Brannigan Foods (BF) faces issues related to the productivity of its Soup Division. The Soup Division has recently become less profitable, with decreases in product sales and a decline in market share (Quelch & Kindley, 2013). Based on a qualitative analysis of four opportunities, efforts to advertise BF’s ready-to-eat soups and increase their affordability could be recommended as the least risky financial improvement strategy.
The proposal involves increasing advertising expenses by eighteen percent to focus on the market’s growing segments and promote Heart-Healthy Soups, Dry Soups, and Simple Meals. The proposal can increase younger target customers’ awareness of the brand by popularizing offerings that are well-aligned with their preferences for healthy and convenient options (Güney & Sangün, 2017). As per the two-dimensional BCG matrix model, the three product groups listed in the proposal fall under the definition of “star” products (Hossain & Kader, 2020).
However, BF’s ready-to-eat soups can be considered a “cow” product that brings most of the revenue. As the term suggests, the low-risk “cow” goods provide financial resources to be invested in innovation and “feed” companies. Although the company’s ready-to-eat soups outperform other subdivisions in profits, this proposal ignores their leading role and might lead to greater reductions in profits by shifting attention to segments associated with greater uncertainty and competition. Also, BF’s products are not considered particularly innovative, which involves the possibility of losing the competition for young and fastidious customers’ attention despite large additional investments in advertising.
The second proposal is centered on diversifying the company’s product portfolio by buying out smaller competitors that offer innovative flavor solutions, convenience, and healthier food options. It could support BF in deriving benefits related to the economies of scale and gaining access to new intellectual property, such as trade secrets and recipes, without labor-intensive product development and testing endeavors. However, purchasing a new company is always a risky effort due to the need for enormous investments, responsibility for this company’s liabilities, and no guarantees that its products will remain popular and top-quality.
Moreover, current research indicates that companies’ innovation capacity tends to decline in the post-merger period (Haucap et al., 2019). Post-acquisition declines in innovative activity could affect BF’s position concerning the remaining fast-growing competitors, such as the Private Labeled Soups. Finally, businesses’ size and degrees of innovativeness can have a bearing on their corporate cultures, and the incompatibility of BF’s and new companies’ cultures will create barriers to success.
The third proposal focuses on increasing BF’s investment in research and development activities and the subsequent promotion of innovative products with original flavors and packaging solutions. As per Schumpeter’s theory of innovation, market power that stems from innovation can be extremely effective for the production of excessive profits (Chen et al., 2020). Theoretically, it makes this strategy well-aligned to increase profitability and gain market leadership. However, BF should have a pronounced innovation capability to benefit from this strategy instead of sustaining financial losses from investing in the development of failing products.
There is no clear evidence of BF’s innovation and research potential. Instead, retailers do not consider it innovative, and BF lags behind smaller competitors in terms of developing new soup tastes and altering production technologies to make products healthier. BF’s previous poor performance in innovation and declining profits make the option rather risky to implement.
The last opportunity deals with investing in BF’s brand recognition and increasing the company’s capital investment in its ready-to-eat soups to reduce production costs and these soups’ prices. The solution does not encourage new product development, but this feature makes it the least risky approach to increasing profitability in the short term. As per Porter’s competitive advantage model, decreases in production costs and prices can support financial success by adding to products’ attractiveness and affordability (Shukurillaevich, 2021).
The increased affordability of BF’s ready-to-eat soups will be noticed by non-wealthy consumers, thus making the price advantage another factor in their purchasing decisions apart from BF’s brand name. Increasing demand for BF’s core products will also discourage retailers from giving preference to BF’s competitors when it comes to shelf space. Finally, the strategy is centered on the segment that provides the largest share of revenues from BF’s soups. Efforts to strengthen BF’s “cash cow” could eventually provide more financial resources for product development in the future.
Based on the proposals’ potential consequences, the fourth option can be recommended. It could be the safest option due to the absence of risks associated with product development, relying on promising rather than the largest profit-generating segments, and the integration of new companies into the existing structure. Also, the fourth option will allow considering modern consumers’ preference for convenient products. The organization’s most loyal consumer group, those born before the mid-1960s, are getting older, giving more consumer power to other demographic cohorts, including the Millennials. Consumer preferences and demographic characteristics belong to the number of critical non-economic determinants of demand for alimentary products (Mjeda et al., 2020).
Research suggests that the Millennials exhibit a strong preference for easy-to-consume foods and environmentally-sound solutions (Güney & Sangün, 2017). BF’s ready-to-eat soups already emphasize convenient consumption, and some strategies for cost optimization, such as the reduction of waste, could also add to younger customers’ positive perceptions of BF.
Finally, BF’s current situation and relatively low innovation potential can signify the need for low-risk strategies, such as the fourth proposal. The maximization of profits derived from the company’s current “cash cow” can create financial gains without significant uncertainty. These resources could then be used for research and product development.
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