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Lyceum of the Philippines University

STRATEGIC MARKETING MANAGEMENT

Professor: Atty. Jaime Gonzales

CASE ANALYSIS: LA FINN’S LABORATORIES, INC

I. SITUATION AUDIT
a. Corporate Scope and Objectives:
La Finn’s Laboratories, Inc. was established to develop and market a new
antibiotic baby product, a diaper antibiotic aerosol spray that can eliminate odor
from baby diapers. They named the product Lafdayaper Pail Spray.

b. Financial Structure - Liquidity


No given data for Liquidity yet

c. Sales and Costs:


Average Retail Price Php 90.00
Cost of Goods Sold Php 15.00
Sales Proceeds Php 50.00 per can
Testing Cost Php 500,000.00
Administrative and Overhead Costs Php 5,000,000.00
*average retail price is six times the Cost of Goods Sold
d. Marketing Strategy - Cmpetetion
The original marketing strategy implemented by the company is
direct/personal selling through five (5) detail men. The role of these men is to
visit and call on people in all medical professions to explain the benefit of the new
product, how it was used, and where it could be obtained. Additionally, small size
free samples were left to the medical professionals so they could recommend the
product to a patient and may be able to give a 10-day supply of Lafdayaper as
well.
This strategy was favored over consumer advertising because LFL, Inc
believed that recommendation from doctors will surely attract women to use
Lafdayaper and recommend the same to their friends “word of mouth promotion).
Another consideration was Lafdayaper stocks were still limited because of the
pending approval of the product by the FDA.
Beginning April 1, the company planned a Consumer Advertising
Campaign, costing Php 2,500,000.00 advertising budget, based on the
discussion with brokers, people in the trade, and the company’s agency,
druggists ads in San Fernando City, La Union.

Since the Lafdayaper would be the first on the market, there is no


possible competition for at least one more year.

e. Target Market and Objective


Based on the market potential stated on the paper, there were 350, 000
babies in the company’s initial marketing area. The target market of the company
initially are mothers/parents of the babies. It is forecasted that the target market
will reach the 10% of the approximate 8 million babies in diapers, that is 800,000
in the Philippines..

f. Summary of Opportunities and Problems:


Opportunities:
1. Lafdayaper would be the first on the market, eliminating competition for
at least one year, allowing it to then to be the benchmark antibiotic aerosol spary
and be the generic product in the market.
2. With the emergence of a possible new use of Lafdayaper, that is as a
diaper spray (before diapers are used), other than a pail spray, it can expand its
market vertically. This may allow another target market to come up – the diaper
production industry.
3. Lafdayaper with its original use as a diaper spray, may look into the
institutional market as another target market.

Problems:
1. Lafdayaper was unable to launch on time because DFA wants the
product to undergo further testing. The efficacy of the product and its absence of
any harm needs to be proven.
2. The problem of how to get the detail men to see the medical
professionals is also encountered, knowing that the company is just started and
offering one product.
3. The issue on the packaging of the product is encountered as well by
the company. A batch of 180,000 three-ounce cans to be used as samples and
distributed to doctors was not approved by the FDA. Change in the can design
had resulted in valves which did not fit properly. Another problem is the use of
full size can for the products’ packaging which resulted in product spoilages.
4. The company wasted 500,000 in the testing of the product because the
company failed to get the right formulation that resulted to product spoilages as
well.
5. The company lost focus on the approved primary use of the product as
a pail spray and instead promoted it as a diaper spray.
6. It took too long for the FDA to approve the new product, thus the time
to have their return on their investment also was delayed.
7. The company lacks strategic planning- the overall long term planning
of the company thus affecting their strategic marketing plan for their product that
resulted to bas decisions by the management that lead to the re-launching of
their new product.

II. PROBLEM STATEMENT:

The problem of La Finn’s Laboratories, is the company will need to start all over
again to re-launch the new product and build the brand recognition and increase
short and long-term sales and profit with significantly lower advertising, promotional
and production costs.
The company will have to answer the on the “HOWs, on better product research
to eliminate problems on product packaging and formulation thus, decreasing
product spoilages that may lead to increase in production cost, noting the costs
incurred for the re-launching and the time it took for the product to be approved by
the FDA.

III. ALTERNATIVES/OPTIONS
As the current situation of the company, after receiving an approval from FDA to
begin marketing Lafdayaper Pail Spray, there are alternatives proposed by the
company’s executives.
1. Following the same strategy utilized in the primary launching of the product.
This option entails less cost in promotion and marketing, but it will take time to cover
the entire target market. If This Option will be chosen, the company must increase
the number of detailed man and set marketing quotas for these men on a particular
time frame.
2. Benchmarking marketing strategies implemented by other reputable ethical
drugs. This is also entails less cost, but is more effective than that of the first option.
Using established outlets that do not require the high cost of familiarizing people with
the product is an advantage for this option. Opting for this alternative, the company
will have to use the detailed men to encourage medical practitioners, doctors, to
recommend the product. This will eliminate the need for a significant amount of
consumer advertising required to support a product to be distributed in the
supermarkets and discount stores.
3. Letting Lafdayaper be known in an article of a known business magazine with
a testimonial of a higher official of integrity to further explain what the product could
do for the target market and the end-users. This is also less costly but only a limited
audience will be informed. The reading community or the market of the magazine will
only be the ones to be informed about the product.
4. The Company is also planning to tap The Associated Diaper Services of
the Philippines and other similar trade organizations. They have participants who
make 83 million contacts per year wherein money changes hands. With the help of
those companies, Lafdayaper might be made acknowledged to millions of women via
diaper service distributors. This option entails less cost but the market coverage is
wide. It will effectively bring the company its desired profit and attain its long term
goals.
5. Company executives had also contacted a manufacturer of institutional
clothing. These companies offer high quality sleeping garments for babies and
mentally retarded in the hospitals and training schools, etc. Along with their
products, they will include and distribute Lafdayaper thinking that this method would
yield large market. This option also entails a lot of cost but the market coverage is
wide, but limited only to the institutions. Even if it is costly, it will effectively bring the
company its desired profit and attain its long term goals.
6. The executives consider partnering with a cosmetic broker to distribute
their product. This option is out of the course because in the first place, the diaper
pail spray is not a cosmetic.

IV. CRITICAL ISSUES


La Finn’s Laboratories, Inc. encountered several critical issues.
a. Delayed of the implementation of Marketing Plan
- Marketing promotes accountability for achieving results by a
specified date. Thus, just like effective goal settings, marketing
plan must be SMART (Specific, Measurable, Attainable, Realistic,
and Timebound). The cause of delay of the implementation of the
marketing plan is the miscommunication between FDA and the
company.
b. Marketing Strategies
- Regards with the Marketing strategies, the company turbulence
time whether they will offer the product locally or international.
c. Limited/Multiple product use Usage of the Diaper Antibiotic Aerosol Spray – The
company should decide if their new product will only be for Limited products use
as pail spray or for general use like a diaper spray for babies as well
d. Making Decision whether the product can make a generic product
e. Target Market - LFL, Inc. should consider also their target market for their new
product like mothers, institutional entities, and the public.
f. Financial Consideration local vs. national
g. Distribution

V. ANALYSIS:
Financial Analysis:
Break Even Analysis:
BEP (units) = Fixed Cost/ (Price per unit-Variable Cost/Unit)
= 5,000,000.00/ (90-15)
*66,667 units
BEP (Peso) = BEP units x Price per unit
= 66,667 x P 90.00
=6,000,000.00
Contribution Margin Analysis:
CM (Peso per unit) =P 90.00 – P15.00
= P 75.00

VI. RECOMMENDATION
Considering the Sales Forecast, LFL, Inc. will make profit in their Lafdayaper
Aerosol Spray. The Best Marketing Option considering the present situation the
company is in, The Company should try to consider tapping The Associated Diaper
Services of the Philippines and other similar trade organizations. They have
participants who make 83 million contacts per year wherein money changes hands.
With the help of those companies, Lafdayaper might be made known and
acknowledged by millions of women via diaper service distributors. This option
entails less cost but the market coverage is wide. It will effectively bring the company
its desired profit and attain its long term goals. The profit can still cover Research
and development Costs for the improvement of the formulation and packaging of the
product.

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