Marketing Management (MB221) : January 2006 Questions

Question Paper
Marketing Management (MB221) : January 2006
Section A : Basic Concepts (30 Marks)
• This section consists of questions with serial number 1 - 30.
• Answer all questions.
• Each question carries one mark.
• Maximum time for answering Section A is 30 Minutes.
1. Which of the following is the value that a buyer obtains from a product and allows the buyer to use the
product as he wishes?
(a) Time utility (b) Place utility (c) Form utility
(d) Possession utility (e) People utility.
< Answer >
2. Which of the following is least likely to be associated with a firm’s macro-environment?
(a) A new staff incentive scheme
(b) Analysis of household savings ratios
(c) Study of the changing birth rate
(d) Cultural convergence
(e) Advancement in technology.
< Answer >
3. A firm accrues the following benefits by retaining its customers except
(a) Increased revenue (b) Increase in cost of selling
(c) Advertising (d) Decrease in cost of selling
(e) Cross selling possibilities.
< Answer >
4. Order processing, inventory management, materials handling, warehousing, and transportation
constitute which of the following activities?
(a) Strategic planning (b) Marketing (c) Logistics
(d) Channel management (e) Production.
< Answer >
5. The Consumer Protection Act came into force in India in 1986 to safeguard the interest of consumers. A
consumer can seek legal help in all of the following conditions except when
(a) A trader adopts unfair trade practices or restrictive trade practices
(b) Goods and services hired or availed suffer from one or more defects or deficiencies
(c) A trader charges a higher price, which is more than the fixed price of the product
(d) A consumer is dissatisfied with the product purchase
(e) Goods that are hazardous to life and safety are being offered to the general public for sale, against
the provisions of any law.
< Answer >
6. Customer information system (CIS) is a database that contains specific information about the behavioral
and transactional aspects of each customer. This advanced software is helpful in conducting
(a) Financial analysis (b) Contribution Analysis
(c) Customer profitability analysis (d) Environmental analysis
(e) Marginal analysis.
< Answer >
7. Which of the following is a form of competition where all the companies compete for the same
disposable income of the customers?
(a) Form competition (b) Industry competition
(c) Generic competition (d) Brand competition
(e) Price competition.
< Answer >
8. Sanjay Mehta lives with his divorced mother and his sister Kavita. Sanjay wants to buy a skateboard
with the money he has saved. Kavita has discovered that the skateboard Sanjay wants to buy does not
have any brakes. His mother is afraid he will injure himself on a skateboard and has said, “No.” Which
of the following sentences best describes the roles the individual family members played in making this
decision?
< Answer >
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(a) No family member served as decider
(b) The mother took the role of purchaser, influencer, and decision maker
(c) Kavita acted in the role of influencer and information gatherer
(d) Sanjay only acted in two roles-purchaser and decision maker
(e) The mother took the role of gatekeeper when she stopped Sanjay from making the purchase.
9. Reverse marketing is
(a) A method consumers use to increase their influence, power, and rights when dealing with
institutions
(b) The deliberate effort by organizational buyers to build relationships that shape suppliers' products,
services and capabilities to fit the buyer's needs and those of its customers
(c) A synonym for benchmarking
(d) An industrial buying practice in which organizations agree to purchase each other’s products
(e) The use of sales promotions following advertisements.
< Answer >
10. Ellen was the marketing research director for the local mall. She decided to conduct an experiment in
the mall's car park to see if shoppers would respond to a lower parking price to
park in some of the under-utilized sections of the car park. Ellen is using which type of market
research?
(a) Exploratory (b) Causal (c) Descriptive
(d) Investigative (e) Observational.
< Answer >
11. Focus on companies that prefer leasing to buying would be an influence of which factor of
organizational purchasing approaches to segment industrial markets?
(a) Purchasing function organization (b) Power structure
(c) Nature of existing policies (d) General purchase policies
(e) Company technology.
< Answer >
12. Which of the following is a model used to allocate resources to Strategic Business Units of an
organization?
(a) Boston Consulting Group (BCG) growth-share matrix
(b) Just-in-time (JIT)
(c) ABC executive judgment planning model
(d) Total Quality Management
(e) SWOT analysis.
< Answer >
13. Turning marketing strategies into specific day-to-day, month-to-month activities is related to which of
the following?
(a) Marketing analysis (b) Marketing planning
(c) Marketing implementation (d) Marketing control
(e) Marketing audit.
< Answer >
14. Businesses maintain their market position by making competitive moves to challenge
competition. Which of the following has a considerable market share and a significant presence in the
industry?
(a) Market challengers (b) Market followers
(c) Market leaders (d) Market nichers
(e) Market supporters.
< Answer >
15. Among industrial products, large tools and machines used for production of goods or for providing
services for a considerable length of time are classified as
(a) Capital equipment (b) Accessory equipment (c) Component parts
(d) Raw materials (e) Consumable supplies.
< Answer >
16. Kimberly-Clark closed down a number of small under performing businesses like Midwest Express that
limited the opportunities for improving its airline business. This is an example of
(a) Product line pruning (b) Product line extension
(c) Product line filling (d) Product line modernization
(e) Product line stretching.
< Answer >
17. The use of symbols to provide strong brand recognition is a typical strategy used in which of the
following types of differentiation?
(a) Product (b) Services (c) Personnel
< Answer >
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(d) Image (e) Channel.
18. Bubble-Right makes all the world’s bubble gums but sells them through middlemen who market these
bubble gums under individual store brands. This is an example of
(a) Manufacturer's branding (b) National branding (c) Private branding
(d) Licensed branding (e) Generic branding.
< Answer >
19. Which form of distribution has a limited number of intermediaries between the producer and the
customer?
(a) Intensive distribution (b) Selective distribution
(c) Expansive distribution (d) Exclusive distribution
(e) Priority distribution.
< Answer >
20. Which of the following best describes the nature of distribution channels?
I. Intermediaries match supply and demand.
II. Producers can do without intermediaries, but not the functions they perform.
III. Information dissemination is an important marketing channel function.
IV. Distribution channels consist of interdependent organizations.
(a) Only (I) above (b) Both (I) and (III) above
(c) Both (II) and (III) above (d) (I), (II) and (IV) above
(e) All (I), (II), (III) and (IV) above.
< Answer >
21. Which of the following factors is/are not true for marketing communications?
I. A mass marketing strategy is the way forward.
II. Customers can clearly distinguish between message sources.
III. Message structure and format illustrates what a marketing communicator decides to say.
IV. Computers and IT are helping a shift towards effective mass marketing.
(a) Only (I) above (b) Both (I) and (III) above
(c) Both (III) and (IV) above (d) (I), (III) and (IV) above.
(e) All (I), (II), (III) and (IV) above.
< Answer >
22. Which of the following statements about the promotional mix is true?
(a) The promotional mix only contains four promotional elements
(b) Of all the promotional elements only public relations is completely free
(c) Direct marketing is the only promotional element that provides immediate feedback
(d) Advertising and direct marketing are the only promotional elements, which create customized
interaction
(e) The difficulty with effective sales promotions is the fact they can be easily duplicated.
< Answer >
23. Before the salespeople for Ascom Timeplex, Inc., set out to make a sales call, they use their laptop
computers to dial into the company's database. There, the salespeople can retrieve the latest price lists,
engineering and configuring notes for each customer, and status reports on previous orders. The laptops
can also be used to send customer orders to Ascom Timeplex headquarters in New Jersey. Which of the
following helps to make the Ascom Timeplex salespeople more efficient and more effective?
(a) Decentralization (b) Field computerization
(c) Salesforce automation (d) A combination compensation plan
(e) Media convergence.
< Answer >
24. Which of the following is a technique, which helps in evaluating the factors responsible for the
deviations in sales?
(a) Sales analysis (b) Market share analysis
(c) Sales variance analysis (d) Marketing expense to sales analysis
(e) Financial analysis.
< Answer >
25. Coca-Cola, Budweiser beer, and Marlboro cigarettes use this method of market entry in foreign
markets. This method allows these companies (and others) to retain control over their products while
others manufacture and distribute the products in foreign markets. The companies are paid a fee or
royalty for the right to manufacture their products. Which of the following entry strategies would be
associated with the method described?
(a) Exporting (b) Management contracting
(c) Direct investment (d) Licensing (e) Joint venture.
< Answer >
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26. Which of the following are discussion groups located on commercial websites that link users to
libraries, directories or chat rooms?
(a) Bulletin boards (b) Web communities (c) Cyberhoods
(d) Newsgroups (e) Forums.
< Answer >
27. Which of the following are useful for serving as an early warning about service problems?
(a) Policy manuals (b) Employee handbooks
(c) Complaint logs (d) Strategic plans
(e) Operations manuals.
< Answer >
28. When a company adjusts price levels so that it can increase sales volume to levels that match the
organization's expenses, it is said to employ a ____________ pricing objective.
(a) Market share (b) Cash flow
(c) Return on investment (d) Survival (e) Profit.
< Answer >
29. ________ pricing is possible when a firm is able to reduce its manufacturing costs at a predictable rate
through improved methods, materials, skills, and machinery.
(a) Experience-curve (b) Psychological (c) Geographical
(d) Promotional (e) Captive product.
< Answer >
30. In new product development, which of the following expenses does a company have to bear during test
marketing?
I. High advertising costs considering the low volume.
II. Indirect cost of revealing the new product idea to competitors.
III. High distribution costs, because of low volumes.
IV. Cost of distributing samples, coupons etc.
(a) Only (II) above (b) Both (I) and (III) above
(c) Both (II) and (IV) above (d) (I), (III) and (IV) above
(e) All (I), (II), (III) and (IV) above.
< Answer >
END OF SECTION A
Section B : Caselets (50 Marks)
This section consists of questions with serial number 1 – 7.
Answer all questions.
Marks are indicated against each question.
Detailed explanations should form part of your answer.
Do not spend more than 110 - 120 minutes on Section B.
Caselet 1
Read the caselet carefully and answer the following questions:
1. What were the possible reasons for Candy’s failure? Why could it not sustain the interest it had drawn during
the initial months of its launch?
(7 marks) < Answer >
2. ‘Proper positioning is important, especially in markets where competition is intense.’ Explain what could be the
pitfalls in positioning a product?
(8 marks) < Answer >
Onida's market share in the Color Television (CTV) market went up from 9.5% in 1997-98 to 11.7% in 1999 (In 2000,
Onida's market share was 13%). However, almost 45% of its sales had come from the 21-inch segment. Onida therefore
decided to increase its market share across all categories. Onida, which was better known as a ‘21-inch television
company,’ wanted to rejuvenate the brand by entering the 14 inch and 20 inch segments.
In May 1999, Onida came out with a unique product, a 14-inch CTV set nicknamed Candy. Candy came in four colors -
Berry Blue, Mint Green, Lemon Yellow and Cherry Red-and was priced at Rs. 9,990.
Soon after the launch in Mumbai, G Sundar, executive vice-president of Onida, invited 80 dealers to discuss how to
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make the Onida brand appealing to the youth. Onida finally decided to use the cricket World Cup as a vehicle to
rejuvenate the brand. Sundar banked on the World Cup to push Onida ‘Candy’, the ‘cute, funky, nifty, little product.’
Since Candy came with a free cordless headphone, one could listen to the cricket commentary on TV without disturbing
anyone at home. To capitalize on the fact that technology was no longer a driving force Onida decided to come out with
a superior looking television to attract the customer. Onida was banking on quality technology and superior aesthetics to
take Onida ahead in the future.
It seemed to be an ideal product launch before the World Cup. With this strategy in mind, Onida started marketing
Candy more aggressively than its other products. Hoardings were put up at prime locations in Mumbai. Just before the
World Cup, Candy was launched nationally. Onida sold almost 4,000 Candy sets in the first month of its launch in
Mumbai. Dealers in Calcutta, Punjab, Tamil Nadu and Karnataka also received a good response. Onida expected to sell
around 2,000-3,000 sets per month in each of these markets. In December 1999, six months after its launch, the brightly
coloured Candy seemed to be a runaway success. The company achieved its national sales target in the Mumbai market
alone.
In April 2000, Onida launched Candy in dual coloured television cabinets. Called Candy Duet, it was available in four
colours – Black Currant, Raisin Cream, Berry Delite and Double Mint in the 14-inch version. Onida maintained the old
price tag of Rs 9,990 for its new products. Candy Duet was also simultaneously launched in a 20-inch version in three
colours, Cherry Ice, Cool Mint and Berry Delite, priced at Rs 12,990 (somewhat higher than its competitors).
Onida was eying for the replacement TV market, in which black TVs were exchanged for colour TVs, as well as an
Add-On-TV market at the same time. The replacement market accounted for 25% of the CTV market. Onida positioned
Candy to tap this market. Research carried out by Onida in 1998 revealed that 60% of TV repurchases were done by
24 to 35 year olds. It seemed that Candy was ideally placed to tap this age group. Onida also planned to create a niche
market for Candy targeting youth. However, in mid-2001, after two years in the market, Candy seemed to be in trouble.
Onida Candy was vying in an overcrowded CTV market. Company sources did not reveal the exact sales figures.
However, some estimates from industry sources indicated that, in mid 2001, Onida sold only 3,500 Candy sets per
month nationally with the Mumbai market contributing less than 500.
Onida planned to gradually bring variants of the product like video games, calculators built into the TV and possibly
Internet facilities. The company was also planning wall or ceiling mounting for Candy and customised colour
designing. Commented Sundar, “If successful, the Candy variety will be used for the large screen TVs. We will use the
sub-brand to tickle the taste buds of the youth.”
Caselet 2
Read the caselet carefully and answer the following questions:
3. Did the macro environmental factors in India prove lucrative for Canon, for investment? How?
(6 marks) < Answer >
4. What would be the strengths, weaknesses, opportunities and threats (SWOT) of Canon?
(8 marks) < Answer >
From being known as a camera and copier company, Canon has moved on to being a reckoning force in the peripherals
market. But this didn’t come easy to this 100% subsidiary of the Japanese imaging giant. Since it came in early 1997,
Canon India has had a checkered past. The major players in the market were Modi-Xerox - the market leader with 58%
of market share, RPG-Ricoh and HCL Toshiba. Within two years, Canon proved the analysts wrong by capturing 18%
of the photocopier market, knocking Ricoh out from the number two slot.
In India, though the government was a coalition, yet it was pro-liberalisation. This spelt stability on the economic
policies front and thus the political environment was conducive to investment. The new economic policies were proinvestment.
Deregulation, and liberalization of Industrial Licensing had already taken place. FERA was liberalised
which meant that foreign investment and technology import were made easier. Fiscal and monetary reforms were in the
pipeline and pointed towards a bright future. Public sector participation was being abetted by the government.
Though the middle class was burgeoning, yet the population below the poverty line was a concern. A major part of the
Indian population lived in small villages, which did not even have access to electricity. However, this was not of much
of a concern to the firm.
India was fast being recognized worldwide as the leader in Information Technology. Allied industries were booming
and India seemed to be on its way up. The development of Information Technology pointed to emerging 'paperless
offices'. The Indian market was experiencing the Internet and IT business boom, which led to an increase in PC
penetration
Canon’s cameras were already selling through the Mahatta Camera Corporation. It decided to sell the copiers and fax
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machines through national distributors. The first three years of operation of the subsidiary didn’t turn out to be
successful. The competition was too tough, and there was also the gray market to contend with.
In 2000, when the Indian market was experiencing the Internet and IT business boom the increase in PC penetration led
to a spurt in inkjet printer sales. At that point, there were mainly HP and Epson in the inkjet market. While Canon’s
photocopiers and fax machines were doing average business, and cameras had their own presence, there was a need to
come forward in the PC peripherals area too. Canon had printers in its Indian portfolio, and initially things looked okay,
with market share reaching almost 12% at one point. But that was the short-lived effect of a push factor that dwindled
later.
Coinciding with a market slowdown, 2001 saw aggressive price wars in the inkjet arena. Both HP and Epson dropped
prices of their entry-level models. Canon’s inkjet share dipped to almost 3%. While HP and Epson had sound channel
strategies, Canon seemed to have missed out on that.
The results of the market analysis led Canon to rethink its marketing and distribution strategies. Clearly the peripheral
market was where the action was. Cameras were still Mahatta’s domain. Photocopiers were still there, and were picking
up, but they weren’t enough.
In 2001, Canon seemed to have finally hit paydirt in the peripherals market. Apart from its own strategies, problems
faced by the competition have also helped. HP was preoccupied with its parallel shipment problems. Epson’s Stylus 480
didn’t live up to its expectations and Epson didn’t manage to recover from that, and Lexmark, which had so far been
selling through TVSE, decided it was time to go solo and proceeded to revamp its distribution plan. As the company
went into the IT Peripherals space, it became necessary to reach B&C class cities. Now, with a consumer products
thrust, the company plans to tap even smaller locations in India.
Though the market leader, Modi-Xerox, had the lion’s share of the market. Modi-Xerox was concentrating on the
offices and corporate clients. This was one of their strength areas. Since Modi-Xerox was not focusing on another major
segment – the ‘jobber’ segment (the corner-shop which does a photocopy)- Canon, India decided to vigorously attack it!
However, the jobbers segment is spread over a large geographical area - in all major and small towns of India. At this
time, RPG-Ricoh (the second largest player) was involved with restructuring its business and could not employ any
tactics to thwart Canon, India’s entry. The timing of the entry seems to be strategically very appropriate as RPG-Ricoh
was unable to react due to its restructuring. Eyeing the huge market segment of jobbers (which accounted for 60% 0f
India’s photocopying work), Canon, India formulated several market penetration strategies. Modi-Xerox was catering to
the corporate clients and was thus high priced. Canon, India introduced slow machines at cheap prices to satiate the
demand of the jobbers segment.
In late October 2002, Canon India planned to launch more than 20 new products ranging from inkjets, direct
photoprinters, scanners to digital cameras, camcorders, and more. With things more stable, Canon is confident that it’s
the right time to take over the digital camera business. The future, according to Canon, lies in digital imaging. In the
same year, they unveiled some of these products in an expo at Beijing in China, and the thrust clearly was on printing
pictures at home directly from your digital camera. With the world reaching the level of digitization it has, Canon feels
direct photo printing will make the printer and the digital camera together reach a level where they’re regarded as
consumer appliances rather than just as IT peripherals. India, though not as far ahead as some other countries in the
region, seems ripe to receive this technology.
The president and CEO of Canon’s South East Asia regional headquarter Singapore, Fukui Eiji, is confident that India
is going to be an important market for Canon. With the upcoming launch of products, its distribution strategy in place,
cross-selling opportunities in digital cameras, and competitive pricing, Canon India’s spirits are buoyant. Going
forward, two product categories – digicams and projectors – will be the prime focus areas for Canon’s consumer
strategy. These product categories are vital for it to scale its operations from business communications or automation to
IT peripherals to consumer products. “It’s a big change for Canon,” says Alok Bharadwaj, Director and GM, Consumer
Imaging & Information Division.
Caselet 3
Read the caselet carefully and answer the following questions:
5. The winds of change seen in the Indian market place in recent times have brought about a clear shift in consumer
buying behaviour. Briefly, explain the personal and psychological factors that influence consumer-buying
behavior.
(8 marks) < Answer >
6. “Consumers look for “perceived value” and not at price alone.” Justify.
(6 marks) < Answer >
7. How should marketers deal with perceived value, if they aim at attaining loyalty for brands? Discuss.
7
(7 marks) < Answer >
For many years, product and service marketers felt customers were there with them for life, and started taking brand
loyalty for granted. However, there has been a transformation in the Indian market and consumers are now loyal to
‘perceived value’ and not necessarily to brands.
Due to intense competition and a wide choice of brands, every Indian consumer today is equipped with ‘an imaginary
remote control’. With this imaginary remote control, the consumer explores various brands, only momentarily, and
evaluates them according to the ‘perceived value’ he is getting. This is not to say that brand loyalty can no longer exist.
However ‘perceived value loyalty’ will precede brand loyalty. Only after a thorough assessment would a consumer
settle for a particular brand. Only brands that are able to give regular, sustainable and consistently high ‘perceived
value’ can attract and retain customers.
How did this trend suddenly emerge? Well, the first reason is competition, followed by the rising standards and
expectations of Indian consumers. Further, many brands never had brand loyalty; they had a mere monopoly in a
particular category or consumers bought their products just out of habit. Thus consumers were not loyal to the brand out
of choice, but because they had few other options. In the long run, price wars do not really work in the branded market.
Consumers look for “perceived value” and not at price alone. Value is a blend of quality and price. A consumer is
willing to pay a certain price for a certain quality. Different segments of consumers look at different ‘perceived value’
points and not just price points. This is the tangible part. The intangible part of perception, which is a combination of
image and emotional value, also contributes to consumers’ purchase and consumption decisions.
The tangible value and the intangible perception make up the ‘perceived value’ of any brand in the minds and hearts of
the consumers. Thus ultimately it is the ‘perceived value points’ that the consumer looks for and the wars that are
actually won are “perceived value” wars and not ‘price’ wars. Since brands are different from commodities, non-price
factors also play a role in adding to the perceived value. Therefore, reducing the price may give a wrong signal to the
consumer about the product. Rash, thoughtless and desperate price-cutting measures, directly or through promotions,
actually reduce and discount the perceived value of the brand in the minds and hearts of the consumers.
In recent times, Star TV’s Star Plus channel has shaken brand loyal TV consumers and has aggressively increased its
market share. This again is the result of the Indian viewer taking out his ‘imaginary remote control’ and surfing
channels in the search of ‘perceived value’. The viewer’s involvement with ‘perceived value’ is so high that he looks at
programmes, and not channels, and evaluates each one before settling down to watch it. If a channel is able to provide a
mix of good programmes that have higher ‘perceived value’, the consumer gives up his brand loyalty to that channel
and moves towards greater enjoyment and satisfaction. Here too, brand loyalty has declined and ‘perceived value
loyalty’ towards programmes and hence the channel has increased. If another channel comes with better programmes
and gives higher ‘perceived value’ to viewers, they would not even hesitate for a second to switch the brand. Due to the
changes in the consumer behaviour, Brand managers and marketing heads will have to clean up and polish their act
because nothing stops the Indian customer from deciding not to continue with any brand that does not provide him with
the desired ‘perceived value’.
There has been an acceleration of the concept of perceived value loyalty through the phenomenon of multi-brand
purchasing. Most non-durable consumer product classes comprise several brands that are so similar in terms of their
basic attributes that consumers find it difficult to distinguish one from the other. Thus it is hardly surprising that
consumers do not, on the whole, show total loyalty to any one brand, but select from a small set of tried and tested
brands that are close substitutes. This can be called the ‘Consideration Set’. Since all products tend towards parity, for
Brand Switch one must create disparity. There is a great deal of evidence that consumers behave in the manner stated
above. The markets for established non-durable products are characterised typically by more or less stable sales, at least
in the short to medium term. The buying behaviour of individuals usually involves several brand choices, but the
aggregate level of market sales and brand shares is stable and predictable.
Customers may change brands often – the vast majority frequently do make substitutions – but not in the sense of
irrevocably switching brands; that is, never again buying that which is rejected. Buyers of a given product class
typically choose several brands over a sequence of purchases. The original concept of brand loyalty (which was
measured by the degree to which a consumer purchases a brand without considering alternatives) is fading away,
making way for Perceived Value Loyalty.
END OF SECTION B
Section C : Applied Theory (20 Marks)
This section consists of questions with serial number 8 - 9.
Answer all questions.
Marks are indicated against each question.
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Do not spend more than 25 -30 minutes on section C.
8. CHOOKS fresh & tasty is a fast food chain of 15 stores, in Southern Australia, that sells burritos, tacos, and
salads. In order to expand nationwide, CHOOKS has decided to franchise its operations. Discuss the advantages
and disadvantages of franchising to CHOOKS.
(10 marks) < Answer >
9. Fuegotech Ltd., a newly set up business management company, launches a public relations program as it believes
that public relations is “one of the best places to spend your marketing rupees because though advertising may get
you visibility, PR gets you credibility.” In this light, explain the major decisions involved in launching a public
relations program, for Fuegotech.
(10 marks) < Answer >
END OF SECTION C
END OF QUESTION PAPER