IB Business Management SL 4.1.1 Market and product orientation Question Bank

KapTan


KapTan (K T), which manufactures rechargeable batteries for cordless consumer products like vacuum cleaners, began five years ago as a business with a product orientation. It sells business to business (B2B). Multinational companies dominate the rechargeable battery industry, and K T suffered from cash-flow problems in its first year of trading. Its profits are small and, in the last two years, have fallen.
K T has now developed an innovative battery that is small and lightweight. This battery is an emergency power source allowing electric cars to reach a charging station. However, the battery can only be used ten times before it runs out. K T has insufficient finance to create a battery that can be recharged an unlimited number of times.
Through market research, K T has discovered that:
- no other emergency batteries for electric cars exist
- owners of electric cars fear running out of power
- KT's new battery could be obsolete in five years.
K T has the capacity to produce 90000 of these new batteries each year. The average cost is $\$200$ per unit. KT has insufficient funds to invest in additional capacity.
K T is considering two options:
Option 1: Market and sell directly to existing car owners through business to consumer (B2C) at a retail price of $\$400$. K T will need to borrow significant capital to finance this option.
Option 2: Accept an offer of a five-year strategic alliance with a manufacturer of electric cars. K T would provide its product exclusively at $\$250$ per unit. Sales are guaranteed.

Define the term product orientation.