Decision Sheet -1

Submitted by:
Akula Padma Priya
PGP12101

Alternative 1:
Advantages:
1. Brannigan is in synchronize with the rising sectors
2. Brannigan promotes a healthy lifestyle
Disadvantages:
The Net Sales are estimated to be $2913 but to Srikant Tipha it is estimated to be $2954
COGS is 55% of the Net sales of the US subdivision
Marketing expenses are increased by $18 million
Other expenses are assumed to be 21% of the Net Sales
Calculate Earnings
Other expenses are calculated to be 21%
Advertisements and Promotions are increased by $18 million.
Alternate 1 is not preferable as the Net Earnings of the year 2013 are estimated as per Srikant
Tipha can’t reach the company’s goal which is to increase its profits by 3%.
Alternative 2:
Advantages:
1. No investment in R&D
2. Reduced Cannibalization risk
Disadvantages:
1. Anabelle is a failed project of Brannigan.
2. High Investment Cost
Calculate Other Expenses
Net Sales declined by 2% every year
Marketing expenses = 30% of net sales / 2
Advertising and promotion expenses are 45% of marketing expenses.
Calculate Other expenses
Calculate Earnings
Alternative 2 is also not preferable as the net earnings after acquiring the company Red
Dragon Foods is decreasing nonstop and the target of having a 10% return on investment
years can’t be reached.
Alternative 3:
Anna Chong, Chief Innovation Officer, shows an alternative by investing in R&D and
advertising and promoting new product entries. She outlines that it is important to “milk the cash
cows” and subsidize the investment of the “star products”. She proposes very original ideas, like
new flavors that are appealing to the growing demands of the public, new innovative packages,
and new usages of the soups
Advantages:
1. Enable entry into healthier categories for ‘weight watchers’ and ‘active lifestyle’ enthusiasts
by options such as chicken noodles and fast and simple Mediterranean tomato basil as well as
packaged Deli soups
2. Less expensive as compared to the inorganic acquisition
3. Traditional strength reinforced as new products build on Brannigan’s most popular soups
4. Enable increase of a price ~USD 0.10/ can, resulting in incremental net earnings of up to USD
12 Million and up to USD 6 Million of additional gross profit can be achieved if fresh shelf
space is obtained, although there is a low probability of its occurrence.
Disadvantages:
1. May induce cannibalization of existing product lines
2. Difficult to assign R&D costs for new products
3. Retailers not warming up to the idea of new products with short life cycles that are failing to
meet up to their sales and profit expectations
4. Low new product success rate of 7%, meaning only 1 in 10 succeed while developing new
product costs of USD 8 Million/ year. However, these new products can typically at least recover
the costs (R&D and Marketing) incurred
Option 3 as a stand-alone strategy has issues with long-term implementation, given its low
success rate (~7%) for new products and their associated expenses/ cost
Alternative 4:
Bob Pugh, director of Marketing and Sales, focuses his strategy on an increase in the marketing
expenditure by $20MM to increase brand awareness and restore it to previous numbers. He also
states a price decrease of the Ready to Eat soups by 5 cents and proposes a $22MM investment
in capital to enhance the manufacturing plants’ efficiency and cut production costs
Advantages:
● reduce the risk to endure the failure of new products and their associated costs.
● maximize profit on the maturing products, i.e., milk the cash cow (BCG product matrix).
● Serve to attract young customers through the ‘Boys and Girls Love Soup’ program.
● Any brand dilution caused by a reduction in perceived value due to increasing prices and
cutting back on promotion spending for the RTE products will be reversed, thus
stemming the sales decline.
● The strategy will likely be backed by senior management and much of the sales force.
Mr. Pugh is himself a Vice President of the company.
Disadvantages
● Price reduction could harm the premium brand image. It may also lead to a decrease in
dollar
● Sales of soup cans sales do not go up.
● The focus of this strategy is a mature product with declining sales As such, this strategy
may lead to loss of market share and not being very viable in the long run.
● This strategy calls for a capital investment of $ 22 million in capital expenditure. This
will increase the interest and depreciation expenditure (similar to alternative 2).

Recommendation:
Based on the investigation and data analyzed for all the alternatives, we think that the best
alternative is a mix of option three and option four. It is important to understand that these
options alone may not generate a stable and steady growth in the long term due to possible
fluctuations in the market trends. Although option four does look profitable, qualitative analysis
for the long term such as brand health, brand equity, and brand perceptions in the consumers’
minds, are not addressed properly and will hinder the company’s growth in an ever-changing and
constantly fragmenting market. As managers, we have a holistic view of the whole context and
understand that it is important to reinforce the “cash cow” of the division which is the Ready to
Eat Soups (option 4), but we also understand that the leader position in the market obliges
Brannigan to invest in R&D due to the changing trends and needs of the market (option 3). It is
important to invest in marketing to make the RTE soups strong in the market and to be able to
keep financing the “question mark” products, which will become stars and future “cash cows”
with the way the market is growing. This mix of both strategies certifies the company´s
short-term goals and envisions long-term profits with the investment made since it stretches the
life cycle of the RTE soups and boosts growth in the early stages of the new products' life cycles.