3.1 Marketing, competition and the customer

MTL is a large business which sells children’s toys. MTL wants to act ethically with all of its stakeholder groups including its 430 employees. The market MTL operates in has become more competitive. The business uses a range of methods to promote its products. Having a good brand image is important. MTL’s directors are considering entering a new market in another country. The are aware there may be problems if they choose to do this.

b) Identify two reasons why some markets have become more competitive. [4] Reason 1: Reason 2:

Amir and Carla are business partners. They own a luxury hotel which operates in a niche market. The business has a short hierarchical structure. Amir and Carla use Herzberg’s theory of motivation to keep their 5 employees well motivated. Amir and Carla are considering opening another hotel in a different city. They will need to identify a suitable source of finance if they decide to expand. Secondary market research can be used to help a business decide whether it should expand.

c) Outline two advantages to Amir and Carla of operating in a niche market. [4]

JTA is a public limited company. It sells holidays in a mass market. The business has 44 shops and 200 employees. The Finance Director is considering ways a business can increase its profit. She has been asked to analyse JTA’s financial performance using ratio analysis. An extract from JTA’s financial statements is shown in Table 3.1.

c) Outline two benefits to JTA of selling in a mass market. [4]

LRL makes skincare products including face cream. It is a private sector business in country X. One of LRL’s objectives is to contribute to sustainable development. Maintaining customer loyalty is important and the Marketing Director knows a business must have an appropriate marketing mix. He is analysing data to calculate the value of LRL’s market share. An extract is shown in Fig. 3.1. The total value of sales of skincare products in country X for 2023 was $120 million.

b) Calculate the value of LRL’s market share in 2023. [2] Working: Final answer: (d) Explain two advantages to LRL of maintaining customer loyalty. [6] Advantage 1: Explanation: Advantage 2: Explanation:

IDT manufactures clothes for the mass market. It is a multinational company with factories in 4 countries. IDT has short-term and long-term financial needs. The Finance Director is analysing IDT’s statement of financial position. An extract is shown in Table 3.1. He has been asked to calculate working capital and to explain how an increase in non-current liabilities might affect IDT.

a) Define ‘mass market’. [2]

Nicky wants to be a successful entrepreneur. She plans to start up a travel business specialising in walking holidays. Nicky will be operating in a niche market. She is preparing a business plan to help with her decision-making. Nicky has been told government support is available for business start-ups. She knows building customer relationships will be important.

b) Identify two ways a business can build customer relationships. [2] Way 1: Way 2: (c) Outline one benefit and one limitation to Nicky’s business of operating in a niche market. [4] Benefit: Limitation:

FR is a multinational company. It has hotels in 18 countries. FR wants to expand into a new market and is planning to build another hotel. FR’s Marketing Director is considering how the market can be segmented. FR’s Financial Director is considering which source of finance to use to fund the expansion. He is also constructing a cash-flow forecast for the new hotel’s first year of trading.

c) Identify four ways a market can be segmented. [4] Way 1: Way 2: Way 3: Way 4:

Meena wants to leave her job as a teacher to become a successful entrepreneur. Her business will produce handmade jewellery. Meena knows that there is government support for business start-ups. She plans to use market research to help identify a market segment for her jewellery. Meena’s brother has offered to become her business partner but she cannot decide whether it would be better to operate as a sole trader (b) Identify two ways a market can be segmented. [2] Way 1: Way 2:

TDG is a bicycle retailer. It has 3 employees. TDG needs to maintain customer loyalty as the business sells in a mass market. Simon, the manager, knows managing cash flow is important. He is analysing TDG’s cash-flow forecast. An extract is shown in Table 1.1. Simon is considering ways for TDG to overcome its short-term cash-flow problem in September.

a) Define ‘mass market’. [2]

WFH produces hats and sells them to a mass market. It holds a high level of inventory. The Managing Director is concerned about the liquidity of the business and has been analysing WFH’s financial statements. An extract is shown in Table 2.1. The Managing Director thinks that the business might fail. Other stakeholder groups might also be interested in WFH’s financial statements.

(e) Do you think it is always better for a business to sell to a mass market? Justify your answer. [6]

Pamela is a successful entrepreneur. She is the owner of a gift shop selling celebration cards, toys and candy (sweets). When Pamela started her business 30 years ago she had no help to manage the shop. She now has 5 employees. Pamela knows maintaining customer loyalty is important. She uses competitive pricing. Most of her marketing budget is spent on sales promotion. Pamela does not use e-commerce.

d) Explain two methods Pamela’s business can use to maintain customer loyalty. [4] Method 1: Explanation: Method 2: Explanation:

NSL is a business based in country X. It manufactures food products including bread and breakfast cereals. NSL uses lean production in its factory. Maintaining quality is important. NSL imports 15% of its raw materials. Changes in country X’s exchange rate can affect businesses which import raw materials. NSL’s Marketing Manager knows the business should respond to changes in consumer spending patterns. She is aware that market research can be used to help make business decisions.

b) Identify two reasons why consumer spending patterns might change. [2] Reason 1: Reason 2:

NFC manufactures shoes using batch production. Quality assurance is used to maintain quality. NFC uses market segmentation. The Marketing Director is reviewing NFC’s product range. He knows there are both benefits and limitations to developing new products. He also knows the promotion of products is important.

d) Explain two benefits to NFC of using market segmentation. [6] Benefit 1: Explanation: Benefit 2: Explanation

Rachel’s business produces and sells chocolate bars. Quality is important. Rachel is a sole trader who received government support when she started up her business. The business operates in a competitive market. Rachel is considering ways to increase sales of her best-selling product. She is also planning to introduce a new chocolate bar. Rachel knows deciding which pricing method to use for a new product is important.

c) Outline two ways Rachel could increase sales of her best-selling product. [6]