IB Business Management SL 4.1 Introduction to Marketing Topic Practice

KapTan


KapTan (KT), 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 KT suffered from cash-flow problems in its first year of trading. Its profits are small and, in the last two years, have fallen.
KT 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. KT has insufficient finance to create a battery that can be recharged an unlimited number of times.
Through market research, KT 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.
KT 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.
KT is considering two options:
Option 1: Market and sell directly to existing car owners through business to consumer (B2C) at a retail price of $\$400$. KT 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. KT would provide its product exclusively at $\$250$ per unit. Sales are guaranteed.

Define the term product orientation.

ELE has three profitable divisions but faces major changes. Gasoline sales are expected to decline as governments ban new gasoline and diesel cars, while electric-car sales are growing and battery prices are falling. Zeat's gasoline-station compressor market is saturated but profitable, and car-rental growth in Europe is expected to slow. The car-rental division has expanded through stations, airports and online booking. The existing Section B information below gives the data needed to evaluate market share, redundancy, outsourcing MiniC production to Hungary and Perrana's offer to buy the gasoline stations. The offer would close the stations, make all station employees redundant and require ELE to relocate 700 car-rental offices, but it could finance expansion into India, where tourism and urbanization are growing and car rentals are still a small share of cars on the road.

ELE is continuing to focus on all three of its divisions.
Car rental division
In 2010, ELE owned 4.5% of the European Union (EU) car rental market. In 2019, ELE's car rental division had revenues of EUR 0.9 billion in a market worth EUR 16.8 billion. Initially, ELE only provided car rentals in its gasoline stations in Belgium. By 2014, ELE had expanded the service to its stations in France, Spain and the UK. Giselle believes that maintaining high levels of customer satisfaction is an important factor in the car rental division's continuing success.
Zeat division
Zeat's MiniC production line, based in the UK, has 125 employees, most of whom have been with the business since 2000.
Currently, approximately 90 % of MiniC sales are to customers in the EU, and profit margins for the MiniC air compressors have fallen significantly due to rising costs in the UK. Lucas recommended to ELE directors that MiniC production be outsourced to a manufacturer in Hungary in the EU.
Gasoline station division
The gasoline station division accounted for 35 % of ELE's operating profits in 2021. Perrana PLC, a global supermarket chain, has offered to purchase all of ELE's gasoline stations. The offer significantly exceeds the current market value of ELE's gasoline stations.
Perrana would close the gasoline stations and open supermarkets on the sites. All ELE gasoline station employees would face redundancy. ELE's workforce will feel betrayed. Although Hugo is very unhappy about the proposal, Giselle has mixed feelings: she would need to find new locations for her 700 car rental offices, but the sale could help finance the expansion of ELE car rentals into India.