Grade 12 Revision Questions
International Marketing and PESTG
1. Cool Man Airconditioning
Cool Man Airconditioning (CMA) is a New Zealand based manufacturer of air conditioning units for domestic
and business usage. Intense competition from countries with low labour costs combined with an increase in the
exchange rate value of the New Zealand dollar has meant that CMA has experienced low sales growth in recent
years, despite growing demand for air conditioning. The Marketing Director at CMA has asked the board of
directors to consider two proposals to address their current problems:
•
undertake primary and secondary market research to identify the strength of the CMA brand and to identify
the target market(s).
•
research the potential for establishing joint ventures with air conditioner manufacturers in other countries.
CMA would ask other companies to manufacture and distribute air conditioners under the CMA brand.
Analyse the factors CMA should consider when marketing its products internationally.
(Total 8 marks)
2. No-Prisoners Footwear
No-Prisoners Footwear (NPF) is a leading European sports footwear provider. The footwear is manufactured by
suppliers in Asia and Latin America. The Head Office in London concentrates on promotion, new product design
and finance.
In recent years NPF has been criticized by pressure groups who claim that NPF makes excessive profits by
exploiting cheap labour in developing countries and by charging unfair prices for its products. A number of
parents have complained to the media that their teenage sons have resorted to crime to help pay for a pair of the
latest No-Prisoners training shoes.
To counter this criticism NPF has recently published its accounts in a number of newspapers and has emphasized
the substantial funding NPF provides for under-privileged school children from developing countries. NPF has
also argued that competitive pressures for the globalisation of business have left it with no choice but to produce
overseas and to increase its sales base worldwide by entering more markets.
Compare the different strategies that NPF could use to enter overseas markets.
(Total 6 marks)
3. Tesco Supermarket
United Kingdom’s largest supermarket group Tesco has recently invested £215m in a joint venture with the
Malaysian conglomerate, Sime Darby, to open 15 Malaysian hypermarkets by 2006. The first store has already
opened on the outskirts of the Malaysian capital Kuala Lumpur. Several other foreign, food-retailing groups,
such as the French Carrefour group and the Dutch supermarket chain, Ahold, have opened stores recently in
Malaysia.
Tesco aims to have half its selling space in overseas locations by the end of 2003. It already operates 48
hypermarkets in Taiwan, South Korea and Thailand, and has ambitious plans to expand into the emerging
economies of Eastern Europe, particularly in Poland, Hungary, Slovakia and the Czech Republic, many of which
are in the process of applying for membership of the European Union. The expansion plans may involve some
franchising or joint venture arrangements.
Tesco’s mission statement is:
“To create value for our customers, to earn their lifetime loyalty “.
This is summed up in their two values, which drive the way they do business:
• “No one tries harder than we do for our customers”
• “We treat people the way we like to be treated”.
Analyse the potential benefits and problems associated with Tesco’s and Carrefour’s decision to expand their
businesses in overseas locations, rather than seek expansion in their own countries.
(Total 8 marks)
4. China
China, with a population of some 1.3 billion people, is hungry for economic growth. Between 1979 and 2000, its
GDP grew at 9.7% per year on average. Young Chinese drink coffee at Starbucks, talk on mobile phones and use
the Internet for their news and fashions. By night the neon signs illustrate the extent of foreign investment. They
display Nestle, Samsung, Canon, Pepsi and Standard Chartered. Shanghai, Beijing and the coastal cities are as
dynamic now as Hong Kong was a few years ago.
With world demand for ICT products and services falling, companies in expensive markets, such as the US and
Japan in particular, have turned from innovation towards cutting costs. In China more than two million university
graduates qualify each year. Wages are about 50 cents per hour. American manufacturers, pay more than $6. US
companies such as Dell and Siemens as well as Acer of Taiwan and Japan’s Sony and Hitachi have moved
production to China. Foreign motor manufacturers are now among the highest Chinese taxpayers. Boom towns
such as Shenzen create an image of China as a country full of technology fanatics. It has 40 million Internet users
and 178 million mobile-phone owners which is more than in America.
However, the wealth gap between rich and poor is widening. China is bureaucratic with a centrally planned
economy. There are political risks associated with the new government, but after a year as a member of the
World Trade Organization (WTO), China can claim to have achieved about 70% of the tariff cuts agreed to on
entry. Overall tariffs have come down from 15% to 12%. However, some agricultural tariffs have risen and new
rules, such as health and safety requirements, discriminate against foreign firms who also complain about
illegally copied books, music and software.
Using a PEST framework analyse the potential advantages and disadvantages to foreign firms of locating in China.
(Total 6 marks)
5.
Mr Yin produces traditional Chinese medicines. He has established a successful family business within a single
region of China. Mr Yin is thinking of expanding the company’s activities. This expansion may be within
China – or, indeed, outside China so as to meet the needs of Chinese communities abroad.
The company’s success is likely to be dependent on regional economic growth. Mr Yin is currently considering
the following options. The costs of individual options and expected profit (loss) for each option are:
Expected return ($) from selected
economic conditions and probability
of conditions (%)
Improved
Unchanged
Worsened
Options:
Costs
20%
50%
30%
1. Expansion into the European Union
$2m
4.6m
2.4m
1m
2. Expansion into the USA
$1.75m
5m
3m
(–1.5m)
3. Expansion into different region in China
$0.5m
lm
0.5m
(–0.5 m)
$0.5m
lm
0.5m
(–0.5 m)
Extra $0.5 m
2m
lm
0.75m
(a) With no changes to its product portfolio
(b) With improved product range
(a)
Construct a decision tree and select the most desirable option for expansion of Mr Yin’s business on
financial grounds. Show all your working.
(8)
(b)
Describe how Mr Yin may have gathered the information to produce the decision tree.
(3)
(c)
Assess the difficulties that the organization may face selling its product abroad.
(Total 5 marks)