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DALMIA INSTITUTE OF MANAGEMENT STUDIES AND RESEARCH MMS/PGDBM-I SEMESTER(FINAL EXAMINATION) MARKETING MANAGEMENT Duration : 3 Hours Instructions to Examinees : 1) This paper consists of 4 parts Section A, B, C and D. 2) Time Allowed : 3 Hours 3) Read the following before answering the examination questions : (i) (ii) (iii) (iv) Read all questions carefully before you answer Apportion your time according to the marks allocated to the questions. Number the answers to the questions clearly before answering. Please write neatly as illegible handwriting cannot be evaluated for the merits it deserves. SECTION-A Q.1. Give the differences between Haat and Mela. Q.2. What is single segment concentration? Give an example. Q.3. What stage of life cycle cotton clothing is presently in? Why? Q.4. How will you do simulated test marketing for a Gift Pen set? Q.5. What is the demand for Audio CD in India by Chain-Ratio Method? (Average Cost Per Audio CD is Rs. 100/-) Q.6. Give one major strength, weakness, opportunity and threat for a firm contemplating to enter courier business. Q.7. What is Reciprocity in Business Marketing Situation? Give a suitable example. Q.8. Give any two market leader strategies for competing with examples. Q.9. Where does income come from for a Dot Com Company? Q.10. In a BCG model, when one says a SBU is a STAR, what is meant? (10 x 2 = 20 Marks) Max. Marks: 100

SECTION-B Fill in the Blanks. 1. When a company selling cell phone, TV and Washing Machine under Brand Tab, launches the DVD player with the same name. They are doing (1) 2. In my daily life the two convenience goods are (3) 3. Alpha Testing is the name given to testing the product 4. Fads are fashions that (5) (6) (7) (4) (2) and

5. In India Reliance differentiates itself by

6. The two attack strategies I would choose as a challenger are and (8)

7. The variables I would choose to plot market preference pattern for a Talcum Powder are (9) and (10) 8. The two factors that form part of Natural Environment are and (12) (11) ( 12 x 1 = 12 Marks) SECTION-C 1) Until Mid-80s, ladies cosmetics were restricted to Kajal, Bindi, Nail Polish and Conventional lipsticks for special occasions. With the changing environment, exposure to westernization, beauty contests, TV channels and magazines coupled with the recognition status for women, the demand pattern for cosmetics is changing. The ladies buy and will continue to. How will you go about segmenting and targeting if you are a perfume marketing professional? 2) There are many branded cotton trousers in the market today. Allen Solly, Colour plus, Park Avenue, Black Berry etc are some of the brands. You are coming with the brand Waist. How will you position yourself? Explain with logic.

3) The market for microwave ovens is estimated to be around 60,000 pieces per annum. CQM, MH, Simsong, Shape are some brands attempting to expand the market in the last few years. MH launched its microwave ovens in two models- 30 litre normal and 30 litre with grill. The company also plans to launch higher capacity models for large families. The price range of MH models are from Rs. 13,500 Rs. 22,900. CQM and Simsong Models are priced around Rs. 8,000 for smaller no-frillmodels. MH Brand has benefits like faster operation, auto-defrost, child lock, rotating turn table etc. MH holds live demos in exhibitions and offers recipes to consumers. Microwave ovens are around in Indian market for quite sometime but they do not appear on the priority list of most consumers. How do you tackle pricing and consumer behaviour aspects of the problem? 4) Consumers for a long time had no choice in the category of branded butter. Amul is a national brand. It has used topical advertisement for a number of years (hoarding in cities used by Amul), Britania recently entered the market and positioned the brand as Better Butter. The Butter market is over Rs. 300 crores a year with a growth rate of 20% per annum. What are the product oriented strategies you would recommend to Britannia? 5) Onida is one of the pioneer companies to introduce TV in India. It has a good brand recall, on account of its devil based TV campaign. Today with the players like LG, Samsung, Thomson, Philips, Sony etc, Onida does not have control over the market. How can Onida go about its plan to compete and regain its status in the market? 6) Coleece is an ayurvedic nasal inhaler introduced by Quebro and is produced from Natural oils like eucalyptus. Its main competitors are Vicks and Amrutanjan. The market is estimated to be at 80 million units per year. Consumers are aware that the eucalyptus is used for colds. The price is Rs. 15/- per inhaler. Public perceive that ayurvedic products do not have side effects. Coleece has a different smell which consumer is not used to over these years. What are your target segments and how would you go about introducing the product in the market? Give reasons. ( 6 x 8 = 48 Marks)

SECTION -D HEMANT STEELS LIMITED M/s. Hemant Steels Limited was established in 1985 and it went into commercial production in 1987. It had technical collaboration with a leading steel producer in Western Europe. The firm was manufacturing steel strips which were hitherto imported. Thus, they were doing 100 per cent import substitution job. At the time when they came into the market, a similar plant with indigenous technical knowhow also came up. Its investment was 1/10th that of M/s. Hemant Steel Limited. The organizational structure of M/s. Hemant Steel Limited was as per Exhibit-1. Exhibit-1 : Organization Chart Chairman (Mr. Bhagwati) Board of Directors

Chief Executive (Mr. Nathan)

Works Manager Deputy Works Manager

Chief Controller of Finance Chief Sales Executive Sales Engineers

Commercial Manager Sales Development Engineer Regional Managers

Quality Control head 1 Quality Control Engineer Chemist

Foreman 2 Machine Operators 3 Technical Sales Officer Accountant

Before going into production, the chairman, Mr. Bhagwati called a meeting of all the executives to decide the price structure. Chairman (Mr. Bhagwati) : Gentlemen, you might be aware that our plant is one among the worlds most modern plants. With our sophisticated equipment we have the result of the trial production which is really encouraging. I hope we shall be in a position to supply goods as good as imported, if not better. I have already given you the price structure of imported material (See Exhibit-II). Exhibit-II Prices of Imported Material Size CIF Value (Rs. per kg) Import Duty Clearance charges etc (Rs. per kg) 4 5 10 12 Actual Value (Rs. per kg) 12 15 22 26

A B C D

8 10 12 14

Now, I would like to have your opinion regarding the price structure of our material. Chief Executive (Mr. Nathan) : Before you consider this aspect, I would like to inform you of the following mode of pricing : (a) We should calculate the actual cost, keep a reasonable profit margin and decide the prices. (b) Since this item is imported, the availability is scarce and we should take the maximum possible advantage and keep the prices as per the current market price. (c) We should strike a balance between our cost and market price. Commercial Manager (Mr. Kamath) : As per the market data, the requirement of such stell is 6,000 M.T. per year whereas our installed production capacity is only 3,600 M.T. per year. Taking into consideration our competitors production capacity we anticipate no difficulty in marketing our material, if the consumers have to take the material only from indigenous sources. Chief Sales Executive (Mr. Khanna) : I have already approached the government authorities. As per the latest policy, no material is allowed to be imported if it is 5

available indigenously. Moreover, looking at the foreign exchange reserves position, the import of this item is likely to be banned completely. I, therefore, strongly recommend to charge the highest possible price, even more than the current market price. This will enable us to recover the cost of our plant in the minimum possible time. Regional Manager No. 1(Mr. Reddy) : I had contacted some of the potential buyers in my region and they have promised to extend their full cooperation if we : (a) offer them quality material, and (b) charge them reasonable prices I am, therefore, of the opinion that we should keep our prices at realistic level. This will certainly help us to establish ourselves in the market. Mr. Khanna : No buyer would ever tell us to charge more price. We should ignore what they say and try to exploit the situation. After a long discussion, the Chairman decided the price structure as per Exhibit-III. Exhibit-III Prices of Hemant Steel Limited Size A B C D Price (Rs. per kg) 26 30 45 63

The price list was released and made known to the customers through various quotations. Many inquiries from established importers, actual manufacturers and dealers in the trade were received. Most of the inquiries remained only inquiries and never materialized. The response and the off-take of the material was very poor. The sales turnover was very much below the break-even turnover. The chairman arranged a meeting of the executives and the regional sales managers. Chairman : With great regret I inform you that our companys performance has been very discouraging. At this rate, I am afraid, we cannot run our plant. On the basis of the information you all had given me and the subsequent discussion I had with you, the prices were decided on much higher level. Many companies, 6

distributors, dealers etc., sent their inquiries. We had quoted our prices to them. Most of them have remained silent since then. Some companies have indicated orally that unless we reduce the prices, they will not be able to purchase our steel strips. We presumed the demand to be inelastic and set skimming prices. This has resulted in lower sales. I would now like all of you to analyse the situation to find out the crux of the problem and come to a conclusion. I warn you that I cannot tolerate poor sales performance any more and something must be done at the earliest. Commercial Manager (Mr. Kamath) : The reasons for poor off-take as I understand are : (a) There is a lot of imported material in the pipeline and till the time the stock lasts, the buyers would try to negotiate with us and would pressurize us to reduce our prices, and (b) Since the government has already agreed to ban the import of strips, I firmly believe that if we can pull through another six months, we shall be in a position to sell the material at our terms. Regional Sales Manager (Mr. Reddy) : I dont agree with Mr. Kamath. We are finding it very difficult to sell at high and unrealistic prices. We should understand that by lowering the prices we would be able to achieve higher sales turnover, which will be god for the prosperity and growth of our company. Regional Sales Manager No. 2 (Mr. Kamath) : I fully agree with Mr. Reddy. I would even go to the extent of saying that if we do not reduce prices, we would be inviting trouble. Some of the associations have already approached the government complaining that the quality of our material is not good and hence, they should be allowed to import the material. You all know the reason behind the argument. Since they cannot ask for import permission on the price issue, they have complained about the quality. Chief Sales Executive (Mr. Khanna) : If this is true, then it is not a good sign. This would affect our relationship with the future customers. We must do something to win their confidence. Chief Executive : You all have said things but nobody has suggested any concrete solution. Regional Sales Manager No.3 (Mr. K.C. Sen) : What I feel is that we have gone wrong conceptually. The basic assumptions regarding the introduction of market skimming pricing policy, buyers behaviour and inelastic demand of the product were wrong. This has led us to serious trouble in spite of the monopolistic nature of our product.

We must adopt penetration pricing policy. By this I mean that we should lower down our prices to the level of landed price of imported materials. This will increase demand, keep our factory busy, and we would be able to establish ourselves in the market. Once the quality of our product is accepted by repetitive supplies, we shall be able to increase the prices. Commercial Manager : The basic design of our plant is such that we cannot accept Mr. Sens suggestion. If we reduce our prices to the level indicated by Mr. Sen, I am afraid we may break-even or at the most make only marginal profits. The return on capital employed will be extremely low. We cannot allow the market to dictate terms like this. Chief Sales Executive : Let us experiment by fixing the prices.. Chairman : No more experiments. Too many changes in the price will disturb the market equilibrium and will erode our credibility. After a long discussion, the prices were fixed as per Exhibit-IV, which were higher than the imported prices but lower than the initial prices as per Exhibit-III. The prices as per Exhibit-IV were made known to the market. The demand did pick up but not to the companys satisfaction. Those who did not have import licenses, started buying indigenous steel. But these were not the potential customers. Exhibit-IV Revised Prices of Hemant Steel Limited Size A B C D Price (Rs. per kg) 19 25 30 40

The pressure on government from various corners was intensified. In the meantime, the balance of payment position of government improved. The reserves of foreign exchange reached an all-time high. The government started allowing partial imports. The company had to bring down the prices again. The off-take of the material started picking up. All the above events over a period of two years set the Chairman of the company thinking on the following problems: 1. Was the company conceptually right or wrong? 2. What kind of pricing policy should the company adopt for a new product? Should it be market-skimming, penetrating or based on actual costing? 3. Can the monopolistic nature of the product always allow the company to dictate its terms? 4. Does the buyers behaviour play an important role under Indian conditions? (20 Marks) 8