EDDIT GRAMMAR MISTAKES

Chris8888

grammar_eddit.doc

Home >Business & Finance homework help >Accounting homework help >EDDIT GRAMMAR MISTAKES

interoffice memorandum

to: elise ferguson, president of the writing implements division of U.S Home, Clique pens

from:

subject: Clique pens strategy revise

date: 10/12/16

Problem Clique Pens facing is the decreasing gross profit margin, due to allocated too much promotion to retailers. In the situation Clique Pens has to change the old promotion strategy. Indicated by analysis and data, the final recommendation to Clique Pens is reduce spent on retailers and give MDFs to market and adverting.

Problem Identification

Problem of Clique Pens is the decreasing gross profit margin. For solving this problem, analysis and research indicates the best recommendation, which is reducing the promotion we offer to retailers and use money saved on consumer-oriented MDFs. Major retailers are taking the dominant position in the collaboration relationship with writing implements companies. They could require manufactures offer allowances and discount for help them selling the products. Clique Pens, like most of the company in the industry, allocated the most promotions on retailer discount, but less on advertising and marketing. As the result of that, our sales of Clique Pens are increasing by years but our gross margin is going to an opposite way.

Situation Analysis

· The micro-environment inside the company: Clique Pens is in the low-power position and retailers takes the high-power position, once retailers decided reduce the shelf spaces, we could have lost most of our consumer because it is hard to make differences with our competitors. Consumer could choose other brands on shelfs. The situation is due to the excessive supply. Too many writing instruments companies but less major retailers and shelf spaces. Retailers could choose which company they willing to cooperate with. Competing for larger shelf spaces, which led to lager market shares and sales. Clique Pens allocated too much promotion budget on the retailer part. The U.S home income statements shows that trade allowances we gave to retailers take average 9.75% of our sales from year 2012 to 2013e, and the percentage are increasing annually . But the consumer promotion and advertising just take average 7.725% of our sales in the same period. Also, the percentage is decreasing annually .

Then clear that problem Clique Pens facing is the decreasing gross profit margin, and the desired state of Clique Pens is stop decreasing gross profit margin, and increase it. Promotion strategy need to be changed, which will affect Clique Pens relationship with retailers. Three strengths could support Clique Pens not to worry about affects along with changed strategy. The first one is weak customer royalty. Consumer choose brands they are familiar with, as a brand with long history, Clique Pens have consumer awareness. Dramatic fall of sales do not need to be worry. The second strength we have is Clique Pens is not the only product line we have, once this product line failed, we have other product lines to be our back up and give us time bring Clique Pens back to its original position. Our technology also could be one strength, Clique Pens has “secret sauce” ink formula which made ink “always ready” . On the other side, the weakness is hard to differentiated Clique Pens from other products, so back to the problem, Clique Pens still rely on major retailers to sale most of its products.

· The macro-environment outside: Most of the companies in the industry is considering how to make products stand out from similar writing instruments. But innovation is hard in writing implements industry. Technologically, products could be innovated, creative pens like ruler pens and digital pens could attract part of consumers but also offered with higher prices. For example, the USB pens, combine USB with Pen, selling about $106 USD, but a box of 60-counts regular pens selling about $4.76 USD on Wal-Mart online store. The positive side of innovation, it could catch consumers’ eyes in the first couple weeks after launched. But the negative side is bigger; innovation narrow down customer segmentations, from general to specific fancy pens’ lovers, the most important is, the raising budget. It is nearly possible that sales could cover budget planned on innovations. It is not necessary for us spent extra money on creative pens. Generally, writing instruments performed very well in 2015-2016 . Due to the growing population of adult. Not only adults, people use pens in their office, school, home and almost everywhere. Research in 2012 about the fluency people use pens shows 39% of interviewees use pens more than 10 times everyday . All this data shows that the demand of writing implements is stable.

· Consumer: Consumer satisfactions relate tightly with prices and performances. Consumer choose writing implements in lower prices but high performances. Data shows consumers don’t spent much money on their pens, 60% of consumer cost $1-$3 on each pen they bought . Data shows that more consumers are focus on smooth ink flow, 41% of consumers thought pens with smooth ink flow is extremely important . To capture more consumers, we should offer products with affordable, even cheaper prices, and convenient for consumers’ daily use, trying use technologies on how to make writing instruments has high quality (no leaking ink and smooth ink flow) in lower price to meet consumers’ satisfactions.

· Competitors: Successful in improving relationship with retailers and product promotions are important for beating Clique Pens’ rivals. Writing implement is a high competition industry, more than 50 companies are competing in this industry. Threat we have is compete with strong competitors like BIC, take the biggest market share and have the largest consumer-base. Data shows that 86% of people bought BIC’s products in the past and 40% consumer chose BIC as their favorite writing instruments brand, also, 68% consumer are still using BIC’s products . We also have opportunities, 31% of consumers willing to buy different and variety pens while they are choose the brands . Consumers are shifting among different brands. The way we could beat strong competitors is offer coupon and discount packages to attract consumers, and offer products with high quality. Expect improve quality of products, the relationship with retailers are also important.

· Collaborators: Major retailers like Wal-Mart and Quill Office Suppliers are important for us. We rely on them display and selling our products. Most people choose Office supply store to buy writing instruments because they could buy variety of products in one time, office supplier stores display many different brands on shelfs. Considered that those retailers take huge consumer flows, we have to compete with other companies for more shelf spaces. Retailers take the dominant position, and we lost our control over our products, because we need to satisfied retailers to get more shelf spaces, increase sales, then our market shares.

Alternative & Analysis

To achieve our objective, which is stop decreasing gross profit margin. Several alternatives could be evaluated.

· Reducing trade promotion brings gross profit margin back. Using MDFs in consumer-oriented promotion and advertising. As what Chen advised, we could reduce or remove allowances to retailers. Use saved budget to buy more co-op advertising and consumer-directed discounts. Increasing prices of products. Also, improve relationship with retailers is needed, for them easier to accept reduce or remove allowances.

Remove or reduce discounts offer to retailers may reduce our shelf spaces because retailers turn to choose companies who give them better promotion which bring them more profit. The increasing prices may not be accepted by retailers because they doubt that increasing prices may reduce their profit from selling products. But more co-op advertising and consumer-discounts could raise our sales by 5%. Improve our relationship with retailers could help us reserve shelf spaces from retailer if we want to reduce or remove discounts offer to them. Retailers responses could be the uncertain factor for this alternative.

· As McMillan’s advice, keep offering discounts to retailers for more shelf spaces and lager market shares. Also, let sales control MDFs. This alternative increasing the sales and improving relationship with retailers, but lower the gross profit margins.

Keep discounts and allowances we offer to retailers cause keep reducing the gross profit margin, but will save our relationships with retailers and keep shelf spaces for our products. Also, will increasing sales and market shares. MDFs controlled by sales offer more opportunities for Clique to increase sales. The increasing sales may have possibility to cover the promotions allocated to retailers, but with so many competitors in the market, it is hard to dramatically increase our sales, so the gross profit margin will still be decreasing. In fact, we don’t know clear how discounts and allowances affect our sales.

· Hybrid. Keep promotions for retailers, and also, allocated more money on consumer-oriented promotion and advertising. For satisfying both consumers and retailers.

Hybrid certainly cost more money than we used spent on promotion strategy. This alternative can both keep our retailers and customers but the cost is too high, we will need to increase sales in a dramatic way to cover the high cost, which is nearly possible.

· Do nothing, still use promotion strategy that allocated the most budget to retailers, and less for consumer and advertising.

Doing noting and keep our old promotion strategy, the sales will keep increasing because we spent considerable promotion budget to retailers but also due to that, the gross profit margin also will keep decreasing. We cannot achieve our objective which is stop decreasing gross profit margin and increasing it by 4%.

· Exist. Stop selling and producing of Clique Pens, sell the product line, use extra money on other product lines.

Stop selling and producing Clique Pens, and sell the product line could handle the issue in short-term. For long-term, we will lose one of the most profitable product line. Also, our market share will certainly decrease because we stop selling the product. The decreasing sales and market share will not change the situation about decreasing gross profit margin.

Recommendation

· Goals: The objective is stop decreasing gross profit margin and increase it by 4%. Based on alternative analysis, the only one result in increasing gross profit margin is reducing trade promotion and use MDFs for consumer-oriented.

· Strategy: Promotion strategy need to be changed, keep using the old promotion strategy will not bring Clique Pens increasing gross profit margin. The old promotion budget used too much to retailers. Just one alternative has no extra budget and give more promotion to consumer and advertising, which is the first alternative above.

· Tactic: Stop giving too much discounts to retailers. Indicates by data and analysis, trade promotion takes the big part of promotion, result in deceasing gross profit margin. Do not pay much attention bring up sales. Because for cover cost on retailers, sales need dramatically increase.

· Implement: Reducing trade promotions, using saved money on consumer and advertising. Try other ways to improve relationships with retailer’s. Offering consumer-direct coupons, or decreasing prices.

· Control: Reducing trade promotion could get power of control products back. Keeping, even increasing trade promotion makes Clique Pens still in the low-power position in relationship with retailers. The only alternative could change the situation is reduce trade promotion and use more promotion on consumer-oriented side.

Analysis indicates that reducing the promotion Clique Pens offers to retailers and use money saved to buy co-op advertising and consumer-direct discount. Reduce the selling price and improve relationship with retailers.

Actions

· Clique Pens trade promotion used to be 55%, it could be reduced to 40%, consumer promotions and advertising adjust to 40% and 20%. Then we reduce the trade promotion and at the same time raise the consumer promotions. Advertising has less affects so we just raise 5%.

· Co-op advertising, we could choose a drug store. Putting its marker on our writing instruments, and share the advertising costs with them. And require them offer bigger shelf space for our products.

· Consumer-direct discount. We could offer “instant coupons” of our products to consumers. Consider our products are low prices, we could offer two different kinds: 1. Offer 10% off coupons for our products. 2. Buy two get one free accessory, for example, buy two 4-counts packages get one free 4-counts cartridges.

· Improving relationship with retailers. Consider that we reduced trade promotions, we need to improve our relationship with retailers in other ways. We could offer free samples to retailers monthly or every time new products launch. Also, co-op advertising is a way to improve relationship with retailers.

Justification

The most significant reason is this alternative meet the primary goals, which is stop decrease our gross profit margin and increasing it. For this alternative the only uncertainty is relationships with retailers, and even this uncertainty could be managed by using various ways improve relationship with retailers.

� Clique Pens:

� Clique pens:

� http://www.toxel.com/tech/2010/01/20/14-innovative-and-creative-pens/

� http://www.euromonitor.com/writing-instruments-in-the-us/report

� http://www.ppai.org/inside-ppai/research/documents/writinginstrumentstudy_final.pdf