Abstract:
In this study, a simulation model is built to study the dynamics of a food product for a given age group by using system dynamics modeling methodology. The model deals with a food product targeted to children between two and six years old. Since target population is changing, marketing strategies have to be developed accordingly. The purpose of the model is to provide insight into the difficulties of coordinating operations and strategy in a market involving competitors, to analyze how companies perceive the market and take action accordingly, enabling us to see the feedback structure between product life cycle stage and firm strategies. Product-life cycle in such a setting is not predetermined but is the result of market dynamics and their interactions, which in turn affects each company’s strategy. Model analysis is done with the input variables advertising, sales promotion and trade promotion. Related scenarios and policies are analyzed to understand the effects and interactions of each decision variable in the product life cycle. Continuous advertising is found to be better than discrete advertising. Furthermore sales promotions are effective when accompanied with advertising. In addition to this, trade promotions are required in the newly created categories. Time to market entry is an issue which constitutes a trade-off between profit level and market share because the market share of an early entrant may be higher, but this does not necessarily mean a higher profit level - this latter may actually be lower. Finally, considering the above findings a near optimal policy is tried to be obtained.
