Unit 5 General Questions
1. As part of its feasibility study
for a new product, Moore Ltd supplies the following financial information:
Forecast
Output (Sales) 40,000 units
Selling
price per unit €20
Fixed
Costs €300,000
Variable
Cost per unit €10
i. Illustrate by means of breakeven
chart the following:
a. The breakeven point
b. Profit at forecast output
c. The margin of safety output
ii. Outline one other function of a
feasibility study for Moore Ltd. 25 marks
Diagram done on sheet
Feasibility Study
·
Field Research
A type of Market Research that will help a
business decide if a product or service are financially viable. A business can carry out feasibility studies
on their staff, if their product is environmental etc.
2.Motor Manufacturing ltd is considering
the introduction of a new product. The business has provided the following
figures:
Forecast
Output (Sales) 30,000 units
Selling
price per unit €15
Fixed
Costs €200,000
Variable
Cost per unit €5
i. Illustrate by means of breakeven
chart the following:
a. The breakeven point
b. Profit at forecast output
c. The margin of safety output
ii. Explain Margin of safety
30 marks
Diagram done on sheet
Margin of Safety
·
The business has made enough revenue to cover all
costs
When the business passes the breakeven point
it then enters the margin if safety. The
business makes a profit at this stage.
3.If the Marketing Mix is to
succeed, it must be based on customers needs and must support the required
image for a particular product or service.
Analyse,
for a product or service of your choice, the elements of the marketing mix. 35
marks
Name product: Coca Cola Lemon and Lime 250ml
bottle
Product
|
Price
|
Place
|
Promotion
|
·
Brand Name
Coca Cola is a well
established brand and this will help the launch of the new flavour
·
USP
Lemon and Lime
flavour
·
Stage in lifecycle
This is a new
product at the Introductory stage of the lifecycle (Illustrate)
·
Package
Coca Cola using
their
distinguishable
shaped bottle and label. The bottle maintains the fizz and the label
gives facts and information about the product
|
·
Strategy used
·
How price is
set
|
·
Channel of
distribution used
·
Places to sell
|
·
Advertising
Type
Medium
·
PR
·
Sales
Promotions
·
Personal
Selling
|
4.Paula and Thomas have recently
returned to Ireland having worked with transnational companies for ten years.
They wish to set up in business together in Ireland manufacturing a range of
new organic breakfast cereal. Paula has particular expertise in production and
finance and Thomas in marketing and Human Resource.
Draft a
business plan for this proposed new business using 5 main headings, outlining
the contents under each heading. 40 marks
Business
Plan
A predetermined course of action
Description
o
Type of product
Organic
Breakfast Cereal
o
Target market
Health conscious / Green consumer
Management
o
Name
Paula
o
Work Experience
ü
Worked in
Transnational for 10 years
ü
Production and
Finance
o
Name
Thomas
o
Work Experience
ü
Worked in
Transnational for 10 years
ü
Marketing and
Human Resources
Marketing
o
Market Research
§ Desk
– based on media many
consumers are becoming health conscious
-
Increased
interest in organic products
§ Field
-
Survey of 1000
people showed 75% would prefer to buy organic
Marketing Mix
§ Product
Organic Breakfast
Cereal
·
Brand
We will create a brand
name to reflect the product
·
USP
Organic
·
Stage in
lifecycle
Introduction
·
Package
Recyclable box with
image of cereal
§ Price
·
Strategy
Penetration pricing
·
How it is set
Examination of competitor’s
prices
We are selling to a niche
market
We are new to the market
Price will b set at €3.50
§ Place
o
Channel of
distribution
We will sell direct to
retailer
o
Where to sell
Health shops
Super Valu stores
Superquinn stores
§ Promotion
o
Advertising
Health magazines
Trade fairs
o
Sales Promotion
Free taste in store
Money off 2nd
purchases
o
Personal Selling
We will call to each
retailer and persuade them to stock our brand
o
Public Relations
We will be a sponsor of
the 2013 Tidy Town competition
Production
o
Method of
production
§ Method
Batch
·
Type of worker
Semi skilled workers
·
Type of machinery
Flexible machinery
Finance
o
Sources
§ Short term
Creditors – stock
Overdraft – pay wages
§ Medium Term
Leasing – Van and
premises
Term Loan - Equipment
§ Long term
We would like to
establish as a Private Limited company and sell shares and eventually purchasing
our own premises.
o
Cash Flow
|
June
|
July
|
August
|
Receipts
|
10,000
|
15,000
|
25,000
|
Payments
|
15,000
|
22,000
|
15,000
|
Net
|
-5,000
|
-7,000
|
10,000
|
Opening
|
10,000
|
5,000
|
-2,000
|
Closing
|
5,000
|
-2,000
|
8,000
|
Signed: Paula
Thomas
4. Michael Kelly is 29 and a graduate
with an engineering degree. He has been working in the area of Research and
development in a large TNC since graduation. He has a desire to work for
himself and feels that the time is right to form his own company in his home
town producing electronic parts for domestic appliances. He has asked you to
help him write his business plan.
A. Explain the importance of a
business plan 20 marks
B.Draft a Business Plan for Michael
Kelly's venture under 5 main headings. State relevant assumptions where necessary.
40 marks
5. What is a Business Plan?
Explain
its role in business start up 20 marks
Business
Plan
A
predetermined course of action
A plan sets targets for the future of the business
o
Helps
the Business to Face the future
It gets the entrepreneur to set out
the objectives of the business and the strategies by which they will be
achieved. This will guide the
entrepreneur towards success
o
Assists
the business in Identifying weaknesses
See internal problems in the here and
now. They can then eliminate such
weakness and turn them into strengths.
o
Helps
the business to Raise capital
A plan will impress investors when
seeking finance. The plan will be used
to judge whether the idea is commercially viable
o
Motivates
the business staff
A plan shows employees what needs to
be achieved and how they can achieve this.
It gives employees something to aim for.
7. Outline the benefits of preparing
a business plan. 10 marks
o
Face
future
It gets the entrepreneur to set out
the objectives of the business and the strategies by which they will be
achieved. This will guide the
entrepreneur towards success
o
Identify
weakness
See internal problems in the here and
now. They can then eliminate such
weakness and turn them into strengths.
o
Raise
capital
A plan will impress investors when
seeking finance. The plan will be used
to judge whether the idea is commercially viable
8. What is a Marketing Plan?
Evaluate
the role such a plan can have for a business 20 marks
Marketing Strategy / Plan
·
Marketing plan is a predetermined course of action
A marketing
plan is prepared for a marketing event in the future
·
Sets out steps for a business to achieve their
marketing goals
A marketing
plan provides the business with a focus and guides them to achieve their
marketing aims
·
There are different elements to a marketing plan
Market
research
Marketing
mix
Marketing
budget
Role
o
Helps
the Business to Face the future Marketing needs
It gets the entrepreneur to set out
the objectives of the business and the strategies by which they will be
achieved. This will guide the
entrepreneur towards success
In my opinion facing future marketing
needs is important because.......
o
Assists
the business in Identifying marketing weaknesses
See internal problems in the here and
now. They can then eliminate such
weakness and turn them into strengths.
In my opinion identifying marketing
weaknesses is important because.......
o
Helps
the business to Raise capital for marketing projects
A plan will impress investors when
seeking finance. The plan will be used
to judge whether the idea is commercially viable
In my opinion raising finance for
marketing is important because.......
9. Within the product element of the
marketing mix evaluate product design and product packaging. 20 marks
Every product,
as part of its marketing mix, should identify its:
·
Brand
name
·
USP
/ design
·
Lifecycle
·
Package
Product Design
·
Every
product design should have something
unique about it.
Something that makes it stand out from the rest of the
products it is competing with.
Every product should have a Unique Selling
Point (USP).
In my opinion having something unique is important because
.............
·
Business
must make sure this design complies with the law
The design should
o
Make
sure the product is of Merchantable quality
o
Make
sure the product is fit for purpose
In my opinion complying with the law is important because
..............
Product Package
·
Attractive
to the consumer
The packaging used on the product
must be eye-catching. It must make the
product standout from competitors. The
package will help portray the image of the product
In my opinion attractive packaging is
important because .............
·
Protect
the product
Products can
go through various channels of distribution before it finally arrives with the
consumer. Appropriate package will make
sure the product arrives in its original form
In my
opinion protecting the product is important because ............
10.Deirdre
Moloney hopes to start up her own business selling cosmetics and personal
beauty products aimed at the consumer market. She has approached you as
marketing consultant for some marketing advice.
Explain to her the significance of 'packaging, branding and product life
cycle.
30 marks
Packaging
·
Attractive
to the consumer
The packaging used on the product
must be eye-catching. It must make the
product standout from competitors. The
package will help portray the image of the product
This is significant to Deirdre
because .......
·
Protect
the product
Products can
go through various channels of distribution before it finally arrives with the
consumer. Appropriate package will make
sure the product arrives in its original form
This is significant to Deirdre
because .......
Branding
·
When
a business gives a product a name / symbol, this makes it easily identifiable
and stands out.
Consumers associate products with
brands. When travelling consumers tend
to look for a brand they are familiar with.
Many consumers stay brand loyal
This is significant to Deirdre
because .......
·
Helps
determine the Price charged
Well known
brands can charge high price. Consumers associate quality with brand and will
pay high price
This is significant to Deirdre
because .......
Life Cycle
Diagram done in class
·
A
business must know what stage the product is at in the lifecycle to assist
with:
I.
Pricing
II.
Places
to sell
III.
Promotions
This is
significant to Deirdre at the introduction stage of lifecycle because .......
·
A
business can prolong its lifecycle using
I.
Pricing
II.
Where
you sell
III.
Promotions
This is
significant to Deirdre at the introduction stage of lifecycle because .......
11. Draw and
label the 'product life cycle' diagram.
Illustrate the methods a business could use to extend a products life cycle.
25 marks
Diagram done in class
·
A business can prolong its lifecycle using
o
Pricing
Reducing price to a more
competitive price can keep consumer interest
o
Where
you sell
Making sure the product
is accessible to consumer will prolong its self life
o
Promotions
Using advertising, Sales promotion,
public relations and personal selling will remind the consumer the product
still exists
NB Apply
examples to each point
12.'Many
businesses spend large sums of money developing a brand name'. Illustrate the benefits
of branding for the business and the consumer. 25
marks
·
When
a business gives a product a name / symbol, this makes it easily identifiable
and stands out.
Consumers associate products with
brands. When travelling consumers tend
to look for a brand they are familiar with.
Business : Vacuum cleaners are very
often referred to as Hoovers because of the popularity and success of the
hoover brand.
Consumer: Know the brand Hoover and
that is reliable.
·
Helps
determine the Price charged
Well known
brands can charge high price.
Business :
make more profit for example MAC charge high prices their products
Consumers: associate quality with brand and will
pay high price, consumers know MAC is a high quality brand
o
Establish
Brand Loyalty
When
consumers become familiar with a brand they stay loyal and keep returning to
purchase that brand
Business:
return customers, Barry’s Tea would have a very loyal customer base
Consumer:
Know they are getting what they want, Consumers like the taste of Barry’s tea
so keep purchasing it
·
Easier
to introduce new products
13.In the
case of a particular product/service of your choice, evaluate the role of (i)
Advertising (ii) Public relations (iii) Personal selling 30 marks
14.Evaluate 3 promotional methods for a product or service
of your choice
30 marks
Promotional Mix
If
consumers don’t know a product exists then they cannot buy it. A product will not sell unless people know
about it.
Product
Coca Cola 250ml bottle
1. Advertising
o
Types
of advertising differ with products
The main types of advertising are Reminder advertising,
informative advertising, persuasive advertising, generic advertising and
comparative advertising.
Coca Cola use reminder
advertising a lot to let consumers know that their well known brand is around.
In my opinion selecting the right
type of advertising is important for Coca Cola because they are at the maturity
stage of the product lifecycle and they want to make sure consumers remember
their product
o
Medium
used depends on the target market and budget available
The main advertising media include television, radio,
newspapers, magazines, billboards and direct mail.
Coca Cola have a large target market and a large advertising
budget, for these reasons they can afford prime time television
advertising. They would also use
colourful magazine and billboard adverts in prominent positions
In my opinion selecting the right
medium for advertising is important for Coca Cola because they want to reach as
many consumers as possible and they want people to see their product and hear
about it.
2. PR
o
Builds
an image that reflects the company
Public perception of a business is very important. Public service activities makes the public
admire the efforts of a business.
Coca‑Cola Foundation recently
provided a grant for ‘Sport for Life’.
The ‘Sport for Life’ project will target 100 schools and 3,000 pupils in
areas of greatest disadvantage with the aim of educating pupils on the health
benefits associated with physical activity.
In my opinion reputation is
important for Coca Cola because consumers expect large business to give back to
the community.
o
Targets
customers
Sponsoring events and causes that are known to consumers will
appeal to the target market. Consumers
who follow events or celebrities may purchase a product based on this.
Taylor Swift endorses Coca Cola, this in turn would attract a
teenage girl market. Coca Cola Sponsor
the Olymic Games and this would attract a sporting target market
In my opinion target market is
important for Coca Cola because they mass produce their product and want to
reach as many markets as possible
3. Personal Selling
o
Gives knowledge and expertise
Consumers will require as much
information as possible about a product before they purchase it.
Coca Cola have sales team that
will call to retailers with facts and figures about coca cola and why they
should stock it
In my opinion expert advice is important for Coca Cola to give because
retailers may not realise coca colas popularity and sales potential
o
Face to face selling
Salespeople meet with customers and persuade them to purchases the
product
Coca Cola sales teams would visit new retailers, restaurant, public
houses etc and convince them to stock coca cola over competitors. .
In my opinion face to face selling is important for Coca Cola because it
is always harder to decline business to somebody’s face .
15. Evaluate
Sales Promotion and Public Relations as forms of promotion. 20 marks
PR
o
Builds
an image that reflects the company
Public perception of a business is very important. Public service activities makes the public
admire the efforts of a business.
Coca‑Cola Foundation recently
provided a grant for ‘Sport for Life’.
The ‘Sport for Life’ project will target 100 schools and 3,000 pupils in
areas of greatest disadvantage with the aim of educating pupils on the health
benefits associated with physical activity.
In my opinion reputation is
important because consumers expect large business to give back to the
community.
o
Targets
customers
Sponsoring events and causes that are known to consumers will
appeal to the target market. Consumers
who follow events or celebrities may purchase a product based on this.
Taylor Swift endorses Coca Cola, this in turn would attract a
teenage girl market. Coca Cola Sponsor
the Olymic Games and this would attract a sporting target market
In my
opinion target market is important because they mass produce their product and
want to reach as many markets as possible
Sales Promotions
o
Incentives to buy more
Competitions (more they spend the more times they can enter), loyalty cards
(more they spend more points they get), 3 for 2 offers are all aimed at a
consumer to buy in bulk.
Offering the
consumer a promotion will make they want to avail of that offer and buy more
than planned.
Coca Cola sell multi packs to encourage consumers to buy several bottles of
coke rather than 1.
In my
opinion incentives are important because it encourages higher sales for the
business and attracts consumers to the product
o
Encourage consumers to buy now
Free samples (trial of the product), money off vouchers (discount coupons),
free gifts (gift on purchase) and merchandising (displays) are aimed to get the
consumer to spend their money now rather than at a later date.
Coca Cola use free samples in stores, offering tastes of coca cola and often
compare it to competitors.
They also use
merchandising displaying cold cans of coca cola close to cash register.
In my
opinion getting consumers to buy now is important because it keeps the business
cash flow in a surplus.
16.Outline
the factors a business should consider when choosing a suitable Channel of
Distribution. Provide examples 20 marks
·
Costs
If a product
is job produced and carries a high price tag.
Direct Channel
·
Production
methods
If a product
is mass produced and it would be too difficult for the manufacturer to distribute
to all stockists
Traditional Channel
·
Type
of goods / shelf life
If a product
needs to be used immediately as it is out of date soon after production
Illustration
done in class
·
Convenience
for consumer
If consumers
want easy access to the product
17Deirdre Moloney hopes to start up her own business
selling cosmetics and personal beauty products aimed at the consumer market.
She has approached you as marketing consultant for some marketing advice.
Explain the term Channel of Distribution and recommend a suitable one for
her business.
10 marks
Channel of distribution
o
The product must be available in the right place for the consumer to
access it.
Consumers
want convince and want to get the product easily
Deirdre
must consider where her consumers shop and would purchase her product
Diagram
done in class
Deirdre
should consider approaching local chemists and getting them to stock her new beauty
range.
18 Outline
and illustrate the term niche market 10 marks
·
Small
subset in a target market
·
Willing
to pay high prices for goods
·
Example
19.Explain the advantages for a business enterprise of
adopting the marketing concept.
15 marks
·
Marketing
concept puts focus on customer satisfaction
It involves
identifying target markets needs and wants
·
Marketing concept involves getting
ahead of competitors using Market research
A business
must carry out desk and field research to find out exactly what customers want
·
Marketing concept involves getting
the right marketing mix
The right product
In the right place
At the right price
Using the right promotion
20. Olympian Ltd is a company that produces a range of high
quality branded sportswear. Following a lengthy market research process, the
firm is now expanding its business to include a new range of Hoodie Tracksuits,
aimed at the teenage market.
Outline the stages involved in the development process of the new range of
hoodie tracksuits
20 marks
1.
Idea Generation
a.
Internal ideas
b.
External ideas
Apply
case
2.
Product Screening
a.
SWOT
Apply case
3.
Concept
Development
a.
USP
b.
Paper – Business
Plan
Apply
case
4.
Feasibility study
a.
Viable
i.
Commercial
ii.
Environmentally
iii.
Financially –
Break – even analysis
Apply
case
5.
Prototype
a.
1 sample
Apply
case
6.
Test Marketing
a.
Produce a limited
number of units
Apply
case
7.
Product Launch
Apply
case
21.Deirdre Moloney hopes to start up her own business
selling cosmetics and personal beauty products aimed at the consumer market.
She has approached you as marketing consultant for some marketing advice.
Explain to her the stages in the development of a new product / service
20
marks
1.
Idea Generation
a.
Internal ideas
b.
External ideas
Apply
case
2.
Product Screening
a.
SWOT
Apply case
3.
Concept
Development
a.
USP
b.
Paper – Business
Plan
Apply
case
4.
Feasibility study
a.
Viable
i.
Commercial
ii.
Environmentally
iii.
Financially –
Break – even analysis
Apply
case
5.
Prototype
a.
1 sample
Apply
case
6.
Test Marketing
a.
Produce a limited
number of units
Apply
case
7.
Product Launch
Apply
case
22.Kilronan ltd produces a range of chilled food products.
Made from natural ingredients, the firm's award winning products have become
household names. It is now one of the leading brands in Ireland and supplies
all the major supermarket chains. Kilronan ltd is considering either a merger
or a takeover as methods of expansion within the Irish market. It is also
considering how it will finance growth.
Distinguish between debt and equity capital as sources of finance for the
expansion of Kilronan ltd.
15 marks
Expansion
The main
aim of a commercial business is to make profit. A business can make profit by
growing and becoming larger, more successful business'.
Equity:
The business does not have to pay this back until the business is closed down.
The business does not have to pay dividends unless it makes a profit.
Apply
Debt:
Business must pay back at set times with interest. If a business fails to repay
loans it could go bankrupt.
Apply
Equity:
Shareholders make decisions and have power to make changes in the business
Apply
Debt: The
lenders do not want to run the business they are just giving finance and have
no other role
Apply
Equity:
gives business a low gearing position. The original owners may lose their
control to other shareholders.
Apply
Debt:
gives business a high gearing position. This may mean it is difficult to get
further loans in the future
Apply
23. Discuss, using examples, the factors a manager should
consider when selecting sources of finance for expansion.
20 marks
24. Evaluate
Debt and Equity Capital as sources of finance for business expansion.
20
marks
Equity:
The business does not have to pay this back until the business is closed down.
The business does not have to pay dividends unless it makes a profit.
Debt:
Business must pay back at set times with interest. If a business fails to repay
loans it could go bankrupt.
Equity:
Shareholders make decisions and have power to make changes in the business
Debt: The
lenders do not want to run the business they are just giving finance and have
no other role
Equity:
Shareholders do not require security, they take a financial risk investing
their money
Debt: A
loan will require collateral and if the loan is not repaid the business risk
losing this fixed asset.
Equity:
gives business a low gearing position. The original owners may lose their
control to other shareholders.
Debt:
gives business a high gearing position. This may mean it is difficult to get
further loans in the future
25. Discuss
two possible challenges associated with starting a new business. 10 marks
·
Sourcing Finance
Explain
Example
·
Establishing yourself on
the market
Explain
Example
26. Outline the internal and external sources of new
product ideas for technology companies like Google.
20 marks
·
Internal
o
Customer
feedback
o
Employee
suggestions
o
Research
and development department
·
External
o
Media
o
Competitors
27. For a business to survive it needs to grow and expand.
Evaluate two methods of expansion
20 marks
There are
two main methods of expansion:
1. Organic Expansion
Natural,
slow internal expansion
Selling
more products and making more profit. A business can do this by improving their
marketing mix.
Nintendo
did this by bringing out a new game 'More Brain Training'. This new product hit
a new older target market. They promoted the product with PR, using Nicole
Kidman to endorse it. Sales grew and the company expanded.
This is
when an original owner (franchiser) grants permission to other entrepreneurs
(franchisee) to use their idea, as they created it for a fee.
McDonald's
is a franchise, it has expanded
globally this way. Every McDonald's franchise using the same products,
the same promotion, the same decor.
2. Inorganic Expansion
Quicker
expansion using external sources.
- Strategic
Alliance / Joint Venture
When two
businesses come together to work on a single project. The business each
maintain their own identity. Both businesses benefit sharing, time, resources
and expertise.
The watch
company Swatch and the car manufacturer Mercedes came together and created the
SMART (Swatch Mercedes Art) car. This allowed both companies expanded into new areas
When two
businesses join together to form one larger, stronger business. In a merger the
businesses join together permanently.
Irish
Life, an insurance company and Irish Permanent, a building society merged in
1999 to form Irish life and permanent PLC. They expanded to form a larger financial services
company.
28. Discuss the short term and long term implications of
business expansion using the following headings:
Organisation structure, Product mix, profitability, Employment
20
marks
·
Organisation Structure
Short term: the
structure of the business will need to change with growth. If expansion happens with
a merger or take over the business would change the line structure so there
would be 1 CEO rather than 2.
Long term: the
structure would need to change over time, as the business grows there will be
more delegation/ project work and new teams.
The business could use a Matrix structure.
o
Product mix,
Short term:
Long term:
o
profitability,
Short term:
Long term:
o
Employment
Short term:
Long term:
29. An Irish
company, ' All weather Wellies Ltd' identified a niche market for colourful
wellington boots of all sizes. The wellington boots are sold mainly online to
people wh enjoy the 'great outdoors' and festival goers. The company wishes to
expand and add accessories, such as umbrellas, scarves and hats to the product
range.
a. Outline the market research techniques available in
developing the product range for All weather Wellies Ltd' .
20 marks
Desk Research
X2
Field research
X2
b. Explain the term 'market segmentation' with reference to
All weather Wellies Ltd'. Discuss the reasons why marketing department
of All weather Wellies Ltd' might engage in market segmentation.
20
marks
·
Splits
a market
o
Demographic........
o
Geographic.........
·
Identifies
a specific target market
p.302
·
Increase
Sales
o
If
target a neglected segment ..........
·
lower
costs
o
Avoids
spending budget marketing to consumers outside the target market
c. Outline the factors a marketing manager might consider
in determining the selling price of products at All weather Wellies Ltd' . 20
marks
·
Target
market income
·
Price
of competitors products
·
Will
they cover their costs
·
Have
they a successful brand name
·
Is
the product in high demand
·
Is
the product new and unknown
30. Illustrate the types of pricing strategies businesses
could adopt for their product / service
20 marks
Book p309
