Blue Mountain Coffee Case Analysis

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The other assumption is that we assume long term share and profit are more important to Blue Mountain’s future development. Based on the case, we found that if the company could not maintain or increase its market share in the next several years, it would probably lose distributors. We still put some focus on the short term goal and profit to help achieve the company’s current critical goal of reaching 6% next year.

The reason that we chose to increase the total budget is because we found $8.8 M is an optimal annual budget. Even though higher budget could get higher feedback, it’s possible that it’s not going to be approved by the top management. Besides, considering the slow sales growth rate of 1% in this period, the higher budget may not get higher sales and thus higher budget could be a great risk. So, increasing 10% of the budget would be a great way to lower risk and avoid the possible disapproval from top management. Seeing from the Exhibit 3, we found $8.8M is the optimal budget to reach 6% market share by the end of next year.

Limitations

Copy effectiveness, media efficiency and weighted scaling of goals can be hard to predict or determine. While ADBUG attempts to account for these variables in the model, they are still entirely subjective and leave much up to the intuition of the decision-maker. Even when taking historic results into account, we must still question the accuracy of these projections, especially when you consider the vast impact these variables have on the model. In the end, these variables are left up to the judgement of the manager’s, and because internal value systems vary greatly between people, one must be wary to how accurate the results of the model might be.

In addition, this model doesn’t take the competitors and other market factors into account, which could lead to an over-optimistic evaluation. In real life, the results may not be as ideal as in the model, thus we should be more conservative and careful.

Conclusions

Based on our analysis, we recommended increasing the copy effectiveness or media efficiency by 0.15 and the total budget by 10% per year from $8 M to $8.8 M so that the market share goal of 6% could be reachable. Besides, to focus on the long term profit and share, we suggested adjusting the weight objectives. Overall, all the three recommendations would go hand in hand to reach a long term market share of 8.26%.

Appendix

Exhibit 1

Scenario 1 Base Case

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Scenario 2 Increase Copy Effectiveness from 1 to 1.15

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Scenario 3 Increase Media Efficiency from 1 to 1.15

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Scenario4 Increase both Copy Effectiveness and Media Efficiency from 1 to 1.15

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Exhibit 2

Scenario 1 Base case with original GoalSeek

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Scenario 2 Maximize Long term share and profit

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Scenario 3 Maximize short term share and profit

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Scenario 4 Recommended scenario by emphasizing Long term share and profit

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Exhibit 3

Scenario 1 Increasing total budget by 10% per year

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Exhibit 4

Recommend scenario by combining all the three recommendations

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