Business Studies A Level - MAP 3 Test

What is Risk?

The possibility that things will go wrong:

• This can be assessed and managed through contingency planning

E.g. risk in investing in a product

What is Uncertainty?

The unpredictable and uncontrollable events that affect a business

E.g. how sales will go for a product

How does M&S have sustainability in their goods? (palm oil)

• Palm oil is the most widely consumed vegetable oil

• Plan A was launched by M&S in 2007

• By 2015, 100% of palm oil in M&S products were given Roundtable for Sustainable Palm Oil (RSPO) certification

What did Primark do to have ethical supply chains?

• In 2013, Rana plaza building collapsed in Bangladesh

• The building manufactured for Primark and 28 other brands

• Primark gave them aid and relief and did so in other factories that manufactured dot them across Asia

What are the Pros of using Cost to Influence Pricing?

• Easy to calculate

• Price increase can be justified when costs rise

• Managers can be confident reach product is sold for profit

What are the Cons for using Cost to Influence Pricing?

• Ignores PED

• May not take competition into account

• Profit is lost if price is lower than what customers are willing to pay

• Sales are lost if price is set above what customers are willing to pay

• Business has less incentive to control costs

What are 5 possible reasons to use Indirect Distribution channels?

1. Geography - customers may live too far for direct channels

2. Consolidation of small orders into large ones

3. Better use of resources elsewhere

4. Lack of retailing expertise

5. Segmentation - different market segments best reached from different distribution channels

What are the Factors to consider when Distributing?

• Nature of product:

  • Perishable/fragile?

  • Technical/compelx?

  • Customised

  • Type of product e.g. convenience, shopping etc.

  • Desired product image

• The Market:

  • Is it diasporic?

  • The extent and nature of competition

• The business:

  • Its size

  • Its nature

  • Dos it have establish distribution network

What are the Pros of Multi-Channel Distribution?

• Allows more target market segments to be reached

• Customers increasingly expect products to be available via more than one channel

• Enables higher revenues - e.g. if retail outlet has no stock, customers can buy online

What are the Cons of Multi-Channel Distribution?

• Potential for Channel “conflict” - e.g. competing w/retailers by also selling direct

• Can be complex to manage

• Danger that pricing strategy becomes confused (in eyes of customers)

Why are Businesses changing from distribution of products to Sales of Services?

• Traditional distribution channels and methods are focused on getting tangible goods to consumer

• There’ll always be the need for distribution of tangible goods

• But the move to a mobile/cloud-based world is changing things quickly

Why are Businesses using New Product Development as a Marketing Strategy? (4 things)

• Time consuming - but CAD is reducing development times

• Cost of development rises as it approaches launch

• Market research including a test launch often done to reduce risk of product failure

• Most new product ideas don’t reach launch phase

What happens to a business’ Marketing Strategy at the Introduction Stage of the Product Life Cycle?

• Good launched to market

• Low sales

• Low capacity utilisation

• High unit costs

• Negative cash flow (usually)

• Distributors at be reluctant to sell an unproven good

• Heavy Promotion to make consumers aware

What happens to a business’ Marketing Strategy at the Growth Stage of the Product Life Cycle?

• Advertising to promote brand awareness

• Increased distribution channels

• Market Penetration pricing then (if possible) price leadership

• Continuing high promotional spending

• Improve the product - add value, new variants etc.

What happens to a business’ Marketing Strategy at the Maturity Stage of the Product Life Cycle?

• Mange Capacity and production

• Promotion focuses on differentiation

• Persuasive advertising

• Intensive distribution

• Enter new segments

• Attract new users

• Repositioning product

• Develop new uses

What happens to a business’ Marketing Strategy at the Decline Stage of the Product Life Cycle?

• Maintain Market Share

• Harvest by spending little on marketing the product

• Rationalise by weeding out product variations

• Price cutting to remain competitive

• Promotion to retain loyal customers

• Distribution narrowed

What happens to a business’ Marketing Strategy when using Extension Strategies in the Product Life Cycle?

• Lower Price

• Change promotion tactics

• Add value to product

• Look for alternate distribution channels

• Develop new market segment

• Find new uses for product

• Reposition the product

What is the Boston Matrix?

A tool firms use to analyse their portfolio (collection) of products

What are the 4 categories for products in the Boston Matrix?

1. Stars

2. Cash cows

3. Question Marks (problem childs)

4. Dogs

What is the main idea of using the Boston Matrix?

Firms should aim for a balanced portfolios with some products in each category

What is the Marketing Strategy for Question Marks (Problem Children) in the Boston Matrix?

• Invest to increase Market Share

• Substantial investment to achieve growth at the expense of powerful rivals

• Invest in Promotion and other aspects of marketing

• Build selectively

What is the Marketing Strategy for Stars in the Boston Matrix?

• Invest to sustain growth

• Build sales and/or market share

• Spend to keep rivals at bay

• Invest to maintain or increase leadership position

• Repel challenges from rivals

What is the Marketing Strategy for Cash Cows in the Boston Matrix?

• Defend market share

• Aim for Short-term profits

• Little need for investment

• Little potential for further growth

• Reduce investment to maximise short-term cash flow and profits

• Use profits from cash cows to invest in new products

What is the Marketing Strategy for Dogs in the Boston Matrix?

• Phase out or sell off (divest)

• Not worth investing in

• Any profit has to be reinvested to maintain market share

• Uses up more management time and resources than a justified amount

• Divest or focus on a defendable niche