RED OOMPA LOOMPAS

SIMBRAND REPORT
Module: BMK0139 Integrated Marketing Practice
Instructor: Mr. Giles Forbes
Students name: Mai Thi T. Dao - u1473572
Group: Red Oompa Loompas

Mai T T Dao U1473572

Contents
I.

Introduction:.............................................................................................................3

II. Year 1-4:.....................................................................................................................3

2.1. Market environment:...............................................................................................3
2.2. Decision-making process:.......................................................................................4
2.3. Result analysis:.......................................................................................................7
III. Year 5 The prespiortu ............................................................................................8
3.1. Market environment................................................................................................8
3.2. Decision-making process:.......................................................................................9
3.3. Result analysis:.....................................................................................................11
IV. Year 6- Deterioration stage.....................................................................................13
4.1 Market environment:..............................................................................................13
4.2 Decision-making process:......................................................................................13
4.3. Result analysis:.....................................................................................................14
5. Year 6- Deterioration stage......................................................................................10
5.1 Market environment:..............................................................................................10
5.2 Decision-making process:......................................................................................11
5.3. Result analysis:.....................................................................................................13
VI. Conclusion:.............................................................................................................16

Mai T T Dao U1473572

List of tables and pictures:

1. Table 1
2. Table 2: Product design Year 1-4
3. Table 3: Product design Year 50
4. Table 4: Product design Year 6
5. Table 5: Product design in Year7-8

List of pictures:
1.

Picture 1: Share price Year1-4

2. Picture 2: market size and growth in Europe and Asia in year 5

3. Picture 3 : BCG matrix0
4. Picture 4: Share price Year 5:
5. Picture 5: Sale and profitability in Year 5
6.

Picture 6 : Sale and profitability in Europe Year 65

7.

Picture 7: Market size and growth Year7-8:

8. Picture 8 : Result in year 7-88
9. Picture 9 : Gross profit of Red and Bakery group9

Mai T T Dao U1473572

I. Introduction:
Cesim is an easyto-use system assisting in business course. In this context, Cesim is
applied to illustrate our group operation of smartphone organization, namely Red
Oompa Loompas. To develop business, our group has based on the Marketing Mix and
AIDA model that help us to clarify our products strategy to achieve as many
percentages of market shares as possible. The aim of this repost is to display the
companys decision-making process in term of designing products and related activities
in order to evaluate our business performance during 8 years. Basing on our
performance, the report will be divided five parts including the analyzing of business
performance from Year 1 to Year 8. The estimated vision for next five years also will be
mentioned at the end.
II. Year 1-4:
2.1. Market environment:
At the beginning (Year1), Europeans demand for smartphones was already at a
dominant stage. Although staying behind Europes, estimated growth in Asia was great
also. Therefore, we approached in both markets, mostly in high-end segments because
of the high number of their estimated market size.
In the following years, there were some global markets changes. The smartphones
demand growth slightly went down in both markets, making up about 70% of the first
year. Moreover, because of the rapid rise in population, Asias demand growth was over
Europes, in which low-end segments were dominated, making the price more sensitive
(price elasticity is high).
3

Mai T T Dao U1473572

2.2. Decision-making process:

The design :

Our enduring goal is aiming to high-end consumers in two markets. Moreover, Asia is
our main target. Because most of the competitors launched their products in Europe,
the market is low competitive. Therefore, we determined to be market leader in Asia.
After four years, we have two Europe-based products and three Asia-based products
(Table1).
Table 1:

The low-end products also are launched to take advantage of their high growth rate
(especially in Asia). This will help us increase our sale volume and profit.
The styles in Europe is Sport, high-end Europeans favorite style whereas Asia products
are in Classic which most of Asian prefer to. In order to take Asia market, we choose the
style that attracts as many consumers as possible (both high-end and low-end
consumers). Table 2 below displays several features of our products during Year 1- 4.

Mai T T Dao U1473572

Table 2: Product design Year 1-4

Mai T T Dao U1473572

Pricing strategy:
Positioning ourselves as a premium smartphone company, our products prices must be
high. Specially, we defined RedHawk as price-leadership in Asia market.
In Year4, because of the changes in market condition, we started the skimming price
strategy by reducing the product price. However, generally all our products still were in
high price to a certain extent (300 to 350 ), comparing the other competitors.

Sales forecast:

The method we used in this phase is basing on the last round volume and the estimated
growth of market size. We invested 30-40% of the estimated growth for the target
6

Mai T T Dao U1473572

segment and 10% for others.
Investment :
For Advertisement and channels (A&C), because our unit cost was relatively high due to
the high rate in compactness and Battery life, we determined to invest merely
acceptable budget on A&C. Thus, we only used around 5% of the products contribution
margin for investment.
In term of Warranty, our policy was 18 months as we aim to provide the best quality
product with the best service for consumer. Moreover, this strategy also enable us gain
customer loyalty. For R&D, we decided to enhance intensively from 4000k to 20000k
during four-year-period. In fact, R&D affects the high quality product, which is relevant
with our product strategy.

2.3. Result analysis:

After 4 years, our company stayed at third place of Universal 1 with the share prices of
28.75 (Picture 1). Generally, we did follow our target, high-end products brandname
(high price, quality and high technology indices). However, although we launched new
products, A&C investment had a very low expense , with 10,904k and 3 465k
respectively. This caused the low awareness and low intension rate, leading to low
revenue.
Picture 1: Share price Year1-4

Mai T T Dao U1473572

Also, low-end products failed. Redfox and Reddot prices were too high (320)
comparing to bestselling products from competitors, Oreo1 (240) and G4-E4 (270) in
Europe and G2-A (250) and Optimus (255) in Asia. Hence, the group should balance
between the A&C investment and product features to maintain the reasonable price.
Moreover, our groups share price only started to increase from year 3. The reason is
the markets expected high compactness and battery products (from 105-100); whereas
ours were around 70-90 in year 1 and 2. Fortunately, we made-up the product
enhanced to about 120-150 in Year 4.
III. Year 5 The prosperity year:
3. 1 Market environment:
In this year, the market continued in bad condition. However, the growth rates of lowend consumers demand still climbed globally, especially in household ones with the
growth rate is 100% in Asia (picture 2). The high-end consumers demand were
saturated which alarmed us to consider whether we should continue our target or not. It
8

Mai T T Dao U1473572

is not mentioned that this tendency happened mostly in Asia, our main market. In
addition, the market was tougher because our competitors start paying attention to
R&D, like us. Hence, our company decided to alter the strategy that was relevant to the
competitive market.

Picture 2: market size and growth in Europe and Asia in Year 5

Mai T T Dao U1473572

Market size and growth in Asia

14000.00
12000.00
10000.00
8000.00
6000.00
4000.00
2000.00
0.00

Round 1

Round 2

Round 3

Round 4

Round 5

Market size and growth in Europe

10000.00
8000.00
6000.00
4000.00
2000.00
0.00

Round 1

Round 2

Round 3

10

Round 4

Round 5

Mai T T Dao U1473572

3.2. Decision-making process:

From Year 5, our company tends not to launch any new products. Because we do not
spend more money to create new products in the maturity stage of market, we focus to
adjust the current ones to refresh the product line.
The skimming price strategy was applied by reducing the products prices due to the
economy crisis (Table3). Excepting RedInfusion and RedHawk (2 our key high-end
products), the others prices were reduced. Hence, instead of being Asias cost-leader,
Redhawk followed pricing plan of follower like our rest products. However, we still aim
Redfox and Redstorm to the high-end segments.
Table 3: Product design Year 5

Investment:

Basing on the BCG matrix (picture3), we recognized the good products and bad ones to
make decision on investment efficiently.
Picture 3: BCG Matrix
11

Mai T T Dao U1473572

90%
80%
70%
60%
50%
40%
30%
20%
10%
1.00
0%

0.10

Low-end products in two markets were expectedly potential; therefore we decided their
investment be equal with the high-end ones, with 10-15% of the margin after advertising
in Advertising and about 25 % in Channels. Additionally, we supported money heavily on
Specialty Stores, triple than the rest ones, mostly in the Cash cow because our main
focus is high-end consumers. We also released advertising campaign for RedInfusion to
repositioning the product focusing more to the high-end consumers. For Reddot (a star),
it was invested intensively because Asian buyers refer low-end products at that time.
Plus, R&D increase intensively to approximately 70,000k in total.
3.3. Result analysis:
Despite the downturn in economy, our share price (62.43) was threefold in comparison
with the Year 4s statistic (picture4). Also, the discrepancy between ours and second
groups was not much different.
12

Mai T T Dao U1473572

Picture 4: Share price Year 5

Our market share in Asia was good, making up around 19% averagely. As expected,
Reddots sale was the third of bestseller ranking in Asia, rocketing from 480k to 1500k
within a year. Regarding the rest, although the sale of RedInfusion and RedHawk
slightly declined, we still got high profit from them due to their high price.
This is our successful year in terms of sale volume (nearly double than the last year);
however in Europe the profit was not good as the past (picture 5). It means that our cost
for producing product so high or the high fixed cost in Europe product line.
Picture 5: sale and profitability in Year 5

13

Mai T T Dao U1473572

14

Mai T T Dao U1473572

IV. Year 6- Deterioration stage

4.1 Market environment:
The maturity of smartphone market was more and more obvious, causing the downturn
in demand growth globally, particularly in High-end consumers. Similar with Year5
condition, the growth rate in low-end demand still rose up slightly.
4.2 Decision-making process:
In Year 6, we only increased Compactness/battery rate by making our product have the
highest comparing with competitors in order to build image of high quality product
(table4).
Table 4: Product design Year 6

15

Mai T T Dao U1473572

Investment:

Our Year6s strategy is investing intensively in A&C but reducing in R&D because we
believe the high investment in Year5 will influence this year. The percentage of
Advertising investment was about 20-25%. In channels, Reddots percentage of
investment increased to 40% whereas the rest were only 10%. In our view, consumer
would not spend money for expensive products in the depressed economy; hence, we
focused only this product. In other to save money for A&C investment, we provided only
1 years for the warranty policy and 16000k for the R&D.
4.3 Result analysis:
After Year 6, we lost 13 388 k and were surpassed by Ochre group. Our lesson from
this failure is always a balance between the investment domains. We created a huge
awareness but lacking of attention to the customer care and the importance of R&D,
making the decline in consumer buying intension. In fact, our sale volume (1 351 979)
and market share were very well (occupying of 20-25% in both markets for 4 segments).
However, our variable cost was so high (1 260 916) and our operating profit after
depreciation was negative (-51 243) so that we failed in this phase. Mostly the loss was
16

Mai T T Dao U1473572

in Europe market, with EBIT went down 10% of the decline comparing to Year5 (Picture
6).

Picture 6: Sales and profitability in Europe Year 6

17

Mai T T Dao U1473572

V. Year 7-8: Recovery stage
5.1. Market environment:
During this period, the maturity level in both markets has hit their peak. The growth rates
amongst 4 segments were turn in negative figures. Fortunately, the economy in Asia has
a sign of recovery in Year8 (picture 7).

Picture 7: Market size and growth Year7-8

Market size and growth in Europe

10000.00
8000.00
6000.00
4000.00
2000.00
0.00

Households EU

High-End Household EU

Companies EU

High-End Companies EU
Total sales EU

18

Mai T T Dao U1473572

Market size and growth in Asia

18000.00
16000.00
14000.00
12000.00
10000.00
8000.00
6000.00
4000.00
2000.00
0.00

Households Asia

High-End Household Asia

Companies Asia

High-End Companies Asia

Total sales Asia

There are some changes including the rise number of new products and high quality
ones making the market become more competitive. Moreover, Year 8 is a burst of the
development of technology; hence, R&D investment might have crucial effects to the
development of enterprises.
5.2. Decision-making process:
We aim to make up the loss in Year6 therefor the features are adjusted to be more
relevant with their prices and target consumers.
Table 5: Product design in Year8

19

Mai T T Dao U1473572

From the failure of Redstorm, we change its feature by deleting the security and adding
the photo/video ability. The reason is that now we want to gain more market share in
household segment. Its price is not too high or too low, but in a very good quality, so
that it might attract more both high and low end consumers.

Investment:

Our new strategy is investing 20% in the target segment (high-end consumers) and
10% for the rest in Advertising. In Channel, we invest heavily in Asia with up to 30% for
investment. In our opinions, the economic is hard that mean we have to pay attention
more on the consumer awareness. Moreover, the warranty period return to 18 months
as well as increasing the Margin on Repairs in Asia (2%) to continue our mission: leader
in Asia market. Our R&D investment is small because we want to focus on enhancing
our products awareness in this period.
5.3 Result analysis:
From picture 4, we finally places at fourth position of share price (55.32) at the end of
Cesim, being behind The Orange Orange (85.22), Grey-Gremlins (70.71) and Ochre me
20

Mai T T Dao U1473572

Vuekve Loca (64.74) (picture 8).
Picture 8: result in year 7-8

After the accident in Year6, the discrepancy between our group and Orange and Grey
groups performance expense larger. Hoverer, the good point is our share price in this
period increase slightly. Apart from Orange and Grey group, Ochre has become our new
main competitor. We should pay attention to Grey because their profit is the largest in
last year (104 043 k). Moreover, Bakery group seems be promising competitor in our
view because they did very well in Year 8 whose gross profit (180 768 k) is similar ours
(185 219 k) (picture 9).

Picture 9: Gross profit of Red and Bakery group

21

Mai T T Dao U1473572

VI. Conclusion:
In general, our pros might be the R&D investment, followed by product
compactness/battery life and sales forecast. These sections perform well to enable us
to design high-end smartphones with low unit costs turning to our good profits. On the
other hand, our group was poor in balancing fixed costs and advertising investment,
which is main reason for poor awareness and high variable costs. In fact, spent on
advertising should be in line with the sales volume and the product contribution margin
to maintain the profit. Therefore, for the next five-year strategy, in my opinion, we should
solve these mistakes.
As mentioned, the economy in Asia has a slightly rehabilitate that can be a push for the
market. However, there are no certain for the economy in worldwide. There are several
similar products in the current market, which might be a risk because of cannibalizing
each other. Therefore, from my point of view, I want to refresh consumers by providing
new product or refreshing the product line by adjusting several feature in our current
products.

22

Mai T T Dao U1473572

According the consumer research, from Year8, avant-garde style is popular in high-end
segments; thus, in my pinions, our group should create at least 2 products with the
design as avant-garde. The other way is that our group might adjust Redstorm as avantgarde design and aim the product to low-end segment in Asia. The market in Asia has
some recovery sign, so we should invest intensive in R&D and advertising to boost the
business. In both markets, the compactness and battery life rate should be reduce to
around 150 to reduce the variable unit cost. Moreover, the product prices still are same
at year 8 because reducing products price constantly is not a perfect strategy in my
opinion. It will impact on the premium brand image.
According to the results of our performance, we have lost a. However, the most
important I concern is what we learnt from these mistakes and how to avoid them. In
fact, our group has made the great work to retrieve our development in year 7 and 8.
There is no doubt that we learnt a lot from this course. I have chance to involve in
practical activities to run a whole business such as the way to implement strategies,
design and position the products basing on consumers insights and market condition,
how to monitor market spend against sales and profitability and so on.

23