IB Business Management SL 4.4 Market Research Topic Practice

Pablo's Peanuts (PP)
Pablo recently emigrated from Argentina to Miami, Florida, which has a large Hispanic* population. However, he could not find caramelized peanuts - known as garrapiñada -at any of the Latin American markets in Miami. These tasty sweet snacks, sold by street vendors, are very popular in Latin American countries. Pablo began testing different recipes to make the snack himself. Once convinced he had the perfect product, he conducted primary market research in several Hispanic neighbourhoods. He was overwhelmed by the positive response.
As a result, Pablo set up Pablo's Peanuts (PP) as a private limited company. He then purchased a food truck (a large vehicle equipped to cook and sell food). From Tuesday to Sunday, he drove to different Latin American markets in the Miami area to cook and sell his product. PP soon became profitable, but meeting demand was difficult.
Pablo wants PP to grow. To do this, he needs a second food truck and an employee. The second truck would require an investment of $\$ 100000$. Pablo's break-even analysis shows that the expected increased output would more than double PP's profits if the cost of fuel for the food trucks remains constant.
Pablo is considering two options to finance the second truck:
- Option 1: A local Miami bank, clearly impressed by the break-even analysis data, is willing to lend Pablo $\$ 100000$ with a 10 % interest rate.
- Option 2: A business angel, Ana Perez, with a strong portfolio of Latin American food products, has approached Pablo. She is offering $\$ 100000$ for 35 % of shares in PP.

* Hispanic: relating to Spain or to Spanish-speaking countries, especially those of Central and South America

Explain two reasons why Pablo conducted primary market research.

PU is considering new lecturer working patterns: compulsory IT training, working at home three days a week, shorter vacations with higher basic pay, and performance-related pay. PU is also considering a joint venture with Country B, whose government would provide facilities and local staff. PU would design courses and materials, train staff, monitor academic standards and undertake market research, receiving an annual government payment and a fee for each student who completes a degree. The decision must consider PU's not-for-profit mission, reputation, academic quality, student demand, staff morale, the costs of training and monitoring, Country B's facilities and market, financial returns and risks of managing an overseas campus.

The trustees of PU have made proposals to introduce new working patterns for lecturers:
- Compulsory training in IT use for teaching, including online teaching and creating libraries of online resources.
- Contracts that require all lecturers to work at home three days a week. There would be a schedule of who is on site on each day.
- Vacations reduced in length to enable sufficient face-to-face contact with all students. Lecturers would receive a compensatory increase in basic pay.
- Introduction of performance-related pay (PRP).
PU is considering a joint venture with Country B's government. Country B is performing well economically and is planning to expand its university sector. The trustees of $P \cup$ believe that the university has a sufficiently strong reputation that the government of Country B will be interested in PU opening a campus there.

Country B's government would provide the facilities and recruit local lecturers and other staff to work at the university. PU would be responsible for all the other costs that it incurs setting up the campus.

PU would:
- design degree courses, syllabuses and course materials
- train all staff
- monitor the progress of each course to ensure that academic standards are good enough to award degrees.

In addition, PU would undertake all market research needed for planning and monitoring new courses, including primary research into the market for university courses.

PU would receive an annual payment from the government of Country B and a fee for each student that successfully completes a degree course.

Explain two methods of primary market research that $P \cup$ could use to monitor the progress of each course.

High Plains PLC (HP)


High Plains PLC (HP) owns 600 budget hotels. It operates in a rapidly growing market and has a 60 % market share of the budget hotel market.
Recent secondary market research on the hotel industry revealed:
- guests of luxury hotels are brand loyal
- 80 % of guests of budget hotels respond positively to a price reduction
- the budget hotel market is growing rapidly
- detailed statistics and information on all hotel chains.
HP's directors aim to increase occupancy rates in HP's hotels from the current 65 % to 80 % by the end of 2024. Each of HP's hotels has 400 rooms. People on business trips account for only 15 % of the hotels' bookings.
HP is considering two options.
Option 1: Price discounts on 100 of the rooms in each of HP's hotels
The discounts would undercut prices charged by its major competitor, Kampfort Inns (KI), by 10 %. HP would also offer a price match guarantee, which means that it would match any lower price charged by KI for any room.
Option 2: Upgrade 100 of the standard rooms in each of HP's hotels
Upgraded rooms, called HP+, would have improved IT facilities, new décor, a coffee machine and a better shower. HP+ rooms would be $\$20$ per night more expensive than standard rooms. Estimated upgrade costs are $\$1500$ per room, and the upgrades would take two years to complete. The HP+ rooms are targeted both at the business traveller market segment and at customers willing to pay slightly more for an enhanced hotel experience.

Explain one advantage and one disadvantage for HP of using secondary market research.

MM is reviewing its hotel and mining operations.
To understand customer opinions about its hotels, MM will distribute questionnaires at two of its hotels and use a convenience sampling method. MM is also considering introducing flexitime for hotel employees.
For its gold mining operations, MM wants to increase its market share worldwide to 1 % by 2030. In 2020, MM produced 17 tonnes of the global production of 3200 tonnes.
In another development, MM wants to enter the rapidly growing lithium market. MM has rejected the idea of buying an existing lithium producer and is considering two options: opening its own lithium mine in Australia or entering a joint venture with a lithium mining company.
Option 1: Open a lithium mine in Australia
MM has identified a site in Australia, and the Australian government, which is keen to develop its country's lithium mining industry, will approve a mining license for it. Development of the mine would take three years and cost $\$100$ million. Table 2 shows the forecasted net returns for the first six years.

MM will sell the lithium to battery manufacturers in China, a market familiar to the Australian mining industry. Transport costs would be high. Environmental pressure groups oppose the mine because of the water and air pollution they think it would create.
Option 2: A joint venture with CanLith (CL)
CL, a lithium mining company, is seeking expansion with a new mine and needs finance. A joint venture with MM would bring MM's expertise and corporate values to the expansion. MM and CL would have equal ownership of the new mine and jointly manage it. CL would appoint a board of directors. However, CL has attracted bad publicity because of its poor environmental record, and local people oppose the new mine. Information on the joint venture is shown in Table 3.

Explain one advantage and one disadvantage for M M of using convenience sampling for its market research.