ollowing year.
Average Purchase Inten�ons
Purchase Inten�ons by Consumer Segment
Brand Firm Explorers Shoppers Professionals High Earners
Savers
LOCK L 0.9 % 0.3 % 0.1 % 0.0 % 22.9 %
LONG L 2.9 % 22.9 % 0.1 % 0.1 % 0.1 %
LOOP L 5.9 % 0.3 % 2.6 % 26.8 % 0.1 %
MORE M 2.9 % 0.1 % 7.7 % 1.9 % 0.0 %
MOST M 1.3 % 0.4 % 0.1 % 0.1 % 43.3 %
MOVE M 5.0 % 6.8 % 0.2 % 0.1 % 0.5 %
ROAD R 2.0 % 7.9 % 0.0 % 0.0 % 0.1 %
ROCK R 4.8 % 0.2 % 54.8 % 1.1 % 0.1 %
ROLL R 43.1 % 0.5 % 0.7 % 0.4 % 0.1 %
ROME R 1.4 % 0.0 % 0.3 % 11.0 % 0.0 %
ROSE R 0.3 % 0.1 % 0.0 % 0.0 % 3.6 %
SOFT S 1.3 % 0.4 % 0.1 % 0.1 % 26.2 %
SOLID S 1.7 % 0.1 % 30.0 % 0.3 % 0.0 %
SOLO S 10.0 % 56.8 % 0.2 % 0.2 % 0.4 %
SONIC S 1.6 % 0.1 % 0.6 % 24.3 % 0.0 %
TONE T 5.3 % 0.2 % 2.3 % 33.3 % 0.1 %
TOPS T 9.3 % 2.8 % 0.2 % 0.2 % 0.3 %
TOSS T 0.2 % 0.1 % 0.0 % 0.0 % 2.2 %
TOTAL ‐ 100 % 100 % 100 % 100 % 100 %
Shopping Habits
56. The shopping habit data in the chart below represent, for each c
hannel, the propor�on of individuals who would choose that ch
annel when shopping for a Sonites.
Consumer Panel – Sonites Market – Period 5
The consumer panel study shown below is based on a sample gr
oup of over 500 consumers whose buying behavior is believed t
o be representa�ve of the en�re
Sonites market. It provides market shares by consumer segment
as well as industry sales in this product category
Market Shares (Based on units sold)
The market shares figures in the chart and table below represent
the propor�on of individuals who have purchased a given bran
d during Period 5. The report gives
the informa�on for each brand currently on the market, in total
and by consumer segment
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Total Market Shares (%Unit)
Market Shares by Consumer Segment (%Unit)
Brand Firm Explorers Shoppers Professionals High Earners
Savers
LOCK L 0.5 % 0.2 % 0.1 % 0.0 % 18.9 %
LONG L 3.9 % 30.1 % 0.1 % 0.1 % 0.1 %
LOOP L 6.4 % 0.3 % 2.5 % 26.4 % 0.1 %
57. MORE M 3.6 % 0.1 % 8.5 % 2.1 % 0.0 %
MOST M 1.1 % 0.4 % 0.1 % 0.1 % 47.5 %
MOVE M 5.4 % 7.1 % 0.2 % 0.1 % 0.5 %
ROAD R 2.4 % 9.2 % 0.0 % 0.0 % 0.1 %
ROCK R 6.2 % 0.2 % 62.9 % 1.3 % 0.1 %
ROLL R 39.5 % 0.4 % 0.5 % 0.3 % 0.1 %
ROME R 1.1 % 0.0 % 0.2 % 7.8 % 0.0 %
ROSE R 0.1 % 0.1 % 0.0 % 0.0 % 2.3 %
SOFT S 1.1 % 0.4 % 0.1 % 0.1 % 27.8 %
SOLID S 1.4 % 0.1 % 21.2 % 0.2 % 0.0 %
SOLO S 8.7 % 48.3 % 0.2 % 0.2 % 0.3 %
SONIC S 1.7 % 0.1 % 0.6 % 22.7 % 0.0 %
TONE T 6.6 % 0.2 % 2.6 % 38.5 % 0.1 %
TOPS T 10.0 % 2.9 % 0.2 % 0.2 % 0.3 %
TOSS T 0.1 % 0.1 % 0.0 % 0.0 % 1.8 %
TOTAL ‐ 100 % 100 % 100 % 100 % 100 %
Industry Volume (based on units sold)
The charts below give the unit product category sales by consu
mer segment and in total. The rela�ve sizes of the 5 consumer s
egments are provided as well.
Unit Sales by Consumer Segment in thousands of units
Rela�ve Consumer Segment Sizes
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Consumer Survey – Vodites Market – Period 5
This survey ques�onnaire has been administered to 3,000 indivi
58. duals during Period 5. It gives brand awareness, purchase inten
�ons and shopping habit data for
each consumer segment in the Vodites market
Brand Awareness
The brand awareness figures in the chart and table below repres
ent the propor�on of individuals who have unaided recall of a b
rand name. The report gives the
informa�on for each brand currently on the market, in total and
by consumer segment.
Average Brand Awareness (in %)
Brand Awareness by Consumer Segment
Brand Firm Innovators Adopters Followers
LEAN L 15 % 23 % 17 %
MEET M 63 % 36 % 50 %
MEOW M 14 % 12 % 31 %
REACH R 11 % 9 % 22 %
SEED S 15 % 12 % 34 %
SEGA S 50 % 26 % 30 %
TERM T 19 % 17 % 44 %
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Purchase Inten�ons
The purchase inten�ons figures in the chart and table below rep
resent the propor�on of individuals who would select a brand as
59. their first choice, if they were
buying within a year. The report gives the informa�on for each
brand currently on the market, in total and by consumer segment
. Please note that these figures
correspond to the situa�on of the period when the study is done
and does not necessarily represent purchase inten�ons for the f
ollowing year.
Average Purchase Inten�ons
Purchase Inten�ons by Consumer Segment
Brand Firm Innovators Adopters Followers
LEAN L 1.7 % 17.2 % 8.8 %
MEET M 53.4 % 35.8 % 6.6 %
MEOW M 1.0 % 7.2 % 20.8 %
REACH R 1.3 % 7.2 % 14.1 %
SEED S 1.6 % 4.8 % 22.4 %
SEGA S 40.1 % 23.4 % 4.4 %
TERM T 0.9 % 4.3 % 22.9 %
TOTAL ‐ 100 % 100 % 100 %
Shopping Habits
The shopping habit data
in the chart below represent, for each channel, the propor�on of
individuals who would choose that channel when shopping for a
Vodites.
Consumer Panel – Vodites Market – Period 5
The consumer panel study shown below is based on a sample gr
oup of over 500 consumers whose buying behavior is believed t
o be representa�ve of the en�re
Vodites market. It provides market shares by consumer segment
as well as industry sales in this product category
60. Market Shares (Based on units sold)
The market shares figures in the chart and table below represent
the propor�on of individuals who have purchased a given bran
d during Period 5. The report gives
the informa�on for each brand currently on the market, in total
and by consumer segment
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Total Market Shares (%Unit)
Market Shares by Consumer Segment (%Unit)
Brand Firm Innovators Adopters Followers
LEAN L 1.0 % 11.9 % 6.0 %
MEET M 57.4 % 43.0 % 7.4 %
MEOW M 0.8 % 6.8 % 22.2 %
REACH R 0.7 % 5.1 % 11.5 %
SEED S 1.2 % 4.4 % 23.3 %
SEGA S 38.1 % 24.6 % 4.2 %
TERM T 0.7 % 4.2 % 25.4 %
TOTAL ‐ 100 % 100 % 100 %
Industry Volume (based on units sold)
The charts below give the unit product category sales by consu
mer segment and in total. The rela�ve sizes of the 3 consumer s
egments are provided as well.
Unit Sales by Consumer Segment in thousands of units
61. Rela�ve Consumer Segment Sizes
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Distribu�on Panel – Sonites Market – Period 5
The distribu�on panel provides con�nuous tracking of
product sales to consumers, based on informa�on gathered
at the retail point‐of‐sale. Informa�on is
primarily gathered from scanning cash‐registers with supplemen
tary store audits. Our read represents sales in about 35,000 retai
l outlets in the Markstrat world.
This report gives market shares and coverage data, by distribu�
on channel.
Sales and Market Shares by Channel
The table and charts below provide the market shares, based on
units sold, by channel for each brand currently on the market. T
hey also give the unit product
category sales by channel and in total. The rela�ve sizes of the
channel are provided as well.
Market Shares by Channel (%Unit)
Brand Firm Specialty stores Mass Merch. Online Stores
LOCK L 2 % 11 % 4 %
LONG L 10 % 9 % 10 %
LOOP L 6 % 2 % 6 %
MORE M 3 % 1 % 3 %
MOST M 6 % 27 % 10 %
62. MOVE M 3 % 2 % 3 %
ROAD R 3 % 3 % 3 %
ROCK R 16 % 5 % 15 %
ROLL R 6 % 1 % 3 %
ROME R 2 % 1 % 2 %
ROSE R 0 % 1 % 1 %
SOFT S 4 % 16 % 6 %
SOLID S 5 % 2 % 5 %
SOLO S 17 % 15 % 15 %
SONIC S 5 % 1 % 5 %
TONE T 8 % 3 % 9 %
TOPS T 2 % 1 % 2 %
TOSS T 0 % 1 % 0 %
TOTAL ‐ 100 % 100 % 100 %
Unit Sales by Channel in thousands of units
Rela�ve Channel Sizes (%Units Sold)
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Distribu�on Coverage
The distribu�on coverage figures in the charts and table below
represent the propor�on of stores who carry a given brand. The
report gives the informa�on for
each brand currently on the market. The number of outlets in ea
ch distribu�on channel is provided as well.
Distribu�on Coverage by Channel (%Stores)
63. Brand Firm Specialty stores Mass Merch. Online Stores
LOCK L 17 % 31 % 26 %
LONG L 39 % 31 % 39 %
LOOP L 44 % 23 % 45 %
MORE M 50 % 29 % 50 %
MOST M 26 % 39 % 29 %
MOVE M 35 % 28 % 32 %
ROAD R 38 % 29 % 38 %
ROCK R 48 % 27 % 44 %
ROLL R 39 % 11 % 29 %
ROME R 34 % 17 % 32 %
ROSE R 18 % 27 % 20 %
SOFT S 29 % 40 % 33 %
SOLID S 45 % 22 % 43 %
SOLO S 47 % 37 % 43 %
SONIC S 43 % 23 % 42 %
TONE T 49 % 33 % 53 %
TOPS T 38 % 28 % 39 %
TOSS T 24 % 36 % 29 %
Number of outlets in each Channel
Rela�ve Channel Sizes (%Outlet)
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Distribu�on Panel – Vodites Market – Period 5
The distribu�on panel provides con�nuous tracking of
product sales to consumers, based on informa�on gathered
at the retail point‐of‐sale. Informa�on is
64. primarily gathered from scanning cash‐registers with supplemen
tary store audits. Our read represents sales in about 35,000 retai
l outlets in the Markstrat world.
This report gives market shares and coverage data, by distribu�
on channel.
Sales and Market Shares by Channel
The table and charts below provide the market shares, based on
units sold, by channel for each brand currently on the market. T
hey also give the unit product
category sales by channel and in total. The rela�ve sizes of the
channel are provided as well.
Market Shares by Channel (%Unit)
Brand Firm Specialty stores Mass Merch. Online Stores
LEAN L 7 % 6 % 7 %
MEET M 44 % 19 % 29 %
MEOW M 6 % 18 % 13 %
REACH R 4 % 10 % 8 %
SEED S 6 % 18 % 13 %
SEGA S 28 % 10 % 17 %
TERM T 6 % 19 % 13 %
TOTAL ‐ 100 % 100 % 100 %
Unit Sales by Channel in thousands of units
Rela�ve Channel Sizes (%Units Sold)
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65. Distribu�on Coverage
The distribu�on coverage figures in the charts and table below
represent the propor�on of stores who carry a given brand. The
report gives the informa�on for
each brand currently on the market. The number of outlets in ea
ch distribu�on channel is provided as well.
Distribu�on Coverage by Channel (%Stores)
Brand Firm Specialty stores Mass Merch. Online Stores
LEAN L 30 % 21 % 27 %
MEET M 52 % 28 % 39 %
MEOW M 35 % 50 % 46 %
REACH R 25 % 38 % 34 %
SEED S 34 % 49 % 44 %
SEGA S 49 % 24 % 35 %
TERM T 38 % 53 % 48 %
Number of outlets in each Channel
Rela�ve Channel Sizes (%Outlet)
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Seman�c Scales – Sonites Market – Period 5
The seman�c scales study provides data based on a seman�c di
fferen�al ques�onnaire administered to 600 individuals. Severa
l seman�c scales corresponding to
the Sonites physical a�ributes were presented to the respondent
66. s. The figure below shows a sample scale for Power.
Several crucial informa�on are derived from these ques�onnair
es: brand percep�ons, ideal value along each scale, ideal value
evolu�on, brand maps.
Brand percep�ons
Respondents are asked to rate each brand according to the way t
hey perceive the brand on each characteris�c. The reported resu
lts are summarized in the table
below, using the mean value for each brand.
Brand Firm Features Design Ba�ery Display Power Price
LOCK L 2.5 3.9 1.9 3.0 2.1 2.0
LONG L 1.7 5.7 2.9 4.7 4.6 3.0
LOOP L 3.5 5.5 3.4 4.5 4.7 5.6
MORE M 4.7 5.7 4.5 5.9 5.2 5.8
MOST M 2.5 4.2 1.9 3.1 2.4 2.1
MOVE M 2.0 5.3 2.9 4.3 4.1 2.8
ROAD R 2.0 5.3 2.9 4.7 4.4 2.8
ROCK R 5.5 5.2 5.6 5.8 5.5 6.1
ROLL R 4.1 3.5 4.8 5.7 5.6 4.6
ROME R 3.3 5.7 3.3 4.4 4.6 5.4
ROSE R 2.5 3.2 1.8 2.7 2.1 2.1
SOFT S 2.3 4.3 2.0 2.6 2.3 2.1
SOLID S 5.1 5.7 4.9 5.6 5.7 6.0
SOLO S 2.0 5.7 2.9 4.8 4.9 3.0
SONIC S 3.3 5.7 3.2 4.4 4.6 5.8
TONE T 3.4 5.8 3.4 4.8 4.5 5.7
TOPS T 1.9 4.9 2.8 4.4 4.2 3.6
TOSS T 4.3 2.9 1.8 2.5 2.2 1.9
Ideal Values
Respondents are also asked to indicate their preferred (also call
ed “Ideal”) value on each scale. The reported results are summa
rized in the table below, using the
67. mean value for each segment.
Segment Features Design Ba�ery Display Power Price
Explorers 4.3 2.7 5.3 5.7 5.8 4.1
Shoppers 2.2 5.2 3.0 4.8 4.8 2.9
Professionals 4.6 5.3 4.8 5.7 5.7 6.1
High Earners 3.2 5.7 3.3 4.0 4.6 5.7
Savers 2.7 4.0 1.9 3.2 2.4 2.1
Importance of characteris�cs
Finally, respondents are asked to rate the importance of
each characteris�c in their purchasing decision. Although
consumer segments differ on the exact
importance ra�ngs a�ributed to the characteris�cs, they tend t
o agree on the ranking of the scales, i.e. their “rela�ve” importa
nce. This is why only average value
are reported on the chart below. Ra�ngs are given on a scale fro
m 1 (not important) to 10 (very important).
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Brand Maps
Maps represen�ng consumers’ percep�ons based on the seman
�c scales can be obtained for each pair of a�ributes. Five maps
are provided below. We invite you
to export data into Excel and draw addi�onal maps if needed
69. Savers Period 3 2.6 3.9 1.8 2.9 2.3 2.1
Savers Period 4 2.7 4.0 1.9 3.0 2.3 2.1
Savers Period 5 2.7 4.0 1.9 3.2 2.4 2.1
Shoppers Period 3 2.0 5.2 3.0 4.6 4.6 3.0
Shoppers Period 4 2.0 5.2 3.0 4.7 4.8 3.0
Shoppers Period 5 2.2 5.2 3.0 4.8 4.8 2.9
Online Tool ‐ Addi�onal Charts
The most important charts and graph of the Seman�c Scales stu
dy are given in the above report.But an online tool provides add
i�onal charts that will allow you
to:
‐ Monitor the evolu�on of ideal values in a visual way
‐ Design Powerful R&D projects as described in sec�on VI of t
he Markstrat Handbook
Access Addi�onal Charts
http://markstrat.stratxsimulations.com/Web%20-
%20InstructorTools/MSWebMultiFunctionTool/MultiFunctionT
ool.aspx?params=BrfGHxGjf!M0Owk8Tc88lO0eGjN!0wS0!GPF
NOmYlgamzbwWl3FrwSlHjxGHxwJ_TI8Il*0Ozbw8lCHOzbw_
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Seman�c Scales – Vodites Market – Period 5
The seman�c scales study provides data based on a seman�c di
fferen�al ques�onnaire administered to 600 individuals. Severa
l seman�c scales corresponding to
70. the Vodites physical a�ributes were presented to the respondent
s. The figure below shows a sample scale for Power.
Several crucial informa�on are derived from these ques�onnair
es: brand percep�ons, ideal value along each scale, ideal value
evolu�on, brand maps.
Brand percep�ons
Respondents are asked to rate each brand according to the way t
hey perceive the brand on each characteris�c. The reported resu
lts are summarized in the table
below, using the mean value for each brand.
Brand Firm Resolu�on Energy Carbon Connec�vity Apps Price
LEAN L 4.5 4.0 5.0 3.5 4.4 5.4
MEET M 5.2 2.9 4.3 5.1 3.6 6.1
MEOW M 3.5 4.6 3.0 3.3 3.4 4.9
REACH R 3.5 5.0 3.2 3.5 3.3 5.4
SEED S 3.7 5.1 3.2 3.6 3.4 5.1
SEGA S 5.0 3.2 4.6 4.8 3.6 6.1
TERM T 3.2 4.4 3.3 2.9 3.2 5.1
Ideal Values
Respondents are also asked to indicate their preferred (also call
ed “Ideal”) value on each scale. The reported results are summa
rized in the table below, using the
mean value for each segment.
Segment Resolu�on Energy Carbon Connec�vity Apps Price
Innovators 5.3 3.6 4.1 5.1 3.8 5.9
Adopters 4.7 4.2 4.8 4.4 4.4 5.2
Followers 3.7 4.6 3.1 3.5 3.5 4.6
Importance of characteris�cs
Finally, respondents are asked to rate the importance of
each characteris�c in their purchasing decision. Although
71. consumer segments differ on the exact
importance ra�ngs a�ributed to the characteris�cs, they tend t
o agree on the ranking of the scales, i.e. their “rela�ve” importa
nce. This is why only average value
are reported on the chart below. Ra�ngs are given on a scale fro
m 1 (not important) to 10 (very important).
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Brand Maps
Maps represen�ng consumers’ percep�ons based on the seman
�c scales can be obtained for each pair of a�ributes. Five maps
are provided below. We invite you
to export data into Excel and draw addi�onal maps if needed
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Ideal Value Evolu�on
This study monitors the evolu�on of consumer needs over �me.
The preferred values on each scale over the past (3 years maxi
mum) are recorded in the table
below, for each consumer segment.
Segment Period Resolu�on Energy Carbon Connec�vity Apps
Price
Adopters Period 3 4.5 4.1 4.9 4.0 4.3 5.4
Adopters Period 4 4.6 4.1 4.8 4.2 4.4 5.3
Adopters Period 5 4.7 4.2 4.8 4.4 4.4 5.2
Followers Period 3 3.6 4.6 3.3 3.4 3.4 4.7
Followers Period 4 3.6 4.6 3.2 3.4 3.4 4.6
Followers Period 5 3.7 4.6 3.1 3.5 3.5 4.6
Innovators Period 3 5.1 3.3 4.3 4.9 3.7 6.2
Innovators Period 4 5.2 3.4 4.2 5.0 3.8 6.1
Innovators Period 5 5.3 3.6 4.1 5.1 3.8 5.9
Online Tool ‐ Addi�onal Charts
The most important charts and graph of the Seman�c Scales stu
dy are given in the above report.But an online tool provides add
i�onal charts that will allow you
to:
‐ Monitor the evolu�on of ideal values in a visual way
‐ Design Powerful R&D projects as described in sec�on VI of t
he Markstrat Handbook
Access Addi�onal Charts
http://markstrat.stratxsimulations.com/Web%20-
%20InstructorTools/MSWebMultiFunctionTool/MultiFunctionT
ool.aspx?params=BrfGHxGjf!M0Owk8Tc88lO0eGjN!0wS0!GPF
73. NOmYlgamzbwJl3FrwSlHjxGHxwJ_TI8Il*0Ozbw8lCHOzbw_
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Compe��ve Adver�sing Es�mates – Sonites Market –
Period 5
Es�mates of compe��ve adver�sing budgets are given by firm
, by brand and by consumer segments. All brands marketed in th
e current period are included in the
study.
Es�mated Total Adver�sing Expenditures (in million dollars) –
By Firm and by Consumer Segment
Es�mated Brand Adver�sing Expenditures (in thousand dollars
) – Total and by Consumer Segment
Brand Explorers Shoppers Professionals High Earners Savers
TOTAL
MORE 490 490 490 3,360 490 5,320
SOLO 710 2,940 470 470 470 5,060
MOVE 440 2,970 440 440 440 4,730
SOFT 380 380 380 380 2,880 4,400
LOOP 380 380 380 2,770 380 4,290
MOST 380 380 380 380 2,690 4,210
LONG 380 2,670 380 380 380 4,190
SONIC 380 380 380 2,550 380 4,070
SOLID 380 380 2,550 380 380 4,070
TONE 310 310 310 2,200 310 3,440
TOSS 300 300 300 300 2,220 3,420
ROCK 310 310 1,910 460 310 3,300
74. LOCK 290 290 290 290 1,940 3,100
ROAD 460 1,810 260 260 260 3,050
ROME 520 260 260 1,710 260 3,010
TOPS 260 1,730 260 260 260 2,770
ROSE 210 470 210 210 1,460 2,560
ROLL 900 260 260 160 160 1,740
TOTAL 7,480 16,710 9,910 16,960 15,670 66,730
Es�mated Communica�on Dimensions and Message Quality
The table below provides an es�mate of the dimensions that hav
e been used in brand communica�on, as well as an es�mate of t
he message quality. Higher
message quali�es are obtained with higher adver�sing research
budgets.
Brand Firm Communica�on Dimensions Message Quality
LOCK L PPower & Display Excellent
LOOP L Price & PPower Good
LONG L Price Good
MOST M Price & PPower Good
MOVE M Price & PPower Excellent
MORE M Price & PPower Excellent
ROCK R PPower & Display Poor
ROLL R PPower & Display Poor
ROME R
ROSE R Price & Display Poor
ROAD R Design & PPower Poor
SOFT S Price & PPower Good
SOLO S Price & PPower Excellent
SONIC S Price & PPower Average
SOLID S Price & PPower Average
TONE T Price & Design Poor
TOPS T Design & PPower Poor
TOSS T Design & Display Excellent
Compe��ve Commercial Team Size Es�mates –
75. Sonites Market – Period 5
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Es�mates of compe��ve commercial team size are given by fir
m, by brand and by distribu�on channel. The breakdown by bra
nd and channel is also provided. All
brands marketed in the current period are included in the study.
Es�mated Commercial Team Size (in full‐�me equivalent) –
By Firm and by Distribu�on Channel
Es�mated Brand Commercial Team Sizes (in commercial peopl
e equivalent) – Total and by Distribu�on Channel
Brand Specialty stores Mass Merch. Online Stores TOTAL
TONE 62 47 40 149
MORE 58 34 29 121
ROCK 58 35 27 120
SOLO 44 46 20 110
LOOP 49 27 27 103
SOLID 51 25 24 100
SOFT 23 62 15 100
LONG 38 42 20 100
TOPS 35 35 20 90
SONIC 43 25 22 90
ROAD 35 35 20 90
TOSS 18 50 12 80
MOST 19 50 11 80
MOVE 28 30 13 71
76. LOCK 12 40 11 63
ROME 30 17 15 62
ROLL 42 7 11 60
ROSE 12 31 7 50
TOTAL 657 638 344 1,639
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Compe��ve Adver�sing Es�mates – Vodites Market –
Period 5
Es�mates of compe��ve adver�sing budgets are given by firm
, by brand and by consumer segments. All brands marketed in th
e current period are included in the
study.
Es�mated Total Adver�sing Expenditures (in million dollars) –
By Firm and by Consumer Segment
Es�mated Brand Adver�sing Expenditures (in thousand dollars
) – Total and by Consumer Segment
Brand Innovators Adopters Followers TOTAL
MEET 3,680 1,380 880 5,940
SEED 760 760 3,520 5,040
SEGA 2,470 950 580 4,000
MEOW 550 550 2,700 3,800
REACH 620 620 2,310 3,550
LEAN 490 1,900 870 3,260
TERM 480 480 2,210 3,170
TOTAL 9,050 6,640 13,070 28,760
77. Es�mated Communica�on Dimensions and Message Quality
The table below provides an es�mate of the dimensions that hav
e been used in brand communica�on, as well as an es�mate of t
he message quality. Higher
message quali�es are obtained with higher adver�sing research
budgets.
Brand Firm Communica�on Dimensions Message Quality
LEAN L
MEET M Connec�vity & Price Excellent
MEOW M Connec�vity & Price Good
REACH R
SEGA S
SEED S Connec�vity & Price Excellent
TERM T Energy & Price Poor
Compe��ve Commercial Team Size Es�mates –
Vodites Market – Period 5
Es�mates of compe��ve commercial team size are given by fir
m, by brand and by distribu�on channel. The breakdown by bra
nd and channel is also provided. All
brands marketed in the current period are included in the study.
Es�mated Commercial Team Size (in full‐�me equivalent) –
By Firm and by Distribu�on Channel
Es�mated Brand Commercial Team Sizes (in commercial peopl
e equivalent) – Total and by Distribu�on Channel
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Brand Specialty stores Mass Merch. Online Stores TOTAL
TERM 40 50 30 120
MEET 78 13 16 107
SEGA 73 12 15 100
MEOW 33 42 25 100
SEED 30 38 22 90
REACH 20 25 15 60
LEAN 28 11 11 50
TOTAL 302 191 134 627
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Adver�sing Experiment – Sonites Market – Period 5
This experiment is conducted by increasing adver�sing budgets
in a selected regional market. The results of the study are used t
o project the level of awareness
and the market share that would have been achieved na�onwide
by each brand with the same increase in adver�sing, and if co
mpe��ve ac�ons have remained
unchanged. The impact on brand contribu�on is provided as wel
l.
The results below would have been achieved by a given brand if
its adver�sing budget had been increased by 20% and if compe
��ve ac�ons had remained
79. unchanged.
Expected Change in Contribu�on (in K$)
Expected Change in Brand Awareness
Brand Explorers Shoppers Professionals High Earners Savers
TONE 0.3 % 0.2 % 0.2 % 0.9 % 0.2 %
TOPS 0.3 % 1.0 % 0.2 % 0.4 % 0.2 %
TOSS 0.6 % 0.3 % 0.3 % 0.7 % 2.1 %
Expected Change in unit Market Share (%U)
Brand Explorers Shoppers Professionals High Earners Savers
TONE 0.4 % 0.1 % 0.0 % 0.9 % 0.0 %
TOPS ‐0.3 % 0.4 % 0.0 % 0.0 % 0.0 %
TOSS 0.0 % 0.0 % 0.0 % 0.0 % 0.1 %
Commercial Team Experiment – Sonites Market – Period 5
This experiment is set up by increasing the number of commerci
al people per channel in a selected regional market. The results
of the study are used to project
the addi�onal number of distributors and the market share that
would have been achieved na�onwide by each brand with the sa
me increase in commercial team
and if compe��ve ac�ons have remained unchanged. The impa
ct on brand contribu�on is provided as well.
The results below would have been achieved if the number of sa
lespeople had been increased by 10 in each channel and if comp
e��ve ac�ons had remained
unchanged.
Expected Change in Contribu�on (in K$)
Expected Change in Number of Distributors
80. Brand Specialty stores Mass Merch. Online Stores
TONE 0 36 0
TOPS 93 39 16
TOSS 96 47 19
Expected Change in unit Market Share (%U)
Brand Specialty stores Mass Merch. Online Stores
TONE 0.0 % 0.1 % 0.0 %
TOPS 0.1 % 0.0 % 0.1 %
TOSS 0.0 % 0.0 % 0.0 %
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Adver�sing Experiment – Vodites Market – Period 5
This experiment is conducted by increasing adver�sing budgets
in a selected regional market. The results of the study are used t
o project the level of awareness
and the market share that would have been achieved na�onwide
by each brand with the same increase in adver�sing, and if co
mpe��ve ac�ons have remained
unchanged. The impact on brand contribu�on is provided as wel
l.
The results below would have been achieved by a given brand if
its adver�sing budget had been increased by 20% and if compe
��ve ac�ons had remained
81. unchanged.
Expected Change in Contribu�on (in K$)
Expected Change in Brand Awareness
Brand Innovators Adopters Followers
TERM 0.9 % 0.5 % 2.3 %
Expected Change in unit Market Share (%U)
Brand Innovators Adopters Followers
TERM 0.0 % 0.3 % 2.1 %
Commercial Team Experiment – Vodites Market – Period 5
This experiment is set up by increasing the number of commerci
al people per channel in a selected regional market. The results
of the study are used to project
the addi�onal number of distributors and the market share that
would have been achieved na�onwide by each brand with the sa
me increase in commercial team
and if compe��ve ac�ons have remained unchanged. The impa
ct on brand contribu�on is provided as well.
The results below would have been achieved if the number of sa
lespeople had been increased by 10 in each channel and if comp
e��ve ac�ons had remained
unchanged.
Expected Change in Contribu�on (in K$)
Expected Change in Number of Distributors
Brand Specialty stores Mass Merch. Online Stores
TERM 84 37 12
82. Expected Change in unit Market Share (%U)
Brand Specialty stores Mass Merch. Online Stores
TERM 0.2 % 0.4 % 0.5 %
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Market Forecast – Sonites Market – Period 5
This study provides es�mates of the expected market size in on
e period and in five periods. Results are given for the whole mar
ket and are also broken down by
consumer segment.
Total Market Size
The charts below show the actual market size this period and th
e expected market size in one and five periods. Market growth r
ates are reported as well. Market
sizes are given in thousands of units.
Market Size (in thousands of units) Market Growth rates (in %)
Market Size by Consumer Segment
The charts below show the actual market size this period and th
e expected market size in one and five periods. Results are brok
en down by segment. Rela�ve
segment size, in % of the total market size, and segment growth
rates are reported as well. Sizes are given in thousands of units.
Market size broken down by consumer segment (in thousands of
83. units)
Consumer Segment Growth Rates (in % units)
Rela�ve Consumer Segment Sizes (in % of total market size)
Current Period In Five Periods
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Market Forecast – Vodites Market – Period 5
This study provides es�mates of the expected market size in on
e period and in five periods. Results are given for the whole mar
ket and are also broken down by
consumer segment.
Total Market Size
The charts below show the actual market size this period and th
e expected market size in one and five periods. Market growth r
ates are reported as well. Market
sizes are given in thousands of units.
Market Size (in thousands of units) Market Growth rates (in %)
Market Size by Consumer Segment
The charts below show the actual market size this period and th
e expected market size in one and five periods. Results are brok
en down by segment. Rela�ve
segment size, in % of the total market size, and segment growth
84. rates are reported as well. Sizes are given in thousands of units.
Market size broken down by consumer segment (in thousands of
units)
Consumer Segment Growth Rates (in % units)
Rela�ve Consumer Segment Sizes (in % of total market size)
Current Period In Five Periods
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Conjoint Analysis – Sonites Market – Period 5
This study enables firms to es�mate the rela�ve importance of
the price and physical characteris�cs of a product category. Onl
y the three characteris�cs that are
perceived as most important are included in the study. The stud
y also provides the u�lity a�ached by consumers to varying lev
els of price and characteris�cs.
Results are broken down by consumer segment.
Rela�ve importance of price and physical characteris�cs
U�lity charts
The charts below show the u�li�es a�ached to four arbitrary le
vels in each dimension included in the study. U�li�es are meas
ured on a scale from 0 (very low
u�lity) to 1 (very high u�lity): the higher the u�lity the higher
85. the preference of consumer for the corresponding level in this d
imension. The four levels have been
chosen in the feasible range for the dimension so as to test varyi
ng levels of interest for the segment. Results are broken down b
y consumer segment.
Explorers
High Earners
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Professionals
Savers
Shoppers
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Conjoint Analysis – Vodites Market – Period 5
This study enables firms to es�mate the rela�ve importance of
86. the price and physical characteris�cs of a product category. Onl
y the three characteris�cs that are
perceived as most important are included in the study. The stud
y also provides the u�lity a�ached by consumers to varying lev
els of price and characteris�cs.
Results are broken down by consumer segment.
Rela�ve importance of price and physical characteris�cs
U�lity charts
The charts below show the u�li�es a�ached to four arbitrary le
vels in each dimension included in the study. U�li�es are meas
ured on a scale from 0 (very low
u�lity) to 1 (very high u�lity): the higher the u�lity the higher
the preference of consumer for the corresponding level in this d
imension. The four levels have been
chosen in the feasible range for the dimension so as to test varyi
ng levels of interest for the segment. Results are broken down b
y consumer segment.
Adopters
Followers
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Innovators
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Company Dashboard – Firm T – Period 4
SPI Revenues (M$) Earnings Before Taxes (M$)
Total Market Share (%$) Market Share –
Sonites & Vodites (%$)
Brand Revenues (M$) Brand Contribu�on (M$)
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Financial Report – Firm T – Period 4
The financial statements of firm T published for Period 4 have b
een prepared on December 31st, Period 4 in accordance with Int
erna�onal Financial Repor�ng
Standards (IFRS), as adopted in the Markstrat world.
Company Profit & Loss Statement
The table below shows the evolu�on of firm T financial results
in thousands of dollars, as well as the cumula�ve results since
Period 0.
88. Period 4 Period 3 Period 2 Period 1 Period 0 Cumula�ve
Revenues 43,324 78,736 70,207 64,373 52,148 308,788
Cost of goods sold ‐21,655 ‐31,274 ‐32,140 ‐33,758 ‐31,703
‐150,531
Inventory costs ‐1,034 ‐413 ‐165 ‐413 ‐313 ‐2,338
Contribu�on before marke�ng 20,636 47,048 37,901 30,203
20,131 155,920
Adver�sing expenditures ‐6,950 ‐6,185 ‐4,164 ‐4,000 ‐4,000
‐25,299
Commercial costs ‐6,400 ‐3,449 ‐1,957 ‐1,282 ‐1,224 ‐14,311
Contribu�on a�er marke�ng 7,286 37,415 31,780 24,921
14,907 116,310
Market research studies ‐827 ‐780 ‐446 ‐406 ‐245 ‐2,704
Research and development ‐1,600 ‐9,420 ‐3,250 0 0 ‐14,270
Loan reimbursed ‐1,995 ‐200 0 0 0 ‐2,195
Loan received 1,700 8,600 200 0 0 10,500
Loan interests paid ‐515 ‐440 ‐10 0 0 ‐965
Excep�onal cost or profit 0 0 0 0 0 0
Earnings before taxes 4,048 35,175 28,275 24,515 14,662
106,676
Revenues & EBT Evolu�on
Cost Evolu�on ‐ By Category (%Revenue)
Market Contribu�on
The table below shows a comparison of the net contribu�on gen
erated by the two markets where firm T is marke�ng products.
Sonites Vodites
Revenues 38,927 4,397
Cost of goods sold ‐15,306 ‐6,349
Inventory costs ‐1,034 0
Contribu�on before marke�ng 22,588 ‐1,952
Adver�sing expenditures ‐4,725 ‐2,225
Commercial costs ‐4,370 ‐2,030
89. Contribu�on a�er marke�ng 13,493 ‐6,207
Market research studies ‐448 ‐379
Research and development ‐1,600 0
Net contribu�on 11,445 ‐6,587
Revenues Net Contribu�on
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Brand contribu�on
The table below shows a comparison of the net contribu�on gen
erated by the brands marketed by firm T in Period 4.
TONE TOPS TERM
Sonites Sonites Vodites
Revenues 26,969 11,958 4,397
Cost of goods sold ‐8,733 ‐6,573 ‐6,349
Inventory holding cost ‐916 ‐118 0
Inventory disposal loss 0 0 0
Contribu�on before marke�ng 17,321 5,267 ‐1,952
Adver�sing media ‐2,500 ‐2,000 ‐2,000
Adver�sing research ‐125 ‐100 ‐225
Commercial costs ‐2,901 ‐1,469 ‐2,030
Contribu�on a�er marke�ng 11,795 1,699 ‐6,207
Revenues
Note: brands with low revenues or contribu�on (< 5% total) are
90. not shown on this chart
Contribu�on a�er Marke�ng
Marke�ng results
The sec�on below provides key marke�ng results for each of y
our marketed brands
Market Shares
TONE TOPS TERM
Sonites Sonites Vodites
Volume Market Share 5.7 % 4.1 % 13.8 %
Value Market Share 8.4 % 3.7 % 9.7 %
Volume sold
The table below provides the volume sold for each of your mark
eted brands in each of the three distribu�on channels. Sales are
given in thousands of units.
Distribu�on Coverage
The distribu�on coverage figures in the chart and table below r
epresent the propor�on of distributors who carry a given produc
t. The report gives the informa�on
for each brand currently on the market. The number of distribut
ors in each distribu�on channel is provided as well.
Specialty stores Mass Merch. Online Stores
Number of distributors 9,333 6,500 1,083
Brand prices
The table below shows the prices in $ of your marketed brands.
The Recommended Retail Price is the price that you specified in
your marke�ng mix decisions. The
Average Retail Price is the average end‐user price, taking into a
91. ccount the discount offered by distributors. Finally, the Average
Selling Price is equal to the Average
Retail Price minus the distribu�on margins.
TONE TOPS TERM
Sonites Sonites Vodites
Recommended Retail Price $ 500 $ 311 $ 360
Average Retail Price $ 483 $ 301 $ 338
Average Selling Price $ 312 $ 193 $ 227
Loans and Budget Changes
The le� table below summarizes the loans and/or budget change
s that were granted to your company by the instructor. The other
table provides the past and
future payments made by your company to reimburse the loans.
The first column shows the reimbursement of the capital borrow
ed; the second columns shows
the interests paid in the period; the third column indicates how
much capital remains to be reimbursed at the end of the period.
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Budget
increase (K$)
Budget
decrease (K$)
92. Loan capital
borrowed (K$)
Loan Dura�on
Interest rate
(%)
Period 0
Period 1
Period 2 200 1 5
Period 3 8,600 4 5
Period 4 1,700 1 5
Period 5
Period 6
Period 7
Period 8
Period 9
Period 10
Capital
reimbursed (K$)
Interest paid
(K$)
Capital
remaining (K$)
0 10 200
200 440 8,600
1,995 515 8,305
3,795 415 4,510
2,200 225 2,310
93. 2,310 115 0
6/2/2016
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Produc�on Report – Firm T – Period 4
The report below provides with informa�on on produc�on level
s and produc�on costs for each of the brands marketed in Perio
d 4.
Sales, Produc�on and Inventory
The chart below shows the units sold , the produc�on level and
inventory level for each of your brands at the end of Period 4.Al
l numbers are given in thousands
of units.
The table below provides you with addi�onal details such as pla
nned produc�on versus the actual one, and the inventory levels
at the beginning and at the end of
Period 4.All numbers are given in thousands of units.
TONE TOPS TERM
Sonites Sonites Vodites
Units sold 87 62 19
Produc�on Plan (your decision) 250 95 24
Produc�on 200 76 19
Inventory at beginning of period 0 0 0