Marketing Management (MB221): April 2005

Marketing Management (MB221): April 2005

Section A : Basic Concepts (30 Marks)
· · This section consists of questions with serial number 1 - 30.
· · Answer all questions.
· · Each question carries one mark.
· · Maximu m time for answering Section A is 30 Minutes.
1. Marketing is best understood as the process of
(a) Promoting products and services (b) Creating customer needs
(c) Satisfying customer needs and wants (d) Making a sale
(e) Creating demand.
< Answer >
2. Cutting timber and milling the trees into standard-size lumber is an example of
(a) Place utility (b) Form utility (c) Time utility (d) Possession utility (e) People
utility.
< Answer >
3. From a buyer's viewpoint, which of the following elements of the market mix is designed to provide
convenience of purchase?
(a) People (b) Product (c) Promotion (d) Process (e) Place.
< Answer >
4. A _________ Business Unit is a unit of the company that has a separate mission and
objectives and can be planned independently from other company businesses.
(a) Strategic (b) Service (c) Substrata (d) Supplier (e) Selling.
< Answer >
5. RPG’s Giant is the first _____________of its kind to be set up in India.
(a) Supermarket (b) Discount store (c) Specialty store
(d) Hypermarket (e) Department store.
< Answer >
6. Cinema Ltd. defines itself as being a company in the film making business rather than providing
entertainment. This is an example of
(a) Modern marketing (b) Product positioning
(c) Pure competition (d) Reactive marketing (e) Marketing myopia.
< Answer >
7. The socio-cultural environment is made up of institutions and other forces that affect
(a) The natural resources that are needed as inputs by marketers
(b) A society's basic values, perceptions, preferences and behaviors
(c) The laws and government agencies limiting individual behavior in society
(d) The characteristics of populations
(e) Consumer purchasing power and spending patterns.
< Answer >
8. A change in behavior based on experience is called
(a) Selective retention (b) Motivation (c) Learning
(d) Dissonance (e) Perception.
< Answer >
9. Which of the following is not one of the major “product” variable decisions to be made by a retailer?
(a) Target market selection (b) Product assortment decision
(c) Merchandising (d) Store atmosphere decision
(e) Services mix decision.
< Answer >
10. Within the buying center, who has the formal or informal power to select or approve final suppliers?
(a) Gatekeeper (b) Approver (c) Influencer (d) Decider (e)
Initiator.
< Answer >
11. When the Gap branched out to offer clothing targeted to infants, children, and mothers-to-be, they < Answer >
were segmenting the market based on
(a) Age and life cycle (b) Gender (c) Income
(d) Psychographics (e) Generation.
12. Which of the following is not one of the major steps involved in the marketing research process?
(a) Defining the problem and research objectives
(b) Developing the research plan
(c) Collecting and tabulating data
(d) Establishing a marketing information system
(e) Interpreting and reporting the findings.
< Answer >
13. Setting a high price for a new product in order to make the maximum revenues layer by layer from
the segments willing to pay the high price is called
(a) Market skimming (b) Market penetration
(c) Promotional pricing (d) Captive-product pricing (e) Two
part pricing.
< Answer >
14. “Friends don't let friends drive drunk” is an example of
(a) Niche marketing (b) Social marketing (c)
Selling
(d) Advertising (e) Sales promotion.
< Answer >
15. When a company stocks the product in as many outlets as possible, it is using
(a) Selective distribution (b) Convenience-based distribution
(c) Exclusive distribution (d) Intensive distribution (e) Warehousing.
< Answer >
16. Revlon Cosmetics expresses that: “In the factory, we make cosmetics; in the store we sell hope.”
Hope is the
(a) Expected product (b) Augmented product (c) Associated
feature
(d) Generic product (e) Core benefit.
< Answer >
17. Which of the following consists of a set of buyers who share common needs or
characteristics that the company decides to serve?
(a) Mass market (b) Government market (c) Reseller market
(d) Target market (e) Heterogeneous market.
< Answer >
18. When a seller requires that a dealer not handle competitors' products, the agreement is called a/an
(a) Exclusive distribution (b) Exclusive dealing
(c) Control criterion (d) Dual distribution (e) Dealer’s rights.
< Answer >
19. Within the jewelry industry, Tanishq is India’s first premium branded jewelry manufacturer and
retailer, and targets an investment-minded and price sensitive customer base. Thereby, Tanishq caters
to a
(a) Clustered market (b) Mass market (c) Niche market
(d) Demographic market (e) Individual market.
< Answer >
20. Which of the following statements about retailing is not true?
(a) Retailing involves selling to final consumers
(b) Retailing is a major industry
(c) Manufacturers and wholesalers never make retail sales
(d) Retail sales may be done by person, mail, telephone, vending machines or from a Web site
(e) Technology advancement constitutes an uncontrollable element in retailing.
< Answer >
21. Which of the following describes the use of electronic means and platforms to conduct a company's
business?
(a) E-tailing (b) E-purchasing (c) E-business
(d) E-marketing (e) E-mail.
< Answer >
22. Dove soap contains one-quarter moisturizer. Dove's brand positioning is based on
(a) Desirable benefits (b) Strong beliefs and values (c) Product attributes
(d) Customer wants (e) Product durability.
< Answer >
23. A Brazilian NGO Reciclar-t3 makes clothes out of recycled clothes. This is an example of
(a) Blue marketing (b) Green marketing
(c) Community relations (d) Value added engineering
(e) Global warming.
< Answer >
24. Airline travel is very price competitive. People will switch airlines if the price of a round-trip ticket is
lower on one airline than another. This is an example of
(a) Pure competition (b) Monopolistic competition (c) Pure
monopoly
(d) Brand Mindset (e) Oligopolistic competition.
< Answer >
25. Which of the following is a process by which people select, organize and interpret information to
form a meaningful picture of the world?
(a) Perception (b) Satisfaction
(c) Cognitive dissonance (d) Beliefs and attitudes (e) Motivation.
< Answer >
26. Which of the following implies "Buy our product now"?
(a) Advertising (b) Public relations (c) Sales promotion
(d) Publicity (e) Word of mouth.
< Answer >
27. Yahoo enables users to design a My Yahoo section with a choice of topics, arrangement, and colors.
This is an example of
(a) Benchmarking (b) E-commerce (c) Outsourcing
(d) Decentralization (e) Customization.
< Answer >
28. A product's positioning is the way the product is perceived by
(a) Company officials (b) Consumers (c) Suppliers
(d) Distributors (e) Stakeholders.
< Answer >
29. The process of dividing a market into distinct groups of buyers with different needs, characteristics or
behavior who might require separate products or marketing programs is called
(a) Market share (b) Positioning (c) Market evaluation
(d) Market segmentation (e) Marketing audit.
< Answer >
30. Which of the following is not one of the problems typically associated with secondary data?
(a) It is too expensive to obtain (b) It may not be current (c) It may not exist
(d) It may not be impartial (e) It may not be reliable.
< 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. The phenomenal success of Nirma can be attributed to its unique marketing mix strategy. Discuss the company’s
marketing mix.
(9 marks) < Answer >
2. The changing environment led Nirma to foray into various product categories and also diversify. In what terms has
Nirma been a pioneer and what are the threats and opportunities for the company?
(6 marks) < Answer >
Aided by an aggressive pricing strategy and apt product positioning, Nirma has managed to carve a niche in the lower
end of the detergents segment. Buoyed by the success in the detergent ma rket, the company ventured into the toilet soap
segment. It plans to enter the vacuum salt and shampoo segments in a big way.
The Nirma success story is a result of its founder and Chairman, Dr. Karsanbhai Patel's relentless focus on quality, cost
and value. The distribution model, sustained line extensions and umbrella branding strategies have enhanced the brand's
cost leadership. Today, the company's two brands, Nirma and Nima, are distributed through more than two million
retail outlets across the country. To make inroads into personal care products, Nirma has to tap chemists, paanwalas and
other retailers in addition to its regular two million retailers.
Since the launch of Nirma detergent powder in 1969, the Nirma portfolio has expanded to include fabric care products,
personal care products, food products, packaging and chemicals. This was primarily to cater to the changing business
environment. The company has a significant presence in the detergent powders, cakes, toilet soaps as well as in the
scouring bars category. However, the underlying philosophy remains consistent - to deliver value-for-money products
to consumers.
In the fabric care category, Nirma has three products for the lower-end market - Nirma yellow washing powder, Nirma
detergent cake targeted at lower income consumers and in the mid-priced segment, and the super Nirma washing
powder, which successfully debunked the myth that high quality products had to be high-priced. The powder is 40%
cheaper than its nearest competitor. The blue colored super Nirma detergent cake was introduced in 1990 to make
consumers shift from the then available detergent brands. The Nirma clean bar was launched to enable users of
unbranded detergent powders and cakes to switch to a value-for-money branded product.
Nirma's foray into the toilet soaps category was launched with Nirma Bath Soap, a carbolic soap which positioned itself
against the largest selling carbolic soap brand, Lifebuoy, from the Hindustan Lever stable - at half the latter's price. The
more up market Nirma beauty soap with four perfume variants, also became an instant success and is the third largest
selling brand in the country, today.
Nirma lime fresh soap was launched as a mid-priced toilet soap without any advertising support. In the first month of its
launch, seventeen million packs were sold, vindicating the company's belief that value-for-money products are what
consumers are looking for. The product sells for half the price of its nearest comparable rival. Nima Rose and Nima
Sandal are the other toilet soaps that are on offer in the mid-priced category.
Apart from these consumer products, the company also sells a number of industrial products, all of which conform to
the Nirma philosophy of better products, better value, better living.
There are many challenges for Nirma considering that the detergent market shrunk 9 percent in volume terms, and the
toilet soap segment recorded a decline of 12 percent in value terms, in 2001. Hindustan Lever, Nirma’s key competitor,
is also bettering Nirma at the price-competitive strategy for the more volumes game. To combat these challenges Nirma
has forayed into the foods category with the launch of Nirma Shudh Salt in 2002. Nirma Shudh is only the second
vacuum salt in the country.
However, Nirma Shudh Salt achieved a turnover of Rs.16 crore in 2001-02 as against Kunwar Ajay Sarees’ Dandi
Namak, which, launched later, has already become a Rs.100-crore brand.
In a truly path-breaking move in the prevalent fast-moving consumer goods climate, Nirma, in 2002, announced the
exclusive marketing and manufacturing arrangement by which Nirma was to bring Camay, one of the world’s leading
beauty soap brands, to the Indian consumer.
Nirma's success is also synonymous with its advertising and marketing strategy. Nirma's advertising has always focused
on the value-for-money angle. Its simple and catchy jingle - Dudh si safedi Nirma se aye, rangin kapda bhi khil khil
jaye - has continued to echo in the drawing rooms of middle-class Indian homes through the decades. While the jingle
stresses on the product, it also salutes the savvy and budget-conscious Indian housewife.
Caselet 1
Read the caselet carefully and answer the following questions:
3. It's obviously testing times for coffee bars, the storm may just be brewing in the cup. What are the causes of
concern for coffee pubs?
(7 marks) < Answer >
4. With coffee pubs being unsuccessful in sweeping the country, stand-alone coffee bars brew strategies for
sustained profitability and market growth. What are the growth measures that coffee pubs could undertake to
come out of the slump?
(7 marks) < Answer >
Pub-crawlers haven’t had it better. That’s something that has been evident in the past few years, when names such as
Barista, Café Coffee Day and Qwiky’s made sipping smoothies, granitas and ice-float coffee famous and fashionable.
Most of these pubs have great ambience, and claim to offer quality coffee experience. But now, it seems like the initial
euphoria has died down.
For example, Barista Coffee Company – the four-year-old, 130-stores-strong pub – which made visiting pubs
aspirational and respectable, is now adopting a franchise route for expansion, setting up Espresso Bars in smaller towns,
and talking of affordable pricing upfront, all for the first time since it set up operations.
Coffee conglomerate Amalgamated Bean Coffee Trading Company Ltd. (ABCTC), which operates its retail chain, Café
Coffee Day, is in the process of shifting to a regionalized food and beverage offerings from a westernized menu, based
on findings from a countrywide research.
The Chennai-based Chimayo Chains Pvt. Ltd, which operates the Qwiky’s coffee bar chain, has set up a new company
by the name of Chimayo BPO Pvt. Ltd., making it the first of its kind in the business process outsourcing (BPO) space
to offer professional services to companies for food and beverages.
And, as if competition from each other was not enough, established FMCG players too are in the fray, vying for their
own space in the coffee pub retail space. Take FMCG major Nestle. The food company’s Café Nescafe outlets in select
cities are positioned on the lines of its Nescafe brand’s ‘taste that gets you going’ theme. Café Nescafes offer beverages
priced as competitively as Rs.10.
FMCG giants such as Hindustan Lever and Tata Coffee are sooner or later expected to venture into the coffee chain
business. The US-based Starbucks too is expected to stage an entry into India.
Finally, there’s Amoretto’s, a start-up food and beverages service café chain, positioned as a ‘non-alcoholic’ mocktails,
cocktails and shocktails bar.
On the other hand, elaborates Jagdeep Kapoor, Managing Director, Samsika Marketing Consultants: “Sensible growth
and expansion is the need of the hour. Since coffee drinking is only an occasional habit in India, for every 100 new
coffee bars, I expect 20 to shut down, unless the players manage an appropriate mix of location and viability. To avoid a
shakeout, each parlor will need to stand up for itself and turn in cash profits.”
The players themselves maintain they are taking forward their growth and expansion plans through the slow and steady
route, and differentiating by way of hard-core strategies.
Tata Coffee Ltd. picked up a strategic 34.3 per cent equity stake in Barista Coffee Company in mid -2001. Barista also
announced its intention to make its maiden overseas foray through a 51:49 joint venture arrangement with the Sri
Lanka -based Jewelex Trading Ltd., under the name of Barista Coffee Lanka Pvt. Ltd.
Further, Barista has tie-ups with Planet M, Crossword and the Taj group of hotels for setting up Espresso corners within
their premises.
Similar to Barista, Café Coffee Day too plans to tap smaller cities such as Agra, Mussourie, Dehradun, Nagpur, Jaipur,
Bhubaneshwar, Jamshedpur, and Hubli.
Observes Sudipta Mukherjee, Head of Marketing, Café Coffee Day: “Our effort is to be a completely customer-oriented
company. When we decided to revamp our menu, we decided to look at more than just our track record and statistics.
The new menu is a consequence of our customers’ preferences.” Mukherjee also cites a recent nationwide survey
initiated by the company, according to which frequenting coffee retail chains is not necessarily a youth habit, and that
the Indian consumer is quick to adapt to western habits, specially in big cities such as Delhi, Mumbai and Bangalore.
Amalgamated Bean Coffee Company’s biggest strength, of course, is that it grows the coffee it serves in its cafés. The
company, meanwhile, invests in coffee research and its exports account for 15 per cent of the country’s overall coffee
exports. The company has expansion plans too.
Planning expansion through franchisees, Sashi Chimala, CEO and founder of Qwiky’s, says, “Our plan is to develop the
market in the Indian sub-continent as a master franchisee for the region. To this end, Qwiky’s also began operations in
Sri Lanka last year, similar to Barista.”
For the domestic market, meanwhile, Qwiky’s has been working on a multi-level retail growth format, experimenting
with formats such as mobile coffee kiosks, coffee carts, shop-in-shops and even co-branded stores, besides, of course,
the conventional company-owned and franchise route.
Caselet 3
Read the caselet carefully and answer the following questions :
5. Consumerism may be the bread and butter of marketers, but this does not empower them to start converting kids to
consumerism at the age of three or five. Justify
(8 marks) < Answer >
6. Children being increasingly targeted, there is a need for responsible advertising. What could be the elements of
responsible advertising?
(6 marks) < Answer >
7. Prasoon Joshi, creative director of McCann Erikson says, “Kids are responsible for making an ad a hit or flop.”
How has pester power become increasingly advantageous to marketers?
(7 marks) < Answer >
There is not much Atul Bendre, an engineer with Indian Airlines, can do when both his children demand the latest
gizmos and fancy foodstuff they get to see on television. “My 15-year-old daughter demanded a cell phone when she
passed out of school. I had to buy one for my 12-year-old son too, otherwise he would have got a complex,” he says.
“It’s difficult for me to manage a household, but today parents are helpless. Our children are constantly comparing us
with neighbours.”
That sums up the dilemma of parents – and the new-age marketing mantra. “Pester Power” is the new buzzword in
marketing circles and the country’s business houses have realized that the child is the key to loosen his parents’ pursestrings.
No wonder then that a number of children’s channels are waiting to take off in the next few months – they’re
sure to find brands eager to advertise on them, which means good money.
Apart from the already popular Cartoon Network, Pogo and Nickelodeon there is news of Disney and Star keen on
making an entry. UTV is expected to have launched the country’s first full desi channel with localized content in Hindi,
this year. The channel will target 50 million Indian children spread across 44 million cable and satellite homes.
Skeptical adults may wonder who’s going to watch all these kid channels, but a survey by AC Nielsen, UTV’s research
partner, showed that, the time spent in front of television goes up with age, and the preferred language of viewing is
Hindi across all age groups. Apart from the programs, the children also view a lot of the advertisements.
“Kids are better consumers of advertising”, says Samit Sinha of Alchemist Brand Consultancy. “Their minds are not as
cluttered as adult minds and so they can assimilate the message faster.” That receptiveness translates into pester power.
Schools were considered to be a place where children could be prevented from the horde of advertisements. However,
in order to make their brands more visible, companies are targeting children through in-school promotions. Budget
shortfalls are forcing school boards to allow corporations access students in exchange for badly needed cash, computers
and educational materials.
A study conducted by Millward Brown and IMRB showed that kids influence decision-making on categories beyond
those just meant for kids. Data also suggests that recognition of corporate logos happens at the age of six months, brand
name requests begin by the age of three years, differentiating between brand values happens by age 10 and brand
loyalty begins by the age of eleven. Marketers realize that if they can get tweens (children in the 8-14 age-group)
positively inclined to their brand, they could literally have consumers for life.
The research also showed that six out of 10 children pester an average of nine times even after their parents say ‘no’ to a
particular request, and that 80 per cent of all brand purchases by parents with tweens are controlled by their children.
Says Purnendu Bose, COO, New Ventures, UTV, “Pester Power research indicates that 30 per cent of fast-moving
consumer goods (FMCG) purchase decisions are influenced by kids, they also influence selection of brand for non-kids
category like refrigerator, music system, car etc.” In some ways, kids always provide expert opinion especially since
they know a lot about modern technology, and advertisers do understand the impact of pester power, he says. “Probably
that is why you see children associated with seven out of ten commercials.”
“Kids in India have always had the pressure vote: by sheer dint of either child-like nagging or persuasion they can get
doting parents to get them what they want”, says adman Suhel Seth. “The situation today is even more delicate because
today they can effect purchase with increased pocket money. Preteens are thus definitely having a greater say in the
whole buying decision-making and they should, since the borders of consumption are no longer age-restricted”, he says.
So, innovative marketing strategies are increasingly targeting kids, directly or indirectly. A growing slew of ads feature
kids - think of the Maruti ad with the little Sikh boy, the Hutch ad with the boy and the dog, the LG TV ad with the
bespectacled boy, and several Pepsodent ads.
“Kids are responsible for making an ad a hit or flop”, says Prasoon Joshi of McCann Erikson. “If a kid likes an ad, he
remembers it and keeps repeating it. Soon enough the parents are humming the tune as well.”
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.
· · Do not spend more than 25 -30 minutes on section C.
8. An FMCG company gains a competitive advantage through its product differentiation strategy. What is
competitive advantage? Explain how the company would assess its business environment in the light of Porter’s
five forces model.
(10 marks) < Answer >
9. A tyre company assesses the profitability of its various strategic business units, namely off-the-road tyres, aircraft
tyres, engineered products, and chemical products, to allocate resources using the BCG matrix. Explain in detail,
the components of the BCG matrix and what they signify.
(10 marks) < Answer >
END OF SECTION C
END OF QUESTION PAPER
Suggested Answers
Marketing Management (MB221): April 2005
1. Answer : (c)
Reason : Marketing is defined as the process of planning and executing the conception, pricing, promotion,
and distribution of ideas, goods and services to create exchanges that satisfy individual and
organizational goals. Therefore it can be concluded that marketing is aimed at satisfying consumer
needs and wants.
< TOP >
2. Answer : (b)
Reason : Form utility is created when raw material is converted into a finished product. (a) Place utility is
provided when a marketer provides the product at locations preferred by the customer. (c) Time
utility is provided by offering products when customers want them. (d) Possession utility allows a
buyer to use the product as he/she wishes. It is the value that the buyer obtains from the product.
(e) No such concept exists.
< TOP >
3. Answer : (e)
Reason : Place in the marketing mix refers to the distribution channel for a product. From the buyer’s point
of view it can be looked at as a convenient location for purchasing a product.
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4. Answer : (a)
Reason : A strategic business unit is a separate and self-sufficient business unit operating in the market. The
reason for the formation of such units is the wide spectrum of activities and companies trying to
leverage as many opportunities as possible.
< TOP >
5. Answer : (d)
Reason : A hypermarket is a very large supermarket with a large shop floor area offering a wide variety of
products. Also, products can be purchased in bulk from these hypermarkets.
< TOP >
6. Answer : (e)
Reason : Marketing myopia occurs when a marketer is excessively preoccupied with product development,
manufacturing or selling and ignores customer needs, wants and interests. (a) The modern marketing
concept evolved due to lack of trust and coordination between the marketing and sales functions of
organizations. As per this concept, the sales department could be brought under the purview of the
marketing department. (b) Product positioning pertains to the consumers’ perception of the product,
particularly with respect to competitor’s products. (c) Pure competition is an ideal competitive
structure in which many marketers compete to sell the same undifferentiated product. (d) Reactive
marketing is a marketing style in which the marketers view environment forces as uncontrollable and
try to adjust to them.
< TOP >
7. Answer : (b)
Reason : The socio-Cultural environment refers to the attitudes, beliefs, norms, values and lifestyles of
individuals in a society. (a) Natural resources refer to the natural environment. (c) Laws and
government agencies refer to the legal environment. (d) Characteristics of populations refer to the
demographic environment. (e) Consumer purchasing power and buying patterns are related to
consumer buying behavior.
< TOP >
8. Answer : (c)
Reason : Inferring from the learning effect, which states that the number of labor hours needed to produce a
unit of a product is reduced as the worker gains experience over a period of time, it can be stated
that learning is based on experience. (a) Selective retention refers to information that consumers
retain based on what their beliefs support. (b) Motivation is a strong urge that drives a person’s
activities towards unfulfilled needs. (d) Dissonance refers to a conflict in people’s opinions. It
could arise when a customer is searching for information on a product before purchasing it or after
purchase due to dissatisfaction with regard to product performance. (e) Perception is the process
by which an individual selects, organizes and interprets stimuli into meaningful thoughts and
pictures.
< TOP >
9. Answer : (a)
Reason : Retailing involves selling of products made by various manufacturers through specific
outlets/channels. It does not involve the target market selection decisions. Options (b), (c), (d),
and (e) are decisions that can be made by a retailer.
< TOP >
10. Answer : (d)
Reason : Deciders are the people who have the power to choose the best alternative among the available
options regarding the purchase of a product or service. Hence they have the power to approve the
final suppliers. (a) Gatekeepers are the people who control the flow of information into the
organization. (b) Approvers authorize the purchase process, before the buyers in the organization
implement it. (c) Influencers are people who persuade or push the purchase decision. (e) Initiators
identify the need for a product or a service.
< TOP >
11. Answer : (a)
Reason : Age and life cycle segmentation, apparently, considers tastes and preferences of particular age
groups and their life cycle stage. Targeting infants, children, and mothers-to-be relate to age and
life cycle segmentation. (b) Gender segmentation involves products directed at a particular
gender. (c) Income segmentation is based on specific income groups. (d) Psychographics include
factors such as motivation, values, beliefs, lifestyle etc. (e) Every generation is deeply influenced
by activities of its time. Therefore, it is used by marketers in segmentation.
< TOP >
12. Answer : (d)
Reason : Establishment of a marketing information system is not a stage in the development of a research
process or program.
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13. Answer : (a)
Reason : Market skimming is where companies prefer to set high prices to recover costs. (b) Market
penetration involves pricing products low so as to induce greater volume of sales and tap a big
market share. (c) Promotional pricing involves price reduction so as to attract customers to try the
product or service. (d) Captive-product pricing involves setting a higher price for the ancillary or
spare parts compared to the basic product, to overcome low profits earned on the basic product. (e)
Two part pricing is normally followed in services in which a company charges a fixed price for an
initial service and subsequent charges for over and above the minimum service consumed.
< TOP >
14. Answer : (b)
Reason : Social marketing is where marketers include societal/social interests in their marketing decisions.
(a) Niche marketing is where marketers target narrow segments of customers whose needs have
remained unsatisfied. (c) All marketing efforts ultimately aim at inducing sales. (d) Advertising
helps create an awareness about a company’s products and services. (e) Sales promotion is an
activity that boosts up sales of a product.
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15. Answer : (d)
Reason : Intensive distribution is where the manufacturer distributes his products through as many outlets as
possible. (a) Selective distribution is where the manufacturer uses few of all the available
channels. (b) Convenience-based distribution includes small stores located near residential areas.
(c) In exclusive distribution there are a limited number of intermediaries between the producer and
the consumer. (e) Warehousing is where goods sourced from manufacturers or wholesalers are
stocked before being sent to retail stores.
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16. Answer : (e)
Reason : A core benefit is the fundamental service or benefit that the customer is really buying. (a) Expected
product includes features that a customer finds essential to make a purchase. (b) Augmented
product is that which exceeds customer expectations. (c) Associated features are those that
complement the core features. (d) Generic product is the basic unbranded product without any
differentiation.
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17. Answer : (d)
Reason : Target market is a customer base a marketer specifically identifies as his potential market and has
customers with similar needs or characteristics. (a) Mass marketing involves mass production,
< TOP >
mass distribution and mass promotion of products. (b) Government market refers to the federal,
state, local and foreign governments that buy goods and services. (c) Resellers are marketers who
do not purchase products for converting them into finished products or for personal use, but for
selling them to other customers for a monetary gain. Wholesalers and retailers form a part of the
resellers market. (e) Heterogeneous market is where people or organizations have differing
characteristics.
18. Answer : (b)
Reason : An exclusive dealing agreement between a manufacturer and distributor makes it legally binding
for the distributor to exclusively deal with the distribution of the manufacturer’s product line. (a)
In exclusive distribution there are a limited number of intermediaries between the producer and the
consumer. (c) In evaluating a distribution channel and selecting an intermediary, a company has to
balance its desire to control important functions of the firm, and the need to market coverage with
the help of external agencies. (d) In dual distribution, a manufacturer distributes his products
through more than one marketing channel. (e) Companies generally have the freedom to select
their dealers, but their right to terminate the dealership is restricted.
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19. Answer : (c)
Reason : A niche market is a narrow or smaller segment that has simila r attributes and has been neglected by
other marketers. (a) A clustered market has customers with preferences in distinct clusters. (b)
Mass marketing involves mass production, mass distribution and mass promotion of products. (d)
A demographic market is segmented based on attributes such as age, gender, income, occupation,
religion, race, etc. (e) Individual marketing is the extreme level of marketing in which marketers
focus on individual customers.
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20. Answer : (c)
Reason : Manufacturers and wholesalers do make retail sales. For e.g. Arvind Mills sells the denim jeans it
manufactures through company owned factory outlets. Wholesale cloth merchants also sell
directly to customers through their own outlets.
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21. Answer : (c)
Reason : E-business relates to the transformation of a wider range of key business processes through the
application of Internet and other relevant technologies. (a) E-tailing refers to the on-line sales of
retail type goods. (b) E-purchasing refers to buying goods online. (d) E-marketing refers to
marketing efforts via the Internet. (e) E-mail refers to sending mails online.
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22. Answer : (c)
Reason : Product attributes refer to physical features and contents of a product. Therefore moisturizer would
be product attribute. Options (a), (b), (d) and (e) are irrelevant.
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23. Answer : (b)
Reason : Green marketing is a recent phenomenon in which manufacturers focus on producing environment
friendly products. Options (a), (c), (d) and (e) are irrelevant.
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24. Answer : (e)
Reason : In an oligopoly, a few sellers control the major supply of the product. (a) A pure competition
includes a large number of sellers who compete to offer homogeneous/relatively similar products.
(b) In monopolistic competition, many firms compete with one another, each having a relatively
small market share. (c) In a pure monopoly one firm controls the supply of a product. (d) Option is
irrelevant.
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25. Answer : (a)
Reason : Perception is defined as the process by which people select, organize and interpret information to
form a meaningful picture of the world. Other options are irrelevant.
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26. Answer : (c)
Reason : Sales promotion is a form of attracting consumers and inducing immediate sales by offering
various benefits, incentives, discount coupons etc. (a) Advertising is a paid form of non personal
presentation of goods and services by an identified sponsor. (b) Public relations is a function
where an organization tends to develop and manage its goodwill in the market. (d) Publicity is a
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non-paid form of communicating information about the company or the product or both. (e) Word
of mouth, apparently, is promotion on a one-to-one basis.
27. Answer : (e)
Reason : Customized products are tailor-made products meant to satisfy individual needs. Other options are
irrelevant.
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28. Answer : (b)
Reason : Positioning can be referred to as the position/image of a product in the minds of
customers/consumers. Other options are irrelevant.
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29. Answer : (d)
Reason : Market segmentation can be defined as the process of dividing a market into smaller distinct
groups of buyers with different needs, characteristics or behavior who might require separate
products or marketing programs. (a) Market share refers to a company’s share in the target market
it serves as compared to its competitors. (b) Positioning is creating an image in the minds of
customers. (c) Market evaluation refers to assessing the feasibility of a market. (e) Market audit is
a comprehensive review of a firm’s marketing environment, objectives, strategies, and goals.
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30. Answer : (a)
Reason : Secondary data is cheaper to obtain as it is readily available. Therefore, it is not a problem
associated with secondary data.
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Part B : Caselets
1. Product – Nirma on its inception sold only the yellow washing powder. Over the years, it has expanded its
portfolio to include fabric care products, personal care products, food products, packaging and chemicals. In the
fabric care category, Nirma has three products - Nirma yellow washing powder, Nirma detergent cake, and the
super Nirma washing powder. In 1990, the company launched the blue colored super Nirma detergent cake to
make consumers shift from the then available detergent brands. The Nirma clean bar followed. Eventually Nirma
forayed into the toilet soaps category, with Nirma bath soap, Nirma lime fresh soap, Nima Sandal and Nima Rose.
In 2002, the company ventured into the foods category, with the launch of Nirma Shudh Salt. Further, in 2002,
Nirma announced the exclusive marketing and manufacturing arrangement by which Nirma was to bring Camay,
one of the world’s leading beauty soap brands, to the Indian consumer. Apart from these consumer products, the
company also sells a number of industrial products.
Price – Nirma has an aggressive pricing strategy. Nirma started with low priced pricing products so as to cater to
the lower-end market. In the fabric care products category Nirma’s mid-prices successfully deflate the falsehood
that high quality products have to be high-priced. Also Nirma’s super washing powder is 40% cheaper than its
nearest competitor. The Nirma clean bar was launched to enable users of unbranded detergent powders and cakes
to switch to a value-for-money branded product.
In the bath soaps category also, the products are mid-priced. The high sales again justify the company's belief that
value-for-money products are what consumers are looking for. The products sell for half the price of their nearest
comparable rivals.
Place – Nirma has a wide distribution network with over two million retail outlets countrywide. Nirma sells its
personal care products through chemists, paanwalas and other retailers.
Promotion - Nirma's advertising and marketing strategy are also partners in achieving the success it has. Nirma's
advertising has positioned the product on the value-for-money angle. Its simple jingle “dudh si safedi Nirma se
aaye, rangeen kapda bhi khil khil jaye” while focusing on the product, also addresses the confident and budgetconscious
Indian housewife.
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2. Nirma in India pioneered a new development in the domestic detergent industry. It noticed and effectively
responded to the need for an economical and good quality washing powder, which was affordable to a large mass
of lower-middle -class people. Nirma offered them convenience of use, better quality, and value for money.
Threats – With stiff competition in the washing soaps and detergents market, Nirma can possibly face pressures
due to erosion in the market size, de-growth in its products and stiff competition from domestic companies and
imports. Nirma may face severe competitive pressures, as innumerable low-priced detergents are available in the
market. Also Hindustan Lever is bettering Nirma at the price-competitive strategy for the more volumes game.
Nirma’s problems can also be cited as one of brand image and name. Nirma’s brand image is that of a low-priced
product and maybe low quality as well. This has come in the way of the company getting into the high end of the
market. Secondly, the brand name Nirma is strongly associated with washing detergent powder and hasn’t worked
wonders with other products that it has introduced into the market. For instance, Nirma Shudh Salt, launched a
couple of years back, achieved a turnover of Rs 16 crore in 2001-02 as against Kunwar Ajay Sarees’ Dandi
Namak, which, launched later, has already become a Rs 100-crore brand.
Opportunities - Nirma is looking to broaden its products portfolio with a view to lowering dependence on the
increasingly competitive and stagnating washing soaps and detergents market. It does seem finally that Nirma has
realized that name does matter, and Camay may just be its entry vehicle into the premium market. Another
business the company is said to be looking at is the foods market, particularly the branded staple foods segment. It
made an entry into the foods market two years ago with Nirma Shudh Salt.
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3. The initial euphoria with coffee pubs seems to have died down with the same speed as it collated. Some of the
concerns of coffee chains are
· · There seem to be few tangible differentiators to set apart a Barista or a Qwiky's from each other, with all of
them citing quality, ambience and value-for-money as their positioning.
· · With more westernized menus, there also seems to be a lack of focus on customer tastes and preferences.
· · Since coffee drinking is only an occasional habit in India, bars are likely to shut down soon, unless the
players manage an appropriate mix of location and viability.
· · Talking of viability, India not being primarily a coffee-drinking market, sustained operating profits may be
tough to come by. The issue is not so much a concern for a company such as Nestle or a Hindustan Lever
(when it does venture into coffee chains), for whom coffee pubs are only part of their business. For stand-alone
coffee chains, however, this is obviously critical, especially because they have strategic equity partnerships and
would not want results to show on the coffee chain's balance sheet.
· · Expanding too fast too soon may also adversely affect the bottom lines of players for whom coffee pubs
are a stand-alone business. Besides, there are realistic supply-chain issues that need to be efficiently
streamlined at all times.
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4. Sensible growth and expansion is the need of the hour. The players apparently are taking forward their growth and
expansion plans through the slow and steady route, and differentiating by way of hard-core strategies. Some of the
measures for growth are
· · Equity sharing and overseas forays. E.g. Tata Coffee Ltd picked up a strategic 34.3 per cent equity stake
in Barista Coffee Company in mid-2001. Barista also announced its intention to make its maiden overseas
foray through a 51:49 joint venture arrangement with the Sri Lanka -based Jewelex Trading Ltd, under the
name of Barista Coffee Lanka Pvt. Ltd.
· · Tie -ups with music stores, hotels etc. E.g. Barista has tie-ups with Planet M, Crossword and the Taj group
of hotels for setting up Espresso corners within their premises.
· · Coffee chains can exploit innovative channels such as Ban café - a café in the bank premises.
· · Coffee-centric merchandise, and marketing associations with properties such as music, soft adventure
sports, art and photography are the other initiatives the chains can undertake.
· · Tapping smaller cities.
· · Regionalizing their menus, and even upgrading them in an effort to be completely customer-oriented.
· · Tap the youth who are quick in adapting to western habits.
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5. The issue of whether it’s fair to target children as consumers is only beginning to be debated. Commercials are
getting more and more sophisticated and children don’t have the power to rationalize. Today’s advertisements
interfere with the traditional value system of our children. In our country, there are no standards as yet as far as
advertising for children is concerned, making it all the more difficult.
In-school promotions have evolved from just dumping products on kids to promotions that are relevant to them.
There are educational and entertainment events designed to make children more informed about brands and
choices. But criticism could be abounding as this could lead to ‘undesirable’ pester-power.
The result of aiming children is not only an epidemic of materialistic values among children, but also convincing
them that they're inferior if they don't have an endless array of new products. Deeper still, what are some of the
destructive messages contained in commercials? Personal hygiene products promise to not only cure bad breath
and dandruff, but also guarantee that people who use these products will get the guy or girl of their dreams. And
increasingly, people who buy all the right products are portrayed as hip and with-it, while those who don't are
branded as hopeless dorks.
While older children and adults understand the inherent bias of advertising, younger children do not, and
therefore tend to interpret commercial claims and appeals as accurate and truthful information and are easy targets
for commercial persuasion. Kids' minds are vulnerable, impressionable, easy to influence. This exposes them to
the temptations such as toys that are not educative, drinks that are nutritionally questionable, fast foods and snack
foods that are laden with fat, promotional material that promotes western teen values or encouraging them to
pester their parents for high-end durables and automobiles.
This is a critical concern because the most common products marketed to children are sugared cereals, candies,
sweets, sodas and snack foods. Such advertising of unhealthy food products to young children contributes to poor
nutritional habits that may last a lifetime and be a variable in the current epidemic of obesity among kids.
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6. With children’s advertising failing to reflect social values such as diversity and respect, there is a greater need for
responsible advertising. Freedom to advertise brings with it special responsibilities, especially towards children.
These responsibilities include protecting and helping children to understand and interpret advertising in the
context of their daily lives. Responsible advertising of products and services normally used by children, and the
depiction of children in advertising in general, can serve not only to inform children of these products and services
but also about many aspects of society and the world in which they live.
Calls for a responsible approach to business have been particularly loud in the area of marketing to children. In
addition to being a highly emotive issue for parents, advertising to children is increasingly linked to the wider anticapitalist
movement against global brands and the anti-advertising backlash. The arguments against include that it
breeds new generations of ‘must have’ consumers and that in some cases it has a negative impact on children’s
health and welfare. The arguments in favour are bas ed on the need to encourage children – who are surrounded by
advertising and brands – to be more critical of what they see and hear and thereby to make more informed choices.
The debate about advertising to children now has two distinct strands. First is the so-called ‘moral debate’ which
is focused on the ethics of advertising to children, in particular whether this causes increased materialism,
commercialism and ‘pester power’. Second is the role of advertising in the health debate which increasingly
attempts to link food advertising with obesity and challenges the advertising of snack foods and fast food brands.
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7. Kids represent an important demographic to marketers because they have their own purchasing power, they
influence their parents' buying decisions and they're the adult consumers of the future. Today's kids have more
autonomy and decision-making power within the family than in previous generations, so it follows that kids are
vocal about what they want their parents to buy. "Pester power" refers to children's ability to nag their parents into
purchasing items they may not otherwise buy. Marketing to children is all about creating pester power, because
advertisers know what a powerfu l force it can be.
As society in general has become more media-literate, children, perhaps inevitably, have also become more
media-aware, not surprisingly since so much advertising and promotion is targeted specifically at them. This trend
has meant that children have become more sophisticated consumers and are aware of brands and fashion trends
from a very young age as advertisers directly target children more than ever before. Children are increasingly
brand and advertising literate and are able to make informed decisions about the products that they buy.
To their advantage, marketers are targeting children in schools. Budget shortfalls are forcing school boards to
allow corporations access students in exchange for badly needed cash, computers and educational materials.
Corporations realize the power of the school environment for promoting their name and products. A school setting
delivers a captive youth audience and implies the endorsement of teachers and the educational system
Marketers plant the seeds of brand recognition in very young children, in the hopes that the seeds will grow into
lifetime relationships.
The guilt factor among urban upper and middle class, can play a role in spending decisions as time-stressed
parents substitute material goods for time spent with their kids. It is this persuasion that most marketers target and
exploit. Parents today are willing to buy more for their kids because trends such as smaller family size, dual
incomes and postponing children until later in life mean that families have more disposable income.
Research on children’s commercial recall and product preferences confirms that advertising does typically get
young consumers to buy their products. Furthermore, studies show that these product preferences can affect
children’s product purchase requests, which can put pressure on parents’ purchasing decisions and instigate
parent-child conflicts when parents deny their children’s requests.
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Part C: Applied Theory
8. Competitive advantage is the critical advantage that a firm possesses in the market over a competitor in the
industry. Almost all the firms in the market try to achieve a sustainable competitive advantage. According to
Michael Porter, there are two types of competitive advantages - cost advantage and differentiation advantage.
A firm that offers a consumer the same value as the competitors, but at a lower cost, is said to possess cost
advantage, whereas a company that offers superior value to its customers when compared to its competitors,
possesses differentiation advantage. These two advantages .are called positional advantages as they represent the
firm's leading capability in the industry in either of these advantages. .
The resources of an organization along with its skills create unique competencies. These competencies in turn help
the firm identify its cost or differentiation advantages and ultimately create value for the customers. The resources
.of the organization include its brand value, technological know-how, patents and trademarks, and the goodwill of
the firm in the market. The skills include its service quality, employee skills and efficiency.
Porter's Five Forces Model
Competition in an industry is determined not only by existing competitors but also by other market forces such as
customers, suppliers, potential entrants, and the existence of substitute products. Understanding the level of
competition is important because the level of profits depends to a large extent upon this. The position should give
the firm enough space to defend itself confidently. Understanding the sources of competition can help a firm
gauge its strengths and weaknesses, and analyze the trends in the industry so that it can position itself optimally
for the best returns. Michael E. Porter of the Harvard Business School developed a framework known as the ‘Five
Forces Model’ to help managers analyze the business environment. The five forces included in the model are the
threat of new entrants, the bargaining power of buyers, the bargaining power of suppliers, the rivalry among
existing players and the threat of substitute products.
Barriers to Entry/Threat of New Entrants
Firms generally face a threat from new entrants in an industry in which the entry and exit of new players are free.
Any firm can enter or exit such an industry, at its free will, unless restricted by macro environmental factors.
Various entry barriers are: economies of scale, product differentiation, high capital cost, cost disadvantages
independent of scale, access to distribution channels and government policy. Some of the other barriers to entry
are government restrictions, patents and proprietary knowledge, etc.
An example of an industry creating barriers to new entrants is Reliance Industries that set up a petrochemical plant
with the highest capacity in the industry of 27 mtpa in Jamnagar, Gujarat. Due to its higher capacity, it was able to
achieve economies of scale. This created entry barriers for new players. If a company wants to enter his industry
now, it has to develop a plant of the same or higher capacity. Otherwise, its production cost will be very high and
it will not be able to compete in the marketplace. Similarly, Xerox and GE were unable to enter the mainframe
computer industry mainly due to their lack of economies of scale in production, marketing, research and service.
Prior to economic liberalization in India, organizations needed to get a license or permit from the government to
produce certain items such as cement, etc. The government fixed even the quantity that they could produce.
Similarly, there were certain product categories that were reserved only for public sector undertakings.
Intensity of Rivalry among Firms
Any firm tries to gain an advantage over its competitors. The industry concentration or the number of business
units operating within a particular industry indicates the amount of rivalry. When a few firms enjoy a large market
share, rivalry among them will be less. On the other hand, if significant market share is enjoyed by a large number
of small players, the rivalry among them will be high mainly because of equality in size. When rivalry among
firms is high, it leads to price wars, advertising battles, launches of new products and increased customer services
and warranties. A lack of differentiation among the products of the players in the industry also leads to intense
competition. Similarly, when the switching costs for customers are low, rivalry among firms is high.
The industry is disciplined when the rivalry among firms is low. A firm trying to gain a competitive advantage in
the industry sometimes disturbs such a relatively calm and peaceful environment. The strategies it can adopt to
gain an advantage can be any of the following:
· · Differentiating its products by improving their features, benefits, etc.
· · Keeping the prices of its products different from that of the competitors.
· · Utilizing distribution channels innovatively.
The rivalry among the firms in an industry is influenced by several factors. If the number of firms in the industry is
high with almost the same market shares, then the intensity of rivalry to gain an advantageous position in the
market is bound to be high.
Threat of Substitutes
Substitutes affect the level of competition in an industry. Sometimes, the price that a company can charge' from its
customers is restricted by the prices of substitutes. For example, tea, soft drinks, juices, etc. are substitutes for
coffee. Because of the existence of these substitutes, the prices charged by companies in the coffee industry are
restricted. If coffee prices are hiked, customers have the option of switching over to tea or soft drinks, which are
its substitutes. At the same time, the switching costs are negligible.
Bargaining Power of Buyers
The bargaining power of buyers is determined by the industry in which the firm is operating. If the firm is
operating in a market where there are many suppliers and a few buyers, then the buyers have the capacity to
significantly influence the price. For example, there are only a few automobile companies in India but there are
numerous suppliers of auto components. For auto components, automobile companies are the buyers. Therefore,
automobile companies command prices because they have higher bargaining power. Buyers can sometimes
integrate backward and become competitors. Porter specified the following circumstances in which the bargaining
power of buyers will be higher:
· · When there are many suppliers and a few large buyers.
· · When the supplier's industry depends on the buyers for a large percentage of its total orders.
· · When the buyers can switch orders between supply companies at a low cost, thereby playing companies off
against each other to force down prices.
· · When it is economically feasible for the buyers to purchase the input from several companies at a time.
· · When the buyers can use the threat to provide for their own needs through vertical integration as a device for
forcing down prices.
Bargaining Power of Suppliers
Similar to buyer power, suppliers too exert power. When there are only a few suppliers in the market and many
buyers, the suppliers can get together and decide on the price, which is most profitable to them. An example of a
powerful supplier is Intel, the world's largest manufacturer of microprocessors. Though there are other players,
they are very small in size and their credibility in the market is not as high as that of Intel. Therefore, most
manufacturers of personal computers are dependent on this single powerful supplier of computer chips. Most
standard personal computers run on Intel's microprocessors. So, PC manufacturers have little choice but to use an
Intel microprocessor. As a result, Intel has become the most powerful supplier in the industry. Suppliers are
powerful under the following circumstances:
· · When the product they sell has few substitutes and is important to the purchasing company or buyer.
· · When no single industry is a major customer for the suppliers.
· · When products in the industry are differentiated to such an extent that they are not easily substitutable and it
is costly for a buyer to switch from one supplier to another.
· · To raise prices, the supplier can use the threat of vertically integrating forward, into the industry and
competing directly with the buying company.
· · The buying companies cannot use the threat of vertically integrating backward and supplying their own
needs as a means to reduce input prices.
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9. Companies are operating in an ever changing and challenging environment. The spectrum of activities is widening
and every company is trying to leverage as many opportunities as possible. The consequence is strategic business
unit (SBU). A strategic business unit is a separate and self-sufficient business unit operating in the market.
Resource allocation to strategic business units is done by differentiating the company's businesses, according to
their potential and identifying whether they are profitable.
The task of resource allocation is comp lex in a constantly changing scenario. However, an organization is required
to take decisions based on some fundamental criteria. The BCG growth-share matrix displays the positions of
business units on a graph of market growth rate against their market share relative to competitors. It contains four
cells - question marks, stars, cash, cows, and dogs.
Question Marks - These business units are characterized by low market share and high growth rate. They demand
significant investment because their cash needs are high - the norm in a growing industry. Potential users are not
aware of new products or services of organizations. So these organizations have to make a huge investment in
advertising and promotion. With the market growing rapidly, it is easier to gain a market share. However, the
growth stage of an industry is characterized by a lot of uncertainty that results from changes in technologies,
distribution channels, and the players themselves. So, only a few question marks move to stars.
Stars - These business units have a large market share in fast growing markets or industries. Firms need to invest
in stars as the industry is still emerging and the market share is also growing. Stars often generate as much
revenues as they use. But once the industry reaches the stage of maturity, the stars hardly need any investment and
become major sources of revenue for the firms.
Cash Cows - These business units hold a large market share in a mature and slow growing industry. These
businesses have a strong business position and negligible investment requirements and so the returns from these
businesses are often more than their investment requirements. Or, they are net cash generators. Organizations
often tap their 'cash cows' in order to draw out resources required elsewhere in the organization.
Dogs - These business units have a low market share in an intensely competitive, mature industry characterized by
low profits. A dog does not need much of an investment, but it ties up capital that could be invested in industries
with better returns. So organizations concentrate on recovering as much as possible from these units in terms of
returns on investment and often undertake ruthless.. cost cutting. Unless there is a larger purpose in keeping such
units, an organization should divest itself of dogs at the earliest.
However, recent research suggests that well-managed dogs can have a positive effect on the organization, and be
highly reliable revenue generators. Well-managed dogs have a narrow business focus, concentrate on high product
quality and moderate prices, have strong control over costs, and advertise only to a limited extent. Though these
units can generate surplus returns, there is no possibility of their being transformed into a cash cow.
Though the BCG matrix provides a framework for 'allocating resources' among different business units and allows
one to compare many business units, it is criticized for its over-simplification. For example, the relationship
between market share and profitability is questionable, and the emphasis on improving market share may lead the
organization in a direction which does not meet the objectives of the organization.