Practise analysing strategic options with decision trees and expected outcomes for IB Business Management SL using real exam-style questions and mark schemes.
Now she began to think about the next phase of her career and her life. She was approaching her late thirties. In the US, many female musicians and film stars struggle to remain popular in their forties: modelling jobs are harder to get; girls and younger women typically prefer younger musicians and stars; and the idea of selling youthfulness becomes more diffi cult as women grow older. LadyA hired business consultants, Kersey & Joyce (K&J), who specialized in the strategic direction of brands, to help her consider her options. K&J identifi ed three strategic options in their report to LadyA.
Option 3: Re-brand herself. With this strategy, LadyA would actually lower her media profile for three years. During that time, she would associate herself with a charitable cause, to tackle issues such as malnutrition in developing countries, homelessness in big cities, or international trafficking of children. She would use her wealth to set up various non-profit organizations to support the charitable cause, and utilize various techniques for marketing non-profit organizations. She would then appear on American television talk shows and do magazine interviews, building a new brand identity based on the image of a strong, mature, determined and compassionate woman. This would allow for new revenue streams to be sought based on this new brand.
Kersey & Joyce’s Option 3 would lower LadyA’s media profile for three years, associate her with a charitable cause such as malnutrition, homelessness or child trafficking, establish non-profit organizations and build a new brand identity as a strong, mature, determined and compassionate woman. It could create new revenue streams and a socially positive reputation, but it would reduce her visibility and involve costs, uncertainty and the risk that audiences would reject the new identity. Option 1 would move into South American markets, use the name Lady Alejandra, tour and repeat her career through downloads, concerts, films, endorsements, magazine covers and perfume and cosmetics. Option 2 would develop clothing, shoes, handbags and lingerie under the LadyA family brand, distribute through US department stores and use e-commerce internationally.
| Additional information for one LadyA concert | Amount |
|---|---|
| Average price per ticket | $300 |
| Variable cost per ticket | $50 |
| Fixed costs | $2 750 000 |
Additional information for one LadyA concert
Describe one strength and one weakness of K\&J's Option 3.
Possible strengths could include:
- LadyA associating herself with a "charitable cause, to tackle issues such as malnutrition in developing countries, homelessness in big cities, or international trafficking of children", demonstrating social responsibility to society.
- Using her personal wealth to set up non-profit organizations to support the above causes - demonstrating responsibility to society, by paying back to them for specific causes to humanity.
- Build new brand identity by appearing on American television talk shows and magazine interviews - an image of a "strong, mature, determined and compassionate woman", building a new image, a new product life cycle, or extension.
Possible weaknesses could include:
- Lowering media profile for three years - may prove difficult in the media world "out of sight, out of mind" of the target market, new competitors may develop.
- Seeking new revenue streams based on the new brand identity, the outcomes of which are unknown.
N.B. some candidates may identify the use of personal wealth to set up non-profit organizations as a weakness of this option and thus this can be credited.
Do not credit external factors such as the opportunity, or the threat, coming from the external environment;
the strengths and weaknesses must be internal and must refer to K\&J's Option 3.
Mark as 2+2.
Award [1] for a correct strength / weakness identified and [1] for a relevant description in context. Award up to a maximum of [2].
LadyA has rejected Option 3. Recommend whether LadyA should choose Option 1 or Option 2.
Option 1: Move into South American markets
Possible advantages include:
- Some fans in Spanish-speaking markets.
- South American markets generally accept older female musicians and film stars, also Lady Alejandra has an Hispanic background which could help her fit well with the target market as from "their own".
Possible disadvantages include:
- Fans in English-speaking target market may be lost, this will also affect product sales, the perfumes and cosmetics - they may also see a decline with the English-speaking target markets.
- Any future re-entry into the English-speaking target market may be difficult.
- Huge costs (not known) to be incurred in re-establishing a new brand altogether, entering an untested market with a major concert tour and rebuilding the brand name Lady Alejandra, through sale of music, films, product endorsements, magazine covers, perfume and cosmetics etc.
Option 2: Develop more products
Possible advantages include:
- Further exploitation of the already established brand name to develop more products - LadyA shoes, LadyA handbags and LadyA lingerie.
- Uses the already established distribution network in the US (for perfumes and cosmetics) for the new products. Economies of scale may be experienced.
- Develops a global market - while some products work well in some markets others will work in other markets.
- Opportunities for e-commerce within US and worldwide.
Possible disadvantages include:
- New producers will have to be sought, design, product quality details and other arrangements - worked out - more management, logistics etc.
Candidates may even mention high risk / medium risk. The stimulus material has not articulated costs / profits. We may need further information.
Accept any relevant substantiated recommendation.
If the response is a one-sided relevant approach with no discussion, award a maximum of [4]. If only one strategic option is discussed, award a maximum of [5].
Award a maximum of [5] if the answer has no substantiated judgment/conclusion.
Marks should be allocated according to the markbands on page 4.