Key Issues
The situation currently being faced by Clique Pens Division is not an easy one and the company has to now compete with Sharpie, Paper mate, Pilot, Pentel, Scripto and BIC. The shelf space fight is going on among the strongest retailers worldwide. These major retailers include Kroger, CVS, Target and Wal-Mart. As these all are the major retailers of the market and they possess a lot of power therefore, in order to maintain significant share of the shelf space, Clique has to come up with a way in order to allocate all of their funds in a way that seems to be the most appropriate use in order to maintain their shelf space in the market.
The business of pens could be considered a very good business for the retailers as they are able to make high turnover and profits but since, the retailers have not changes their prices since a decade, all the manufacturers of these pens are losing a lot in profits and their profit margins are eroding day by day. The significant power in this market relates to the buying of the retailers and they possess this power because if they are not able to get what they want at their desired price they might turn away and choose another brand from the wide range of brands available in the market.
Now, if the company wants to remain competitive and profitable in the business then they need to make a decision that whether the company should spend their promotional budgets and time in order to promote their products to the consumers or to the retailers. The vice president of sales favors the marketing towards the consumers.
Establishing a consumer oriented MDF and then reducing the trade discounts available for the customers along with further consumer-targeted marketing programs would be the correct way to make the best use of the promotional resources of the company. On the other hand, the Vice President of sales does not agrees with this view arguing that this would lead towards the loss of the sales and also that this move would prove to be costly for Clique. The problem now lies to identify a plan which would increase the sales, gross profit, gross profit margins, agreement between vice president of sales and marketing and determining finally that who will control the MDF.
Analysis
Trade Promotion Objectives
The relationship between retailers and manufacturers is called as trade. Trade Promotion could be also defined in a similar way. Trade promotion is basically a marketing activity whose objective is to increase the sales of the company and also boost the demand of the products of the company. Under trade promotions, the company could provide its customers with gifts, value added bonuses, demonstrations, special price offers, display fixtures etc.
Objectives of MDF & Trade Discounts
Trade discounts are basically a part of trade promotions and the main objective behind trade discounts is to increase the purchase rate and also the consumption rate of the products. On the other hand, the MDF which stands for the market development funds are the funds that are used in indirect sales channels. These are basically the funds that are provided to the distributors, retailer, VARs, resellers and channel partners so that they could promote the products of the company, create local awareness about its brand and sell the products to a larger customer base for the company.
The objective of MDF is related to the marketing area where as the objective of the trade discounts are related to the sales area. MDF is basically a market driver function and on the other hand, trade discount is basically a sales driven function. This is the reason that the vice president of Marketing, Mr. Chen is supporting the consumer based MDF, whereas the vice president of sales does not agrees with his views and therefore, the conflict arises.
Clique Pens He Writing Implements Division Of Us Home Case Solution
Consumer & Retail Oriented MDF
The calculations for the consumer based MDF and the retailer based MDF have been performed in the spreadsheet based upon the assumptions of Chen and McMillan. First of all if we talk about the calculations of consumer based MDF, then it could be seen that the trade discounts have been reduced by approximately 2% and as mentioned in the assumptions, the future sales have been increased at a growth rate of 5% with the gross profit margin standing at 38%. After performing the calculations it has been assumed that the vice president of sales is wrong in making the assumption that the reduction in the discount and the increase in the price is a wrong assertion. .........................
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