Practise Edexcel Business questions on the marketing mix and strategy, applying product, price, promotion and place decisions to a specific business context.
Sources for use with Extract E Niche brands are increasing their mass market appeal In the last 10 years there has been an increase in the number of health and well-being brands moving from a niche to a mass market. Many health products are benefitting from increased revenue, due to growing consumer desires to live healthier lives. These brands are no longer viewed as exclusive products and are now purchased by more customers each year. One of these brands is Pukka, which sells premium priced speciality tea. The global speciality tea market is predicted to grow by $50bn between 2021 and 2026. Extract F About Pukka Pukka sells a range of speciality teas including herbal, organic and fruit teas. Entrepreneurs Sebastian Pole and Tim Westwell launched Pukka in 2001. Sebastian had been interested in plants and conservation for many years. He was determined to follow his dream to start a business selling a healthy product. Sebastian saw an advertisement of Tim’s which offered to help start up an ethical business. They agreed to meet to discuss their ideas and Pukka was formed shortly afterwards. From the first moment Tim and Sebastian met, they were the perfect match. Although they had completely different personal skills, they shared a common marketing objective, to create a business that would benefit the health of people. Tim had 10 years’ experience as a business management consultant. They spent many hours in Tim’s house planning their future strategy. They worked evenings and weekends to turn their ideas into a successful business.
Extract F About Pukka Pukka sells a range of speciality teas including herbal, organic and fruit teas. Entrepreneurs Sebastian Pole and Tim Westwell launched Pukka in 2001. Sebastian had been interested in plants and conservation for many years. He was determined to follow his dream to start a business selling a healthy product. Sebastian saw an advertisement of Tim’s which offered to help start up an ethical business. They agreed to meet to discuss their ideas and Pukka was formed shortly afterwards. From the first moment Tim and Sebastian met, they were the perfect match. Although they had completely different personal skills, they shared a common marketing objective, to create a business that would benefit the health of people. Tim had 10 years’ experience as a business management consultant. They spent many hours in Tim’s house planning their future strategy. They worked evenings and weekends to turn their ideas into a successful business.
Define the term 'marketing objective'. (Extract F, line 9)
Knowledge 2
Up to 2 marks for defining the term 'marketing objective' e.g.
- A goal the business aims to achieve (1) through its marketing activities (1)
Assess the challenges that a business, such as Pukka, may have faced when
moving from a niche to a mass marketing strategy.
Indicative content guidance
Answers must be credited by using the level descriptors (below) in line with the general marking guidance. The indicative content below exemplifies some of the points that candidates may make but this does not imply that any of these must be included. Other relevant points must also be credited.
Knowledge, Application, Analysis, Evaluation - indicative content
- A niche marketing strategy appeals to a smaller segment of a
larger market where consumers have specific needs and wants.
Mass marketing aims to target the highest number of potential
customers
- One challenge is the change in promotional costs. It is likely the promotional strategy would have changed from lower cost/below the line advertising to more expensive/above the line advertising.
This may affect the cash flow for Pukka
- Changing to a mass marketing strategy would require changes to the distribution networks. In order to reach a global audience, it is
likely that Pukka extended its distribution globally involving more retailers and wholesalers
- Pukka is likely to have faced more competition. This may have
led Pukka to reduce the price of its tea to compete with established businesses
- However, the volume sold by Pukka is likely to be much higher.
This may lead to lower unit costs/economies of scale and
increased profitability
- Mass marketing may create less of a risk to Pukka. It may be less
vulnerable to the economic change of individual economies
- The speciality tea market is set to grow by $50bn by 2027
providing Pukka with an opportunity to increase its revenue and profits
- There are both risks and rewards for businesses using a mass
market strategy, and success depends on effectively managing the change to benefit from economies of scale
Level
Mark
Descriptor
0
No rewardable material.
Level 1
1-2
Isolated elements of knowledge and understanding - recall based.
Weak or no relevant application to business examples.
Generic assertions may be presented.
Level 2
3-4
Elements of knowledge and understanding, which are applied to the business example.
Chains of reasoning are presented but may be assertions or incomplete. A generic or superficial assessment is presented.
Level 3
5-7
Accurate and thorough knowledge and understanding, supported throughout by relevant and effective use of the business behaviour/context.
Analytical perspectives are presented, with developed chains of reasoning, showing cause(s) and/or effect(s).
An attempt at an assessment is presented, using quantitative and/or qualitative information, though unlikely to show the significance of competing arguments.
Level 4
8-10
Accurate and thorough knowledge and understanding, supported throughout by relevant and effective use of the business behaviour/context.
A coherent and logical chain of reasoning, showing cause(s) and/or effect(s).
Assessment is balanced, wide ranging and well contextualised, using quantitative and/or qualitative information, and shows an awareness of competing arguments/factors, leading to a supported judgement.
Question
Evaluate whether on-the-job training is likely to be the most effective type of training used by Walt Disney.
Indicative content
Source for use with Section B
Extract C
About Skechers
Skechers is a global footwear company that designs and develops shoes for men, women and children. It sells its products online and in more than 2,700 shops in 170 countries through its established distribution channels. The annual sales revenue of the business increased from $3.52bn in 2016 to $4.16bn in 2017.
Skechers' marketing department uses both primary and secondary market research. Focus groups and interviews are used during the design stage to collect opinions on new shoes before they are launched onto the market. Focus groups are also used to gain feedback on the performance and comfort of existing styles of shoes. Since 1992 when it launched its first shoe, the company has diversified into several new lines, targeting different market segments and different activities.
The range is updated regularly and includes shoes for walking, work and casual wear. The portfolio includes 3,000 different styles of footwear for all ages that offer quality and comfort. Its best-selling shoe is the Go-Walk brand, sold globally. More recently the company has designed and sold shoes for athletes and is now competing with companies such as Nike and Adidas.
Organisation of Skechers
Although Skechers has offices and shops globally it has maintained a centralised organisational structure. At the corporate headquarters in California, USA, Skechers research, design, and develop the shoes as well as controlling global marketing campaigns and operations. Offices based in South America, Europe and Asia oversee the regional operations.
David Weinberg is the Chief Operating Officer (COO) based in the USA head office. He is responsible for the day-to-day operations. These include planning Skechers policies and objectives and developing financial and distribution strategies to expand the business.
Discuss how the product life cycle may help Skechers develop its product portfolio.
Indicative content guidance
Answers must be credited by using the level descriptors (below) in line with
the general marking guidance. The indicative content below exemplifies
some of the points that candidates may make but this does not imply that
any of these must be included. Other relevant points must also be credited.
Knowledge, Application, Analysis, Evaluation – indicative content
• Product life cycle describes the stages that a product goes
through from introduction to decline.
• Skechers have 3,000 styles of shoe in their portfolio.
• A benefit of using the product life cycle is that it can help devise
promotional strategies. The model will help make decisions on the
established products.
• New shoes in the range, such as the shoes for athletes, which are in
the growth stage, will benefit from advertising and promotion.
• Those shoes in the maturity stage, such as Go-Walk may benefit from
extension strategies to prolong the life of the shoes.
• The life cycle may help Skechers make decisions on those products
with low sales in the decline stage. It may help them to make
decisions on which ranges to discontinue to maintain the reputation of
the business.
• However, the product life cycle is quite a simplistic model. Whilst
there are many products whose sales follow the classical shape
of the model, many others do not. It is very difficult for Skechers
to predict the life of a shoe due to changing fashions.
• The model does not take account of competitors actions. Some of
the Skechers shoes may move into the decline stage quickly if
competitors such as Nike introduce a superior product for golf
shoes for example.
• Whilst the model is a good visual tool for analysing a portfolio of
products, Skechers would need to take account of other research
findings on competitors, the economy, changing trends etc before
decisions were finalised on the product range.
Level
Descriptor
0
No rewardable material.
Level 1
1–2
Isolated elements of knowledge and understanding – recall based.
Weak or no relevant application to business examples.
Generic assertions may be presented.
Level 2
3–5
Accurate knowledge and understanding.
Applied accurately to the business and its context.
Chains of reasoning are presented, showing cause(s) and/or effect(s)
but may be assertions or incomplete.
An attempt at an assessment is presented that is unbalanced, and
unlikely to show the significance of competing arguments.
Level 3
6–8
Accurate and thorough knowledge and understanding, supported
throughout by relevant and effective use of the business
behaviour/context.
Logical chains of reasoning, showing cause(s) and/or effect(s).
Assessment is balanced, well contextualised, using quantitative and/or
qualitative information and shows an awareness of competing
arguments/factors.
Sources for use with Section B
Extract C
Competition in the Entertainment Industry
The games console market is dominated by three businesses; Sony, Microsoft and Nintendo. For many years Sony’s PlayStation console dominated the market. However, Nintendo regained its leadership position for the first time since 2009 with the sales of its new game console, the Switch.
In 2019, Nintendo sold 17.3 million Switch consoles, Sony sold 17.1 million PlayStation consoles, and Microsoft remained in third place, selling 10 million Xbox consoles.
Extract D
Nintendo’s Goal: Bringing Smiles to People’s Faces
Nintendo was founded in 1899 in Japan. It produced traditional Japanese playing cards. In 1970, Nintendo started the development of games consoles and video games. The entertainment market is dynamic, and Nintendo’s goal is to create fun experiences through product innovation.
Nintendo has sold more than 4.7 billion video games and more than 750 million game console units. This is because of the iconic characters it has created, including Super Mario, Donkey Kong, and Pokémon. Its most successful games consoles included Game Boy and the Wii. The Game Boy became the first handheld console to sell in large numbers but is no longer manufactured and the Wii has declining sales. In 2018, the Nintendo Switch was launched, which allows users to enjoy games anytime, anywhere, with anyone.
Extract E
Organisational changes at Nintendo
Nintendo recently made changes to its organisation that positively impacted on the business. Nintendo merged its two game development divisions, which were previously separate. One division had focused on consoles used in the home like the Wii while the other created games for handheld devices like the 3DS. Combining the two divisions aimed to speed up the development of products and allow Nintendo’s creative teams to share ideas and technology.
The use of a matrix organisation has proved to be a good move given the nature of the Switch, which is both a handheld device and a home console. This differentiates it from other games consoles in the market. The main benefit of the reorganisation is that it allows Nintendo to be more flexible with how it uses its game developers and other employees.
Analyse two different pricing strategies that Nintendo might use to compete in the games console industry.
Knowledge 2, Application 2, Analysis 2
Knowledge
Up to 2 marks for defining pricing strategy, e.g.:
- Methods used by a business (1) to set a price for its products or
services (1).
OR
Showing understanding of two types of pricing strategy, e.g.:
- Competitive pricing, setting a price at or near competitors' prices
(1)
- Price skimming, setting an initial high price before reducing later
on (1)
Application
Up to 2 marks for answers contextualised to Nintendo, e.g.:
- Nintendo may price in line with its rivals such as Sony, due to the
competitive nature of the games console industry (1)
- Nintendo has launched the Switch console, which is differentiated
from other consoles as it can be used as a home console as well as
being a handheld device (1).
Analysis
Up to 2 marks for reasons/causes/consequences for Nintendo, e.g.:
- This may prevent Nintendo losing sales to rivals and prevent its
customers switching to substitutes if its price is too high (1)
- Nintendo may be able to sell at a high price until competitors
launch a similar console to rival the Switch (1).
Question
Number
Indicative content
Discuss how the Boston Matrix may help companies such as Nintendo develop their product portfolio.
Indicative content guidance
Answers must be credited by using the level descriptors (below) in line with the
general marking guidance. The indicative content below exemplifies some of
the points that candidates may make but this does not imply that any of these
must be included. Other relevant points must also be credited.
Knowledge, Application, Analysis, Evaluation - indicative content
- The Boston Matrix is a method of portfolio analysis based on market
share and market growth
- It categorises products into Cash Cows, Dogs, Stars and Problem
Children/Question Marks
- It can be used to analyse the current portfolio of products to help with
future strategies and growth. Cash from mature products can be used to
fund new products such as the Switch console
- As market share may be gained through investment in marketing, the
matrix helps to focus on the promotion strategy for new consoles and
games to increase sales
- It will help in the decision making regarding consoles that are regarded
as Dogs that should be discontinued, including the Game Boy
- However, it is only a snapshot of the current product portfolio. It has
little or no predictive value and does not take account of external factors
such as competitors such as Sony and Microsoft
- Just because products are categorised as Dogs does not mean they must
be removed - perhaps they still generate acceptable levels of revenue
- The Boston Matrix cannot be used in isolation and Nintendo must
consider other external and internal factors to help make important
decisions on its product portfolio
- Product life cycle may be a better method of portfolio analysis as it takes
account of the life span of products, which is an important element in
the dynamic games console industry.
Level
Mark
Descriptor
0
No rewardable material.
Level 1
1-2
Isolated elements of knowledge and understanding - recall based.
Weak or no relevant application to business examples.
Generic assertions may be presented.
Level 2
3-5
Accurate knowledge and understanding, applied accurately to the
business and its context.
Chains of reasoning are presented, showing cause(s) and/or effect(s)
but may be assertions or incomplete.
An attempt at an assessment is presented that is unbalanced, and
unlikely to show the significance of competing arguments.
Level 3
6-8
Accurate and thorough knowledge and understanding, supported
throughout by relevant and effective use of the business
behaviour/context.
Logical chains of reasoning, showing cause(s) and/or effect(s).
Assessment is balanced, well contextualised, using quantitative and/or
qualitative information and shows an awareness of competing
arguments/factors.
Question
Number
Indicative content