MNB1601 Assignment 2 2021.

MNB1601 Assignment 2 2021. Business Management. MARKETING MANAGEMENT QUESTION 1 The commercially manufactured sorghum beer market consists of a few operators including United National Breweries. United National Breweries will purchase materials such as sorghum to be used in the production process for sorghum beer. This is an example of the market. 1. consumer 2. industrial 3. resale 4. government Answer: Refer to page 451 the prescribed textbook: 13.8 Market segmentation Each of the different types of market has its own criteria and characteristics. The total market in a country can be subdivided into the following markets:  The consumer market consists of individuals or households purchasing products for their own consumption.  The industrial market consists of individuals, groups of people or organisations purchasing materials and products to be used in the production process.  The resale market includes individuals, groups or organisations purchasing products in order to sell them to final consumers, for example, retailers. It is recommended that you read business case number 11 “Marketing management: Heineken and SABMiller’s beer war” (in the recommended book “Business Cases”) before attempting to answer questions 1 to 3. It is not compulsory that you do so, as the answers to the assignment questions can be found in Introduction to Business Management (ITBM). Market segmentation Each of the different types of market has its own criteria and characteristics. The total market in a country can be subdivided into the following markets:  The consumer market consists of individuals or households purchasing products for their own consumption.  The industrial market consists of individuals, groups of people or organisations purchasing materials and products to be used in the production process.  The resale market includes individuals, groups or organisations purchasing products in order to sell them to final consumers, for example, retailers. It is recommended that you read business case number 11 “Marketing management: Heineken and SABMiller’s beer war” (in the recommended book “Business Cases”) before attempting to answer questions 1 to 3. It is not compulsory that you do so, as the answers to the assignment questions can be found in Introduction to Business Management (ITBM).  The government market consists of the state institutions and departments that purchase various products needed to supply services to the public. QUESTION 2 The South African liquor market is divided into four broad segments. Each one of these segments serves a specific market. Which one of the following most accurately describes the term “market”? 1. A market consists of a relatively large number of people who have a need for a specific product. 2. A market consists of a relatively large number of people who have a need for a specific product and have the money to buy the product. 3. A market consists of a relatively large number of people who have a need for a specific product but are not willing to spend money on it and have to be convinced through the use of marketing. 4. A market consists of a very specific niche of people who have a need for a specific product. Answer: Refer to page 451 of the prescribed textbook: 13.8 Market segmentation A market consists of people with different needs and wants. Not all people like the same colours or the same style of clothing. The range of different watches, shoes, music, types of hotels and so on that are available makes it clear that people have different preferences. It is the responsibility of the marketer to evaluate these needs and wants, and to decide which need/s or wants/s he or she would like to satisfy. No organisation can satisfy all the needs of all consumers (the market). It is therefore important that an organisation focuses on some groups or segments of the market and aims to satisfy just that group’s needs. The term ‘market’ means different things to different people. In brief, a market consists of a relatively large number of people (or organisations) who:  have a need for a specific product;  have the money to buy the product;  are willing to spend money on it; and  are legally able to buy the product. QUESTION 3 The ReadyToDrink market’s perception regarding alcoholic beverages is an individual factor that determines consumer behaviour. There are also group factors which influence consumer behaviour. Which one of the following is a group factor that will determine the behaviour of ReadyToDrink consumers? 1. Lifestyle 2. Motivation 3. Attitude 4. Culture Answer: Refer to page 450 of the prescribed textbook: 13.7.1.2 Group factors Cultural groups The cultural group to which a person belongs has a strong influence on his or her purchasing and consumption patterns. Culture comprises a complex system of values, norms and symbols, which develop in a society over time and which are shared by the society’s members. Cultural values, norms and symbols are created by people and transmitted from generation to generation to ensure survival and facilitate adaptation to circumstances. Schools, churches and other social institutions also play an important role. This process is referred to as socialisation. Each cultural group comprises several subcultures, each with its own values, norms and symbols. There are four key subcultures, categorised according to nationality, religion, race and geographical area. Besides the four main groups, smaller subcultures can also develop, perhaps according to language, age, interests or occupation. South African society consists of many cultural groups and subgroups. Although white people are not numerically dominant, their norms, values and symbols exert great influence on the economic environment. For this reason, most advertisements reflect western culture. QUESTION 4 Companies need to be aware of the fact that there is a cost associated with bad service. Which one of the following options is a consequence of customers leaving the business due to bad service? 1. The reputation of the business receives a boost. 2. There are low levels of complaints. 3. There is a loss of past business. 4. Employees become unhappy. Answer: Refer to page 486 of the prescribed textbook: 13.15.6.2 The consequences of bad customer service  The business loses the income that the relationship generated. The loss of one client may seem insignificant, but over time the effects can be damaging.  The reputation of the business may suffer as customers will share their negative experiences with friends and family.  There is a loss of future business.  There are high levels of complaints.  Employees become unhappy due to a bad atmosphere in the business. QUESTION 5 MTN, the South African multinational mobile telecommunications company, came out on top during the 2019 My Broadband Insights survey. One of the key performance measures was latency which measured how long a network took to react to a command. To which dimension of service does this refer? 1. Reliability 2. Responsiveness 3. Assurance 4. Empathy Answer: Refer to page 485 of the prescribed textbook: 13.15.6.1 Customer service is all about expectations When it comes to service specifically, studies by Len Barry have shown what is important to customers. He uncovered five primary dimensions to service that affect customers’ perception of the service they have received. These are: Reliability. Customers want services to be performed well and when the company says they will perform them. Responsiveness. Customers want their needs met with speed and initiative. This also means that they want their queries answered. Assurance. Customers want service providers to be knowledgeable, courteous and trustworthy. Empathy. Customers want care and concern, and desire to be treated as individuals. Tangibles. Customers care about the tangible product, or the service, and the physical appearance of the facilities and people. QUESTION 6 Marketing concepts are developed on the basis that is/are at the centre of organisational activities. 1. quality 2. consistency 3. customers 4. operations Answer: Refer to page 483 of the prescribed textbook: 13.15.5 The place of customer service in the marketing strategy Marketing concepts are developed on the basis that customers are at the centre of all organisational activities. The purpose of an organisation’s marketing strategy is to win and retain customers. This applies not only to business organisations, but also to governments and social service organisations. Without this goal, organisations would not be able to achieve their objectives and would not remain relevant. QUESTION 7 Before you can start with the marketing strategy, you must first explain to Francis what the marketing concept entails. You point out to Francis that she needs to maximise the profit her business needs to make and that she should not just focus on sales levels. Which one of the principles of the marketing concept is this concept known as? 1. The principle of profitability 2. The principle of consumer orientation 3. The principle of social responsibility 4. The principle of organisational integration Answer: Refer to page 436 of the prescribed textbook: 13.3.1 The principle of profitability The first principle of the marketing concept in a profitseeking business is the longterm maximisation of profitability. This is the primary objective of the business in a freemarket system. It is therefore also the main objective of marketing management. The principle of profitability is fundamental to the marketing concept. It emphasises profitability instead of sales, which do not necessarily maximise profits. QUESTION 8 Francis is aware that there is a gap in the market that satisfies consumer needs for affordable highfashion items. Which one of the marketing principles is Francis incorporating by designing clothing that will address this consumer need? 1. The principle of profitability Read the case study below and then answer questions 7 to 9. Francis is a fashion design student and wants to start her own design company. She is busy preparing her business plan, but is struggling to complete the section that deals with the marketing strategy. She has approached you, her business advisor, to assist her in the compilation of her marketing strategy. 2. The principle of consumer orientation 3. The principle of social responsibility 4. The principle of organisational integration Answer: Refer to page 436 of the prescribed textbook: 13.3.2 The principle of consumer orientation The satisfaction of consumer needs, demands and preferences constitutes a consumer oriented approach to marketing where emphasis is placed on what the consumer needs. Marketing decisionmaking is based on what the consumer wants, but even though the consumer is regarded as ‘the king or queen’, complete satisfaction of consumer needs can never be achieved. Satisfaction can only be given within the constraints of the profit objective and the resources of a business. If the consumer is neglected and his or her wishes are ignored, this can have serious financial implications for the enterprise. Competitors are especially keen to note and turn such opportunities to their own advantage. Consumer orientation also means that the consumer has to be supplied with adequate and correct information about the business’s market offering. This information is usually incorporated into marketing communication messages. QUESTION 9 Francis has decided that during the first two years of establishing her design company, her clothes will only be sold online via a friend’s website. This will reduce the cost of owning her own store until she has enough capital to fund it. Which marketing variable is being described here? 1. Product 2. Place 3. Promotion 4. Price Answer: Refer to page 441 of the prescribed textbook: 13.5 The components of the marketing process In marketing management, four variables (the four Ps) are used for decisionmaking:  The product itself;  The place where it is offered for sale (distribution of the product);  The marketing communication methods used to inform consumers about the product; and  The price, which reflects the product’s value to consumers. QUESTION 10 The marketing team of Toyota South Africa is in the process of developing a new affordable electric twoseater vehicle. The idea for the new vehicle has been developed and screened to determine its viability from a marketing and financial point of view. Unprofitable ideas have also been eliminated. The next step in the new product development process would be to . 1. develop a prototype of the new electric twoseater vehicle 2. develop a marketing strategy for the new electric twoseater vehicle 3. test the market’s reaction to the new electric twoseater vehicle in the Johannesburg area 4. introduce the new electric twoseater vehicle to the market Answer: Refer to page 466 of the prescribed textbook: 13.11.9 New product decisions New product development is planned and executed step by step, and the new product idea goes through various phases until the product is eventually introduced into the market. The phases of new product development are as follows: Phase 1: Product ideas are developed. Phase 2: Product ideas are screened according to financial criteria, for example, sales projection and profitability analysis. Phase 3: Product ideas that do not appear to be viable (profitable) are eliminated. Phase 4: Physical product development is done by the manufacturing division and a prototype is manufactured. Phase 5: The marketing strategy is developed. This strategy entails:  positioning of the product in the market;  choice of brand;  design of packaging;  compilation of the marketing communication message;  decision on price; and  choice of a distribution outlet. Phase 6: Test marketing takes place in a specific small segment of the market – for example, in Port Elizabeth only – to test the market’s reaction. Phase 7: The product is introduced into the market. Each of the seven phases is preceded by intensive research and several factors can lead to the demise of the product idea. Nonetheless, the continual generation of product ideas remains a priority, for the survival and progress of a business are closely linked to the success achieved by the business in this field. The introduction of a product into the market (Phase 7) is the first phase in a product’s life cycle. TOPIC 4: FINANCIAL MANAGEMENT QUESTION 11 Kabelo and Hendrik are joint owners of Fitness Gym. They are currently investigating the option of investing in cryotherapy, a cold therapy that may reduce inflammation in tendons or joints. Their investment would provide Fitness Gym members with equipment which may be used to reduce postexercise recovery times, at an additional cost. The addition of cryotherapy to the gym represents a strategic service for Fitness Gym. Which one of the following statements reflects the importance of capitalinvestment projects such as the example above? 1. The relative magnitude of the amounts involved. 2. The shortterm nature of capitalinvestment decisions. 3. The operational nature of capitalinvestment projects. 4. The direct effect of the time value of money on capitalinvestment projects. Answer: Refer to page 535 of the prescribed textbook: The importance of capitalinvestment projects is reflected by the following three factors: 1. The relative magnitude of the amounts involved. The amounts involved in capital investment are much larger than those relating to, for example, decisions about the amount of credit to be extended or purchasing inventory. 2. The longterm nature of capitalinvestment decisions. The benefits from capital investment projects may accrue in periods varying from two or three years to as much as 30 or 40 years. 3. The strategic nature of capital investment projects. Investment decisions of a strategic nature, such as the development of an entirely new product, the application of a new technology, the decision to diversify internationally or the decision to embark on rendering a strategic service could have a profound effect on the future development of a business. For example, Honda’s decision to branch out from motorcycles to passenger vehicles entirely changed the strategic direction of the company. QUESTION 12 Kabelo and Hendrik have to draw up a new budget to accommodate their investment in cryotherapy. The projected sales for use of the new equipment serves as the point of departure for the budgeting process. In addition, they will use the previous year’s actual income and expenditures as a basis. This is known as budgeting. 1. traditional 2. zerobased 3. forecasted 4. annual Answer: Refer to page 527 of the prescribed textbook: 14.7.2.3 Traditional budgeting Traditional budgeting involves using the actual income and expenditure of the previous year as a basis and making adjustments for expected changes in circumstances. The projected sales serve as the point of departure for the budgeting process. Information must be gathered in order to determine which factors will lead to an increase or decline in sales, as well as factors that will influence cost. Examples of these are inflation, interest rates, exchange rates, wage demands, the actions of competitors and changes to tax legislation. QUESTION 13 Whilst drawing up the budget for the coming year, Kabelo decides to determine the break even point for new cryotherapy equipment. The fixed cost per year to maintain the cryotherapy equipment amounts to R165 000. Kabelo estimates that the variable cost per session will be around R30. If Kabelo and Hendrik decide to charge gym members R280 per session, how many sessions will they need to sell if they want to breakeven? 1. 589 2. 532 3. 660 4. The breakeven point cannot be calculated given the information above. Answer: Refer to page of the prescribed textbook: