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PRAXIS BUSINESS SCHOOL

Assignment # : 1

‘CLASS-OR MASS?’

A Report

submitted to

Prof. Charanpreet Singh

In partial fulfillment of the requirements of the course

Managerial Communication

On 15/12/2009

By

Mayuri Ghosh

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Letter of transmittal
Praxis Business School

Date: 15/12/2009

To Mr. Stanley Renser

From Mayuri Ghosh

Subject:

I am enclosing my report on the case Class-or Mass in partial fulfillment of the course on
Managerial Communication.

Mayuri Ghosh

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Executive Summary:
Neptune Gourmet Seafood, North America’s third largest seafood producer faced with
the problem of excess inventory.

To cope with this problem the management is contemplating a price cut in the premium
brand of Neptune called Neptune Gold. The management also has an alternate option of
launching a separate brand.

Both the options would have an effect on Neptune’s brand equity and profitability.

The recommended plan of action is to launch a new brand.

This would imply that Neptune would add more customers to its share. Also it would
increase the pie for the industry as a whole.

Word Count: 97

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Table of Contents:
SERIAL NO. CONTENTS PAGE NUMBER

1 Situation Analysis 5

2 Problem Statement 6

3 Options 6

4 Criteria 7

5 Evaluation of Option 7

6 Recommendation 9

7 Plan of Action 9

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1) Situational Analysis:
Neptune Gourmet Seafood is North America’s third largest seafood producer. Neptune
supplied mainly to the eastern seaboard and in parts of the Midwest. However Neptune’s
biggest markets were the best restaurants, within 250 miles of its Fort Lauderdale
headquarters, as well as the biggest cruise lines. Neptune had been rated foremost in
quality for the tenth year in a row by gourmet magazine Connoisseur’s Choice.

The company is faced with the problem of excess inventory owing to the implementation
of new technologies which has increased Neptune’s catch. To cope with this problem
Rita Sanchez, Jim Hargrove’s colleague in Neptune is contemplating a price cut in the
premium brand of Neptune Gourmet Seafood called Neptune Gold. The management also
has an alternate option of launching a separate brand lower in price and positioning it as a
value driven brand. However the fear it has is that a cut in prices would lead to price war
by its competitors and the launch of a lower priced brand will cannibalize its existing
premium brand. This issue was taken up for discussion at the Marketing and Operations
Council meeting and was vociferously discussed there.

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2) Problem Statement:
The company is faced with excess inventory on account of better efficiency in catching
fish resulting due to implementation of better technology. The problem is how to dispose
this excess inventory off-through price cut or by launching a new brand or tapping new
sets of customers.

3) Options:
Neptune Gourmet Seafood has three options to deal with the current problem. They are:

a) Go for a price cut of around 50% and sell off the excess inventory.

b) Launch a new brand which would be lower priced than its existing brand Neptune
Gold.

c) Enter new market. It was almost non-existent in the western part of North America.

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4) Criteria:
Option a-Price cut by about 50%: This move could adversely affect the brand equity of
Neptune. It had positioned itself as an up market player. Reducing its price would erode
the brand perception of Neptune. Also once the prices are reduced it will be difficult to
bring them up to their current level. This could affect profitability in the long run.

Option b- Launch a new brand: This move could result in Neptune cannibalizing its own
product. However, this move could also result in Neptune adding more customers to its
pie. This will also broaden the slice for its competitors as well. This could become a long
term strategy of Neptune and might add to its profitability due to greater reach. Also the
demand would be more which would mean better utilization of its resources.

Option c-Enter new markets: This move would add new customers to its base. In the long
run the brand equity of Neptune would help Neptune gain a foothold in the new markets.
This would also mean that the capacity utilization of Neptune would be better on account
of increased demand.

5) Evaluation of Options:
Option a-Price Cut

Pros:

1) Price cut would help Neptune sell of its excess inventory in the short run.

Cons:

1) Wrong Signal: A price cut would send a signal to its customers that Neptune was
overcharging them all this while.

2) Price War: A reduction in the price of its product would lead to a price war with
competitors following suite.

3) Positioning: By reducing its prices Neptune will be positioning itself closer to its
competitors. This would adversely affect the positioning it has made for itself-that of
being an up market product.
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Option b- Launch a new Product:

Pros:

1) Demand: Increase in demand as a result the excess inventory can be disposed off in the
short run.

2) Increase in the pie: It would add more customers to its pie. Also it would broaden the
pie for the entire industry.

Cons:

1) Cost: This move entails a lot of expenditure on branding and sales promotion. This
would spiral up costs and in turn hit profitability.

2) Cannibalization: This move could end up in the new discounted price brand
cannibalizing Neptune’s existing brand.

Option c-Enter New Markets:

Pros:

1) Resource Utilization: Demand would increase leading to better utilization of its


resources.

2) Consolidation: Neptune can consolidate its position by adding more customers to its
base. This would consolidate Neptune’s position in other markets as well and make it a
national player

Cons:

1) Cost: This move is costly. Profitability might be hit.

2) Long Term: This is a long term strategy and will not be a cash cow in the short run.

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6) Recommendation:
Go for a Product Launch- This would help Neptune be present in more than one category
in the market. Also it would help Neptune increase its own as well as the industry’s pie as
it would bring the non sea food eaters who previously stayed away on account of price
into the picture.

7) Plan of Action:
1) Launch a new low-priced product.

2) Open up a new distribution channel to supply the new product.

3) Do not sell at the same outlets that sell Neptune’s flagship brand Neptune Gold.

4) Offer price discounts to hotels and cruises on extra quantities ordered over and above
the previous order.

Word Count: 869

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