IB Business Management SL 4.5 The Seven Ps of the Marketing Mix

[Maximum number: 4]

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.

$Table 2: \(\boldsymbol{K$

Table 2: \(\boldsymbol{K

With reference to Option 1, for K T, explain the relationship between the product life cycle, investment, profit and cash flow.

Initial research and development costs plus the costs involved in launching a product usually means a product will be a loss maker in its early years. Cash flows may be negative. As sales grow and the product moves into the growth phase, profits are likely to be positive but the company will require additional working capital Not until the product reaches the maturity phases of the life cycle are cash flows and profits likely to be positive. In the decline phase, cash flows and profits are likely to remain positive. The cash flows especially should be solid with the contraction of necessary working capital. For K T, the investment in R\&D for the new battery will have had a negative effect on cash flow and profits. Once the product is launched, Option 1 forecasts see quite large sales and therefore large cash inflows. However, we do not know about the marketing costs, which will increase cash outflows. Sometime in year 2, further investment would be needed if sales targets in years 3 and 4 are to be fulfilled as projected sales exceed capacity. This investment would increase fixed costs and reduce profits.

If a candidate shows some understanding the relationship between the product life cycle, investment, profit and cash flow, but with no application to the stimulus, award [1].

If the candidate shows clear understanding of the relationship between the product life cycle, investment, profit and cash flow, but with no application to the stimulus, award [2].

If the candidate shows some understanding of the relationship between the product life cycle, investment, profit and cash flow and has some application to the stimulus, award [2].

If the candidate shows clear understanding of the relationship between the product life cycle, investment, profit and cash flow and has some application to the stimulus, award [3].

If the candidate shows clear understanding of the relationship between the product life cycle, investment, profit and cash flow and has detailed application to the stimulus, award [4].

If a candidate writes or draws some sort of table (such as exist in several of the textbooks IB students use) listing the stages of the product life cycle and showing the relationship between stages of the life cycle and their relationship to investment, cash flow and profit, accept and award [2] marks if well executed with no application to the stimulus and award [1] if poorly executed with no application to the stimulus.

If the candidate applies to the stimulus, either by making inserts into the table or with commentary before or after it, award an additional [1 to 2] according to the depth and quality of the application.

[Maximum number: 12]

Justin Price Clothing Ltd. (JP) is a private limited company that manufactures clothing. Its unique selling point/proposition (USP) is its innovative process. Customers sends images of themselves and some measurements to JP via the internet, which JP uses to determine the customer’s exact measurements. Then, a style consultant contacts the customer via video conference to discuss the customer’s fashion preferences. After this, the style consultant designs clothing for that customer. Using job/customized production, JP manufactures and ships the clothing to the customer. Most materials (stock) are ordered when a customer agrees to the designs. A total of 84 % of JP’s customers have purchased items from JP more than five times.

Justin Price Clothing Ltd. (JP) is a private limited company that manufactures clothing.

Justin Price, JP’s owner, asked his management team to consider two options and decide which would best increase profitability:

Justin Price Clothing Ltd. (JP)

Justin Price Clothing Ltd. (JP) is a private limited company that manufactures clothing. Its unique selling point/proposition (USP) is its innovative process. Customers send images of themselves and some measurements to JP via the internet, which JP uses to determine the customer's exact measurements. Then, a style consultant contacts the customer via video conference to discuss the customer's fashion preferences. After this, the style consultant designs clothing for that customer. Using job/customized production, JP manufactures and ships the clothing to the customer. Most materials (stock) are ordered when a customer agrees to the designs. A total of 84 % of JP's customers have purchased items from JP more than five times.

Table 3: Selected financial information for the year or at year's end 2020, 2021 and 2022

Justin Price, JP's owner, asked his management team to consider two options and decide which would best increase profitability:
- Option 1: Change JP's design and production model. Consultants, when working with customers online, would recommend from a series of pre-made options. The company would shift to batch production and have the stock (inventory) available. Style consultants would still be central to the process, but the clothing would no longer be custom made.
- Option 2: Increase JP's customer base. JP's customers have high brand loyalty. However, the brand is not very well known. JP would open several strategically located retail stores in a few major cities to increase brand awareness. In the store, customers could get their measurements taken and receive in-person fashion advice from a fashion consultant, after which they could purchase unique clothing. JP would continue its online services.

(a)

With reference to JP, explain the term brand loyalty.

[ 2 ]

(b)

Discuss the two options that Justin has suggested.

[ 10 ]

Option 1, switching to batch production, would mean that one important feature of JP's business model would weaken: clothing would no longer be unique to each customer ("consultants would recommend from a series of pre-made options";
"clothing will no longer be custom-made"). A second disadvantage would be that the company would have to increase its investment in stock. Right now, clothing is made one at a time, with stock delivered after the customer has approved the designs. With this option, JP would have large amounts of stock, both before production, during work-in-progress, and finished goods. This would require an increase in working capital. Will the price be the same?
The advantages of switching to batch production are: that costs will be lowered, as batch production is generally cheaper than job production. Further, JP should be able to deliver items to the customer faster (since design options will come from ready-made items). A further advantage is that if JP's sales grow, and all indications are that is what JP wants, the business can scale up operations more easily.
However, it seems unclear how this change will improve JP's brand awareness, one of its aims.
Option 2, building retail stores, would probably increase JP's brand awareness and, therefore, its customer base. Brick-and-mortar stores, if properly located, would increase visibility. Curious potential customers could walk into the stores, where they would probably see mannequins attired in J P clothing. Further, the process of being measured in a store by JP's own trained salespeople and/or tailors will lead to more accuracy in measurements, which should strengthen brand loyalty further. Finally, the service would be even more personalized than before. Salespeople will be able to see customers in person and have a sharper sense of their fashion desires and requirements.
The disadvantages of this approach are that J P will have to make an investment in the brick-and-mortar stores. Already the business has loan capital and not strong liquidity. Increasing debt and increasing debt service might well strain JP's liquidity even further. While the business is profitable, its profitability declined for two years in a row, and increased expenses of the new stores and the interest expense may weaken profitability further.

Accept other relevant judgments, if justified.
Marks should be allocated according to the markbands on page 3 with further guidance below.
N.B. The marks listed are maximum awards.
Maximum mark award
Option 1
Option 2
Judgments/conclusion
3
One option unbalanced
N/A
4
One option balanced (one argument for and one argument against;
or Both options in an unbalanced fashion
N/A
5
One balanced and one unbalanced
N/A
6
Both balanced
No judgments/conclusions
7-8
Balanced Largely effective use of business language and the stimulus
Judgments/conclusions based upon analysis and explanation in the body of the response
9-10
Balanced Rich use of business language, business theory, and the stimulus
Judgments/conclusions based upon analysis and explanation in the body of the response

[Maximum number: 10]

SVT’s product penetration in Europe and the United States of America (USA) is high and growing but low in the rest of the world. In 2022:
• SVT’s total sales revenue from home water filters was $4.9 billion
• the average revenue earned per water filter was $20
• 90 % of SVT’s home water filter sales were to Europe and the USA.

In 2022, SVT announced the closure of its European and USA water filter manufacturing factories. Water filter profit margins had fallen for three years, partly because of increasing costs of energy, rent and labour. SVT has since built a huge new factory in Asia to manufacture home water filters.

In 2022, the global home water filter market was $14 billion.

SVT's product penetration in Europe and the United States of America (USA) is high and growing but low in the rest of the world. In 2022:
- SVT's total sales revenue from home water filters was $\$4.9$ billion
- the average revenue earned per water filter was $\$20$
- 90 % of SVT's home water filter sales were to Europe and the USA.

In 2022, SVT announced the closure of its European and USA water filter manufacturing factories. Water filter profit margins had fallen for three years, partly because of increasing costs of energy, rent and labour. SVT has since built a huge new factory in Asia to manufacture home water filters.

SVT's market research, using quota sampling, found that 80 % of households that purchased an SVT water filter:
- had an above-average income
- owned two or more cars.

In January 2023, SVT:
- launched an advertising campaign in Europe and the USA highlighting the lack of potable water for millions of people in less economically developed countries (LEDCs)
- announced a 5 % worldwide increase in the price of its home water filters.

SVT committed to use the revenue from the 5 % price increase to provide two million free WF15 water purifiers annually to charities in LEDCs. It costs SVT $10 to make a water purifier.

Some disagreement occurred among the board of directors regarding this price increase. Some directors felt it would highlight SVT's vision and commitment to helping people in LEDCs, but others believed sales might fall, impacting profits in SVT's Consumer Products Division.

Discuss whether SVT should have increased the price of its home water filters.

Possible arguments in favour:
- enabled them to launch advertising campaign which would potentially benefit millions;
- enabled some filters to be provided free to charities in LEDCs;
- fits in with SVTs CSR ideas;
- good for SVTs reputation;
- 80\% of SVT's customers in Europe and the USA have above-average incomes and can afford the price increase from $\$20$ to $\$21$ .

Possible arguments against:
- many customers may not be able to afford the increased price;
- sales might fall;
- say lead to lower profits;
- some directors disagree.

Accept any other relevant arguments.
Marks should be allocated according to the markbands on page 4 with further guidance below.

Theoretical answer or context limited to naming the business or lack of development max [4].

Discussion of only one option marks limited to [5].
Discussion but no clear balance [6].
Options considered, good use of evidence, particularly from section B, but no effective conclusion award a maximum of [8].

For [10] the answer needs to be clearly relevant to SVT with good use of context and a clear sense of whether or not SVT should have increased its prices.

[Maximum number: 2]

Justin Price Clothing Ltd. (JP) is a private limited company that manufactures clothing. Its unique selling point/proposition (USP) is its innovative process. Customers sends images of themselves and some measurements to JP via the internet, which JP uses to determine the customer’s exact measurements. Then, a style consultant contacts the customer via video conference to discuss the customer’s fashion preferences. After this, the style consultant designs clothing for that customer. Using job/customized production, JP manufactures and ships the clothing to the customer. Most materials (stock) are ordered when a customer agrees to the designs. A total of 84 % of JP’s customers have purchased items from JP more than five times.

Justin Price Clothing Ltd. (JP) is a private limited company that manufactures clothing.

Justin Price, JP’s owner, asked his management team to consider two options and decide which would best increase profitability:

Justin Price Clothing Ltd. (JP)

Justin Price Clothing Ltd. (JP) is a private limited company that manufactures clothing. Its unique selling point/proposition (USP) is its innovative process. Customers send images of themselves and some measurements to JP via the internet, which JP uses to determine the customer's exact measurements. Then, a style consultant contacts the customer via video conference to discuss the customer's fashion preferences. After this, the style consultant designs clothing for that customer. Using job/customized production, JP manufactures and ships the clothing to the customer. Most materials (stock) are ordered when a customer agrees to the designs. A total of 84 % of JP's customers have purchased items from JP more than five times.

Table 3: Selected financial information for the year or at year's end 2020, 2021 and 2022

Justin Price, JP's owner, asked his management team to consider two options and decide which would best increase profitability:
- Option 1: Change JP's design and production model. Consultants, when working with customers online, would recommend from a series of pre-made options. The company would shift to batch production and have the stock (inventory) available. Style consultants would still be central to the process, but the clothing would no longer be custom made.
- Option 2: Increase JP's customer base. JP's customers have high brand loyalty. However, the brand is not very well known. JP would open several strategically located retail stores in a few major cities to increase brand awareness. In the store, customers could get their measurements taken and receive in-person fashion advice from a fashion consultant, after which they could purchase unique clothing. JP would continue its online services.

With reference to JP, explain the term brand loyalty.

[Maximum number: 4]

The Burnt Tomato (BTO)
In 2003, Ben opened a street-food stall selling vegan food. The food stall was successful. Ben spent little on marketing, mainly advertising on the food stall itself and relocating it to places or events where many consumers would pass by.
In 2008, Ben used the profits from the food stall to open a restaurant, The Burnt Tomato (BTO), which initially employed 16 people. In the following years, labour turnover was low. Employees received an annual bonus, which increased with each year of employment.
In 2015, Ben created a website and began to use social-media marketing. Customers were encouraged to rate their BTO experience online. Their reviews consistently rated BTO's experienced staff highly and showed that they thought the food was exceptional value. Ben replied to all reviews. Many BTO customers also joined a BTO social media group and communicated with each other and BTO regularly. For many customers, the total BTO experience of vegan food and social networking was like being in a club.
Unfortunately, high labour costs, reasonable profits and the use of high-quality ingredients meant that BTO's gross and net profit margins were below industry averages.
Aware of the growing demand for vegan food, Ben borrowed money from a family member in 2018 and opened two more BTOs in different cities, hiring 32 new employees. However, in January 2019, a long-time customer of the original BTO ate at one of the new restaurants and wrote a negative review. The review went viral and sales at all three BTOs declined.

Explain one advantage and one disadvantage for B T O as a result of its use of social media.

[Maximum number: 2]

EkoLogiczne Ltd. (EL)
EkoLogiczne Ltd. (EL) is a packaging company owned 60 % by Marek Kowalski and 40 % by his father. EL is a private limited company. Marek founded the company when he realized that the rise in e-commerce would mean the demand for packaging would always increase.
Originally, Marek imagined that EL's unique selling point/proposition (USP) would be to offer recyclable packaging. However, the eco-friendly market was dominated by one large company, Big Boxes (BB), which enjoyed economies of scale. Marek reimagined his USP: EL would have small factories that enabled customized orders to be fulfilled quickly.
Over time, EL opened four factories across Poland and the Czech Republic. Its customers, which included online retailers and small manufacturing companies, placed orders online; if the factory nearest the customer was too busy with other orders, the order would be shifted to another factory. Many customers chose EL rather than BB for this reason. With growth, however, EL began to experience diseconomies of scale and increasingly failed to fulfil orders on time.
Marek is now considering bidding on a large five-year contract for all the packaging solutions for WszystkoMart (WM), a huge traditional retailer trying to expand its e-commerce presence. The contract would require building a huge factory and focusing almost exclusively on keeping costs low. In terms of scale, EL would be almost as big as BB, the large company dominating the eco-friendly packaging market.
To finance the new factory, Marek would either have to sell many shares and reduce his and his father's combined ownership to 40 % or take a 30 -year loan from a bank.

State two features of e-commerce.

[Maximum number: 6]

Mercy Ships (MS) is a non-profit organization that operates the largest non-governmental hospital ship in the world: the Africa Mercy. With the Africa Mercy, Mercy Ships provides free healthcare and other medical services. Each year, Mercy Ships undertakes thousands of surgical and dental procedures and community health projects. Before the Africa Mercy arrives at a port, Mercy Ships uses brochures aimed at local people to promote its services. Mercy Ships also treats patients at dental clinics away from the port itself. Everyone on the Africa Mercy is a volunteer. To keep the ship in operation, it requires a staff of 400 volunteers, including doctors and nurses as well as chefs, engineers, hair stylists, and many other people from different professions. People volunteer for varying lengths of time and must apply for available positions. Mercy Ships volunteers agree to follow a strict code of conduct and also pay a fee to participate. Volunteers include young people before they begin their professional life, middle-aged people who want a career break, and older people who want to remain active and make a difference. All volunteers believe in Mercy Ships’ vision statement to “become the face of love in action, bringing hope and healing to the poor”.

Mercy Ships (MS)

Mercy Ships (MS) is a non-profit organization that operates the largest non-governmental hospital ship in the world: the Africa Mercy. With the Africa Mercy, Mercy Ships provides free healthcare and other medical services.
Each year, Mercy Ships undertakes thousands of surgical and dental procedures and community health projects. Before the Africa Mercy arrives at a port, Mercy Ships uses brochures aimed at local people to promote its services. Mercy Ships also

Figure for Question 7 — IB Business Management SL

treats patients at dental clinics away from the port itself.

Everyone on the Africa Mercy is a volunteer. To keep the ship in operation, it requires a staff of 400 volunteers, including doctors and nurses as well as chefs, engineers, hair stylists, and many other people from different professions. People volunteer for varying lengths of time and must apply for available positions. Mercy Ships volunteers agree to follow a strict code of conduct and also pay a fee to participate. Volunteers include young people before they begin their professional life, middle-aged people who want a career break, and older people who want to remain active and make a difference. All volunteers believe in Mercy Ships' vision statement to "become the face of love in action, bringing hope and healing to the poor".

Explain two elements of MS's marketing mix other than product, price, place and promotion.

Other elements of the marketing mix might include: packaging, people, process, and physical evidence. Of these, the stimulus provides some evidence on:

People: MS relies on people who are passionate about helping others - they must be, as they actually pay to be part of the MS organization and forgo the comforts of home to live on a ship, where quarters are likely to be cramped and the rules are precise. Further, the volunteers are not making money, as they would likely to be if they were still home. The passion of its volunteers would help them work in these difficult conditions, though the rewards of helping those in need are probably great.

Process: MS' process is very straight-forward. MS goes to its patients. The ship goes to ports where their services are needed. Before a ship arrives in port, brochures are delivered so that potential patients are alerted. If patients are unable get to the ship or other locations, $M S^{\prime}$ staff go to the patients in mobile medical and dental clinics. The other key element of the process is the delivery of modern medical services as well as can be provided in generally underfunded and ad hoc circumstances.

Packaging and physical evidence: Limited evidence is provided for packaging and/or physical evidence. As for physical evidence, apart from the ship itself, MS probably has its logo on the medical clothing worn by the staff and on the vehicles it uses for its mobile clinics. Brochures are distributed: brochures are both a form of promotion and a piece of evidence. Possibly, (though possibly not due to the cost), medical supplies come in packages with the MS logo.
N.B. If a candidate says packaging and physical evidence, award [1] overall. If a candidate says packaging and physical evidence, and then mentions only the ship, award [1] overall.

Mark as 3+3.

Award [1] for identification of an element of the marketing mix other than product, price, place, and promotion. Thereafter, award [1 to 2] for each explanation of the element identified, depending upon the depth.

If candidates treat physical evidence and packaging as separate P s, award a maximum of [4].

[Maximum number: 6]

The Imperial is a seaside hotel in Mombasa, Kenya. It was founded in 1906 by Roger Williams, a citizen of the United Kingdom (UK) who had made a large fortune in the primary sector of British East Africa. Identifying a market opportunity and wanting to diversify his investments, Roger founded The Imperial. The Imperial initially had some financial problems, especially regarding cash flow and liquidity management. Roger operated the hotel as a sole trader. By 1920, The Imperial was the most famous seaside hotel in Mombasa: it had a very positive corporate image and a well-deserved reputation for its grandiose architecture, its high-quality service and its elegant décor. It held that reputation for several decades, until the 1950s.

When appointed manager, Martin had to address a long-term problem: the fact that over the years, the competitive position of The Imperial as Mombasa’s premier seaside hotel had slowly deteriorated. New luxurious hotels were opening in the vicinity; with their spas, themed restaurants and fast WiFi Internet access, they offered better facilities and better services than The Imperial. They had a modern, high-tech feel; in comparison, the colonial charm of The Imperial looked old-fashioned.

A French travel journalist who had recently stayed at The Imperial had written an article praising the high quality of its housekeeping: “We reach here the top of the highest international standards”, he wrote, “in terms of benchmarking, The Imperial is très magnifique”.

Option 3: Form a strategic alliance with the famous safari tour company KenSafar. Together they would offer a two-week package tour. Customers would arrive in Mombasa, spend three nights at The Imperial, go on a seven-day safari tour, and then return to The Imperial for four more nights. This would allow tourists to go on a safari, first getting adjusted to the time zone and climate and later rest for four days before returning home. The owner and manager of KenSafar was Kamau Onyango, a spontaneous, dynamic and charismatic Kenyan who had many networks and contacts, and intuitively knew market trends, even without market research. Kamau insisted that if the strategic alliance were to go ahead The Imperial would have to:
• make some improvements to the appearance of the hotel
• pay Kensafar a 20 % commission for all hotel guests staying at The Imperial and booking through KenSafar
• undertake a marketing audit.

Martin and Susan had similarities: they were the same age, had similar university educations, and neither fitted perfectly well in Kenyan society. They had, however, an important difference: their leadership style. Susan, though efficient, hard-working and committed, was very task-oriented. She liked bureaucracy, formal accountability, and a clear chain of command. She had a scientific approach to decision-making. Her staff found her cold, official and impersonal. Martin, on the other hand, had a much more laissez-faire style. He believed in empowerment and delegation. Though he felt anxious when he saw there were minor problems that he knew he could fix quickly, he was always careful to let supervisors resolve problems. He was also warm, friendly and outgoing.

Once a year the hotel manager and a GP representative calculated the break-even quantity, set target profits and determined the margin of safety. Break-even analysis compares fixed costs, variable cost per room and selling price to identify the output at which total revenue equals total costs. Martin believed in empowerment: supervisors and employees were allowed to take responsibility and resolve problems rather than waiting for him. For a hotel, place includes Mombasa’s seaside location, private beach, access to the airport and channels through which customers book; physical evidence includes the building, grandiose architecture, rooms, elegant décor, housekeeping standards and other visible service cues. Martin’s three choices were Option 1, closing for a year to renovate and relaunch the hotel for similar customers; Option 2, converting rooms into self-contained apartments for business travellers staying at least one week; and Option 3, forming a strategic alliance with KenSafar to offer package tours.

Explain the following two elements of the marketing mix in the case of a hotel such as The Imperial: place and physical evidence.

[Maximum number: 10]

Justin Price Clothing Ltd. (JP) is a private limited company that manufactures clothing. Its unique selling point/proposition (USP) is its innovative process. Customers sends images of themselves and some measurements to JP via the internet, which JP uses to determine the customer’s exact measurements. Then, a style consultant contacts the customer via video conference to discuss the customer’s fashion preferences. After this, the style consultant designs clothing for that customer. Using job/customized production, JP manufactures and ships the clothing to the customer. Most materials (stock) are ordered when a customer agrees to the designs. A total of 84 % of JP’s customers have purchased items from JP more than five times.

Justin Price Clothing Ltd. (JP) is a private limited company that manufactures clothing.

Justin Price, JP’s owner, asked his management team to consider two options and decide which would best increase profitability:

Justin Price Clothing Ltd. (JP)

Justin Price Clothing Ltd. (JP) is a private limited company that manufactures clothing. Its unique selling point/proposition (USP) is its innovative process. Customers send images of themselves and some measurements to JP via the internet, which JP uses to determine the customer's exact measurements. Then, a style consultant contacts the customer via video conference to discuss the customer's fashion preferences. After this, the style consultant designs clothing for that customer. Using job/customized production, JP manufactures and ships the clothing to the customer. Most materials (stock) are ordered when a customer agrees to the designs. A total of 84 % of JP's customers have purchased items from JP more than five times.

Table 3: Selected financial information for the year or at year's end 2020, 2021 and 2022

Justin Price, JP's owner, asked his management team to consider two options and decide which would best increase profitability:
- Option 1: Change JP's design and production model. Consultants, when working with customers online, would recommend from a series of pre-made options. The company would shift to batch production and have the stock (inventory) available. Style consultants would still be central to the process, but the clothing would no longer be custom made.
- Option 2: Increase JP's customer base. JP's customers have high brand loyalty. However, the brand is not very well known. JP would open several strategically located retail stores in a few major cities to increase brand awareness. In the store, customers could get their measurements taken and receive in-person fashion advice from a fashion consultant, after which they could purchase unique clothing. JP would continue its online services.

Discuss the two options that Justin has suggested.

Option 1, switching to batch production, would mean that one important feature of JP's business model would weaken: clothing would no longer be unique to each customer ("consultants would recommend from a series of pre-made options";
"clothing will no longer be custom-made"). A second disadvantage would be that the company would have to increase its investment in stock. Right now, clothing is made one at a time, with stock delivered after the customer has approved the designs. With this option, JP would have large amounts of stock, both before production, during work-in-progress, and finished goods. This would require an increase in working capital. Will the price be the same?
The advantages of switching to batch production are: that costs will be lowered, as batch production is generally cheaper than job production. Further, JP should be able to deliver items to the customer faster (since design options will come from ready-made items). A further advantage is that if JP's sales grow, and all indications are that is what JP wants, the business can scale up operations more easily.
However, it seems unclear how this change will improve JP's brand awareness, one of its aims.
Option 2, building retail stores, would probably increase JP's brand awareness and, therefore, its customer base. Brick-and-mortar stores, if properly located, would increase visibility. Curious potential customers could walk into the stores, where they would probably see mannequins attired in J P clothing. Further, the process of being measured in a store by JP's own trained salespeople and/or tailors will lead to more accuracy in measurements, which should strengthen brand loyalty further. Finally, the service would be even more personalized than before. Salespeople will be able to see customers in person and have a sharper sense of their fashion desires and requirements.
The disadvantages of this approach are that J P will have to make an investment in the brick-and-mortar stores. Already the business has loan capital and not strong liquidity. Increasing debt and increasing debt service might well strain JP's liquidity even further. While the business is profitable, its profitability declined for two years in a row, and increased expenses of the new stores and the interest expense may weaken profitability further.

Accept other relevant judgments, if justified.
Marks should be allocated according to the markbands on page 3 with further guidance below.
N.B. The marks listed are maximum awards.
Maximum mark award
Option 1
Option 2
Judgments/conclusion
3
One option unbalanced
N/A
4
One option balanced (one argument for and one argument against;
or Both options in an unbalanced fashion
N/A
5
One balanced and one unbalanced
N/A
6
Both balanced
No judgments/conclusions
7-8
Balanced Largely effective use of business language and the stimulus
Judgments/conclusions based upon analysis and explanation in the body of the response
9-10
Balanced Rich use of business language, business theory, and the stimulus
Judgments/conclusions based upon analysis and explanation in the body of the response

IB Business Management SL 4.5 The Seven Ps of the Marketing Mix Topic Practice

Covered syllabus points

IB Business Management SL 4.5 The Seven Ps of the Marketing Mix Topic Practice

Covered syllabus points

Question 1

Question 2

Question (a)

Question (b)

Question 3

Question 4

Question 5

Question 6

Question 7

Question 8

Question 9