Evaluate how IB Business Management HL objectives balance strategy, stakeholder interests, performance and corporate social responsibility over different time horizons.
Benno is a soft drinks manufacturer. Its mission statement is “to produce healthy drinks without damaging the environment”. Competition in the healthy soft drinks market is fierce. Benno uses a competitive pricing strategy. However, sales of Benno’s drinks have fallen significantly over the last five years, particularly in the 12–18 age group. The business has no accumulated retained profits.
Benno is committed to innovation and corporate social responsibility (CSR). Its research and development division has recently invented a new biodegradable drink pack ring that starts to break down within two hours of contact with sea water. It dissolves fully in 48 hours. Currently, 98 % of pack rings are made of plastic and when dumped in the sea are responsible for the death of many sea creatures.
A focus group of loyal customers used regularly by Benno’s marketing department is wholeheartedly in favour of the new drink rings. However, the marketing director has read recent studies that suggest: • purchases of green products are not increasing, despite the positive attitude of many consumers towards sustainability and biodegradable products • consumers continue to prioritize price when purchasing soft drinks.
Benno
Benno is a soft drinks manufacturer. Its mission statement is "to produce healthy drinks without damaging the environment".
Competition in the healthy soft drinks market is fierce. Benno uses a competitive pricing strategy. However, sales of Benno's drinks have fallen significantly over the last five years, particularly in the 12-18 age group. The business has no
accumulated retained profits.
Benno is committed to innovation and corporate social responsibility (CSR). Its research and development division has recently invented a new biodegradable drink pack ring that starts to break down within two hours of contact with sea water. It dissolves fully in 48 hours. Currently, 98 % of pack rings are made of plastic and when dumped in the sea are responsible for the death of many sea creatures.
A focus group of loyal customers used regularly by Benno's marketing department is wholeheartedly in favour of the new drink rings. However, the marketing director has read recent studies that suggest:
- purchases of green products are not increasing, despite the positive attitude of many consumers towards sustainability and biodegradable products
- consumers continue to prioritize price when purchasing soft drinks.
To manufacture the new drink rings, machinery costing million would be needed. Drink ring production unit costs would rise from 10 cents to 15 cents and prices of a six-pack of Benno soft drinks would have to increase by 5 %. Benno's net profit margin on a six-pack is 10 %.
Benno's director of corporate social responsibility favours the change to the new drink rings but is opposed by both the finance director and marketing directors.
Explain two roles of Benno's mission statement.
Recommend whether Benno should replace its plastic drink rings with the new biodegradable drink rings.
Office Supplies (OS)
Office Supplies (OS) is a family-owned private limited company that, for 40 years, has operated three retail office supply stores in a small city. OS offers a wide range of office products (such as computer paper and stationery) and office machinery (such as computers and printers). When each store opened, OS purchased the buildings using long-term loan capital. OS's objective is to have enough profit to finance the company's working capital and pay annual dividends.
OS has no clear marketing strategy. Traditionally, OS competed with several other office supply stores operating in the same city. The market was not competitive, however, and most customers went to the nearest office supply store. OS's prices were comparable to those of other retail office supply stores, and the company did little promotion.
Nationally, the retail office supply store industry is declining. Many retail office supply stores have had to close, and new competitors have entered the market, many of which benefit from some or all of the following:
- Specialization in particular office products
- Economies of scale leading to more competitive prices
- Greater convenience, including e-commerce with door-to-door delivery
Like other physical retail stores, OS has seen its sales decline. Gross and net profit margins have fallen. Last year, to ensure enough funds for capital expenditure and revenue expenditure, OS's board of directors chose not to pay dividends. OS also anticipates the need for additional finance next year. OS's board is considering changes to the company's marketing mix in response to new competitors.
State two marketing objectives that a company might have.
Matchpoint Tennis Club (MTC)
Matchpoint Tennis Club (MTC) is a famous members-only club. MTC owns tennis courts, changing rooms and a restaurant. The majority of members are between 30 and 50 years old. Most members have high incomes and successful careers. However, MTC faces increasing competition from Best Sports, a multinational provider of sports centres. An economic downturn has also reduced MTC's profits. Until recently, the restaurant made a valuable contribution to fixed costs but this has fallen significantly in the last 12 months.
Last year, Seb, a former successful tennis player, became the new Managing Director of MTC. With the objective to increase revenue, he wrote a five-year plan with the following strategies:
- double membership of MTC
- open the restaurant to the general public
- open a sports equipment and clothes shop under the family brand "Matchpoint"
- employ professional tennis coaches (teachers).
Tina, the Marketing Director, agreed with Seb about the strategies. In order to achieve the first strategic objective (double membership), she prepared a marketing budget and proposed the following tactics:
- overall reduction in membership fees of 10 %
- discounts for people aged below 18 and over 60 years old
- advertisements in local newspapers and on social networking sites
- a new range of club branded merchandise such as T-shirts and coffee mugs.
Alex, the Human Resources (HR) Manager is concerned about the impact the five-year plan will have on employees. Employees already argue that they work too hard for low pay. An increase in the number of members would increase their workload and responsibilities further. Alex tried to convince Seb that membership of MTC was already at saturation point on the product life cycle and that existing members would not like some of the proposed changes to the club.
Alex also stated that since Seb joined the business last year, the friendly atmosphere at the tennis club has disappeared. That atmosphere has been replaced with a focus solely on profit making. Alex would prefer a focus on providing a good quality service for existing members.
With reference to MTC, explain the difference between objectives, strategies and tactics.
Discuss the likely success of Seb's five-year plan to achieve an increase in revenue for MTC.