- 30 Marks
Question
Bascon Foods Plc is a producer of fast-moving consumer goods in Nigeria. Since it commenced business in 1960, the company has been providing Nigerians with high quality food products, such as cereals, cocoa beverages, confectionaries, and soaps, all at competitive prices. The following product brands had consistently commanded 10% of the market share in their respective segments: Bascon Cornflakes, Bascovite chocolate beverage, Rave cream soap, and Bascon digestive biscuits; all of which have grown to become household names among Nigerian consumers.
In 2021, the company launched Rave Ice-cream. This was done as part of its growth strategy through diversification and in response to the growing demand for ice- cream. Unfortunately, one year after the launch of Rave Ice-cream, sales have been very low with Bascon Foods Plc., thereby, struggling to break-even on this product line. The ice-cream market is said to be growing at the rate of 5%, but the market share of Rave ice-cream has been less than 0.5%.
In addition, Bascon Cornflakes, the company‟s flagship product experienced a sharp decline in total annual sales by 5% per annum between 2019 and 2021. Investigations show that this is partially attributable to the intense competition in the market, which resulted from the entry of a major global brand; Nekloggs to the Nigerian market. The market share of Bascon Cornflakes currently stands at 2% in a market that is growing at 16%. On the other hand, annual sales growth of Bascovite chocolate beverage has consistently risen by 6% per annum between 2016 and 2021. The market for chocolate beverages is believed to be growing at the rate of 8% per annum. Also, the market shares of Rave cream soap and Bascon digestive biscuits have been fairly stable in the last 7 years at 5%. Market growth rate for cream soap and digestive biscuit market is 7%. Profits made from Bascovite Chocolate beverage, Bascon digestive biscuits, and Rave cream soap have been high and stable. Despite the challenges faced by the company in each business unit, all product brands enjoy dominant positions in their respective markets, except Rave Ice-cream, whose market share is currently negligible. Also, all of the company’s products are in fast growing markets.
As a strategy to reduce costs and thus, increase profits across all its product lines, the Board of Directors of Bascon Foods Plc is also planning to outsource a number of its non-core activities. It is hoped that within a short period of time, after the proposed outsourcing strategy has been implemented, Bascon will become a low-cost producer of household food items.
Required: You have been engaged as a consultant to Bascon Foods Plc. To this end, advise the company’s management on:
a. The position of each of Bascon Food Plc’s products in the product lifecycle.
(10 Marks)
b. The suitable strategy to adopt for each of Bascon Foods Plc’s product brands, using the life-cycle portfolio matrix.
(5 Marks)
c. Classification of all of Bascon Food Plc’s products, using the Boston Consulting Group (BCG) model.
(10 Marks)
d. Strategy for each of Bascon Food Plc’s products, using the BCG framework.
(5 Marks)
Answer
a. Position of each of Bascon Food Plc’s products in the Product Life Cycle (PLC): Bascon Food Plc has a total of five (5) products. The positions of these products in the Product Life Cycle (PLC) are as follows:
| S/No. | Product Brand Name | Position in PLC |
|---|---|---|
| 1 | Bascon Cornflakes | *GROWTH, or *MATURITY, or *DECLINE |
| 2 | Bascovite Chocolate Beverage | GROWTH |
| 3 | Rave Cream Soap | MATURITY |
| 4 | Bascon Digestive Biscuits | MATURITY |
| 5 | Rave Ice Cream | INTRODUCTION |
Note:
- In the case of Product Brand Bascon Cornflakes, given the nature of the data and information presented in the question’s scenario, a candidate may choose amongst GROWTH, MATURITY, or DECLINE positions in the life cycle. Any of the positions is correct, as long as the candidate is able to properly justify the choice accordingly.
Justifications:
- Rave Ice Cream (Introduction): Characterized by low sales, high running costs, and not yet profitable.
- Bascon Cornflakes (Growth): Relatively fast sales growth, company begins to make profit, new entrants attracted.
- Bascon Cornflakes (Maturity): Stable annual sales, no growth opportunity, stable profits.
- Bascon Cornflakes (Decline): Sales and profits decline, companies gradually leave the market.
- Bascovite Chocolate Beverage (Growth): Relatively faster sales growth, company begins to make profit, new entrants attracted.
- Rave Cream Soap (Maturity): Stable annual sales, no growth opportunity, stable profits.
- Bascon Digestive Biscuits (Maturity): Stable annual sales, no growth opportunity, stable profits.
Marking Guide:
- Identification of position in PLC: 5 marks (1 mark for each)
- Justification for each position: 5 marks (1 mark for each)
- Total: 10 marks
b. Suitable strategy for each product using the life-cycle portfolio matrix: The life-cycle portfolio matrix suggests strategies for products based on their PLC position and competitive strength (dominant, strong, favorable, tenable, weak).
| Product Brand Name | Position in PLC | Strategies |
|---|---|---|
| Bascon Cornflakes | Growth | Cost leadership, differentiation, product quality improvement, product refinement, defend position, renew |
| Maturity | Cost leadership, differentiation, defend position, fast growth, product modification | |
| Decline | Defend position, focus niche, renew, product innovation, harvest, divest | |
| Bascovite Chocolate Beverage | Growth | Cost leadership, differentiation, product quality improvement, product refinement, defend position |
| Rave Cream Soap | Maturity | Cost leadership, differentiation, defend position, fast growth, product modification |
| Bascon Digestive Biscuits | Maturity | Cost leadership, differentiation, defend position, fast growth, product modification |
| Rave Ice Cream | Introduction | Niche, catch-up, grow with industry, market penetration, advertising, sales promotion |
Marking Guide:
- Mentioning appropriate strategy for each position: 5 marks (1 mark each)
- Total: 5 marks
c. Classification of all of Bascon Food Plc’s products, using the Boston Consulting Group (BCG) model: The BCG model classifies products as Question Marks, Stars, Cash Cows, and Dogs.
| Product Brand | BCG Classification | Characteristics |
|---|---|---|
| Bascon Cornflakes | Star or Question Mark | High market growth, high/low market share |
| Bascovite Chocolate Beverage | Star | High market growth, high market share |
| Rave Cream Soap | Cash Cow | Low market growth, high market share |
| Bascon Digestive Biscuits | Cash Cow | Low market growth, high market share |
| Rave Ice Cream | Dog | Low market growth, low market share |
Justifications:
- Star: High market share in high growth market (Bascovite).
- Question Mark: Low market share in high growth market (Bascon Cornflakes if low share).
- Cash Cow: High market share in low growth market (Rave Cream Soap, Bascon Digestive Biscuits).
- Dog: Low market share in low growth market (Rave Ice Cream).
Marking Guide:
- Classification of products: 5 marks (1 mark each)
- Characteristics for each classification: 5 marks (1 mark each)
- Total: 10 marks
d. Strategy for each of Bascon Food Plc’s products, using the BCG framework:
- Bascon Cornflakes (Star): Invest to maintain position, build.
- Bascon Cornflakes (Question Mark): Invest to build, harvest, or divest.
- Bascovite Chocolate Beverage (Star): Invest to maintain position, build.
- Rave Cream Soap (Cash Cow): Milk to finance other products, hold.
- Bascon Digestive Biscuits (Cash Cow): Milk to finance other products, hold.
- Rave Ice Cream (Dog): Harvest or divest.
Marking Guide:
- Strategy for each product: 5 marks (1 mark each)
- Total: 5 marks
- Uploader: Samuel Duah