Formula development and Brand portfolio

The first decision we have to look at in each round is about formula development and brand
portfolio. We often come up with this decision through 4 considerations: (1) Discovered formula
from R&D department, (2) Importance of choice criteria, (3) Competitors product attributes, (4)
Competitors product prices.
(1) Discovered formula data comes from companys report for each period. In this section,
R&D department will list all of their creations for a totally new product or an
improvement of existing products. A new formula includes the new products attributes
in terms of performance, nutrition, packaging and flavor and production cost for each
unit. The decision depends a lot on the efficiency of R&D department because not any of
their formulas are good as well as appropriate to launch into the market.

(2) Importance of choice criteria data comes from Sematic scales market studies. After
overlooking at formulas from R&D department, we have some choices for this kind of
decision. Then, we will base on what customers expect from our products such as low
Formula development
and brand portfolio
(1) Discovered
formulas from
R&D department
(2)Importance of
choice criteria
(3)Competitors
product
attributes
(4)Competitors
product prices
price, medium performance or high nutrition. The importance of choice criteria will give
us the information about how many percent each attribute account for, then we will
compare with the formulas from R&D to see which of them are most fit with the criteria
choice of customers.

(3) Competitors product attribute data comes from Newsletter Attribute of marketed
brands. We need to base on it to determine which product directly competing with us.
Then we will compare with the formulas from R&D to determine which attribute needs to
be upgraded to compete with competitors.

(4) Competitors product price data comes from Newsletter Attribute of marketed brands.
It is necessary to look at because if competitive products have advantage of price over
ours, we need to consider the formula to reduce the production cost of existing product
then to reduce price in order to compete with them in case of this product are targeting on
customers concerning about the price which based on importance of criteria choice
above.
The following is an example of formula development decision in period 5:

First of all, based on discovered formulas from R&D department, we currently have 5 choices
for decision, two formulas for CANDY, one for CAKE and two for COCOA.

Secondly, we look at the importance of choice criteria, we will know which attribute customers
concern the most to eliminate inadequate formulas. For instance, if we choose C04B-Cost to
reduce the cost for CANDY and also reduce performance of it, then look back the importance of
choice criteria we see that High earners (targeted customers for CANDY) are most concern about
performance and flavor and less price-sensitive, so this is not appropriate formula.


Thirdly, when we look at attributes of marketed brands, we see that TACO is the strongest
competitor to our COCOA, both of them target on Affluent families. However, when we look
back the formulas from R&D department, we have no formula to upgrade nutrition for COCOA
(which Affluent people concern the most) to compete with TACO. But we have C16E-Cost to
reduce the production cost for COCOA which is currently higher than that of TACO ( $4.7 and
$4.25), and look back importance of criteria choice, Affluent people also concern a lot about the
price when shopping (28.6%), so we decided to reduce cost of COCOA, then reduce its price to
compete with TACO.


Production level











We base on (1) Units sold in the previous period, (2) Inventory of products, (3) Segment size and
growth rate and (4) Automatically production adjust (+/- 20%) of factory to decide how many
units for each kind of products we should produce in the period.
(1) Units sold in previous period data come from Report- Brand results. This will give us the
figure of how many units are sold up, which determine the demand of customers towards
our products.
(2) Units in inventory data also come from Report-Brand results. This information will help
us examine how many products are not yet sold out. If units in inventory remain a lot, we
have to use estimated demand minus those inventories to get more proper production
level for the next period.
(3) Segment size and growth rate data come from Market forecast study. This section will
estimate the size of each segment in the future, help us determine whether to increase or
decrease production level to fit with the growth of segment. If the segment size increased,
it is necessary to raise the production level to adapt with the demand and vice versa.
Production level
(1) Units sold in
previous period
(2)Units in
Inventory
(3)Segment size
and growth rate
(4)Automatically
production adjust
(+/- 20%)
(4) If the factory sees the actual level of sales more or less than the production level, it will
automatically adjust the production level to a margin of plus or minus 20%. Based on
that, we can decide how many to produce at the safer level.
The following is an example we decided production level in the period 5:
First of all, we have to look at the results of period 4:

We can see in period 4, units sold of CAKE are 9,902, CANDY are 4,020, COCOA are 2,272
units. This information basically gives us the demand of customers for each product.
Then we look at units in inventory, we see that CAKE and CANDY are completely sold out and
no inventories for them. However, there remain 799 units of COCOA in inventory. Moreover,
we also have to consider that COCOA is the new product which just launched in the previous
round, so the demand for COCOA is very potential because from the period 3 to period 4
COCOA increased from 1,089 to 2,272 units. So we can estimate that COCOA demand for the
next round will increase approximately 1,000 units because the increase of customers awareness
towards COCOA.
For CAKE and CANDY, because there remain no inventories for them and it depends on the
increase of marketing, so we estimate that the demand could be higher for the next round.



We also have to combine with the segment size growth from market study:
Here we can see, the segment high earners is forecasted to increase 10% for the period 5, so this
is a signal for us to increase the production level for CANDY which mainly target on this
segment. Similarly, the other segment is also forecasted to increase (Affluent families: 4% and
Low income families: 9%). We can base on this to increase the production level, but we cannot
increase exactly with the percent of growth because customers in 10% growth of high earners
can be attracted to buy the competitors products or buy our product but not target on them like
COCOA.
Another point is that factory can automatically adjust the production level if they see the demand
higher or lower than the real sale volume. They will increase or decrease it with the margin of +/-
20%, so we can base on that to create an interval in which production will be fit with the
demand.
Combine all of the points mentioned above, we set the production level for
COCOA= 2,272 (units sold out in the previous round) + 1,000 (estimated increased demand
from the increase between round 3 and 4) + 4%*7,503 (segment growth) = 3,572 units
Then we minus inventory 3,572 799 =2,773 units
Then we adjust 20% 2,773 2,773*20%= 2,218 units
Actually the not all customer in 4% segment growth will buy COCOA, so we reduce a little, we
decided to set production level for COCOA is 2,100 units for period 5.