Pharmasim Handbook

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SECTION 1: THE PHARMASIM CASE
ALLSTAR BRANDS' OTC COLD MEDICINE GROUP:

The Allround Brand

ALLSTAR BRANDS CORPORATION. . .
. . . is one of the leading manufacturers of packaged goods in the world. Since its founding in 1924, the company has acquired or merged with a number of smaller packaged goods companies.

The management team at the over-the-counter cold medicine (OCM) group of Allstar Brands just completed its third presentation in the past month to the Pharmaceuticals Division manager regarding the status of the Allround cold medication. It is apparent, from all the attention the team has received, that the Allround brand it manages is of strategic importance to the company. Unfortunately for the team and the company, the fourth quarter performance reports for Allround were not as positive as management expected. Therefore, the OCM team has been under the intense scrutiny of senior management.

Overview

Allstar Brands' Allround product is the market share leader in the over-the-counter (OTC) cold and allergy remedy market. The consistent success of the brand in terms of profitability and sales has made it a critical component of the Pharmaceuticals Division's long-term strategic plan. The division anticipates that the brand's cash flow in the coming periods will allow the company to pursue new opportunities in emerging markets. However, the division manager responsible for Allround has become concerned with the competitive nature of the OTC cold remedy market. In the past three periods, the industry has seen several product introductions as well as major increases in promotional and advertising expenditures. There is concern among senior management that this competitive activity will lead to declining market share and profitability for Allround. The brand has lost one full share point in the last period. Senior management expects that skillful marketing will prove pivotal to the long-term success of Allstar Brands.

The Company

The company consists of three divisions: Consumer Products, International, and Pharmaceuticals. The Consumer Products Division handles a number of packaged goods, such as laundry detergent, shampoo, and bar soap. The International Division

The PharmaSim Case—Page 11

distributes Allstar products on a global basis and has a large presence in the European market. The Pharmaceuticals Division is responsible for the marketing and production of ethical and OTC medications. Ethical drugs are available through pharmacies with a physician's prescription, whereas OTC remedies are widely distributed without the need for a prescription. The management of Allstar's Pharmaceuticals Division consists of a number of market related groups, one of these being the OCM group. This group is concerned primarily with the marketing activities of the Allround brand and any line extensions or new product introductions that might fall under the same category. An overview of the corporate structure of Allstar Brands is presented in Exhibit 1.1.

Exhibit 1.1: Allstar Brands Divisional Structure

ALLSTAR BRANDS Consumer Products Pharmaceuticals OCM Group -Allround Brand International Division Level Group Level

The Brand Management Group at OCM

The marketing management group responsible for Allround consists of a brand manager, an assistant brand manager, and a brand assistant who is a recent business school graduate. They work together as a team on all of the marketing decisions related to the OTC cold and allergy remedy market. The three managers are concerned with developing the Allround marketing mix strategy each period, including any reformulation or line

Page 12—PharmaSim Student Guide

extension options. In addition, if Allstar's research department develops any promising new product ideas for the cold medicine market, this team will be responsible for the new product launch. Although all product and marketing decisions are made as a group, each member of the brand management...
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