Question

Answer the following questions:

Number 4

In 1924, Kleenex tissue was invented as a means to remove cold cream. The product was initially backed by a series of advertisements that included endorsements from the era’s Hollywood stars, like Helen Hayes and Jean Harlow. After studying customer usage habits, however, the manufacturer (Kimberly-Clark) realized that many customers were using the product as a disposable handkerchief. The company switched its advertising focus, and sales more than doubled.

Kimberly-Clark faced a significant challenge in trying to grow and defend its new product. At its core, Kleenex is simply tissue paper, a product that is not particularly difficult to replicate. As others in the consumer packaged goods industry saw the profits available from producing disposable handkerchiefs, they moved into the market.

Kimberly-Clark management resorted to series of actions to obtain and maintain the leadership role in this industry. The actions included creating an innovative use for a relatively common product. The company introduced printed tissue in the 1930’s, eyeglass tissue in the 1940’s, space-saving packaging in the 1960’s, and lotion-filled tissue in the 1980’s. At the same time, the company invested in advertising and promotion, building a brand whose name became synonymous with disposable tissues.

Explain and evaluate the Company’s strategy and behavior.


Number 5

Charlie International Corporation (CIC) sells medical measurement devices in Northern European countries for $25 and box of 50 test strips for $22. The test strips measure various chemicals in blood and urine when they are inserted into measurement machines. Prices for strips and machines are dictated by reimbursement policies established through negotiation with insurance companies. In countries such as Italy and Spain, insurance companies’ reimbursement rates are 50% lower than in the Northern European countries. CIC has not tried to sell their products in Southern Europe because they fear that wholesalers in Northern Europe would buy lower-priced products from wholesalers in Southern Europe.

CIC currently produce 12 million boxes of test strips, and have the capacity to produce an additional 6 million boxes of test strips per year at the same marginal cost of $5 per box.   The Southern European market for test strips is $200 million per year. Assuming they would acquire 30% of the market, the opportunity cost of not entering the Southern markets is about $60 million in revenue.

The CIC Management asks you to recommend a scheme that enables CIC to take advantage of this substantial opportunity. What would you recommend?

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Answer 4:
In this case, the company has been trying to build and defend its leadership position in the market. It has been using the strategy of product differentiation and development of innovative uses of the product so that it can create a loyal consumer base and encourage them to use the product more frequently. The company had developed this product first and so it has the first-mover advantage in this product. However, due to presence of competition, the market structure was moving towards perfect competition since the product was similar in use and looks. Therefore,...

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