Wednesday, February 24, 2010

Corona Budgeting and Resource Allocation

For my marketing class, we had to analyze a Harvard Business Case Study on Corona Beer (sorry, you have to pay for the whole thing).

Anyway, the assignment was as follows:
  1. Read the case carefully. 
  2. Analyze the case. 
  3. Prepare written answers for the case questions (as listed on the syllabus and below) and submit it by the due date. This submission should include one Word file and one Excel workbook. Title this file as follows: your name and case name. (e.g. JohnSmithCorona.doc or JoanSmithCorona.xls) 
  1. What is the recommended amount Corona should spend on advertising in order to achieve the #1 import status? You should use data that can be extracted from the case and the competitive parity budgeting model discussed in the lecture to address this task. You do not need to do a share point analysis. 
  2. A modified version of Exhibit 6 in the Corona case is posted in the attachment below. Note the new column on the far right, "Corona Sales". These data are crucial for you to address the following task: determine the most promising states for Corona to allocate its promotional resources, using both the BDI/CDI framework discussed in the lecture and other case data as inputs to your decision. 
Your deliverables are one Excel workbook with two sheets and one Word document (place your cohort and team # at the top of each sheet and the top of the word file):
  • For Question 1: 
    • An overall budget recommendation, including 
    • Computations showing how you arrived at the budget (one Excel sheet) 
    • Explanation of any qualitative adjustments you made to the computed budget that resulted from the competitive parity model (150-word maximum) 
  • For Question 2: 
    • BDI and CDI values for each state (one Excel sheet) 
    • Considering all the data in the case, which are the three most attractive target states and why (200-word maximum) 
Here is what I came up with:

Question 1

Despite the fact that a share point analysis indicated that Corona would need to increase its advertising budget by more than 100%, we believe Corona can surpass Heineken with a 75% increase. This is mainly due to the large gap between the two's existing budget. Heineken spends more than any other imported beer brand by nearly 50%. Corona is sixth with less than a third of Heineken's budget but second in market share. Additionally, Heineken has stumbled in the U.S. market despite a longer tenure and more investment. Anecdotally, we see Heineken on the maturity portion of the life-cycle curve and Corona still on the growth portion. Finally, Heineken has churned through marketing firms and executives, looking for its sweet spot while Corona appears to have a more stable plan for advertising and marketing that has resonated with customers.

Question 2

After reviewing the results from the BDI and CDI analysis (see spread sheet), I determined that Florida should be the focus for a strategic promotional market. Florida provided the highest BDI and Beer CDI and showed a sizable increase in recent demographic size. This is the largest in the sample provided. 

This means that Corona is important in this state, and the potential impact of the area relative to national sales is continuously growing. Florida also is experiencing success in sales when compared to other areas, yet the imported beer market is rather small in the state. With this in mind, promoting in this market could allow the imported beer market to prosper with Corona as its leader.

California and Texas are key states for Corona and I would also consider Georgia a good candidate for a promotional market focus. Georgia has low per capita beer sales and a significant rise in demographic percentage (10.4%). With this in mind, a successful Corona marketing campaign in Georgia could help Corona secure future dominance.   

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