Practise choosing, explaining and evaluating appropriate marketing mixes for products, services, target markets and strategic decisions in IB Business Management HL.
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.
Discuss possible changes to any two elements of OS's marketing mix.
Ways that O S could modify its marketing mix to match and compete with the new competitors.
- Product: Changing its product range (either contracting or expanding its product range).
- Price: Adopting a different pricing strategy.
- Place: Modifying its distribution strategy to include e-commerce.
- Promotion: Initiate a more aggressive promotion strategy.
For each of the four Ps, OS could make modifications. Modifying each has advantages and disadvantages. For example, contracting its product range could give the organization more focus and require lesser investment in stock. On the other hand, assuming that O S process its products properly, each inventory item makes some contribution to fixed costs. Further, any termination of a product line means that customers for that product, however few, will have to go to a competitor for that product.
OS could modify its prices, particularly try being more aggressive with its pricing. Whereas that may attract more customers (advantage), margins will be thinner.
An ecommerce shift with a door-to-door aspect will change OS' supply chain considerably. Time and resources will need to be devoted to this task
There is a sense that O S is a traditional business and new aggressive forms of pricing and promotion will be required. Will they know how to do the latter? Do they need to introduce a social media campaign backed up with a membership or loyalty programme?
Given that OS is a retailer, candidates may choose to use the extended marketing mix:
People -whilst little is known of the employees many of the owners are likely to be of the older generation. Having retail staff conversant with trends in the market such as social media and new workplace technology such as automated stock control systems would be an important aspect of a new marketing strategy.
Process - it is known that new competitors are already using e-commerce techniques, potentially giving them a cost and hence competitive advantage. However, investment in such platforms and training staff accordingly may be expensive in the short term.
Physical Evidence
Some stores are potentially 40 years old and hence may be showing their age. Investing in upgrading stores in the way they look and feel to customers could pay dividends e.g. IKEA. However, this could also be expensive and may not be wise if it is perceived that the market is moving away from the physical store concept.
Candidates are expected to provide a conclusion with a substantiated judgment.
Grade according to the mark bands found on page 3.
For one relevant modification to the marketing mix that is one-sided, award a maximum of [3].
For two relevant modifications, but the discussion of both is one-sided, award a maximum of [4].
For two relevant modifications, one treated in a balanced way and another in an unbalanced way, award a maximum of [5].
For two relevant modifications, both treated in balanced ways, but no real conclusion, award a maximum of [6]. Conclusions must be more than nominal (for example, when a candidate opens a final paragraph with "In conclusion . . ." but then has no real conclusion), award a maximum of [6].
Maximum mark award
Option 1
Option 2
Judgement/Conclusion
3
One option unbalanced
N/A
4
One option balanced (one argument for and one argument against) or both options in an unbalanced fashion
N/A
5
One balanced and one unbalanced
N/A
6
Both balanced
No judgments/conclusions
7-8
Balanced Largely effective use of business language and the stimulus
Judgments/conclusions based upon analysis and explanation in the body
9-10
Balanced Rich use of business language, business theory, and the stimulus
Judgments/conclusions based upon analysis and explanation in the body