The following appeared in a memo to the board of directors of Bargain Brand Cereals.
"One year ago we introduced our first product, Bargain Brand breakfast cereal. Our very low prices quickly drew many customers away from the top-selling cereal companies. Although the companies producing the top brands have since tried to compete with us by lowering their prices and although several plan to introduce their own budget brands, not once have we needed to raise our prices to continue making a profit. Given our success in selling cereal, we recommend that Bargain Brand now expand its business and begin marketing other low-priced food products as quickly as possible."
Write a response in which you discuss what questions would need to be answered in order to decide whether the recommendation and the argument on which it is based are reasonable. Be sure to explain how the answers to these questions would help to evaluate the recommendation.
In the given memo, the board of directors of Bargain Brand Cereals has decided to extend their business from breakfast cereals to other food products as well. Apparently, their logic behind the decision is correct. But if we examine closely, then it can be realized that there are some questions which need to be answered in order to decide whether the recommendation is reasonable or not.
First question which needs answer is whether there is already some reputed company which sales food products, Bargain Brand aiming for, in cheap price? If it is so, then it will not be easy to Bargain Brand to establish a firm market with those food products. Moreover, if other companies are sailing those products in sufficiently low price, then to make the price even lower, Bargain Brand can suffer loss in their business. So, the directors should closely examine the position of other food products companies in terms of reputation and their price of the products too. Because, if Bargain Brand starts to make loss while sailing products in low price, then it will not be a smart business strategy.
Secondly, it is not mentioned in the passage that, besides breakfast cereal whether Bargain Brand are equally efficient to produce other food products or not. May be they have a good set of workers who are expert to produce breakfast cereal only. For that, they are gaining reputation. It is not so obvious that, if one company is producing a specific product very well, it will produce other products well also. Before venturing to the new business, Bargain Brand should be confident enough that they can make those ‘other food products’ equally good.
The other information which is not clear from the passage is the demand of breakfast cereal in comparison to other food products. It may be the case that, there is a high demand of breakfast cereal. For that, Bargain Brand has become reputed in a short span of time. Besides, the amount of consumption of breakfast cereal per person may be so high that people tend to buy cereal in a lower rate. But, for other food products, the demand may not be the same. People may not even bother about the price of those food products. They can simply ignore a new company with low price and continue their own familiar old company as they are consuming that products in a low quantity. In that case Bargain Brand may not acquire equal success with other food products.
Finally, success in any business does not depend on single variable. It needs some mastermind, some good strategy with good set of workers. So, the answer of the question, whether Bargain Brand will fetch success in marketing other food products or not, completely lies on how good their business analysts are deciding strategies and how efficiently those are being implemented. They will not get success by only lowering the prices of the food products.