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The Countrymanager Case sample essay

Kay Pasah, head of the Consumer Healthcare Division of Allstar Brands, looked across the table at her category and brand managers. She had a determined look. “In addition to our United States business, our operations in Europe and alliances in Asia are performing well. But these markets are mature with lots of competition and aging, slow growing populations. On the other hand, we’ve been too slow in developing our business in our own backyard — the Americas. Our board believes, and I agree, that to generate the kind of growth needed to drive our stock price, we need to develop a market presence in Latin America. What I need from you is an analysis of the markets in Latin America and a plan to enter the region. You need to tell me where we should be, when we should be there, and how we will need to manage the business. I want us to be in at least one country in the region next year. The board feels that in the near term we need to be in one or more of the following countries: Argentina, Brazil, Chile, Mexico, Peru, and/or Venezuela.”

Allstar Brands

Allstar Brands is a U.S.–based consumer products company that produces and sells ethical (prescription) pharmaceuticals, OTC (over-the-counter or nonprescription) drugs, and consumer products. It is an $8.9 billion firm that was formed in 1924 and competes with a variety of larger and smaller firms, depending on the product market. It has a number of leading brands in various product categories, including (in the OTC division) Allround, the leading liquid cold remedy in the United States, and Zemlef, a heartburn remedy soon to be converted from prescription to OTC status. The consumer products division includes various types of packaged goods: hand and beauty soaps, laundry detergent, shampoo, toothpaste, shaving cream, etc. Over the years, it has expanded its product category width through internal new product development and acquisition of brands and companies. The company had been historically organized into three divisions (Ethical Pharmaceuticals, Consumer Products, and International), but recently reorganized into a global product management structure with three major divisions (Ethical Drugs, Consumer Healthcare, and Consumer Products). A group of category managers exists within each division.

For example, the Consumer Healthcare division has an oral care category manager, a vision care category manager, etc. Most major brands also have their own brand manager who reports to the category manager. Under the new structure, each division is responsible for its own international operations and, to some extent at least, can pick the products and categories to pursue internationally. The category managers meet regularly with their counterparts from other countries to coordinate the approach for managing the brands across world markets. In addition, within the United States, the VPs for international operations from within each division meet on international strategy to develop synergies in production, exporting, country expertise, and so on.

Figure 1 illustrates this organizational structure.

Figure 1: Organizational Structure of Allstar Brands
Allstar Brands

Ethical Drugs

Consumer Healthcare

Consumer Products

Product Categories

International Operations

U.S. Operations

Europe Oral Category Asia Toothpaste

Latin America

Finance Accounting

Production MIS

Country Management

Country Analysis and Entry Decisions

Latin America is a region of great potential. With a population of approximately 450 million, the region represents a population that is 50 percent larger than that of the United States and Canada. The region has a history of having been politically unstable and has had many weak economies characterized by low growth, high inflation, and a reluctance to take tough economic actions to correct these problems. The dominant national language across Mexico and Central and South America is Spanish, except for Brazil, where the dominant language is Portuguese. Some portions of the population in many South American countries speak one or more native Indian languages. A variety of trade enhancement actions have been struck in recent years. For example, Mexico was signatory of the NAFTA agreement, along with the United States and Canada.

This agreement reduces trade barriers among the three countries and has encouraged a variety of companies to establish production in Mexico to take advantage of low labor costs and fairly seamless access to the United States and Canadian markets. The MERCOSUR agreement provides similar linkages among the South American countries of Argentina, Brazil, Chile, Paraguay, and Uruguay, including association agreements (but not membership) with Bolivia. The Group of Three links Colombia, Mexico, and Venezuela. The Andean Community links Bolivia, Colombia, Ecuador, Peru and Venezuela. Numerous bilateral agreements also exist. Kay’s team had scoured the Internet for additional sources of data and had come across a site maintained by the CIA. “Our tax dollars at work!” Kay exclaimed. A summary of key information from this site appears in the Market Attractiveness Excel Spreadsheet. Tables 1 and 2 below compare economic and social characteristics of the home market and the scenario markets under consideration.

Currency Exchange Rates

The relative value of different currencies affects many of the decisions facing Kay’s team, as well as much of the data used in their analysis. For accounting purposes at Allstar’s corporate offices, revenues and costs are converted into US dollars (USD). Therefore, fluctuations in the exchange rate will affect consolidated reports directly. However, pricing and budgets are set in local currency, so Kay’s team must manage in the local culture and currency but remain aware of the effects of exchange rates. Table 3 provides the current rates of exchange.

World Toothpaste Market

Current world toothpaste sales total approximately $10 billion. The largest country market for toothpaste is the United States, with $1.4 billion spent during the past year. Toothpaste is available in a number of sizes, delivery systems, textures (paste or gel), and formulations. The basic toothpaste product is a paste or gel with flavoring and one or more active ingredients that provide specific benefits to consumers. A general description of these variations in the United States market is listed below. Not all companies produce all possible combinations.

Table 4: Toothpaste Packaging and Formulation Variations Sizes (grams) Travel (25) Personal (75) Family (150) Delivery Systems Tube Pump Texture Paste Gel Formulations (Ingredient/Benefit) Basic contains fluoride for prevention of dental cavities. Whiteness contains hydrogen peroxide for whitening and prevention of gingivitis. Healthy contains baking soda for tartar control. Kids contains special flavorings to appeal to children.

In general, research identified four key segments of consumers defined by benefits sought: 1) 2) 3) 4) Basic/Economy: seeks cavity protection at a low price Whiteness: seeks whiter teeth Healthy teeth: seeks control of tartar and prevention of disease Taste/Kids: seeks a good tasting product to appeal to children

Consumers purchase different formulations based on the benefits they seek and their purchasing ability. The benefit segments also link to demographics. For example, families with children often focus on decay prevention; young singles are typically more interested in whiteness; those in middle age are concerned with tartar and gingivitis; and children find taste of the toothpaste to be a primary feature. Similarly, other attributes may appeal differentially to different consumer groups. For example, pump dispensers add convenience and may be a novelty for children but are more expensive to produce than tubes. Also, single people might prefer the convenience of smaller package sizes, whereas families may prefer a larger package which is typically more economical on a cost per gram basis.

Your R&D department may offer other SKU combinations as the simulation progresses. A number of firms produce and/or market toothpaste in the world market. Table 5 lists the five major producers of toothpaste for the world market, including Allstar Brands. Not all global brands or global competitors will be represented in every market, and some markets might include brands produced by local firms. These local brands may have a minor or major share of the market, depending on the country. Table 5: World Toothpaste Producers with Major Brands Company Name AllStar Brands B & B Healthcare Caremore Company Driscol Corp Evers Consumer World Sales (% of world market) 13 15 21 10 7

Brands Allsmile Britesmile Bancav Clean & White Caregate Dentacare Eversmile

Your job as the first country manager for the new region is to determine which of the scenario countries recommended by the board is the most attractive for Allsmile. You are expected to build the Allsmile business in one market and expand into two or more other regional markets. While you make these decisions, it may be helpful to review the information included in Table 6, which provides data on toothpaste sales by country, and Table 7, which lists producer market shares by country. For each market that you enter, you will need to determine Allsmile’s target market and positioning strategies, how to source products (via importing or local production), which products to launch, through which channels to distribute, pricing, advertising, and promotion. As country manager, you are responsible for the performance of your operations, including revenues, market share, and profitability. Therefore, you must develop and implement strategies that are attractive to customers and profitable for Allstar Brands.

Product Management

Allsmile is a key asset of Allstar Brands. It is one of the company’s highest recognition brands in the United States. It is produced in the United States and in Germany for the United States and European markets, respectively. A large number of stock keeping units (SKUs) are produced. South Korean and Japanese manufacturers also produce Allsmile under license for distribution and sales in Asia. There have been reformulations of the brand, but as of today, the product formulations are essentially the same across all markets for a given SKU (although there are slight differences in packaging and in the type and intensity of flavoring that are thought to reflect regional preferences).

Overall toothpaste market growth in the United States is very slow, matching the slow growth of the population, so that increases in sales of a brand are due to reductions in share of competitors. Much of the shift in market share in toothpaste has resulted from aggressive product development and reformulation supported by promotion to create brand curiosity in the category. For example, product management has developed three line extensions of the Allsmile brand for the United States market: Allsmile Whitening, Allsmile Tarter Control, and Allsmile Kids. These line extensions focus on particular benefit and demographic segments.

* Not all combinations are available. Management of Allstar Brands has made the decision that Latin American market entry is to be done using the existing SKU formulations. In addition to the question of what country or countries to enter, the country manager in Latin America must decide which of the Allsmile versions to use in the chosen market. The usual approach for market entry in the past has been to introduce only four of the 24 available SKUs and review early performance before investing additional resources. Portuguese or Spanish packaging (depending on country) is essential for consumer acceptance.

After initial entry into a regional market with a limited number of SKUs, expansion in the region will likely proceed as follows: • Periodically, market penetration and growth rates for each country manager will be reviewed. Based on achieving these goals, additional SKUs may be introduced in the initial market. The pump delivery system is not available on SKUs during initial market entry, and may become an option later. After successful entry into one market, the country managers can expand their operations into other countries in a similar fashion. The products can be the same as those marketed in the initial country, or they may be entirely different SKUs. Goals and objectives are likely to be set with your instructor at the beginning of the simulation. Your instructor may also provide guidance as to regional rollout timelines.

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