CAIE A-Level Business A2 8.2.3 International Marketing Topic Practice

Evaluate which method CP should use to enter the market in country D.

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Indicative content

Responses may include:

AO1 Knowledge and understanding

Limited knowledge K will be demonstrated through knowledge of international expansion methods, such as joint ventures or direct investment or advantages and disadvantages of methods.

Developed knowledge K+K+ will be demonstrated through knowledge of international expansion methods, such as joint ventures or direct investment and advantages and disadvantages of methods.

- Understanding of methods of entry.

- Exporting directly to retailers - promoting and distributing products to retailers who take responsibility for the marketing.

- Joint venture - alliance with another business, two companies agree to act as one for a particular project.

Direct exporting advantages:

- Quick to set up and discontinue.

- Little investment needed.

- Low initial cost, retailer bears risk.

- Retailer uses local knowledge of markets and promotion methods.

- CP retains control over marketing.

Direct exporting disadvantages:

- May face trade barriers.

- Transport costs.

- CP relies on retailer to implement desired marketing strategy.

- Retailers may prioritise sale of other companies' products.

- CP may have cash flow and credit risks.

- CP unlikely to gain market information.

Joint venture advantages:

- Shared risk.

- Shared cost of investment.

- Access to local market knowledge, distribution arrangements.

- More control over marketing.

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Joint venture disadvantages:

- Higher costs, especially management and communication, and slower, more expensive to set up.

- Possible conflicts over contractual arrangements and possibility that partner may become a competitor.

- Loss of control as shared venture.

- Reliance on another business.

AO2 Application

Limited application, APP applies knowledge to CP once.

Developed application, ${ }^{\text {APP }}+{ }_{\text {APP }}$ applies knowledge to CP twice.

Max one APP for application for the first impact of technological change and max one APP for application for the second impact of technological change.

- Nature of CP's paint products - good quality, value for money, strong brand name, priced above similar brands.

- Not supplied for own brand products.

- Identified market gap is for CP's existing products.

- Joint venture with wholesaler versus direct exporting to retailers.

- Different countries may have different cultures in terms of domestic use of paints inside and outside of homes, maybe due to style of houses or weather.

AO3 Analysis

Limited analysis AN - candidate shows one link in the chain of analysis.

Developed analysis L2AN - candidate shows two or more links in the chain of analysis or offers a two-sided analysis

- Development of knowledge and application points in terms of the advantages and disadvantages of the two stated methods.

- Direct exporting may be less costly and more flexible as it can be set up quickly and the retailer takes the risk. AN However, there is no guarantee that retailers will give CP paints a high profile, so sales may not increase very fast. L2/AN

- A joint venture allows CP to share the risk and gain expertise of a local company, this could increase sales. AN However, there may be some loss of control to the joint venture partner and if the company is a competitor, sales may not increase as fast as expected. L2 AN

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AO4 Evaluation

Limited evaluation ${ }^{\text {EvaL }}$ - limited supported judgement and/or a weak attempt at evaluative comment.

Developed evaluation ${ }^{\text {L2 }}$ [EVAL] - supported judgement and/or reasonable evaluative comment.

Developed evaluation in context ${ }^{\lfloor\mathcal{L} 3 \mid E \text { val } \text { - }}$ - supported judgement in context and/or reasonable evaluative comment in context.

- Other options exist and could be researched: use of an agent, direct investment in a paints factory, etc. Is CP sure that the two put forward are the only realistic options?

- These options rely on accurate and reliable choice of paint retailer or wholesaler.

- Direct exporting may be suitable for CP as there are cost advantages for home paint production, assuming low trade barriers.

- Joint ventures may be suitable if the partner has good local knowledge and contacts. In the case of CP this may be very important in the specialist paints for the aircraft industry.

- Difficult to decide on these factors alone.

- Time scale and finance are important factors. Direct exporting is much quicker and cheaper to set up than a joint venture. CP have limited finance, so direct exporting may be the only possible option.

- Important to clarify objectives before deciding.

- More information needed regarding market in country D - e.g. the market research carried out, quantitative data on forecast costs of the options, revenues and finding suitable partners.

- Need to know the policy of the government in country D on foreign firms and any relevant laws or regulations covering trade, international marketing or paint products.

- A justified conclusion and/or recommendation e.g. recommendation of one option, or that both options are suitable, final choice depends on other factors above.

Accept all valid responses.