Practise IB Business Management SL/HL 4.5.10 by applying appropriate marketing mixes concepts to exam-style questions.
Healthy Start (HS)
Tom Donat started Healthy Start (HS), a national chain of stores preparing and selling healthy snacks, which are produced in batches. HS's target market is teenagers and young adults. Tom was concerned about high levels of fast food consumption and youth unemployment. His vision statement for HS is: "To encourage life-long healthy eating habits and to train school leavers (drop outs) in acquiring work skills".
HS hires many school leavers without qualifications. Because of the valuable social service that HS provides, an independent online media provider will feature HS in a new online reality TV show.
All employees, including managers, start at the lowest level of the organizational hierarchy and train on the job. Job enlargement, job enrichment and intrapreneurship opportunities are available. 20 % of all profits earned are put back into HS to finance these opportunities. Staff turnover is lower than the industry average.
Competition from global fast food restaurants has intensified. Their economies of scale mean that HS struggles to increase its market share. Online reviews indicate that some customers perceive HS's snacks as healthy but overpriced and with small-sized portions.
Tom is considering two options:
- Option 1: Implement flow production. HS will buy new technology and assign each employee to a specific job on the production line. HS will increase portion sizes and keep prices the same.
- Option 2: Implement a new social media marketing campaign linked to the new online TV show. The campaign will focus on the health benefits of HS's snacks.
Discuss the two options that Tom is considering for H S in response to the intense competition.
Discuss the two options that Tom is considering for HS in response to the intense competition.
The first option, which is to implement flow production, is likely to lead to an increase in production and productivity because of the new technology and specialized roles. Currently, HS uses batch production. With improved productivity, HS can increase its portion size without raising prices. This will address the criticism found in the on line review about the portion size. HS will be perceived as more customers' focus. As a result, HS may be able to compete more effectively with the global fast food manufacturers.
However, the introduction of flow production may result in a reduction in the opportunities for job enlargement, enrichment and intrapreneurship. If the new production process is going to lead to specific jobs on the production, then apart from job rotation, the current employees may become demotivated through a restriction on personal growth and development opportunities. Staff turnover may increase as employees seek more innovative or challenging work. Moreover, the above may contradicts the vision statement of H S.
It is likely to be expensive to implement flow production both in terms of the financing and inevitable changes in organizational culture at HS. Reduced profit to be put back into HS to finance job opportunities for the school leavers also contradicts HS's vision statement.
One may judge the erosion of the vision statement as a significant arguments against this option.
The second option may be quicker to organize and much cheaper. The online reality TV show will have established H S firmly in the minds of existing and potential customers. A social media campaign will amplify the brand value of HS and should increase market share. HS will directly communicate with its target market who also express their discontent using social media.
However, measuring the success of social media on market share will be difficult even though the target market should be familiar with this method of promotion. The biggest argument fr against this campaign, however, is that as a competitive tool against the global manufacturers it might not be successful. Emphasising the health benefits of the smack does not address the problem of the portion. It does not mention in the stimulus that there is an issue with HS's perceived health benefits. There will still be this perceived difference in portion size. A social media campaign will not address this aspect. In fact, there is a danger that negative response to the campaign make reduce market share even further.
Both of the responses have some merit, but it would appear that the first option is the most appropriate to tackle the issue of competition with the global fast food manufacturers. The changes in the production process will take some time to bed in and a few staff may leave to work for other snack food manufacturers who have more dynamic or challenging roles. However, the social media campaign will not close the perceived gap between the products offered by HS and those offered by their competitors and, thus, could backfire.
Candidates are expected to provide conclusions and judgments (for top marks). Candidates may conclude that either option is better or they may conclude that HS should do both, given that Option 2 would not be very expensive.
Marks should be allocated according to the markbands on page 5.
A balanced response is one that covers at least one issue for and at least one argument against each option.
For one relevant issue that is one-sided, award up to [3]. For more than one relevant issue that is one-sided, award up to a maximum of [4].
Award a maximum of [6] if the answer is of a standard that shows balanced analysis and understanding throughout the response with reference to the stimulus material but there is no judgment/conclusion.
Candidates cannot reach the [7-8] markband if they give judgment/conclusions that are not based on analysis/explanation already given in their answer.