Transcription

How to Think Critically?

In the previous sessions, we learnt about critical thinking. In this session, let's try to apply the critical thinking learnings
with the help of a case analysis. Before we proceed with the case analysis, let's first try to learn how to read a case or
any other piece of information based on which you are going to take a decision.

This process can start with previewing. That is looking at the basic outline of the case, a quick run through like what is
the title, author, year of publication, the context or the setting of the case. For example, understanding briefly, the
company or the firm details on which the case is revolving or the industry outlook.

Then move on to skimming the case. In this phase, we will try to understand and identify the key issues in the case.
After skimming through, we will enter into the actual reading phase of the case, wherein we will try to read the case
thoroughly, making notes, try to read between the lines. You need to understand the unspoken information. Finally
review the case. Review the highlights and the notes before we proceed with the analysis.

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By now, we know how to go about reading a case. Let's move on to understanding how to analyse the case using six-
step problem solving approach proposed by Penrose and colleagues.

While doing this analysis, we will try to apply the critical thinking skills in terms of identifying the facts, drawing
inferences, making our own assumptions.

The six-step problem solving approach starts with considering the relevant information. It is essentially interpreting
the case using the evidences, identify the most important facts in terms of their relevance, draw inferences if needed
and make logical assumptions.

For this purpose, we are referring to in 2003 Harvard case which is titled as A Rose by Any Other Name. In terms of
the first step of understanding the situation, here what we are doing is we will try to understand what exactly is the
context or setting of the case. Tom Rose, who is protagonist of our case, was about to listen to his marketing head
Cassie Martin. Make a major presentation on the biggest strategic initiative in Rose partyware history. That is, the
launch of a branded line of partyware. Rose had manufactured paper goods for parties and other social events for
many years, but Tom had recently spotted an opportunity to break out the pack. A new printing technology that would
improve the quality and reduce cost. When rose test marketed the new line, consumers simply loved it and retailers
pledged their support.

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Tom felt that the new technology would give rose the edge it needed to establish its own brand, which would in turn,
allow the company to stay ahead of its rivals, having the first mover advantage. In a presentation, Cassie reported that
customers loved the brand concept. However, it was going to be more expensive than she had originally thought. That
means rose is supposed to charge an addition of 6 to 7% premium on the branded products. At the same time, Hank
Lewis, Rose's national accounts manager further complicated the matters when he told Tom that one of the Rose's
biggest customers party had just decided to offer customers a complete line of party goods under its own name and
wanted Rose to manufacture it.

Now the management team has split on whether Rose should launch its own line or Tom needs to decide. So this is
understanding the context or the setting of the case. This brings the first step of six-step problem solving approach.

Now, moving on to the second step that is, defining the problem or the decision dilemma. Case studies usually presents
us with a decision dilemma or a problem to be solved. Our role is diligently identify and understand the problem or
the decision dilemma. For example, in this case now, Tom Rose is at a cross line in terms of making a decision of what
is the best marketing strategy for rose partyware, whether to have its own brand or to become a supplier for the party

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Moving on to the third step in six-step problem solving approach is analysing facts and underlying assumptions. In this
step, the most important element that is required at our end is separating facts and assumptions. Try to process the
information. Your application of the critical thinking skills is required here, which is relevant to arrive at the solution.
For example, in the Rose case, all the financial information requirement to have an additional 6-7% hike in the branded
partyware products, various protagonists and their roles. The current situation of the partyware industry, all these
things, come under the category of facts.

Based on these facts, you may be required to draw inferences in terms of generating various alternatives that Tom
Rose can consider.

As we are having limited information. In any case, it may be imperative, on our part, to make some assumptions. For
example, whenever we'll move in terms of identifying various alternative solutions for a case, we may be basing on
each alternative on a set of assumptions. In the present case, the reports from the retailers, in terms of their
acceptance and the customers willingness to pay the premium if they are getting branded partyware can become one
of the most important assumption that we are making before proceeding with the alternative solutions.

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Once we are done with understanding what is the factual information in the case and what kind of inferences we are
required to draw and what are the assumptions that may be required on our part. Let's move on to the fourth element
in the six-step problem solving approach, listing out all the possible solutions. This need to happen based on our earlier
analysis that we have done in the previous three steps.

It is possible that there can be multiple solutions for the decision dilemma at hand. Try to chalk down all the possible
solutions. For example, in this case, the three possible solutions which Tom Rose can consider is: One, proceed in
terms of having Rose's own brand. Number two, become a generic supplier for party without having any brand of its
own. Third, Tom Rose can consider having a combination of both, that is becoming both generic supplier, at the same
time having a private label of its own.

Once we have identified various possible solutions or alternatives. Now the next sub-step in this step is identifying a
suitable criteria for evaluating the alternatives. For example, in this case, the criteria can be the investment required,
impact on the bottom line, time at hand. What is the entry and the exit barriers in the partyware industry? Whether
you will be able to send a strong signal to your rivals? Can we have the first-mover advantage? All these things can
become your criteria in terms of evaluating the identified alternatives.

Once we have the alternatives and the criteria against which these alternatives have to be evaluated. Now, the next
step is evaluating each alternative. It is like doing a cost-benefit. analysis or identifying the merits or the demerits of

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each proposed solution. So that we can come up with the best possible solution for the decision dilemma. This brings
us to the conclusion of step 4 in six-step problem solving approach.

Now, moving on to step five based on the detailed evaluation of the alternatives, we need to choose the most feasible
solution and prepare to defend it. Try to brainstorm on the possible solutions weighing each against other, because
we need to choose the most feasible and practically viable solution that would happen in relative comparison of
alternatives against each other.

Once we have the most appropriate solution for the problem. Now, finally, we need to determine a correct way to
carry out the solution. How you will go about the step by step implementation of the chosen solution? It is simply
identifying the action plan. It is always a good idea to have a contingency or Plan B handy in case Plan A fails. This
brings us to the end of understanding six-steps problem solving approach for case analysis.

In this particular case, one of the interesting option for Tom Rose is partnering with the large retail customers to better
understand the unique channel prepositions in the partyware category and try to develop products that would result
in higher sales and profits for both retailers and for Rose.

However, here Tom must realise that the US retailing industry is in the middle of a major consolidation. As the big
retailers become more powerful. They'll continue to brand the shopping experience as well as the products they sell.
Retailer brands usually offer the chains a way to differentiate themselves and develop direct relationships with
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consumers because they deliver the same or greater value at cheaper prices. Most customers love them. Retailer
brands are also more profitable for chains to carry.

In the food industry, they typically deliver 10% higher gross margins to retailers than national brands do. That is why
chains like Loblaws in Canada and Walmart in the United States have created powerful retailer brands like President's
Choice and Sam's Choice.

While choosing vendors most retailers treat price as just one of the several factors. They prefer to tie up with
companies, that can add value to their operations in three ways. First, most retailers look for suppliers that can develop
new products, better packaging and merchandising and promotion tools. Second, they value vendors that can manage
the entire supply chain down to the store level inventory. Finally, they expect suppliers to manage the category for
them by developing a deep understanding of the consumer.

Such category managers not only forecast demand trends, but also anticipate the optimal shelf layouts and off-shelf
merchandising opportunities across the chain. Because Rose is a market leader, Tom should propose the party, appoint
his company, the partyware category manager. He should suggest the creation of a party zone of dedicated retail shelf
space in every store to bring order to the category. Shoppers make 80% of their purchase decisions at the point of
sale. 42% of them in 5 seconds or less. So a focused display will enhance sales.

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Tom should also position this proposal as a cost-savings opportunity, since the party zone would allow party to reduce
the number of competing lines and assortments of partyware, it currently carries. Finally, Rose should offer to manage
the chains partyware inventory and promotions, the later on a monthly and if consumer's differences warranted
reasonable basis.

As tom will discover, category management will bring his company several intangible benefits. For instances, Rose will
discover that it makes a lot of commodity products that sell only the basis of price and are ideal candidates for retailer
branding, but Tom will find that he can brand certain non-commodity products and charge premium price in those
cases, Rose could create multiple brands and segment them by distribution channel, key customer, their usage such
as birthdays and weddings.

Consumers will be willing to spend more on wedding party supplies than they would for say, holiday party goods.
However, Rose should focus squarely on packaging design which influences consumer purchasing decisions. However,
it's not recommended here a large marketing investment elsewhere in a national brand creation program. For
example, because of the categories size and the company's limited resources. A big branding effort is also unlikely to
reach the intended targeted audience because Rose sells its products through so many different distribution channels.
Tom will also need to educate his senior executives about his new vision for the businesses.

He must talk to them about the retail markets changing dynamics, the need for category management and the
importance of working closely with Rose's retail customers. Change as we believe, brings opportunity to those who
can see it.

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Moving on to the second alternative that Rose may consider at this point in time is go with Cassie Martin's idea. Tom
should create a brand and invest in its development. It may seem like a risky thing for a small company to do, but the
alternatives are even riskier. Tom will hear three standard arguments against brand-building.

One, he will be told that branding is not important when it comes to partyware, because most people don't buy such
products on a regular basis. Two, it will be argued that building brand awareness will cost the company a great deal of
money and the Rose's rivals will outprice it in the short run. Three, Tom's critics will point out that large retailers would
never allow a supplier trying to build its brand to use premium pricing. So Rose will lose revenues in the nearer term.

However, these arguments will prove false in the long run. It's evident that no product category, for which branding is
unimportant. Every year, produces more and more businesses that have been built by branding, what used to be
commodities. Brands offer the comfort of familiarity in an increasingly hostile world. And humble paper cups and
plates are no exception for this.

One of the earliest example of successful branding in the paper industry was Scott papers branding of toilet tissues.
Surely a less deserving candidate for branding than partyware. Hallmark has brought familiarity to printed stationery
and is able to charge a premium for its products, and parties are usually happy occasions where consumers will be
happy to spend the extra 6-7% to do the things right.

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It is going to be expensive for Rose to create a brand, but it need not be prohibitively so. Tom would do well to
remember that advertising isn't the only way to build awareness. The most important branding vehicle is the product
itself. The intelligent development of the brand name and innovative uses of the logo can work surprisingly well in this
case. A logo cleverly applied to the product will serve as a brand ambassador at every party. Rose can also concentrate
on developing unique product packaging and point of sale display materials. These aren't expensive and they can be
used to build a base of consumer awareness.

Tom must remember that retailers are the enemies of brands and brand building. In their eyes, brands are waste of
money fighting with each other, and that does them little good. As long as store traffic increases, retailers couldn't
care less, which brand consumers buy. They overemphasize the importance of pricing and forever seek larger
discounts and margins from suppliers. A supplier can build a strong business by maintaining a direct relationship with
consumers or retailers heads. The only way to crub retail power is to build the strength of your brand. Rose will be
shooting itself in the foot if it helps build parties brand. Although Tom may make some money in the short run, as the
retailer's brand gains strength, Rose will be pressured to reduce its margins. Tom will have to rely on technological
innovations like the printing process he recently invested in for the company's survival, but they have no guarantee.

Branding would be the flywheel that maintains the company's momentum in times of little innovation or falling
demand. Tom need not, of course, alienate his largest customer. He should explore how the two companies can best
work together rather than present a definite course of action. Since the details of Rose's branding project haven't been
finalised, Tom need only mention the project to parties top management, but he should honestly tell the company
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how concerned he is about getting marginalised once party launches his private label brand. Tom should empower
Cassie to launch a branded line of partyware, although he must warn Jerry to prevent any prolificate ad spending.
There will be bumps along Rose's road to a branded future, but at least the journey will have begun.

Having understood the two options that are available for Tom Rose, moving in terms of identifying the best possible
solution, Tom should move into the private label business, particularly since it's not very different from selling national
brands with low name recognition. By doing so, Rose will gain some additional cult with party, if nothing else, due to
the procurement efficiencies that the retailer will generate by dealing with just one vendor. Tom can use that to
convince the chain to continue carrying the no-name partyware products his company makes.

As rose's interests become more similar to parties, they will be better able to coordinate their efforts. Hence the key
decision Tom needs to make in this context has to do with product quality. Research suggests that the only way to go
is high-quality route. Retailers sell more private label products, make more money and build their own brand equity
by selling top quality merchandise. Tom must convince party that it is in everyone's interest to have high quality specs
and creative designs. If the retailer myopically insist on cheap low-quality products, he should pass on party's offer
and take the idea to some of the other larger retailers.

Tom can't protect the independent retailers. Consolidation in the retailing industry is inevitable, as the shakeouts in
grocery and drug retailing clearly show, but the independents will not disappear overnight and they need something
to keep Rose's products fresh and exciting. Investing in relatively inexpensive brand-building efforts, such as better
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packaging and point of sales displays, will allow Tom to offer added value to the independents who are bound to feel
betrayed by his decision to produce party's line.

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