Please just answer the Running Case questions ( 1-5 ) and Application Questions (1-5) using the following passage.
Thanks
Uncertainty
Todd looked at Ryan and asked, “So what do you think is likely to happen?”
Ryan replied, “I’m not sure. We could end up getting the account outright, which would mean potential sales of an additional 100,000 bars per month. Or, it is possible that we get a smaller order quantity as a test in some of their stores initially to see how the bars do. They may start us at 20,000 bars as a trial and if things go well, we could then see increased orders as they rolled our bars out to all their stores. I guess it is also possible that they go with someone else entirely, and we are left out for now. I certainly hope not, and I don’t think it is likely at this stage given how many people have tried them from their team and given who we are dealing with now, but it could still happen.”
Todd said, “Well what worries me most is that we have to order some ingredients almost six months in advance. And you know the problems we’ve been having with vanilla beans. If we get their full order, that would mean almost 30,000 additional vanilla and almond bars per month! If we don’t order in advance, we’d never meet that demand for vanilla. Even if we got the partial order, it would mean we would need to increase our order significantly to cover the additional 6,000 vanilla bars we’d need in that scenario.”
Chloe said, “If we get an order from them and we don’t have any vanilla bars, which is our most popular by the way, they aren’t going to be happy. They might then cancel all future orders. Given the likelihood we will get at least a trial order, I think we should plan to increase our vanilla order just in case.
Just in Case
Chloe’s suggestion sparked additional debate among the team. All agreed that it would be problematic to get a big order and then not have the vanilla needed to fulfill the order. This was especially tricky since this was one of the largest healthy grocery chains and was important to TSL’s future volume, and it also would help their reputation. They knew it would be a big problem if they couldn’t fulfill the order, but on the other hand, they also knew that it would be a huge problem if they planned for the order, especially the larger order, and then didn’t get it. In that case, they would have paid a large price premium to secure the anticipated ingredients, mainly vanilla, only to see it sit in storage and go to waste without the bar sales to use it. This would be a huge financial loss that could potentially devastate the growing company’s financial stability. So, careful consideration and planning was required.
The team members made several suggestions for dealing with the potential order. The actual decision they had to make was how much vanilla to buy in advance, and there were really only three options. They could either (1) not increase their vanilla order, (2) they could increase the order some to cover the potential smaller order, or (3) they could increase their vanilla order a lot to cover the potential full order. The problem was that they would not know whether they would get an order, nor how much of an order until after they would have to make the vanilla order several months in advance to meet production schedules. The group decided they needed to consider the potential scenarios so they could make a more thoughtful planning decision. So they investigated each option in more detail.
Option 1: If they chose not to increase their vanilla order, what could happen? If they did not get any order for the additional bars, they would be in good shape since they would not have purchased extra vanilla, so they would be financially OK and no real adjustment to their marketing strategy would be needed. On the other hand, if they did receive an order, they would not have enough vanilla to meet demand. This would be a bad situation if the grocery chain placed a small order, but would really be a huge problem if the grocery store chain placed a large order. If this happened, they would have to either fill the order without vanilla bars, or they would have to use artificial vanilla flavoring, which they were all against given their mission and positioning as a high-end bar. Another option if they did receive an order would be to shift vanilla bars to the new grocery chain from existing customers. In this scenario, existing customers would not get all of the vanilla bars they ordered, but would instead get substitute bars with other flavors. Chloe said she would have to figure out some way to rank customers to determine how to “ration” the vanilla bars needed to fill the order for the new grocery chain. She also mentioned this would likely cause some existing customers to reduce or even stop ordering from TSL altogether.
Option 2: If they chose to increase their vanilla order anticipating the smaller order quantity, what could happen? If they did not get any order, they would have purchased extra vanilla, so they would lose money unless they could figure out a way to increase the demand for vanilla bars relative to other flavors. If they did receive a small order, they would have enough vanilla to meet demand and would not need to adjust their marketing strategy. If the grocery store chain placed a large order, they would have to either fill the order without enough vanilla bars, or shift vanilla bars to the new grocery chain from existing customers. This scenario would have the previously mentioned potential consequences if existing customers were not happy about orders for vanilla bars that went unfilled.
Option 3: If they chose to increase their vanilla order anticipating the larger order quantity, what could happen? If they did not get any order, they would have purchased a lot of extra vanilla, so they would lose a lot of money that could potentially devastate the growing company’s financial position. If they received a small order, they would have enough vanilla to meet demand but would still need to adjust their marketing strategy because they would have too much vanilla. They would lose money unless they could figure out a way to increase the demand for vanilla bars relative to other flavors. The new grocery chain would not want only vanilla bars, so in this case, TSL would have to figure out a way to shift existing customers to order more vanilla bars relative to other bars. Perhaps promotions or other quantity discounts could help, but shifting customers to vanilla bars might then result in surpluses of other ingredients. If the new grocery chain made the larger order, everything would go as planned if TSL ordered enough vanilla to meet the larger order, and they would make significantly more profit.
Given the three different scenarios and the discussion, the group was left with the unenviable task of making a decision that would have significant financial and marketing strategy implications. At a minimum, they were glad they had at least gone through the exercise playing the “just in case” scenarios. They at least got a better picture of what would need to happen should they not order the quantity of vanilla that matched the order quantity of the new grocery chain customer. However, they still needed to make a decision. What should they do?
Running Case Questions
Which of the three options is the highest risk? Why?
Which of the three options is the least risky? Why?
Which of the three options would present the greatest challenge from a marketing perspective if something unexpected happens?
Can you think of other viable options for each decision if the unexpected happens? Be specific.
What would you suggest they do in this situation? Justify your decision.
Application Exercise
There are many uncertainties when running a business and TSL has certainly seen their fair share of unexpected issues. Judging from hindsight, they admit they could have foreseen some of the surprises. Some would have been predictable if they had added experience, and some were simply not predictable at all. The difficulty with planning is that you have to make decisions well in advance without complete data. Simply put, you don’t know exactly what will happen in the future, and yet, what happens in the future can have dramatic consequences for your business. While it is likely you will get more detailed exposure to business planning in future courses, let’s take an initial look into marketing planning that integrates the course material.
Recall in Chapter 3 we discussed how the environment affects marketing decisions. One of the environmental issues TSL faced was the potential for significant increases in price and shortages in vanilla beans from Madagascar, the primary source of vanilla in the world. Increasing demand from other companies combined with drought or poor growing conditions could mean shortages of one of TSL’s most important ingredients. How could TSL plan for such a contingency? Answer the following questions and develop a mini-contingency plan for TSL just in case they face a situation of vanilla bean shortages from Madagascar:
Product problem: What would be one specific product issue TSL would face if they could not get their needed supply of vanilla beans? Plan: Suggest one step TSL could use to address this product problem. (Hint: If they cannot get real vanilla beans in the quantities needed to meet demand, how could they or would they change their product(s) to address this problem?)
Place problem: What would be one specific place issue TSL would face if they could not get their needed supply of vanilla beans? Plan: Suggest one step TSL could use to address this place problem. (Hint: If they cannot get real vanilla beans in the quantities needed to meet demand, how could they or would they change their place options to address this problem? Could they limit which customers get vanilla-based bars? How?)
Price problem: What would be one specific price issue TSL would face if they could not get their needed supply of vanilla beans? Plan: Suggest one step TSL could use to address this price problem. (Hint: If they cannot get real vanilla beans in the quantities needed to meet demand, how could they or would they change their price[s] to address this problem?)
Promotion problem: What would be one specific promotion issue TSL would face if they could not get their needed supply of vanilla beans? Plan: Suggest one step TSL could use to address this promotion problem. (Hint: If they cannot get real vanilla beans in the quantities needed to meet demand, how could they or would they change their promotion to address this problem? Would they promote differently by focusing on other flavors, or should they explain the shortage in some way to customers through promotion? How?)
Participation problem: What would be one specific participation issue TSL would face if they could not get their needed supply of vanilla beans? Plan: Suggest one step TSL could use to address this participation problem. (Hint: If they cannot get vanilla beans in the quantities needed to meet demand, how could they or would they change their participation to address this problem? Given their focus on malnutrition, could they encourage customers to participate in some way that might help areas hit by the drought, or could they use the shortage to highlight their malnutrition cause in some other way? How?)
Address how each of the problems explained above should be addressed in TSL’s contingency plans and why. Rank the order of the importance of each item in the contingency plan.

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