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FT MBA MDO

Subject Style and year of examination Title of Paper Time Allowed

MBA 2007/2008 JANUARY 2008 MARKETING DESIGN AND OPERATIONS 2 HOURS

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Instructions to candidates Answer any TWO questions All questions carry equal marks
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1. What advantages do lifestyle segmentation techniques offer over other methods of segmenting a market? For an organisation operating internationally, what difficulties might they encounter using this psychographic approach? A market is defined as a group of people who, as consumers or as part of organizations, need and have the ability, willingness and authority to purchase products in a product class. In order to identify a group of people with quasi similar needs, organizations apply the process of market segmentation by which customers in markets with some heterogeneity can be grouped into smaller, more similar or homogeneous segments. Companies developing their strategy for segmentation can choose one or several variables or bases from a wide range of choices. Amongst the categories, some companies focus on the psychographic variable and study it thoroughly. Personality characteristics, motives and lifestyles are the main psychographic variables used in the segmentation study. Individuals are grouped by lifestyle segmentation according to how they live and spend their time, the importance of items in their surroundings, their beliefs about themselves and broad issues, and some socio-economic characteristics, such as income and education. Lifestyle analysis provides a broad view of buyers because it encompasses numerous characteristics related to peoples activities, interests and opinions. The common method used for such segments is called VALS which divides each country into several categories based culture and several other variables. For example in the US, VALS system classifies adults into 8 primary groups based on personality traits and lifestyle: a. b. c. d. e. f. g. h. Innovators Thinkers Achievers Experiencers Believers Strivers Makers Survivors

For organizations operating internationally, the use of lifestyle as a segmentation variable is problematic, because it is difficult to measure accurately compared with other types of segmentation variable. In addition the relationships between psychographic variables and consumers needs are sometimes obscure and unproven, and the segments that result from these variables may not be reachable. For example, a marketer may determine that highly compulsive individuals want a certain type of clothing. However, no specific stores or particular media such as television or radio programs, newspapers or magazines appeal precisely to this group and this group alone.

2. You work for a domestic appliance manufacturer which is concerned that its main competitor is delivering new products to the marketplace more quickly than they are. Explain how your firm can increase its pace of innovation, noting any potential implementation difficulties. In the analysis of innovation inside organizations such as domestic appliance manufacturers, we can encounter different variables and constraints that limit and slow down the overall process of new product development (NPD). Innovation is the sum of invention and commercialization or the diffusion of the product in the market and the feedback received from consumers determines mainly how fast the product is diffused and adopted in the market in contrast with the competitors level of emergence and innovation. The importance of good management of the innovation process, through the adoption of a formalized NPD process incorporating stage gates, as well as the importance of good decision making through the use of appropriate evaluation criteria and techniques. There are a number of drivers behind the need to accelerate the NPD process in this increasing competitive market and the fact that the life cycle of such products is very short compared to other products. Add to this the need for organizations to recuperate the escalating costs of innovation. The timely introduction of an innovation requires not only a focus on reducing the time to develop a product or service, but also a focus on reducing the time to launch and roll-out an innovation across the targeted markets. There are a number of ways in which the NPD innovation process may be accelerated: Encouraging the role of the product champion Where appropriate, conducting activities in parallel Discouraging the spreading of resources thinly across too many projects Decentralizing decision making, to encourage team commitment and ownership, whilst reducing excessive external interference Integrating suppliers better with the NPD process and innovation team Involving potential customers early in the NPD process, and Employing enabling technologies, such as computer-aided design (CAD) and stereo-lithography, to allow early visualization and rapid prototyping of the innovation

3. Far from providing any useful insights, the concept of the product life cycle is likely to mislead marketing managers. Discuss this statement, and illustrate your arguments with examples. It is really apparent that if the study of the PLC was executed at the brand level, it will rise and fall on a seasonal and yearly basis and the marketer thus has a greater input into the shape of the PLC. But in practice it is difficult to separate the four stages when analyzing a brand, what appears to be a brand entering into maturity may actually be a temporary plateau in the growth of sales. In contrast, where the PLC is studied from a broader perspective, for instance the product market level, the ability for the marketer to impact upon the shape of the PLC is more limited. This is why the concept of the PLC will mislead the marketer. A good example is the evolution of audio and music products. The vinyl record was highly successful between 1950 and the 1970s; however the gradual adoption of portable audio cassettes in the 1970s took market share from the LPs during the 1980s, the audio cassette faced the introduction of compact discs and slowly the CD replaced the LP and audio cassette as the dominant means of listening to music. In the 1990s, a number of new technologies reached the high street, with the launch of the mini-disc and the mp3 player. The mp3 format has in recent years radically altered the music industry. With CDs subject to price competition, digitalized music files can be removed from their original format and exchanged through global social networks. 4. You are the marketing manager of a car manufacturer in decline and have been given a brief to focus on a niche strategy, concentrating on the production of specialist sports cars. What are the likely benefits of such a strategy to this firm, and in which circumstances is it most likely to be effective?

An alternative to being a follower in a large market is to be a leader in a small market, or niche. Smaller firms normally avoid competing with larger firms by targeting small markets of little or no interest to the larger firms. Usually niching strategies are profitable due to the main reason that market nicher ends up knowing the target customers so well that it meets their needs better than other firms selling to this niche casually. As a result, the nicher producing specialist sports cars can charge a substantial price over costs. Therefore, he might achieve high margins, whereas as a mass market in the business of car manufacturing he achieves high volumes. He should be having three tasks: Creating niches Expanding niches Protecting niches Niching carries a major risk in that the market niche might dry up or be attacked. The company is then stuck with highly specialized resources that may not have high-value alternative uses. 5. Critically evaluate the usefulness of the value chain in analysing an organisation's capabilities and in the formulation of marketing strategies. Use examples to support your answer. Michael Porter of Harvard has proposed the value chain as a tool for identifying ways to create more customer value. According to this model, every firm is a synthesis of activities performed to design, produce, market, deliver, and support its product. The value chain identifies nine strategically relevant activities that create value and cost in a specific business. These nine value-creating activities consist of five primary activities and four support activities. Primary activities: a. b. c. d. e. Inbound logistics: or bringing materials into the business Operations: converting these materials into a final product Outbound logistics: shipping these materials Marketing and sales Service: servicing those materials

Support activities: a. b. c. d. Procurement Technology Human resource management Firm infrastructure

The firms task is to examine its costs and performance in each value-creating activity and to look for ways to improve it. The firm should estimate its competitors costs and performances as benchmarks against which to compare its own costs and performance. It should go further and study the best of class practices of the worlds best companies. The main idea is not to analyze how well each activity is performing but to create a synergy that sets a basis for the core business processes. Porter says that the route to superior performance requires the identification of actual or potential capabilities that constitute sources of advantage over the competition: cost leadership differentiation

Examples: Strong companies develop superior capabilities in managing and linking their core business processes, WalMart has superior strength in its stock replenishment process. As Wal-Mart stores sell their goods, sales

information flows via computer not only to Wal-Marts HQ, but also to its suppliers, who ship replacement merchandise to the stores almost at the rate it moves off the shelf. At Xerox, a Customer Operations Group links sales, shipping, installation, service, and billing so that these activities flow smoothly into one another. 6. A major bank has announced that it is about to enter the motor insurance market and offer highly competitive prices to customers. Discuss the options open to a financial services company, which is a well-established insurance provider, when faced by this new discount orientated competitor.

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