4.1 Introduction to Marketing

What you should know 

By the end of this subtopic, you should be able to:

• define the following terms: (AO1)

  • • market orientation

    • product orientation

    • market share

    • market growth

    • market leader

• explain the meaning of market and marketing (AO2)

• describe marketing objectives for for-profit commercial and social enterprises, and non-profit social enterprises (AO1)

• distinguish between market orientation and product orientation (AO2)

• distinguish between market share and market growth (AO2)

• calculate market share and market growth for given data (AO4)

• discuss the importance of market share and market leadership (HL only) (AO3)

• apply the Boston Consulting Group matrix in a given context (AO2)

https://quizlet.com/pa/772078701/41-introduction-to-marketing-flash-cards/?i=4jrhob&x=1jqt 

https://www.gimkit.com/view/63e3f682a62dc40021f6f840

Market growth

Refers to an increase in the size of a market, usually measured by the rise in total sales revenue of the market or industry.

Market leader

Refers to the business with the largest market share in a given industry.

Market orientation

This is an approach to marketing that focuses on meeting the specific demands (desires and needs) of customers and potential customers.

Market share

Refers to the sales revenue that an organization accounts for within a given market or industry. It is measured by expressing the firm’s sales revenue as a percentage of the whole industry’s sales revenue.

Market size

The total number of individual customers or the total value of sales revenue in a certain market.

Marketing

The management process of identifying, anticipating, and satisfying customer requirements in a profitable way. It is the art of determining the goods and services required to meet the needs and wants of customers in a sustainable way.

Needs

These are the things people need in order to survive, e.g., food, water, and shelter.

Product orientation

This is an approach to marketing that focuses on making products a business knows how to make well, rather than primarily concentrating on the needs and desires of potential customers.

Sales revenue

Refers to a firm's income from selling its goods and/or services, i.e., the value of its sales.

Sales volume

Refers to the volume of sales of a particular business.

Wants

These are human desires, i.e., things that people would like to have, or have more of.

BCG Matrix

A matrix that classifies the products of a business into high and low market share and market growth categories.

BCG Matrix: Dogs

Low growth, low market share, should be gotten rid of. These products may be at the end of their product life cycle or perhaps they are niche products competing in mature low-growth markets.

BCG Matrix: Cash Cows

High Market Share, Low Margins. Cash cows are successful products in mature, slower-growing markets. They earn high sales revenue from an established customer base. Customer loyalty is likely to be high. Therefore, less money is needed for marketing. Promotion is likely to focus on replacement products and maintaining loyalty.

BCG Matrix: Problem Child

Low Market Share, High Market Growth. high cash needs that, if nurtured properly, can convert into stars. (also known as ‘question marks’) have low market share but operate in high growth markets. These products are often recently launched in response to the rapidly growing revenues of competitors. In the streaming market, Amazon’s Prime or Hulu can be considered in this category. If they are to gain market share, considerable investment will be required. Therefore, they are likely to have a negative cash flow.

BCG Matrix: Stars

High Market Share, High Growth. Stars are products that have a high market share in growing markets. Revenues should be growing strongly. Netflix can be considered a star product, as it is the market leader in the rapidly growing streaming market. This type of product also requires significant investment to sustain growth. Marketing will focus on attracting new customers and establishing a brand image. Profitability will depend on how much its revenue is reinvested in future growth. Certainly, high growth businesses will be spending heavily to keep expanding their operations and sales. Therefore, it is possible for a star to have a negative cash flow.

Marketing is often described as a management process of identifying, anticipating and satisfying customer requirements in a profitable way. It is also about managing customer relationships, which benefits numerous key stakeholder groups such as customers themselves, employees, managers, suppliers and the government.

• a place where buyers and sellers come together or interact

• Demographic: a particular group of a population (example: Age, Religion, Occupation, Ethnicity, etc)

  • High school students in Vancouver

  • Young mothers

  • Real estate developers

• Geographic: a location

  • Country: Canada

  • City: Vancouver

• Product: a type of product

  • Smart phones

  • Computers

  • Fast fashion

Market Growth: The increase in sales revenues or sales volume in an individual market over time.

Companies that have the highest market share are market leaders

4.1 Case Study Questions

https://drive.google.com/file/d/1evRnLIXRUolGw1PYfzFjuDpeETuXZg_S/view?usp=sharing 

4.1 Case Study Answers

https://drive.google.com/file/d/11mmFC7x3JAHdV9icLlt3bRv7GuUzG8Js/view?usp=sharing 

Question 1

Considering the social foundation in the Doughnut Economics Model, the human need that is being directly met by mRNA technology is ‘health’. This is because the technology is being used to fight viruses such as COVID-19. Scientists anticipate that mRNA technology will also have wide-ranging applications for cancer, multiple sclerosis and other diseases.

You could also refer to the SDG3 Good health and wellbeing, for the same reasons.

Describe is an AO1 level command term, requiring a detailed account. Describe what something is.

• To achieve full marks, you must always include theory and application to the case study in your responses.

Question 2

Product orientation is where a business prioritises research and development of high quality, specialised products rather than prioritising market research.

Define is an AO1 level command term, requiring a precise meaning of a word.

• One mark is given for a vague definition.

• Two marks are given for a complete definition.

• Definitions do not require application to the stimulus material. 

Question 3

Market orientation is where a business designs, makes and delivers products according to customers’ needs and wants. Extensive and ongoing market research will be at the centre of all decision making.

Define is an AO1 level command term, requiring a precise meaning of a word.

• One mark is given for a vague definition.

• Two marks are given for a complete definition.

• Definitions do not require application to the stimulus material. 

Question 4

The research into mRNA technologies could be classified as product orientation. Product orientation is where a business prioritises research and development of high quality, specialised products, instead of market research. Spending is allocated to the development of products, regardless of whether the business has identified a market to sell to. In the case of mRNA technologies, there has been a huge amount of research and development into the new technology without knowing exactly what the applications for human health will be. Even though scientists think that there will be a market for the technology, it was not known from the outset.

However, research into mRNA technologies could also be classified as market orientated. Market orientation is where a business designs, makes and delivers products according to customers’ needs and wants. Extensive and ongoing market research will be at the centre of all decision making. It is clear that there are many diseases, like certain types of cancer and multiple sclerosis, that do not yet have effective treatments. If scientists believe that mRNA technologies could be used to treat those diseases effectively, they could be orienting on market needs.

Explain is an AO2 level command term, requiring a detailed account including reasons or causes. Explain why, explain how.

• Both product orientation and market orientation need to be explained. Other responses are possible and would be rewarded if appropriate.

• To achieve full marks, you must always include theory and application to the case study in your responses to the explain command term.

Answers

(a)  Define the term market share.  [2 marks]

Market share is a measure of the size of a business in comparison to others in the same industry. It is calculated by expressing the firm' sales revenue as a percentage of the sales revenue of all firms in the industry.

Award [1 mark] for a limited response that shows some understanding of the term market share.

Award [2 marks] for an accurate definition of market share, similar to the example above.

(b)  Explain whether the above example illustrates market orientation or product orientation.  [4 marks]

Market orientation is a strategic approach used by a business that provides a good or service to meet the requirements of consumers, usually based on market research. Tesco used market research findings to respond to the changing market needs of its customers.

By contrast, product orientation is an alternative marketing approach that focuses on making or supplying products a business knows how to make well, rather than primarily concentrating on the needs and desires of potential customers. Tesco outsourced the catering services to Elior Group and Compass Group because operating restaurants and cafes is not part of the supermarket chain's core competencies. This enables these catering companies to better meet the need of customer who visit the 300+ restaurants or many more coffee shops at Tesco supermarkets.

Note:

Outsourcing of non-core functions can be an example of both market orientation and product orientation, depending on the reason behind it. If outsourcing is done with the aim of improving Tesco's ability to meet their customers' needs and improving the supermarket's competitiveness, then it can be considered an example of market orientation.

However, if outsourcing is done to improve the quality, functionality, or cost-effectiveness of a product or service (as in the case of Tesco's restaurants and coffee shops), then it can be considered an example of product orientation.

Accept any accurately explained answer that shows knowledge and application to the case study.

Award [1 - 2 marks] for a limited response that shows some understanding of the demands of the question.

Award [3 - 4 marks] for an accurate response that shows good understanding of the demands of the question. There is effective use of business management terminology throughout the answer, making a clear distinction between market orientation and product orientation.

(c)  With reference to Ansoff's martix, explain the method of growth used by Tesco.  [4 marks]

The Ansoff matrix is a strategic management tool, used to devise product and market growth strategies for a business.In this particular case, Tesco is adopting a diversification growth strategy, which involves the business launching new products (coffee shops and restaurants in some of its larger supermarkets) in new markets (catering services for people who do not necessarily shop regularly in Tesco). Having invested in almost 300 restaurants and coffee shops, Tesco had taken immense risks by providing a new service (not part of its core competencies) and catering for new customers (those who do not necessarily shop in Tesco).

Note: it may be possible that some students argue this to be a market development strategy in that Tesco is catering for new customers (diners and coffee drinkers) in their existing stores. After all, market development is a growth strategy that uses customer loyalty to persuade people (existing and prospective customers) to buy a new product. Award answers that are substantiated and justified accordingly.

Award [1 - 2 marks] for a limited response that shows some understanding of the demands of the question.

Award [3 - 4 marks] for an accurate response that shows good understanding of the demands of the question. There is effective use of business management terminology throughout the answer, making a clear distinction between market orientation and product orientation.

 Exam Practice Question 1

Answers

(a)  Define the term market share.  [2 marks]

Market share is the proportion of the sales revenue in a market that is attributed to any particular business, product, or brand. It is measured by expressing the sales revenue of a business as a percentage of the industry's total sales revenue.

Award [1 mark] for a limited response that shows some understanding.

Award [2 marks] for a clear and accurate definition, similar to the example above.

(b)  Calculate the annual sales of Naples Souvenirs.  [2 marks]

Market share = 1.3% × $28.5m = $370,500

Award [1 mark] for the correct answer and [1 mark] for the correct working out.

 Exam Practice Question 2

Answer

The total industry sales = $21m + $24m + $12m + $18m = $75 million

Business Sales ($m) Market share (%)

A 21 21/75 = 28%

B 24 24/75 = 32%

C 12 12/75 = 16%

D 18 18/75 = 24%