HL 4.1 Introduction to Marketing
Which of the following is a benefit of market leadership?
A. Higher production costs
B. Strong brand loyalty
C. Lower profits
D. Reduced availability
B. Strong brand loyalty
Which forecasting method uses past sales trends to predict future sales?
A. Market research
B. Qualitative forecasting
C. Extrapolation
D. Delphi technique
C. Extrapolation
A product sells for $12 and has a variable cost of $8. What is the contribution per unit?
A. $2
B. $4
C. $8
D. $20
B. $4
What is a tariff?
A. A limit on imports
B. A tax on imported goods
C. A trade agreement
D. A government subsidy
B. A tax on imported goods
Last year's market sales were $500 million and this year's market sales were $550 million. What is the market growth rate?
A. 5%
B. 10%
C. 15%
D. 20%
B. 10%
A company surveys 1,000 potential customers about a new product. Which forecasting method is being used?
A. Correlation
B. Market research
C. Extrapolation
D. Moving averages
B. Market research
What is dynamic pricing?
Dynamic pricing involves changing prices in real time based on demand.
Businesses adjust prices according to factors such as demand and time of day.
Dynamic pricing allows firms to charge different prices as market conditions change.
Give one benefit of operating internationally.
International expansion can increase sales and profits.
Businesses can achieve economies of scale by selling in multiple countries.
Operating internationally can reduce business risk by spreading sales across markets.
Businesses may benefit from lower labour or operating costs overseas.
What does market share measure?
Market share measures a business's proportion of total industry sales.
Market share shows how large a business is compared to its competitors.
Market share indicates the percentage of sales a business earns in a market.
What is a sales forecast?
A sales forecast is an estimate of future sales.
A sales forecast predicts the volume or value of future sales.
Businesses use sales forecasts to estimate future demand.
Why might a business use competitive pricing?
Competitive pricing helps a business match or undercut competitors.
It is useful when customers can easily compare prices between businesses.
A business may use competitive pricing to remain attractive to customers.
Which strategy involves using the same product and marketing message worldwide?
A. Localised strategy
B. Pan-global strategy
C. Franchising
D. Joint venture
B. Pan-global strategy
Explain one reason why a market leader may find it difficult for competitors to enter the market.
Strong brand loyalty can make customers less willing to switch to new competitors.
Economies of scale allow market leaders to operate at lower costs than rivals.
Retailers often prefer to stock products from market leaders.
A strong reputation can discourage new competitors from entering the market.
Market leaders have competitive advantages that create barriers to entry.
What is correlation?
Correlation measures the relationship between two variables.
Correlation helps identify factors that may influence sales.
Correlation is used to analyse how changes in one variable relate to changes in another
A business sells a necessity such as fuel. Demand is inelastic (PED < 1). Which pricing strategy could be most effective, and why?
A business may increase prices because demand is relatively unresponsive to price changes.
Since fuel is a necessity, customers are likely to continue buying even if prices rise.
Understanding price elasticity helps businesses maximise revenue when demand is inelastic.
Businesses can use knowledge of PED when making pricing decisions because demand does not fall significantly when prices increase.
What does Hofstede's cultural dimensions theory help businesses understand?
Hofstede's theory helps businesses understand cultural differences between countries.
The framework helps managers adapt business practices to different cultures.
Businesses use Hofstede's dimensions to make international marketing more effective.
A business has increased its market share from 15% to 20%, but the total market has shrunk by 10%. Does this necessarily mean the business's sales revenue has increased? Explain.
No, because the business's market share increased but the overall market became smaller, so sales revenue may not have increased.
A higher market share does not always mean higher sales if the total market is shrinking.
The business controls a larger percentage of the market, but total sales revenue could still fall if the market contracts.
To determine whether sales increased, we would need to know the actual market size before and after the change.
A manager predicts that sales will increase next year because advertising spending will increase. What forecasting method is being used, and what limitation should the manager be aware of?
The manager is using correlation because they are examining the relationship between advertising and sales. However, correlation does not prove that advertising causes the increase in sales.
Correlation is being used to predict sales, but other factors may influence the results.
The relationship between advertising and sales may be coincidental, so the forecast may not be completely accurate.
Contribution Pricing
A business sells a product for $30. The variable cost per unit is $18, and the business has fixed costs of $24,000. If the business sells 3,000 units, calculate the overall profit.
The contribution per unit is $12 ($30 − $18). Total contribution is $36,000 (3,000 × $12). Profit is $12,000 ($36,000 − $24,000).
Overall profit equals total contribution minus fixed costs. Therefore, profit is $12,000.
After covering fixed costs of $24,000, the remaining contribution of $12,000 becomes profit.
A business from Australia wants to enter China. The managers discover that Chinese consumers have different cultural values, buying habits, and long-term orientations compared to Australian consumers. Should the business use a pan-global or localised strategy? Explain why.
The business should use a localised strategy because marketing needs to be adapted to local cultural differences.
A localised strategy would allow the business to meet the preferences and expectations of Chinese consumers.
Cultural differences identified through Hofstede's dimensions suggest that a customised marketing approach would be more effective.
Adapting products and promotion to local tastes may improve sales and customer acceptance in China.