Case Study Reports

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Renova Case

The national brand Renova, a privately held disposable paper products company based out of Portugal, is a brand competing in Western Europe and the Portuguese Tissue Industry. An industry that has been completely penetrated with universal market penetration above 90%. That, combined with limited population growth, has caused an overall industry growth of just 1.5% for the toilet paper category. Renova being a medium-sized family business, is finding difficulty in expanding its market share within such a tight market with such high amounts of competition both in Western Europe (where they maintain only 3% of the market share in the disposable paper products industry) and Portugal (where they maintain only 4% of the market share in the disposable paper products industry. Renova is battling for this market share from many angles, including national labels, private labels, and retailers.

The difficulty for Renova and other national brands to gain market share is partly due to the growth of the premium brand in Western Europe and the rapid growth of private labels in Western Europe and Portugal. This, along with retailers, plays a large part in national brands' ability to grow within the market since retailers hold so much power within the industry while acting as customers and competitors. With retailers carrying only 3-4 brands of toilet paper (their own label, the leading brand, and two different national brands), thus putting a hurdle in front of brands with lower market share to attain reliable distribution and shelf placement. Because of these hurdles, like the growing popularity of private labels and retail power – as well as other limitations like the blandness of the disposable tissue aisle within stores leading to customers' focus on both Price and Quality and buying habits based on the deal they can get that day. It has forced national brands to experiment with technological advancements. These technological advancements focused on the three segments Renova consumers found to be most important in terms of the quality of toilet paper (since they care more about quality and less about price), softness, strength, and absorbency.

Renova's CEO, Paulo Pereira da Silva, now must consider five different broad strategic directions to take the Renova brand to help increase market share for the brand.

The Black and Decker Corporation (A): Power Tools Division

Black & Decker (B&D) is a very well-known and trusted power tool brand within the Consumer “home-use” segment as well as the Professional-Industrial segment. Maintaining the number 1 market share position in the Consumer and Professional-Industrial segments B&D decided to enter the Professional-Tradesman segment – a segment made up of predominantly electricians, plumbers, carpenters, framers, roofers, and general remodelers working in residential construction. Though Professional-Tradesman made up $420 million of the market (28%), it sat the lowest of all 3 segments, with the Professional-Industrial segment making up $550 million of the market (37%) and the Consumer Segment making up $530 million (35%). Though the Professional-Tradesman segment was the lowest, it was the fastest growing segment at 9% compared to a 7% growth rate for Consumers and no growth for the Professional-Industrial segment. Thus, making it a very lucrative segment to try and increase market share in.

Though B&D has a segment share of 20% in its Professional-Industrial Segment and 45% in the Consumer segment, they only maintained 9% of the Professional-Tradesman Segment. Tying for 3rd in market share for Tradesman, B&D sat 41% behind their largest competitor Makita, and only 1% behind their second largest competitor Milwaukee. Through B&Ds research and brand awareness they concluded that the lack of Market Share wasn’t due to B&D’s product quality since they were very strongly competitive in many of the product categories. With B&D having highest total awareness of power tool suppliers among tradespeople and being seen as one of the best brands 44% of the time, they realized the problem lies in people’s preferences towards Makita and Milwaukee caused by tradesman’s negative associations with B&D. Leaving B&D’s Vice President of Sales and Marketing 3 options to try and receive internal support for advertising allowances and rebate money for their Tradesman products even though profitability was almost zero. The three options being:

Harvest Professional-Tradesmen Channels – keeping a focus on profitability for the Tradesman segment even at expense of market share
Get behind B&D’s name with sub branding (likewise to what they have done in their other product lines)
Drop the B&D name form the Professional-Tradesmen segment (with an alternative B&D name suggestions or use a name already used by a B&D brand)

Local Motors: Designed by the Crowd, Built by the Customer

Local Motors (LM) started by, Harvard Business School Graduate, Jay Rogers was created in 2007. Rogers created the company backing the idea that the big names in the automotive industry, during the 2009 automotive crashes caused by an influx of foreign competition and bloated labor deals, were unable to alter their company product and service model. This opened a door for many new companies within the automotive industry to enter where the big-name companies like General Motors, Ford, and Chrysler lacked. Many companies entered the industry with a plethora of backgrounds, business models, strategies, and design philosophies. However, what separated Rogers’ Local Motors structure from many of these other new start-ups was its’ non-traditional “bimodal intelligence” model, where the company would choose from community designs based on what the company could actually build and market. Local Motors would have a very community-oriented structure where designers could submit their designs to LM’s online community and forum, creating online dialogue between the company and its’ community members. His company also fostered this community-oriented structure through pre-purchase activities like design competitions to encourage participation from auto designers, as well as post-purchase activities like build-it-yourself models where customers would come in on weekends for three 8-10 shifts to partner with a “builder-trainer” and anyone else of their choosing to help build their car.

With this unique model employed Roger just had a few other kinks to work out regarding marketing, financing, and production models. Being a startup Rogers had to constantly work for investments from larger companies and investors:

In terms of financing, with large expenses for building micro factories (~6 million on average), Rogers had to weigh his options: try to raise more money from the original investor pool, reach low end of the desired range, employ the bootstrap model, or open to franchising
In terms of Marketing, contingent on the timing and amount of the firm’s capita, his options are: hiring Kinetic firm which would cost $50,000 each month for 6-9 months, and/or accept the proposal from an LA based reality TV show to make LM and its design community the subject of a new show (which would be very costly to LM’s cash reserves).

LEGO Case

Lego, once a carpentry business began in Billund, Denmark in 1932 with the owner Ole Kirk Christiansen. With hard times and the loss of his wife, Ole was left a single father of four boys, and was determined to take care of them. This led to Ole entrance into the toy making business during an effort to make his boys happy. His success was rooted in his ability to put an idea into action and his good eye for quality and detail. That combined with his hard work and dedication through many setbacks like slow sales and a wholesaler from Fredericia going bankrupt before paying Ole.

These hard times pushed Ole and his son, Gottfried, to make crucial steps in the business process to succeed. One of the most important steps being creating the “LEGO” name. A name founded on the Danish saying “Leg Godt” meaning “play well”, coincidentally though in Latin this means “put together”. The next step was making investments into his own company in terms of productions and machinery, putting money into the tools that would improve the quality of the toys in production. Which stand as a testament to Ole’s core value that every detail matters and only the best is good enough, and to never cheat your customer. And just as things started looking up and LEGO was making a profit in the late 1930’s, there was a fire in their warehouse in Billund in 1942. The shop burned to the ground and all drawings and models were destroyed, but luckily for Ole’s perseverance in necessity to take care of his family, LEGO rebuilt its’ factory and fought its way back into the market.

His luck started looking up in 1946 when Ole took a trip to Copenhagen to look at a new machine that just arrived in Denmark – a plastic molding machine. This machine combined with a conversation that Gottfried has on a business trip to England about toys needing to be a part of a system led to the LEGO brick we know today. A toy that is different from others in that strengthens the imagination and creativity of the children playing with it. With this system in place, LEGO experienced a breakthrough, expanding beyond just the Denmark market and into other countries. From there and after yet another factory fire, Gottfried made the executive decision to end the production of wooden toys and only focus on the Lego system that the company had turned into. This turned into a great decision because many new models were built and LEGO got stronger in the toy industry as well as with consumers, so much so that Gottfried was able to bring his vision of LEGO Land to life, an amusement park that introduced 600,000 guest in it’s very first year.

Chateau Margaux: Launching the Third Wine

Chateau Margaux Wine estate, located on the left bank of the Gironde estuary in the Médoc region, originally owned by the Lestonnac family, then the Marquis de la Colonilla in 1810, was purchased in 1977 by André Mentzelopoulos for $16 million. Though many doubted André's capabilities (seeing as though he was Greek and an owner of a successful supermarket chain), he proved the naysayers wrong when he overhauled the vineyards, improved drainage, built the first underground cellar, and initiated new grape plantings. André's improvements and attention to quality over quantity, combined with overall innovation, inspired many winemakers to come, including his 27-year-old daughter, Corinne, who took over the estate after her father's death in 1980. With the help of a new general manager named Paul Pontellier, Corinne brought Chateau Margaux's newly founded wins by increasing first-growth wine quality and, in turn, improving second growth quality. Increasing the quality over quantity of the first and second growths led to the ability to sell and profit off a third growth since it attained residual quality from the first two.

With the overall global wine industry supply increasing with the expansion from “Old World” producers (i.e., France and Italy) to “New World” producers (i.e., U.S., Southern Hemisphere countries, and Antarctica), there became an excessive amount of wine on the market. However, with this increase in supply also came a rise in demand. With France, Italy, and Spain still being the most demanding, the market also began to see momentum in places such as Australia, the U.S., and China. This provided a larger segment in which to understand consumers buying behavior and influences and allowed winemakers to divide the market into six segments: Traditionalists (15%), Enthusiasts (25%), Image Seekers (24%), Savvy Shoppers (15%), Satisfied Sippers (8%) and Overwhelmed (13%). This increase in overall demand for the wine category also led to an explosive rise in demand for the leading Bordeaux chateaux.

The overall increase in demand for Chateau Margaux, combined with the opportunity that Corinne Mentzelopoulos had to capitalize on the Third wine, led to a big decision to be made on behalf of the brand. Should her company follow in the process of wine producers long before her, and as Chateau Margaux had always done. Which was selling their wine bottles to a set of négociants who would then pass the wine down a long chain of distributors, each of which gradually increased the price of the wine. Making it difficult for Chateau Margaux to control the cost of their wine on the market. The other option for Corinne and her company was to allow their wine to become more accessible to their core customers in traditional markets like the U.S., U.K., Japan, and France, who used to buy their wines regularly but have been prices-out due to the increase in wine prices. But to regain the hearts of these once loyalists, the Chateau Margaux had many questions they would have to tackle and navigate. They would need to develop a complete marketing plan for the new offering. This marketing plan would have to include who the target market is, what brand image should be relative to Chateau's first and second wines, which distribution channels to use, which price point to set, and which strategic promotions to employ for the third wine. All with little to no past marketing experience on their side.