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					C. Organization

I. Objectives and Constraints

In early September of 2008 Giant Consumer Products, Inc. (GCP) Frozen Food Division (FFD),
which constituted almost a third of GCP's overall business volume (approximately $600 million in
gross revenues for 2008), was not delivering as expected. FFD's sales volume and gross revenue
were 3.9% and 3.6% respectively below the plan levels. Moreover, company's marketing margin
(the most important metric at GCP) was 4.1% below plan. Wall Street analysts began to wonder
about GCP's long term growth potential which historically has been above industry average. As a
result, at GCP the immediate objectives were clear: (1) generate much needed demand in the Frozen
Foods Division (FFD) without undermining the long-term health of GCP's brands; (2) increase
GCP's numbers to a point where they at least reach the low end of Wall Street's expectations.

The achievement of these objectives heavily depends on GCP’s marketing strategy. GCP's senior
management was highly motivated to reach the planned numbers and was considering undertaking a
sales promotion as the means of achieving identified objectives. Company's management was tasked
to determine whether a national sales promotion would be the right decision for GCP, and if it was,
which products should be considered for promotion. Thus, the risks and opportunities of price
promotion were carefully considered.

Several constraints immediately became visible as the management began evaluating the promotion
decision: (1) indirect cost of cannibalization to GPP’s other non-promoted products; (2) preservation
of one of FFD brand's (Natural Meals™) premium image or avoiding brand equity erosion; (3)
brand switching (fear that consumers would switch to other non-promoted brands, or brands of a
totally different company); (4) purchase time acceleration (consumer stockpiling on promoted
items); (5) possibility of forward-buying by retailers (purchasing large quantities of promoted
products that could also be sold after the promotion is over); (6) non-compliance with pass-through
(retailers not passing along the promotional savings to consumers)

If it becomes clear that a price promotion is the right choice for the company, and items up for
promotion are identified, an implementation plan would need to be developed. If however, the
analysis shows that price promotion would not achieve the desired results, an innovative marketing
strategy would have to be developed that is still consistent with the company’s overall strategic

II. Financial Condition

Giant Consumer Products, Inc. (GCP) was not doing that well in early fall of 2008. In particular,
company's Frozen Foods Division's (FFD) sales volume was 3.9% lower and gross revenue was
3.6% lower than the plan. The most important metric, marketing margin, was also 4.1% lower than
the plan. All these negative effects were caused by consumer behavior that manifested itself by
consumers buying less and buying in a different product mix. On the other hand, GCP was not
offering price reductions to stimulate sales.

Historically GCP's stock has been favored by Wall Street. Unfortunately, to make things worse,
Wall Street analysts began to wonder whether GCP could profitably maintain its above-average
growth. Since the company has been heavily relying on GCP's FFD to set the numbers, the fact that
FFD was not doing well, was creating problems for GCP's overall financial condition.
III. Management Philosophy

GCP exhibits management philosophy that is fairly conservative. This fact is particularly visible
through the following:
      GCP had historically taken a fairly standard to industry approach to promotions
      GCP carefully weighs all the risks before undertaking an initiative.

Allan Capps, CEO of the company, promotes two-way communication that motivates employees.
This careful approach to decision making could also create obstacles for a company if the decisions
are to be made quickly.

IV. Organizational Structure

GCP's is a company organized by divisional structure, which is also called a “product structure.”
This form of organization groups each organizational function into divisions. Each division within a
product/divisional structure then contains all the necessary resources and functions within it. Each
division would have its own sales, manufacturing, and marketing departments. Divisions at GCP are
categorized by product category, e. g. frozen food. GCP’s organizational structure aligns itself with
what has been the industry trend where companies have been turning to product category
management where each brand/product is viewed as a separate business unit.

GCP had clearly defined and measurable goals (top-line and profitability) initially set by senior
management, which then would trickle down to each division of the company where its own annual
targets would be set. Furthermore, targets are negotiated and further set for each brand in the

The divisional structure promotes accountability by establishing key metrics for performance
measurement. On the other hand this type of organization could be detrimental if the set
performance measurements of each division are not aligned with overall strategic goals of the
                             Giant Consumer Products
                                    Organizational Chart

                               Chief Executive Officer
                                     Allan Capps

                               Vice President of Sales
                                     Byron Flatt

                                FFD General Manager
                                   Mary Davidson

                              FFD Director of Marketing
                                   Mike Sanchez
V. Organizational Culture

GSP's FFD took pride in having the most customer-centric management team in the frozen food
industry. This fact allowed the company to stays on top of the trends: emergence of dual-career
families, increase in commute times, less time available for meal preparation. Clear performance
measurement targets kept employees focused and motivated. It is in the company’s culture to
carefully analyze decisions before implementing them. It appears that the company promotes long-
term thinking, instead of being focused primarily on the short-term.

VI. Summary of Strengths and Weaknesses

Potential Resource Strengths and Competitive Capabilities
    Clearly stated objectives
    Manages each product category as a separate business unit, e.g. frozen meals and entrees
    Company able to identify trends, e.g. emergence of dual-career families, increase in
       commute times, less time available for meal preparation
    Careful decision making process
    Strong brand name image, e.g. Natural Meals™
    Stronger than competition relationships with retailers which allows GCP to offer an extra
       promotion very late in the year that competition could not
    Leader in health food segment
    Efficiency gains from scale economies
    Strong position in frozen food category that helps company exert a great deal of influence
       over retailers (able to dictate which items to promote and when, secure compliance and path-
    Retailers favored promotion of GCP brands as they helped drive store traffic

Potential Resource Weaknesses and Competitive Deficiencies
    Some brands (e.g. Natural Meals™) appeal to a niche market. As a consequence they are
       sub-scale for in-store promotions, i. e. they could not amortize display costs across a small
       volume compared to brands with higher volume.
    Might lose market share because of attachment to brand name image
    Management is too cautious to pursue aggressive price promotions that might be needed to
       stimulate sales
    Long decision making process that could hinder company’s ability to quickly come up with
       the much needed solution as the year comes to a close
    While managing each product category as a separate business unit offers great advantages, it
       can also force organization to operate in silos where the goals of each business unit are not
       considered in the context of company as a whole
    A lot of emphasis on hitting Wall Street’s expectations. While GCP could offer a promotion
       and reach the numbers expected on Wall Street thus making shareholders and the company
       overall equally happy in the short run, in the long run brand image of GCP’s premium
       products could suffer.

VII. Implications for Strategy Development

The following issues could cause complications for strategy development:
      The preservation of brand equity could prevent GCP from considering a price promotion at
       all or for certain products (e.g. Natural Meals™) due to concerns that it would tarnish the
       product's premium image
      egative impacts from a price promotion identified as constraints in section I of Part C -
       Organization. GCP should concentrate on minimizing those risks.
      Some marketing solutions require a great degree of flexibility. GCP’s rigid divisional
       structure could make it difficult to implement solutions that require greater degree of change.

Works Cited


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