IB Business Management SL 4.2.5 Differentiation Questions
Practise explaining how businesses differentiate products and services in IB Business Management SL marketing decisions.
- Syllabus
- First assessment 2024
- Course
- Business management SL
- Level
- SL
Exam points
- Explain how businesses differentiate products and services.
IB Business Management SL 4.2.5 Differentiation Questions question 1
[Maximum number: 6]
Stuart Sporting Goods Ltd. (SSG)
Stuart Sporting Goods Ltd. (SSG) is a private limited company in Uisge, Scotland. The Stuart family has owned the store since 1937. SSG sells sporting equipment and clothes. It has strong brand awareness and loyalty based on excellent customer service. In 2021, the company had GBP 2.5 million in assets and GBP 2.1 million in equity.
Uisge is near Glasgow, Scotland's largest city. Young families from Glasgow are moving to Uisge, where housing is cheaper and the pace of life is slower. These new residents' employers, usually in Glasgow, allow them to telework two days per week. Uisge's population has grown only slightly, as these new residents are largely replacing an ageing population.
Recently, MuraMerk ( MM), a retailer, opened a superstore in Uisge, MM's first in Scotland. This superstore sells groceries, clothing, hardware, electronics and sporting equipment. MM also sells online. Because of the economies of scale, MM offers lower prices and more choices than other businesses in Uisge, including SSG. For several years before MM's arrival, SSG's sales revenue did not grow and, after MM arrived, sales revenue started to decline.
Aware of MM's impact on small businesses in the United States (US), Douglas Stuart, who is 59 years old and the Chief Executive Officer (CEO) of SSG, is considering two options:
- Option 1: Lower prices, reduce employee levels, and cut costs in the hope that MM will be unsuccessful in Scotland (as it has been in several other countries).
- Option 2: Accept a takeover offer of GBP 1.1 million from a large chain of sporting goods.
Explain three possible reasons for the decline of sales at SSG.
Possible reasons that SSG's sales revenue is falling include:
- People are attracted to MM because of their lower prices than SSG.
- New residents to Uisge do not have the same brand awareness and loyalty to SSG than long-established residents. Without that awareness and loyalty, they may be buying sporting goods in stores in Glasgow or, after MM opened, at MM.
- Many consumers, and in all likelihood the new residents who are proficient in modern computer technologies (as they telework), are ordering sporting goods from online retailers.
- MM sells many types of products other than sporting goods, including groceries, clothing, hardware, and electronics. Consumers may find it convenient that they can shop for a variety of needs, including sporting goods, at MM and not have to make a dedicated trip to SSG.
Accept any other relevant and plausible explanation.
Mark as 2 + 2 + 2
Award [1] for an identification or description of a reason with or without application.
Award [1] for explanation of a reason with no application.
Award [2] for explanation of a reason and application.
If a candidate states a generic advantage with no possible reference to the stimulus, award a maximum of [1].
Maximum award [6].
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