Ateneo 6 implementation

IMPLEMENTING STRATEGIES: MANAGEMENT, MARKETING, FINANCE/ACCOUNTING, R&D, AND MIS ISSUES

There is no “perfect” strategic decision. One always has to pay a price. One always has to balance conflicting objectives, conflicting opinions, and conflicting priorities. The best strategic decision is only an approximation—and a risk -- Peter Drucker Implementing Strategies

Matching Structure with Strategy Structure largely dictates how objectives and policies will be established. Structure dictates how resources will be allocated

Basic Forms of Structure Functional Structure Groups tasks and activities by business function Divisional Structure Decentralized and organized by geography, product, customer, or process Strategic Business Unit Structure (SBU) Groups similar divisions; delegates authority and responsibility to SBU executive Matrix Structure Most complex of all designs. Depends upon both vertical and horizontal flows of authority and communication

Creating a Strategy-Supportive Culture Strategists should strive to preserve, emphasize, and build upon aspects of existing culture that support new strategies. Elements linking culture to strategy: Formal statements of philosophy, charters, etc. used for recruitment and selection, and socialization Designing of physical spaces, facades, buildings Deliberate role modeling, teaching and coaching Explicit reward and status system, promotion criteria Stories, legends, myths about key people and events What leaders pay attention to, measure and control Leader reactions to critical incidents and crises How the organization is designed and structured Organizational systems and procedures Criteria used for recruitment, selection, promotion, retirement

Marketing variables affect success or failure of strategy implementation Market Segmentation Product Positioning Marketing Issues

Subdividing of a market into distinct subsets of customers according to needs and buying habits A segment is a part of an overall market made up of customers with similar characteristics. Market Segmentation

Geographic – Region, Country, Density, Climate Demographic – Age, Family Size, Family Life Cycle, Income Occupation, Education, Religion, Race Nationality Psychographic - Social Class, Lifestyle, Personality Behavioral - Use occasion, Benefits sought, User status, Usage rate, Loyalty status, Readiness Stage, Attitude toward product Bases for Segmenting Markets

MARKET SEGMENTATION Socio-Economic Segmentation Approach

Market Segmentation 1. Protection 2. After Sun NIVEA Sun is the market leader within this segment in the UK, which has been growing rapidly. 3. Self-tan In contrast to protection and after sun, the self-tan category is concerned mostly with cosmetic appeal. Many adults use self-tan to have an all year round sun kissed glow. The Three Main Product Segments The diagram below shows the three main product segments that make up the NIVEA Sun range. As you will see, there are a variety of products in each, which can also be segmented as shown.

Market Segmentation 1. Protection It is vital that skin is adequately protected against the sun’s harmful effects. NIVEA Sun provides products that enable people to be as safe as possible. Protection is the largest segment in the sun care market with a purchase penetration of 28%. Penetration relates to the percentage of potential customers that purchase a product. NIVEA Sun is the protection segment market leader by value (i.e. more money is spent on NIVEA Sun protection products than any other sun care brand in the UK). When choosing sunscreens there are two important factors to consider: i. skin type The chart below shows segmentation by skin type. The level of protection required for each segment will vary according to generalised skin types (as seen below): Skin type applies to children, as well as adults. Children’s skin is thinner and its repair mechanism is not yet fully developed. As a result they require extra protection and sun screens that are specifically developed for their skin. ii. location NIVEA Sun provides a range of lotions and sprays targeted at different climates and to users with different skin types. Someone with fair skin may be well protected with a SPF 20 product when in England, but when in the Philippines they would need SPF 40.

Market Segmentation 03_Brand Vision A vision paints a picture of what you are trying to achieve with your brand in a simple sentence. NIVEA Sun’s vision is "To be the Number 1 brand in the UK sun care market in penetration, sales and likeability." One key way to achieve the vision is to provide innovative solutions to market needs. This has been a key success factor for NIVEA Sun. As a brand it has achieved this through continually segmenting its consumers in order to: • effectively meet consumers’ needs • identify new market opportunities.

Consumer Segmentation Segmentation has been vital to the success of NIVEA Sun and allowed the brand portfolio to grow to over 40 products, all meeting clear consumer needs. The following factors are used to develop and define the sun care segments: • Demographics - different groups of consumers behave differently (factors relate to age, gender, etc). Demographic differences relevant to NIVEA Sun include different buying behaviours between men/women and adults with children. There is a stark contrast between awareness and usage of sun care products between men (who prefer convenience) and women (who enjoy more luxurious sun care products). Similarly, adults with children are another broad segment with differing needs. Demographic segments are broad. As research shows, the level of awareness of sun care transcends income and social class. SELF-TAN SEGMENTATION The segmentation variables will differ considerably for the self-tan range of products. This is concerned primarily with providing cosmetic benefits.

Consumer Segmentation Attitudinal – this is the most important segmentation variable. Consumers’ attitudes towards sun care influences their purchases. NIVEA Sun conducts market research to understand user attitudes . This involves questionnaires using a nationally representative sample, and more intensive research with small groups, to discuss individual skin protection habits and preferences. This has identified 5 distinct groups for protection and after sun: PRIMARY SUN CARE USERS Conscientious Sun Lovers - adore sunshine and like to use a trustworthy brand with suitable protection factors. They know about sun care and use this knowledge to purchase suitable products for their skin. Naive Beauty Conscious - like to have a good sun tan. They recognise that sun protection is important but fail to understand about Sun Protection Factors (SPFs). These consumers may still be interested in the core features of a sun protection product (e.g. SPF) and be more inclined to purchase an added-value offering such as a mousse. Concerned Consumers – ‘a good tan is not important’. These consumers are conscious of the harmful effects of the sun and purchase sun protection products that are most likely to offer high sun protection factors. such as a mousse. Consumer segments were identified by analysing answers to questions about attitudes. SECONDARY SUN CARE USERS Sun Avoiders - avoid sunbathing and using sun protection when in the sun - it is seen as a chore. These are unlikely to purchase a sun care product. Through education, this segment may be convinced to protect using more easy-to apply such as sprays Careless Tanners - adore the sun but don’t protect against harmful dangers. Tanning is important to this group, not protection. They don’t worry about the long-term damage to their skin and may purchase a low SPF product, if any at all.

Consumer Segmentation The two main aspects of attitudes relate to: Usage occasion (when) – e.g. holiday, outdoor sports, gardening, working etc. This relates to the Sun Protection Factor (SPF) required, e.g. the SPF required for a holiday in Egypt differs greatly to outdoor work in the UK. This is one of the reasons why NIVEA Sun produce a wide range of sun protection from SPF 4 to 50+. Research has shown that consumers often purchase a variety of SPF’s for differing needs and occasions. This factor alone however is not an accurate means of segmenting markets. Benefit sought - protection is the primary benefit but the preference by which this is delivered will vary by segment, e.g. convenience is important to men (so they choose spray applicators). Parents want to provide maximum protection for children (high SPFs and coloured products are therefore important).

Brand Strategy The key proposition of the NIVEA Sun brand is protection. The main elements of this proposition include: • making sun care simple • educating that protection can lead to safer tanning • reinforcing the immediate protection message. NIVEA Sun follows a strategy of product development , in order to achieve its long-term objectives. This takes the form of timely new product launches to enable the brand to more closely meet the needs of different types of consumers. Some good examples of innovative launches include: spray products that are easy to apply (particularly appealing to men) a coloured formulation for children’s sun products (making application more fun) reformulation of the products to offer immediate protection. NIVEA Sun has developed ‘Long Lasting Water Resistance’ for children, a product which has increased the water resistance of sun protection from 80 minutes to 120 minutes.

Conclusion Segmentation is the tool that enables NIVEA Sun to identify different groups of customers, and provide the best possible products to meet individual requirements. The sun care market consists of different consumers with differing needs. The UK has the biggest sales of NIVEA Sun within Europe. Understanding segmentation enables NIVEA Sun to maintain a Number 1 value position in protection and after sun in the UK.

Market Segmentation – Maggi ‘A The research revealed that the market was divided into a number of segments. Chefs fitted into four main segments:

Market Segmentation Maggi ‘A Natural Choice’ combines the goodness and taste of real ingredients with time and cost saving. Target market - Maggi ‘A Natural Choice’ target was to be ‘chefs who aim to please’ . Their prime aim is to provide delicious, wholesome foods that customers enjoy. These chefs enjoy their work and have a pride in the satisfaction they give customers. They are not in business just to make money. The Maggi ‘A Natural Choice’ range has clear and easy to understand nutrition and allergy information on all packaging to help chefs understand what is in the products so they in turn can inform their customers. Two main strategies to deliver this ambition were implemented:

Product Development The research showed a sizeable demand for Segment 3 – a target for Maggi ‘A Natural Choice’ products. Brand proposition – the research defined a proposition for developing the new brand. This new proposition was to create a product with more natural qualities for ‘ chefs who aim to please ’ who want their cooking to be as fresh tasting as possible. Natural qualities would be defined in terms of taste, smell, look and texture. Nestlé’s strength in product research and development makes it possible to develop products to fit market requirements. Maggi is committed to providing cutting edge products that chefs want, e.g. products with a lower salt content. These products are high quality and easy to use. The new products need a more natural taste while at the same time offering value for money. The Maggi ‘A Natural Choice’ range is now lower in salt and made using sunflower oil. In addition, where possible the range benefits from having no added MSG, is gluten free and contains no artificial colours or flavours. The Maggi ‘A Natural Choice’ range has clear and easy to understand nutrition and allergy information on all packaging to help chefs understand what is in the products so they in turn can inform their customers. The range is aimed at a variety of chefs. For example, two Maggi ‘A Natural Choice’ products widely used in school kitchens are: multi-use tomato sauces bouillons (i.e. stock or broth for soup and sauces produced by cooking vegetables, poultry, meat or fish in water, which is then strained).

Developing schematic representations that reflect how products or services compare to competitors’ on dimensions most important to success in the industry Product Positioning based on: Customers wants Customers needs Product Positioning

STRATEGIC POSITIONING STRONG HIGH WEAK LOW Fun Image Strength of Global Brands (Customer Awareness) Royal Caribbean Carnival Star 27% Royal Caribbean 12% Star Cruises 34% Carnival Market Share Company

Pro Forma Financial Statements Allows an organization to examine the expected results of various actions and approaches 6 Steps in Pro Forma Financial Analysis Prepare income statement before balance sheet (forecast sales) Use percentage-of-sales method to project CGS and expenses Calculate projected net income Subtract dividends to be paid from Net Income and add remaining to Retained Earnings Project balance sheet beginning with retained earnings List comments (assumptions) on projected statements

Departmental Program - Marketing Jan 2004 Hold semi-monthly sales meetings to track key performance indicators & handle issues VP Marketing PERSON RESPON-SIBLE Mar 2004 Tie up with top rating TV shows in North America and EU where cruise ship is used as set location, e.g., “The Bachelor”, “Friends” Mar 2004 Account executives assigned to Corporate accounts To increase to 20% the number of 1st time cruisers annually To increase to 20% the frequency of regular cruisers annually To increase exposure in North America and European television Mar 2004 Rewards Program –Earned mile points are convertible to discounts or upgrades EXPECTED OUTPUT TIME TABLE ACTIVITIES

Departmental Program - Operations Jan 2004 3 year replacement plan of all onboard entertainment and recreation equipment VP Operation PERSON RESPON-SIBLE Jan 2004 Monthly inspection of ship facilities and equipment Mar 2004 Independent Quarterly review of menu/international cuisine To achieve 99% Customer satisfaction for room & banquet service To achieve 99% Customer satisfaction for on-board entertainment and recreation Jan 2004 Inventory management for menu items EXPECTED OUTPUT TIME TABLE ACTIVITIES

Departmental Program - HR VP Human Resources PERSON RESPON-SIBLE Apr 2004 Hire top notch sales agents with extensive experience in the leisure/tourism industry Jan 2004 Programmed Training Course for Sales and On-board Crew – Certification required To encourage performance above targets by providing increased variable compensation To provide employee and management continuing professional education & training Mar 2004 Professional Development Program– encourage promotion internally/ succession planning EXPECTED OUTPUT TIME TABLE ACTIVITIES

Departmental Program - Finance VP Finance PERSON RESPON-SIBLE Apr 2004 Financial data for performance review available by workday 3 after month end Jan 2004 Centralize purchasing function at corporate headquarters To efficiently manage cash generated from operations for departmental programs To reduce operating expenses from 77% to 70% Mar 2004 Pool treasury operations with one global banking partner EXPECTED OUTPUT TIME TABLE ACTIVITIES

Departmental Program - IT VP IT Systems PERSON RESPON-SIBLE Apr 2004 Build customer database & market information May 2004 Identify key process for HR, Finance, Marketing, and Operations which can be done through an integrated IT system (internal & external) To explore new sources of customer interface & sales stimulation To build a world class information system to ensure internal efficiencies and to serve the business needs Feb 2004 Identify application systems designed to educate potential first-time cruisers & to allow interaction with regular cruisers EXPECTED OUTPUT TIME TABLE ACTIVITIES

Ateneo 6 implementation

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Ateneo 6 implementation