A Destabilizing Situation for Binatone: The Market for 1000W Stabilizers in Nigeria

Name: A Destabilizing Situation for Binatone: The Market for 1000W Stabilizers in Nigeria (English version)
SKU: IN-S330

David A. Soberman

Product #:IN-S330

Supplier:INSEAD

Discipline:Marketing

Details:Case (PDF) • 20 pages • 2007-04-12

Subjects:

Marketing Communication strategy Product lines Branding

Industries:

Information technology and telecom sector

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$9.71

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The case takes place in 2006 and is focussed on Binatone's stabilizer business in Nigeria. Stabilizers are used in many developing countries to transform irregular current (from wall outlets) into a current that is safe for electrical appliances and equipment. Binatone's 1000W stabilizer business was under pressure due to multiple factors. The first source of pressure was that the market had become increasingly price sensitive. The buyers of stabilizers seemed unresponsive to quality differences between different brands in the 1000W category. Second, the market was flooded with low-priced, low quality brands that were not government approved. Finally, the Nigerian government has recently enacted a new set of regulations to ensure the safety of electrical equipment throughout the country. The regulations forced legitimate manufacturers like Binatone to go through a long, expensive and unpredictable approval process. Faced with this situation, management at Binatone was contemplating a number of potential responses to revitalize its 1000W stabilizer business. These included the possibility of changing the standard mark-up policy employed for all Binatone products, the launch of a 1000W stabilizer line extension, and new distribution and communication policies.

Learning Objectives

"1- To familiarize students with the challenge of operating a conventional business in a developing country where the infrastructure, legal framework and competitive context are completely different than those faced in developed countries. 2- To highlight the shortcomings of a standard mark-up policy as a way of setting prices across a range of products. 3- To underline the importance of meeting customer needs by a) providing customers with what they want and b) not providing them with more than they want. Just because a product is better does not mean that customers will buy it. 4- To examine the challenge of launching a line-extension when there are significant risks in terms of cannibalization. In addition, the line extension is potentially inconsistent with the mother-brand (Binatone) and distributors have limited space to stock two 1000W products from the same company. 5- To develop the skill of looking through data and charts in order to find the seeds of a compelling argument for consumers to shift their focus (and potentially their preferences) to a higher priced/higher quality product. 6- To experience the difficulty of developing logical distribution policy in an environment that is somewhat chaotic."