UNIVERSITI TEKNOLOGI MARA

MKT 750: MARKETING MANAGEMENT

FINAL EXAM: CASE STUDY FRITO LAY, INC; SUN CHIPS TM MULTIGRAIN SNACKS

PREPARED FOR ASSOCIATE PROF. DR. FAIZAH ABD RAHIM

PREPARED BY FATIN HUSNA SUIB 2010241764

DATE OF SUBMISSION 1st November 2010

QUESTION 1 Using the DECIDE Formula, analyze the above case. The decision making process describe as the DECIDE Formula which:

1. Define the problem 2. Enumerate the decision factors. 3. Consider relevant information. 4. Identify the best alternative. 5. Develop a plan for implementing the chosen alternative. 6. Evaluate the decision and the decision process.

Step 1: Define the problem.

The problem of Frito Lay, Inc face is to determine the continuously marketing strategy for Sun Chips Multigrain Snacks for future, how they need to retain and when they need to take action on future action pertaining to the brand. The objective of this company is 1. To create a sustainable competitive advantage 2. Maximizing business performance. 3. Increase sales of the brand. 4. To examine the nature of the US market; whether Frito Lay, Inc should consider venturing into healthy snacks industry. 5. Lower the risk of introducing their new product, Sun Chips TM Multigrain. 6. Ensuring that this product been recognized (brand awareness) by their consumer and target market.

Step 2: Enumerate the decision factors.

In enumerate the decision factors; there are two sets of decision that must be enumerated in decision making process, which are:

a) Alternative changes of action.

These are controllable decision factors which include the marketing mix; product, place, price, and promotion strategy.

Product First, the product itself should be evaluated based on its added value and uniqueness, which differs it from others, so that it could attract consumers to buy. The product that the company wants to introduce to the market is the Sun Chips TM Multigrain Snacks. The details about the product are as follow: i. Sun Chips TM Multigrain Snacks is a crispy, textured snack chip consisting of a special blend of whole wheat, corn, rice and oat flours with a lightly salty multigrain taste chips and is made with canola or sunflower oil which represent a healthier snack for the consumer. ii. It had been packages in two sizes: 2 , 7 and 11 oz. iii. It had two different tastes: Natural and French Onion.

Price Frito Lays, Inc should consider the amount consumers pay for the product. Is it worth for their money or otherwise. The prices of Sun Chips TM Multigrain Snacks when the company introduces in their test market plan are as follows:

Package (ounce) 2 7 11

Size Suggested Retail Price

Frito Lays Selling Price to Retailer

$ 0.69 $ 1.69 $ 2.39

$ 0.385 $ 1.240 $ 1.732

Table 1.0 : SunChips TM Multigrain Snacks Price List

For the selling prices, here is the calculation:

Product (ounce / oz) 2

size Selling price

Price per ounce

% of purchase

Average per ounce

price

$ 0.385

0.1711 $ / oz 15 % (2.25 / 0.385)

15 % x 0.1711 = 0.0257 $/0z 47 % x 0.1711 = 0.0832 $/oz 38 % x 0.1575 = 0.0599 $ /oz 0.1688 2.7004

$ 1.240

0.1711 $ / oz 47 % (7 / 1.240)

11

$ 1.732

0.1575 $ /0z 38 % (11/1.732)

Average Price per oz Average Price per

The price that ad been introduce by the company for the product were consistent with customer reference prices for snack chips and represented a good value.

Place Place is the location where the product can be purchased or distribution channel also important for availability of the product. Frito Lay, Inc had chosen Minneapolis St. Paul, Minnesota for their products test market. This location had been chose due to its high population volume, which Minneapolis is a metropolitan area that could give them sufficient information to test the

product. The population of consist of 1.98 million households that were identified as users snack chips, (2.2 % of the 90 million snack chip user households in the United States). Frito Lay, Inc been distributes this product to: 1. Supermarkets. 2. Grocery stores. 3. Convenience stores. 4. Retail stores. Promotion Promotion is all the communication, which Frito Lays, Inc may use in the market place chosen. These include advertising, public relation, personal selling and promotions strategies.

The company had introduced the product marketing strategies to pursue growth opportunity: 1. Grow established Frito Lay brands through line extension. 2. Create new products to meet changing consumer preferences and needs. 3. Develop products for fast growing snack - food categories. 4. Reproduce Frito Lay successes in the international market.

The company also makes advertising and merchandising strategy: 1. Television advertising. Television advertising had successfully gain several groups of target market: ages 19 34 (primary users). Ages 34 49 (demand for healthier snacks). Ages under 18 years and below (in home usage)

2. in store displays. 3. free standings inserts (FSIs) in newspaper 4. coupons in newspaper FSIs 5. free samples in supermarkets. 6. trade allowances given to retailers.

b) Uncertainties in competitive environment.

Uncontrollable factors that face Frito Lays, Inc are:

1. Competitors. The company cannot control the existence of competitors in snack food industry. Their competitors are: national brand firms (Borden, Procter & Gamble, RJR Nabisco, Eagle Snacks) regional brand firms (Synders, Mike Sells, Charles Chips) private brands ( Kroger and Safeway).

2. Buyer response. The company cannot control their buyers response of the Sun Chips TM Multigrain Snacks that represents a healthier snacks compared to other competitors products. In this case, positive consumer response had been recognize by an independent marketing research firm towards the product concept and brand name of Sun Chips TM Multigrain Snacks.

Step 3: Consider of Relevant Information.

The third step in the decision-making process is Consider of Relevant

Information

that relates to the alternatives identified by the company as being likely to affect the future events. Refer to First In Show Pet Food, Inc; the company has several consideration of relevant information which will influence the decision-making. The table below shows one of the relevant information in terms of Strengths, Weaknesses, Opportunities, and Threats (SWOT) Analysis.

Strength 1. Established company name.

Weaknesses 1. High new product rate failure

Frito Lay already has an establish Frito Lay, Inc face the problem of high company name due to it is a division of new product rate failure that happens on a PepsiCo, Inc and a worldwide leader in the multigrain snack chip called Prontos was manufacturing and marketing of snack introduced in 1974. the failure is caused by chips. noncommittal copy , a confusing name, 2. Capture of nearly one half of retail and a product that generated appeal among sales for snack chips. too narrow target market. Frito Lay, Inc accounts for 13 % of sales 2. Weak management team. in the United States snack food industry Frito Lay, Inc face the problem of weak which consists of nearly one half from management team in the mid 1980s due retail sales in the snack food category. to staff changes and other responsibilities Eight of Frito Lays snack chips also are of project team members thus cause in among the top ten best selling chips in the change in top management and corporate U.S Supermarkets. 3. Plenty of capital available. objectives. 3. Competitive pricing.

PepsiCo, Inc recorded net income of $ The prices that had been introduced by the 1.077 billion on net sales of $ 17.8 billion company give them difficulties to compete in 1990 which could provide enough with other competitors prices which quite capital to the Frito-Lay, Inc. 4. Test market research ability. The company has effective Research and Development Department to test their new product in the market. The company also uses an independent marketing research to monitor potential customer response. 5. Established distribution strategy. The company has several effective similar with them.

distribution strategies to make sure that their product could be finally reached to

customer. The strategies include using store door delivery system that will be sold to supermarkets, grocery stores, convenience stores and retail stores. 6. Brilliant president in managing the test market. Dr. Dwight R. Riskey is the vice president of marketing research and new business at Frito Lay, Inc; have the ability to manage the test market. Opportunities 1. Fast growing snack food categories. The snack food industry had Threats 1. Competitors. been Increase number of competitors makes

increasing due to the customer demands. Frito Lay, Inc introduction program of This situation gives Frito-Lay, Inc a chance Sun Chips become harder. to develop their new product introduction to the market. 2. Copying similar products. Other competitors could copy similar

2. Positive customer response towards a technology and products like Frito Lay, more nutritious snacks. Inc plan. Frito Lays corporate marketing research 3. change in consumer preferences. had indicate that consumers were looking for nutritious snacks in the early 1970s thus open up the opportunities to introduce the Sun Chips TM Multigrain Snacks which had been claimed as a healthier snacks. 3. international marketing of products.

Step 4: Identify the best alternative. There are four alternatives that could be choose by Frito Lay, Inc:
1. Continue the Test Market to collect more data 2. Expand the Test Market 3. Eliminate the Sun Chip project 4. National introduction of Sun Chips, which consist of: Use Test Market strategy Increase Advertising and Merchandising spending Add larger package size Add additional flavor

The pros and cons of each alternative have been show in the table below:

Pros Continue the test market to 1. collect more data.

Obtain more information.

Cons
accurate 1. Lost revenue and market niche.

2. Lowers risk by performing 2. Risk losing first to market more research advantage. 3. Allows competitors time to develop a similar product.

Expand the test market

1. May be more representative 1. Risk losing first to market of the entire U.S. population advantage. Allows competitors to

2. Lowers risk by performing 2. more research 3. Could provide

develop products. key 3. Original test market may have been accurate.

demographic information for products (size, flavor).

Eliminate the Sun Chip 1. Limit risk and potential 1. Risk of losing potential product.
losses. profits.

2. Eliminate projects future 2. Risk of losing access to a expenses. 3. Companys superior image will remain in tact. 3. Not pursuing would violate company strategies. product-marketing potentially growing and

uninhabited segment of the market.

National Sun Chips.

introduction

of 1. Huge potential profits

2. Portray healthier image 3. First to market advantage 4. Easy to add to distribution strategy 5. Gain access to new segment of market

1. Risk of potential losses. 2. Potential damage to

company image. 3. Segment of market may not be profitable.

Step 5: Develop a plan for implementing the chosen alternative

From step 4, we had identified the best alternative, which is National introduction of Sun Chips. After choose this alternative, Frito-lay must increase advertising and marketing expenditures to create brand awareness.

Brand awareness would increase with additional spending and felt that spending the national introduction equivalent of $30 million could stimulate brand trial as well. However, there are some pros and cons when they increasing the expenditure on Advertising and Merchandising campaign:

1. Pros - Increase brand awareness and trial rates - Increase volume - Larger sustained profits

2. Cons - Reduced 1st year profits - Trial rates are projected based on PMT data

Second plan to be developed for the launching of Sun Chips is to add larger package size. They can develop 4 package sizes of 2, 7, 11 and 15oz. A fourth, larger package could add about one-half ounce to the average annual purchase amount per repeat (and repeater) purchase occasion. However, there are some pros and cons to be considered when add larger package size

1. Pros - Increases volume and profits - Additional purchase options

- Once product has foothold in market

- Consumer survey indicates demand for larger size

2. Cons - Stretches production capacity - Increases inventory - Increases number of SKUs - Limits marketing efforts

Third plan to be considered is to add new cheddar flavor (mild cheddar).

Flavor

extension could increase the repeats per repeater to an average of 3.5 times per year. In addition, of another flavor could increase the cannibalization rate to 35%. Frito-lay also can introduce new two flavors, which are Natural and French Onion.

1. Pros - More consumer options - Increase sales and profits - Increase repeats per repeater - Perfect large scale production of new flavors

2. Cons - Increases number of SKUs - Expensive to produce - Higher cannibalization rates - May not be popular with consumers - Large scale production not perfected

Competitive Positioning PepsiCos Frito-Lay division focuses on product innovation to differentiate its snack foods from those of other producers in the market. Premium products such as Frito-Lay Doritos, Cheetos, and Sun Chips demonstrate this differentiation strategy. These

products are comparatively high-priced, offering more than just a typical salty snack. This strategy effectively creates a competitive advantage, increasing the consumers willingness-to-pay while maintaining or decreasing costs. In order to increase the consumers willingness-to-pay, Frito-Lay focuses on adding product value through product innovation. For example, to find the perfect chipping potato Frito-Lay develops thousands of proprietary potato seed varieties not available to other manufacturers.i Frito-Lay has also patented a process that intensifies flavoring by coating both sides of its potato chips. Both of these examples show efforts to

differentiate potato chips (an unlikely candidate) in order to increase prices.

While Frito-Lay works to differentiate its products by adding value, it also is involved in aggressive cost cutting measures. Investments in improved distribution channels, such as through the merger with Quaker Oats, will reduce lead times and inventory carrying

costs. Maintaining or lowering product costs allows PepsiCo/Frito-Lay to further gain a competitive advantage and increase operating profits.

Competitors in the salty snack foods industry use a variety of positioning strategies. Proctor and Gamble, Frito-Lays largest competitor, uses a similar differentiation strategy to position its Pringles potato chip line. The innovative Pringles round cylinder

packaging adds customer value by improving quality (less broken chips) and increasing product awareness (branding). Alternatively, generic chip producers pursue a low cost position. These generic products come in plain packaging and are sold at a discount. In these companies, competitive advantage will be gained through the efficient operation of their production and distribution facilities

Step 6: Evaluate the decision and the decision process.

Frito-Lay has to explore additional markets (International) to grab more variety of clients. The recommendation to increase the expenditure for advertising and merchandising will help to create brand awareness. Frito-Lay considers timing and competitive the big strategic issues so that quick decisions, operational efficiency and high capital investment are critical for Sun-Chips Multigrain snacks to take advantage of first markets. FritoLay introduces two package sizes with distinctive package design for each flavor. It

does not charge a premium price in order to be consistent with consumer reference prices for snack chips. The primary target of Sun-Chips is people between the ages of 18 and 34 because they represent the principal purchasers and heavy users of snack chips. The secondary target is people who bracket to 49 years old. Sun-Chips will be

supported by television advertising so that people will aware about this product. Introduction of Sun Chips Multigrain Snacks in other states of America would expand the product distribution channel and cater more customers which would lead to greater market share instead of take more time doing test market.

QUESTION 2 Test market is critical prior to new product introduction versus consumer research and launching. Discuss.

New product development (NPD) can initiate from new technology or new market opportunities. But irrespective of where opportunities initiate, when it comes to successful new products it is the consumer who is the ultimate judge. So, in order to develop successful new products, companies should gain a deep understanding of their consumer. Consumer research can be taken during each of the basic phases of the NPD process: (1) opportunity identification, (2) development, (3) testing, and (4) launch. It is most widely applied during the development, testing and launch stages. Companies use consumer research to verify that consumers will accept a new product when it will be launched at the market. Successful NPD strongly depends on the quality of the opportunity identification stage. The goal of this phase is to search for new areas of opportunities, which typically involve the unmet needs and wants of consumers. Consumer research is often considered difficult during this stage because it is unsure what to ask consumers at this point. Consumer research, however, helps to increase the probability of success in the market. Even though consumers may not always be able to state their wants, it is important to understand how they recognize products, how their needs are shaped and influenced and how they make product choices based on them. In this way, it helps to avoid working on a new product that has a low probability of success in the first instance. Additionally, it guards against potential winning product concepts being overlooked. As a result, carrying out consumer research in this stage is inexpensive compared to the risk of product failure. Moreover, gathering consumer understanding with the help of formal consumer research methods has the advantage that the results can more easily be disseminated across departments in an organization.

Fig. 1 shows the four typical major stages in NPD along with representative consumer research methods. Since this review is focusing on the opportunity identification stage, only examples of methods are being listed under the other phases. Unfortunately, despite the large number of available methods and techniques to be used in the NPD process, the majority of them are not used by companies or mostly applied in an ad-hoc manner. Large parts of the conducted research in NPD consist of focus groups, surveys and the study of demographic data. This is considered to be one of the reasons for the relatively low new product success rates. A test market, in the field of business and marketing, is a geographic region or demographic group used to gauge the viability of a product or service in the mass market prior to a wide scale roll-out. The criteria used to judge the acceptability of a test market region or group include a population that is demographically similar to the proposed target market and relative isolation from densely populated media markets so that advertising to the test audience can be efficient and economical. The test market ideally aims to duplicate 'everything' - promotion and distribution as well as 'product' - on a smaller scale. The technique replicates, typically in one area, what is planned to occur in a national launch; and the results are very carefully monitored, so that they can be extrapolated to projected national results. The simple go or no-go decision, together with the related reduction of risk, is normally the main justification for the expense of test

markets. At the same time, however, such test markets can be used to test specific elements of a new product's marketing mix possibly the version of the product itself, the promotional message and media spend, the distribution channels and the price. In this case, several `matched' test markets (usually small ones) may be used, each testing different marketing mixes. Clearly, all test markets provide additional information in advance of a launch and may ensure that launch is successful, it is reported that, even at such a late stage, half the products entering test markets do not justify a subsequent national launch. However, all test markets do suffer from a number of disadvantages: 1. Replicability - Even the largest test market is not totally representative of the

national market, and the smaller ones may introduce gross distortions. Test market results therefore have to be treated with reservations, in exactly the same way as other market research. 2. Effectiveness - In many cases the major part of the investment has already been

made (in development and in plant, for example) before the `product' is ready to be test marketed. Therefore, the reduction in risk may be minimal; and not worth the delays involved. 'Competitor warning'. All test markets give competitors advance warning of your intentions, and the time to react. They may even be able to go national with their own product before your own test is complete. They may also interfere with your test, by changing their promotional activities (usually by massively increasing them) to the extent that your results are meaningless. 3. Cost- Although the main objective of test markets is to reduce the amount of

investment put at risk, they may still involve significant costs. One form of `new product launch' which is little discussed, but is probably the most prevalent - and hence most important - of all, is that of replacement of one product by a new one; usually an `improved' version. The risk levels may be much reduced, since there is an existing user base to underwrite sales (as long as the new product doesn't alienate them - as `New Coca-Cola' did in the US and `New Persil' did in the UK). Such an introduction will be complicated by the fact that, at least for some time, there will be two forms of the product in the pipeline. Some firms may opt for a straight cut-over; one day the old product will be coming off the production line, and the next day the new

product. Most will favor parallel running for a period of time, even if only because this is forced upon them by their distribution chains. This ensures that the new really does, eventually, replace the old; and it may reveal that both can run together. The considerable amounts of time and resources necessary to conduct test markets restrict the amount of test markets which can be conducted by companies. The risk to reveal a new product design too early is another concern for companies in fast moving and highly competitive markets, which is independent from any cost & time considerations.

But irrespective of where opportunities originate, when it comes to successful new products it is the consumer who is the ultimate judge. So, in order to develop successful new products, companies should gain a deep understanding of 'the voice of the consumer. Consumer research is often considered difficult during this stage because it is unsure what to ask consumers at this point. An often-heard argument is that asking consumers what they want is useless, because they do not know what they want. Consumer research, however, helps to raise the odds of success in the market. Even though consumers may not always be able to express their wants, it is important to understand how they perceive products, how their needs are shaped and influenced and how they make product choices based on them. In this way, it helps to avoid working on a new product that has a low probability of success in the first instance. Additionally, it guards against potential winning product concepts being overlooked. As a result, carrying out consumer research in this stage is inexpensive compared to the risk of product failure. Moreover, gathering consumer understanding with the help of formal consumer research methods has the advantage that the results can more easily be disseminated across departments in an organization. Knowledge obtained through formal methods is generally used to a greater extent, most likely through its verifiability and credibility.

QUESTION 3 Cannibalism effect for Sun Chips TM and calculate the effect based on incremental Gross Profit effect.

Cannibalization refers to a reduction in the sales volume, sales revenue, or market share of one product as a result of the introduction of a new product by the same producer. In the world of business, there is such thing as inside product competition. This aptly refers to cannibalism in that two offerings from the same manufacturer would compete head on for revenue, being similar in function, market and other attributes. Cannibalism is common among conglomerates and empires that produce several brands under the same line. To address cannibalism, though, a company must carefully plan out the marketing of its product or service. If it offers two similar products, it must make sure that each one has a specific and unique market segment to serve. The entire market can be divided into different categories: upscale, middle and downscale market; kids and adults; men and women; young boys and young girls; east and west; etc. The company needs to carefully examine its offerings regularly, making sure there is no cannibalism whatsoever. Effect of cannibalism made Sun Chips Multigrain Snack sales rapidly increase in a short period of time. Based on the result, 30 percent of Sun Chips Multigrain Snack pound volume comes from consumer switching from Frito-Lays potato, tortilla and corn snack chips. And one-third of the cannibalized volume from Frito-Lays products came from Doritos brand tortilla chips. Because of that, the gross profit for Sun Chips Multigrain is higher than other snacks chips. Below show the calculation based on incremental Gross Profit effect. The independent research firm also identified the incidence of product cannibalization. The research firms tracking data indicated that 30 percent of Sun Chips Multigrain Snack pound volume resulted from consumers switching from Frito-Lays potato, tortilla, and corn snack chips. About one third of the cannibalized volume from Frito-Lays products came from Doritos brand tortilla chips. The 30 percent cannibalism rate was not uncommon in new product introductions in the snack food industry. For example, when Frito-Lay introduced OGradys brand potato chips, one third of its pound volume came from its Ruffles brand

and Lays brand potato chips. Even though cannibalization was an issue to be considered in evaluating test market performance; Frito-Lay executives noted that the gross profit for Sun Chips Multigrain Snacks was higher than for its other snack chips.

INDUSTRY ANALYSIS

VOLUME CALCULATION Purchase Amount Trial Volume (6 oz) Repeat Volume (13 oz) Repeater Volume (13 oz) 41.8% x (19.9% x 90,000,000) x 13oz 3.0rep x (41.8% x (19.9% x 90,000,000)) x 13oz Total Volume (oz) Total Volume (lbs) 496,751,760 31,046,985 291,968,820 97,322,940 Volume Calculation 19.9% x 90,000,000 x 6oz Total Ounces 107,460,000

SELLING PRICE CALCULATION Product Size Selling Price Price Per Ounce 2.25 oz $0.385 0.1711 $/oz 15% % of Purchases Average Price Per Ounce 15% x 0.1711$/oz =0.0257 $/oz 7 oz $1.240 0.1771 $/oz 47% 47% x 0.1771$/oz =0.0832 $/oz 11 oz $1.732 0.1575 $/oz 38% 38% x 0.1575$/oz =0.0599 $/oz

Average Price$/oz Average Price $/lb

0.1688 2.7004

Similar calculation yields Average Retail Price = 3.8726 $/lb

Projected Sales & Gross Profit

Total Volume = 31,046,985 lbs Average Selling Price = 2.7004 $/lb Projected Sales = $83,839,278 Projected Retail Sales = $120,231,344 Gross Profit = 1.30 $/lb x 31,046,985 lbs Gross Profit = $40,361,081

Cannibalization Analysis Gross Margin Sun Chips = 1.30 $/lb Gross Margin Others = 1.05 $/lb Cannibalization = 30% Cannibalization Volume = 30% x 31,046,985 lbs = 9,314,096 lbs Profit Increase = (1.30 $/lb - 1.05 $/lb) x 9,314,096 lbs = $2,328,524 Incremental Profit Analysis Sun Chips Incremental Volume = 70% x 31,046,985 lbs = 21,732,890 lbs Incremental Profit = 1.30 $/lb x 21,732,890 lbs = $28,252,756 Cannibalization Profit = $2,328,524

1st Year Profit = $30,581,280* *not including Advertising & Merchandising spending

Sustained Sales & Profit Repeater Volume = 18,248,051 lbs Average Price = 2.7004 $/lb (3.87 $/lb Retail) Sustained Sales = $49,277,037 ($70,666,692 Retail) Sustained Gross Profit = $23,722,467 Sustained Profit Increase with 30% Cannibalization = (70% x 18,248,051 lbs x $1.30) + (30% x 18,248,051 lbs x $.25) = $17,974,330* *not including Advertising and Merchandising spending

QUESTION 4 Analyze the Snack Industry using the Porters Five forces model.

Michael Porter provided a framework that models an industry as being influenced by five forces. The strategic business manager seeking to develop an edge over rival firms can use this model to better understand the industry context in which the firm operates. a) The threat of the entry of new competitors The snack industries main threats is on the its brand identity. There need to be well known through advertisement. Next is access to distribution channels. The snack products need to supply easily and in large supermarket. Capital requirements can be a threat of the snack industries because to market the snack need cost for advertisement and marketing expenses. b) The intensity of competitive rivalry For most industries, the intensity of competitive rivalry is the major determinant of the competitiveness of the industry. Competitive rivalry is likely to be based on dimensions such as price, quality, and innovation. The snack industries growth rapidly and generate a huge profits. The brand identity of the products must merge with current customers needs. c) The threat of substitute products or services The existence of products outside of the realm of the common product boundaries increases the propensity of customers to switch to alternatives. Buyer inclination to substitute product. Customers maybe switch to eat snack as light food to fast food. Some of the snack products need to switch their products lines to compete with other products. The cost for switching the product lines can be a biggest threat to the industries. The switching may need new advertisement or branding cost and also the product research and development.

d) The bargaining power of customers (buyers) The bargaining power of customers is also described as the market of outputs, the ability of customers to put the firm under pressure, which also affects the customer's sensitivity to price changes. The buyer volume play an important roles in determine profits to the company. So products in snack industries need to compete in price and product identity. Product differentiation will resulting the success of the company. e) The bargaining power of suppliers The bargaining power of suppliers is also described as the market of inputs. Suppliers of raw materials, components, labor, and services to the firm can be a source of power over the firm when there are few substitutes. In the snack industries, the most important is to get the supplier concentration so that they will always to get our products. The volume of products supply to the supplier should high and consistency to ensure consistent profits.

QUESTION 5 How would you answer the criticism that it is impossible to plan given how fast todays market condition are changing? With competition arising from diverse and unexpected sources enterprises can no longer be confident about their market shares: they must constantly innovate to compete. In this new business environment the following key drivers have been gaining in importance: a focus on improving the productivity of knowledge and service workers (rather than industrial productivity), with productivity programmes shifting from culling costs to improving organizational performance and effectiveness; a focus on quality in both products and service, with quality programmes moving from manufacturing operations to knowledge and service operations and firms building a corporate culture around quality the challenge of responsiveness, with a rising need to react rapidly to changing market conditions, competition and customer demands; the globalization of markets, operations and competition; an interest in out-sourcing certain aspects of production, distribution, sales service and support functions, resulting in a shift of enterprise focus to vertical and horizontal integration across organizations; partnering, to function on global markets by establishing alliances and joint ventures with other key players in both similar and disparate markets and greater attention to social and environmental responsibility. Overall, the trend suggests that the changing market conditions now require firms to meet more refined and personalized customer tastes, as well as society's collective needs, as expressed through a wide range of democratic and associative mechanisms. Interaction between producers and these more demanding and better informed customers is an essential factor for growth and competitiveness. A marketing plan is a written document that details the necessary actions to achieve one or more marketing objectives. It can be for a product or service, a brand, or a product line. Marketing plans cover between one and five years. A marketing plan may be part of an overall business plan. Solid marketing strategy is the foundation of a well-written marketing plan. While a marketing plan contains a list of actions, a marketing plan without a sound strategic foundation is of little use. A formal, written marketing plan is

essential in that it provides an unambiguous reference point for activities throughout the planning period. However, perhaps the most important benefit of these plans is the planning process itself. This typically offers a unique opportunity, a forum, for information-rich and productively focused discussions between the various managers involved. The plan, together with the associated discussions, then provides an agreed context for their subsequent management activities, even for those not described in the plan itself. Additionally, marketing plans are included in business plans, offering data showing investors how the company will grow and most importantly, how they will get a return on investment. In particular, we focus attention on the importance of marketing planning with special attention given to the role marketing strategy plays in the planning process. For marketers planning is an essential task that must be continually undertaken. As we will see, shifting market conditions, including changing customer needs and competitive threats, almost always insure that what worked in the past will not work in the future, thus requiring revisions in how a product is marketed. Marketing planning is also important since it is often a prerequisite for obtaining funding whether one is a marketer in a large corporation seeking additional money for his or her department or is part of a small startup company looking for initial funding. Like a business plan, a marketing plan is an important document that needs to be updated on a regular basis. Even five year marketing plans should be revisited periodically - at least once each year to address changes in market conditions, demand, pricing issues, etc.