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Assignment

Program : BBA (Morning)

Section : 2-C

Topic Name: “Marketing By Numbers”

Subject: Principles Of Marketing

Submitted To: Mrs. Rauza

Submitted By: FARAZ AHMED

Date of Submission: 11-06-2020


Case study
Question 1
What brand development strategy is mar undertaking ?
Answer
Mars, The famous M&M’s candy brand are launching a new
product M&M premium. They strategy they are using for
brand development is product line extension. To understand
the strategy we should know what is product line extension.
Product line extension:A product line extension is use of an
established product brand name for launching a new item in
the same product category.
As we are told that M&M’s candy brand are launching new
product M&M premium. This product has new features such
as it has new flavors which are mint, chocolate, mocha,
chocolate almond and raspberry almond with white
chocolate. There is new feature also that M&M premium is
sold in re-closable cartons.

Question 2
Assume the company expects to sell 300 million ounce
of M&M premium within the first year after
introduction but expects that half of those sales will
come from buyers who would normally purchase M&M
regular M&M candies are normally 1 billion ounce per
year and that the company will incur an increase in
fixed cost of Rs.250 million during the first year of
production for M&M premium will the new product be
profitable for the company? refer to the discussion of
cannibalization in appendix 2 : marketing by the
numbers for an explanation regarding how to conduct
this analysis.
Answer
Given data
Wholesale price of M&M premium = Rs. 24 per ounce
Wholesale price of M&M candies = Rs. 15 per ounce
Variable cost of M&M premium = Rs. 17.50 per ounce
Variable cost of M&M candies = Rs.7.50 per ounce
Expected sale of M&M premium = Rs. 300 million ounces
Sale of M&M candies in 1 year =Rs. 1 billion ounces
Fixed cost of M&M premium in first year = Rs. 250 million
ounces

Solution

Contribution per unit off M&M candies = Rs. 15 – Rs. 7.50


= Rs.7.5
Contribution per unit of M&M premium = Rs. 24 – Rs.17.50
= Rs.6.5
Difference between M&M candies and M&M premium
=Rs.6.5 – Rs.7.5
= Rs –1

M&M candies M&M candies and


M&M premium
M&M candies 1000000000x7.5 700000000x7.5
contribution =7500000000 =5250000000
M&M premium 0 300000000x6.5
contribution
=1,950,000,000
Total contribution Rs. 7500000000 Rs. 7200000000

As we can see that total contribution of M&M candies is


greater then contribution of M&M candies and M&M
premium so if they sell 300 million units of M&M premium
then they will be in loss of Rs. 300000000. If they sell more
units of M&M premium from 1 billion units which is the
total units to sell then they can earn profit from it.