Analyze the problem as listed below and provide the solution to the problem in a

Question

Analyze the problem as listed below and provide the solution to the problem in a crisp two page memo. Please provide clear justification as you choose the solution.

SNACK FOOD DEAL EXERCISE Assume you are the brand manager of QUICKBITE, the leading brand in the snack food market with a 20% market share. You are considering offering a deal to your retailers in return for in store promotional activity. You know that your retailers have limited space to run displays. Your major competitor FASTCRUNCH has a 17% market share and is also considering offering a similar trade deal, but you don't know what its brand manager is going to do. Moreover, many manufacturers of other consumer packaged products that do not compete with you are also interested in the same display locations. Because you compete with FASTCRUNCH very heavily you believe that the success of your promotional offer will be affected by what the FASTCRUNCH brand manager chooses to do. Your normal sales are 24,000 cases a year. Your regular price to the retailer is $25.00 per case and your cost is $15.00. The trade deal you are considering offering involves a $2.50 rebate per case for two months. There are 250 retailers nationwide. The response you expect from a representative retailer is the following: If neither you nor FASTCRUNCH offers a trade deal you expect to sell 24,000 cases next year. If you offer the trade deal and FASTCRUNCH does not, your annual sales will increase to 30,000 cases, with 10,000 of those being sold at deal price. If you choose to offer a trade deal and FASTCRUNCH does it too, you expect to sell 25,000 cases, with 10,000 of those being sold at deal price. Finally, if you do not offer a trade deal and FASTCRUNCH does, you expect to sell 15,000 cases.

a. What should you do as a brand manager of QUICKBITE?

b. What do you think the brand manager of FASTCRUNCH will do?

c. How did long-run considerations regarding FASTCRUNCH's competitive behavior affect your decision?

Explanation / Answer

Option 1 Option 2 Option 3 Option 4 No Offer We offer but fastcrunch not If both Offer If Fast Crunch Offer but we not Market Share 20% 25% 21% 13% Total Market         1,20,000            1,20,000        1,20,000        1,20,000 Sales at normal Rate (Units)            24,000               20,000 15000 15000 Sales At rebate Rate               10,000 10000 Sales Price 25 25 25 25 Cost Price 15 15 15 15 Rebate 2.5 2.5 2.5 2.5 Sales value At Normal         6,00,000            5,00,000        3,75,000        3,75,000 Sales Value at Rebate                      -              2,25,000        2,25,000                     -   Total Sales Volume         6,00,000            7,25,000        6,00,000        3,75,000 Cost Price         3,60,000            4,50,000        3,75,000        2,25,000 Profit         2,40,000            2,75,000        2,25,000        1,50,000 a) As a manager of QUICKBITE, as we are not aware of the offer of FASTCRUNCH whether they are going to offer or not , So we have to decide between option 3 & option 4 since the profit in Option 3 is higher and our market share will remain more or less same. So we will offer promotional offer irrespective of the fact Fastcruch offer or not and in case Fastcruch don't offer our market share will increase to 25% and profit to $275,000 b) FASTCRUNCH will also offer the promotional offer to maintain its market share c) In long run this practice doesnot have any impact on the market share so both will stop to offer any promotional offer

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