Date:09.09.

2016 Xavier Institute of Management Course: BBM

Duration: 2 hours End Term Open Book
Instructions:
Mode of Exam is open Book
Students are allowed to access books, printout of slides and class notes (exchange of material is not permitted)
Use of Calculators permitted (exchange of calculators is not permitted)
Any doubt related to questions asked will not be entertained, you may write the assumptions, if required,
while writing your answers.

Jen Moritz, marketing manager for Soren Chemicals, is struggling with poor sales performance of
Coracle, a new clarifier for mid-size commercial swimming pools. Against a budget of 1.5 million in
sales, the company has sold only $111,000 in five months, and the selling season is rapidly drawing to
close. This is surprising because Coracle (product) has similar benefits and the same underlying
formulation as the very successful Kailan MW used in larger size commercial pools. Soren Chemicals
distributes Kailan MW through a group of chemical formulators that serve the commercial pools and
water park markets. The company has chosen to use industrial distributors to sell Coracle, which was
specially developed for mid-size commercial pools, primarily purchased by the hospitality industry.
Furthermore, the company believes that the mid-size commercial pool is a larger market than the large
commercial pools and water park market. The potential market for Coracle was more fragmented than the
commercial market for Kailan MW. The industry report showed that there were approximately 9 million
mid-size swimming pools in United States, all of which required regular maintenance and cleaning, either
by the in-house staff or a professional pool management service provider.

Pool Chemical Channel Structure

Chemical
Manufacturer

Formulator
Industrial
Distributor

Pool Specialty Pool Service

Retailers Professionals

Mass Retailers

Waterparks and Large Mid-Size Pools (Hospitality

Commercial pools sector/apartment complex)

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Moritz identified three leading competitors for mid-size pool users who sold clarifiers. Keystone
chemicals, Kymera and Jackson Lab. She estimated that each of the companies had 15% to 20% share of
the mid-size pool clarifier market. Based on discussions with multiple distributors, she pieced together a
product pricing comparison (Table A). Most service professionals considered Clear Blu to be the most
effective clarifier. Industry experts believed that Clear Blu reduced the need for other chemicals by
approximately 15% although Jackson Lab did not emphasize this benefit. Soren Chemicals Coracle
reduced the spending on other chemicals by 25%.

Base on the data presented below answer the following, calculations should be shown in steps.

1. What is the addressable market size for Coracle? Is the first year goal of $1.5 million sales
reasonable? [ 10 marks]
2. Calculate any two out of three options for the price that Soren Chemical can set for Coracle, since
the current strategy is failing. Which one should be chosen and why? [10 marks]

Exhibit 1: Selected survey data

$300
Annual chemical costs at retail prices, excluding clarifiers (recommended regime)
average
% of consumers who understand and use clarifiers regularly 25%
Annual average cost of clarifiers at retail prices (recommended regime) $50

Table A: Product Comparison

Soren Keystone Jackson

Kymera
Chemical Chemicals Labs
Product Coracle Purity HydroPill ClearBlu

Cost per container, retail price $25.00 $15.00 $3.50 $15.00

Form Liquid Liquid Tablet Liquid
Gallons per container 0.50 0.25 NA 1.00
Cost per gallon, retail price $50.00 $60.00 NA $15.00
Cost per ounce/tablet $0.39 $0.47 $3.50 $0.12
Ounces/tablets needed per 30K gallons 10.0 5.0 1.0 24.0

Cost per treatment, retail price $3.91 $2.34 $3.50 $2.81

Replacement cycle (no of monthly
2.0 4.0 2.0 4.0
treatments)
Monthly cost, retail price $7.81 $9.38 $7.00 $11.25
Average months of pool usage 5.0 5.0 5.0 5.0

Annual cost, retail price $39.06 $46.88 $35.00 $56.25

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 Exhibit 2: Soren Financial Data

Soren Financial Data

2004 2005 2006
Revenue 439 444 450
Cost of Goods Sold 335 339 345
Gross Profit 104 105 105

Selling, General, & Administrative Expense 29 30 31

Research & Development 8 8 9
Depreciation 15 16 15
Operating Expense 52 54 55

Operating Income 52 51 50

Provision for Tax 12 11 12

Net Income 40 40 38

Water Treatment Group

Revenue 121 130 134
Gross Profit 36 39 40
Operating Income 15 17 17

Exhibit 3: Margin Structure

Cost per Cost per

Container Treatment
Retailer / Service Professional price $25.00 $3.91
Retailer / Service Professional gross margin % 15% 15%
Retailer / Service Professional gross profit $3.75 $0.59

Distributor price $21.25 $3.32

Distributor gross margin % 30% 30%
Distributor gross profit $6.38 $1.00

Soren Chemical price $14.88 $2.32

Soren Chemical gross margin % 35% 35%
Soren Chemical gross profit $5.21 $0.81

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 3. Sales Force-Wave Analytics helps a firm manage its sales team without the expense of vehicle
tracking. It has interesting features as Journey replay that allows effective territory management.
It also does automatic collation of Vehicle Mileage and assists in controlling expenses. Salesforce
wave analytics is built on web delivered software to provide a range of tools to manage a sales
team most effectively. With visibility over the movements of any companys sales force,
territories can be managed more efficiently, fuel expenses controlled and productivity increased.
With the increasing demands on business to provide effective monitoring of work-related road
safety the solution also monitors distances driven without a break, speeding and driver behavior.
In addition knowing where your sales team are during the working day via a mobile phone
tracking provides the same level of protection as lone worker solutions. Enable robust duty of
care procedures to be implemented.
Possible Service Output Priorities SME's Mid-Size Firms Large Firms
Lowest Price 12 10 6
Firm Credentials 5 6 20

Product Demonstrations & Trials 5 10 15

Responsive Assistance During Decision Process 16 19 20

Analytics Support 30 18 16
Integration, Installation and training Support 11 15 8

Responsive Problem Solving After Sale 20 18 10

Ongoing Relationship with a Supplier 1 4 5

Total 100 100 100

% Respondents 20% 52% 28%
Salesforce marketing team collected the above for the three identified segments; suggest the
channel design to cover the market. Also indicate the type of collaboration (company managed or
outsourced) for each of the channel intermediary suggested. [10 marks]

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 4. TCS cloud conducted a research to identify the attributes that are considered by the buyers while
choosing a solution. The research used firmographic information to classify the businesses
(prospective buyer groups). The first group had a sample size of 48 firms represented the large
firms and the second group comprised of MSMEs where the data was collected from 128 firms.
Table 1&2 summarizes the result of the research. Suggest how TCS should choose a product and
positioning strategy based the information available. [10 marks]
Table 1
Attribute Importance Beliefs (Buyers belief on the brand for an attribute)
(n=48) TCS Infosys Oracle IBM Amazon
Cloud Cloud Cloud Smart WebServices
Cloud
Reliability 7 8 4 3 1 7
Availability 5 6 7 3 6 3
Scalability 8 8 6 6 4 0
Security 6 6 7 4 8 5
Quality of 4 7 7 5 8 4
Service
Service level 9 5 6 3 7 5
agreements
(Vendor
Support)
Suitability 10 8 6 4 8 3
(for all
applications)
Cost 4 5 8 4 6 5

Table 2
Attribute Importance Belief Score (Buyers belief on the brand for an attribute)
(n=128) TCS Infosys Oracle IBM Amazon
Cloud Cloud Cloud Smart WebServices
Cloud
Reliability 4 6 5 5 2 5
Availability 1 6 8 7 5 6
Scalability 5 5 7 8 6 4
Security 2 5 6 7 8
Quality of 3 7 4 4 8 9
Service
Service level 7 5 8 5 5 10
agreements
(Vendor
Support)
Suitability 10 4 9 2 4 9
(for all
applications)
Cost 9 4 8 1 3 10
[The belief score of 4 for TCS cloud means that TCS cloud in not up to the expectations of the buyer
group and they perceive it to be not cost effective]

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