Arab Open University

Faculty of Business Studies

B203A: BUSINESS FUNCTIONS IN CONTEXT I
Fall 2013-2014
FINAL EXAM MARKING GUIDELINES
Time Allowed: 3 hours

Instructions:
 This examination consists of FIVE (5) questions, and you are required to mark only
FOUR (4) of these questions.
 Answers are expected to be essay-format.
 Any form of cheating should not be tolerated, and should be subject to AOU cheating
policy.
 These marking guidelines are general, and they show how grades should be distributed.
Markers are supposed to use their academic judgment, as in many instances there isn’t
one right answer for these questions.
 In case the student attempts all 5 questions, the first 4 answers only should be considered.

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Question 1 (25 marks)

A. Quality is a key concern of almost all organizations. High-quality goods and services
can give an organization a considerable competitive edge. Discuss the FOUR gaps in
diagnosing quality problems. Support your answers with examples. (12 marks)
B. The process of information management could be broken down into several steps.
Discuss these steps in some detail. (13 marks)

Marking Guidelines of Question 1

Operations management textbook by Slack, Chapter 17 “Quality Management”.
Information management in context by Hinton, Chapter 5 “The process of
information management”
ITEM MARKS
Quality gaps (4 x 2 marks) = 8 marks
Examples of quality gaps (4 x 1 mark) = 4 marks

Gathering information 3 marks

Analyzing information 3 marks
Communicating information 4 marks
Storing information 3 marks
Total 25 marks

A.

Gap 1: The customer’s specification-operation’s specification gap: Perceived quality could

be poor because there may be mismatch between the organization’s own internal quality
specification and the specification which is expected by the customer. + Example (3
marks)

Gap 2: The concept-specification gap: Perceived quality could be poor because there is a
mismatch between the products or service concept and the way the organization has
specified the quality of the product or service internally. + Example (3 marks)

Gap 3: The quality specification-actual quality gap: Perceived quality could be poor because
there is a mismatch between the actual quality of the service or product provided by the
operation and its internal quality specification. + Example (3 marks)

Gap 4: The actual quality-communicated image gap: Perceived quality could be poor because
there is a gap between the organization’s external communications or market image and
the actual quality of the service or product delivered to the customer. This may be the
result of either the marketing function setting unachievable expectations in the minds of
customers or operations not providing the level of quality expected by the customer. +
Example (3 marks)

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 B. The process of information management could be broken down into the following steps:

1- Gathering information: this process includes all the activities in order to collect the
needed information. In some cases, these information gathering activities may involve no
more than receiving the information that other people give you or send to you.
Information gathering may be routine (for example, staff completing and submitting
weekly time-sheets or expense claims) or it ay be ad hoc (for example, a customer calls to
say they have not received their order). They can be small scale, or very large scale.

2- Analyzing information: the purpose of analyzing information is to make it more useful

for decision making. This can be considered as a process of transforming ‘raw data’ into
meaningful information. Analyzing information may involve a variety of manipulations
of the raw data that can range from simple operations than can be done in a person’s head
to complex calculations requiring the use of sophisticated computer software. In some
cases the use of computers can help to reduce the time spent in data analysis, especially
when purely numerical calculations are involved.

3- Communicating information: problems with communication are probably the most

frequently expressed complaint by people working in large organizations.
Communication involves the following:
 Formulation: is deciding what to say, to whom and how to say it.
 Transmission: involves the choice of means of communication (leaflet, fax or
team meeting), and the timing.
 Reception: is affected by choices about formulation and transmission. You can do
your best in focusing and expressing your message and in choosing the right time,
place and means of transmission, but the recipient may still not attend your
message.
 Interpretation: involves the issue of whether the recipient understands the message
in the way you intended.

4- Storing information: information needs to be stored, both for use in later activities and
for submission to higher management and auditing bodies.

Question 2 (25 marks)

A. Discuss in some detail the core aspects of the micro marketing environment (12
marks)

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 B. Strategist Michael Porter identified the so- called generic routes to competitive
advantage claiming them to result in success for companies competing for position
in any particular market. Define competitive advantage, differential advantage, and
discuss in details the three routes to competitive advantage. (13 marks)

Marking Guidelines of Question 2

Marketing Essentials by Dibb & Simkin, Chapter 2 ‘Marketing Strategy’, and
Chapter 3 ‘The marketing environment’
ITEM MARKS
Micro marketing aspects 6 x 2 marks = 12 marks
Definition of competitive advantage 2 marks
Definition of differential advantage 2 marks
The three routes to competitive advantage. 3 x 3 marks = 9 marks

Total 25 marks

A. The core aspects of the micro marketing environment are:

 The organization: refers to the internal environment: top management, finance,
research & development, sales and marketing, etc.. the marketing function’s
recommendations must be consistent with senior management’s corporate goals;
be conveyed to other functions within the organization; and reflect colleagues’
views, input, concerns and abilities to implement the desired marketing plan. (2
marks)
 Suppliers: most organizations source raw materials, components or supplies from
third parties. Without the understanding and cooperation of these other
organizations, a business would fail to deliver a quality product or service that
-satisfies its customers’ needs. (2 marks)
 Marketing intermediaries: some businesses sell directly to their targeted
customers. Most, though, utilize the skills, network and resources of
intermediaries to make their products available to the end- user customer.
Intermediaries include resellers such as retailers, wholesalers, agents, brokers and
dealers; providers of marketing services such as advertising agencies or packaging
design consultancies…etc.. (2 marks)
 Buyers: customers are central to the marketing concept. They have changing
requirements, needs and perceptions, which marketers must understand, anticipate
and satisfy. Consumers should be analyzed, and the marketing mix must be
designed to satisfy these customers’ requirements. (2 marks)
 Competitors: marketers must strive to satisfy their target customers but in a
manner that differentiates their product, brand and overall proposition from

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 competing companies’ marketing mixes. In order to achieve this, marketers
require an in-depth understanding of their competitors. (2 marks)
 Publics: the micro marketing environment also includes any group-public- that
does or could impact an organization’s ability to satisfy its target customers and
achieve its corporate objectives. These include: financial bodies such as banks,
investment houses, shareholders; newspapers magazine, radio, television or
Internet media that carry features about a business; government bodies; consumer
and pressure groups; neighborhood publics such as residents…etc (2 marks)

B.
Competitive advantage is the achievement of superior performance vis-à-vis rivals, through
differentiation to create distinct product appeal or brand identity; through providing customer
value and achieving the lowest delivered cost; or by focusing on narrowly scoped product
categories or market niches so as to be viewed as a leading specialist. (2 marks)

Differential advantage: is an attribute of a brand, product, service or marketing mix that is

desired by the targeted customer and provided by only one supplier. (2 marks)

The three routes to competitive advantage

1- Cost Leadership: This involves developing a low cost base, often through economies
of scale associated with high market share and economies of experience. to give high
contribution. This high financial contribution can then be used to further develop the
low cost base. (3 marks)
2- Differentiation: Companies adopting differentiation strategy strive to offer product
and marketing programs that have a distinct advantage or are different to those
offered by competitors. Differentiation can be achieved on a number of fronts,
including creative and innovative product or brand designs, or novel distribution
channel, pricing and customer service policies. (3 marks)
3- Focus: Companies must maintain close links with the market so that product and
marketing efforts are designed with a particular target group in mind. (3 marks)

Question 3 (25 marks)

Marketing segmentation is a key approach to marketing. Explain what we mean by
segmentation and discuss the four most common types of criteria used for segmentation.
Use examples to support your discussion.

Marking Guidelines of Question 3

Marketing Essentials by Dibb & Simkin, Chapter 6 “Segmenting markets, targeting
and positioning”

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 ITEM MARKS
Definition of marketing Segmentation 5 marks
Discussing the criteria used for segmentation (4 x 3 marks) = 12 marks
Examples (4 x 2 marks)=8 marks
Total 25 marks

Definition of segmentation

Segmentation is concerned with grouping consumers according to their needs.

The aim of segmentation is to identify a group of people who have a need or needs that can be
met by a single product, in order to concentrate the marketing firm’s efforts most effectively and
economically (5 marks)

Criteria used for segmentation

1- Demographics variables

Demographics characteristics that marketers commonly use in segmenting markets include age,
gender, race, ethnicity, income, education, occupation, family size, family life cycle, religion,
and social class. (3 marks)

Example: Manufacturers of tea pages offer their products in packages of different sizes to satisfy
the needs of single consumers and large families. (2 marks)

2- Geographic Variables

The needs of consumers in different geographic locations may be affected by their local climate,
natural resources and population density. (3 marks)

Example: a company that sells products throughout the EU, need to take the different languages
spoken into account when labeling its goods. (2 marks)

3- Psychographic Variables

Psychographic Segmentation ased on the personality characteristics, motives and life style of
the individuals in the segment. (3 marks)

Example: the home insurance market might segment into those who are afraid of crime,
natural disaster or accidental damage to property. (2 marks)

4- Behavioral Variables

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 Behavioral Segmentation: Marketers can also segment markets on the basis of an aspect of
consumers’ behaviors toward the product. This might relate to the way the particular product
is used or purchased, or the benefit the consumers require from it. (3 marks)

Example: brand-loyal customers may require different kind of treatment from those who
switch between brands. (2 marks)

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Question 4 (25 marks)

Marketers go through EIGHT stages when setting the price of a product. Discuss these
EIGHT stages. In your discussion, also explain the following:

 The THREE major dimensions on which prices could be based.

 Any THREE pricing strategies of your choice.

Marking Guidelines of Question 4

Marketing Essentials by Dibb & Simkin, Chapter 12 ‘Pricing concepts’, pp.368-370
ITEM MARKS
STAGE 1 2 marks
STAGE 2 2 marks
STAGE 3 2 marks
STAGE 4 2 marks
STAGE 5 2 marks
STAGE 6 1 mark
The THREE major dimensions 3 x 2 marks = 6 marks
STAGE 7 1 mark
Three pricing strategies 3 x 2 marks = 6 marks
STAGE 8 1 mark
Total 25 marks

STAGE 1: Selection of pricing objectives: this is a critical stage because pricing objectives are
the foundation on which the decisions of subsequent stages are based.

STAGE 2: Assessment of target market’s evaluation of price and its ability to pay: this
shows how much emphasis to place on price and may help determine how far above the
competition prices can be set. Understanding customer’s buying power and the importance of a
product to them with comparison with other products help the target market’s evaluation of price
to be accurately assessed.

STAGE 3: Determination of demand: It’s the quantity of products expected to be sold at

various prices. Usually, as price falls, the quantity demanded increases with the exception of
some prestige products.

STAGE 4: Analysis of demand, cost and profit relationships: this stage can be accomplished
through using marginal analysis or break even analysis.

STAGE 5: Evaluation of competitors’ prices: a marketer needs to be aware of the prices

charged by competing brands. This allows a company to keep its prices the same as competitors’
prices when non-price competition is used. If a company uses price as a competitive tool, it can
price its brand or product below competing brands or products.

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STAGE 6: Selection of a basis for pricing: the three major dimensions on which prices can be
based are cost, demand and competition.

 In using cost based pricing, a company determines price by adding a monetary

amount or percentage to the cost of the product.
 Demand based pricing is based on the level of demand for a product and requires
marketers to estimate the amounts of a product that buyers will demand.
 Competition based pricing, costs and revenues are secondary to competitors’ prices.
 The increasingly popular marketing oriented pricing involves a company taking
account of a wide range of factors including marketing strategy, competition, value to
the customer, etc..

STAGE 7: Selection of a pricing strategy: is an approach designed to achieve pricing and

marketing objectives. Some examples of pricing strategies are:

 Differential pricing involves charging different prices for the same quality or quantity
of the product.
 New product pricing: it could be either price skimming (pricing new products above
all competitors), or penetration pricing (setting a price lower than all competitors in
order to penetrate the market).
 Product line pricing: establishes and adjusts the prices of multiple products within a
product line.
 Psychological pricing: a pricing strategy designed to encourage purchases that are
based on emotional rather than rational responses.
 Professional pricing: is set by people who have great skill or experience in a
particular field.
 Promotional pricing: is a pricing approach in which pricing is related to the short-
term promotion of a particular product.

(There are many detailed pricing strategies mentioned on page 370 of the marketing textbook. Markers
should consider a correct answer other marketing strategies that are not mentioned above in these
marking guidelines. For instance if the student mentions “price skimming” or “prestige pricing”, as a
pricing strategies, then it should be considered as a correct answer).

STAGE 8: Determination of a specific price: is the final stage in establishing a price. It’s to
determine the specific price to be asked for from customers. The basis for a price and the pricing
strategy should direct and structure the selection of a final price.

Question 5 (25 marks)

A. Several types of promotional methods can be used to communicate with individuals,

groups and organizations. Define the term ‘promotional mix’ and then discuss any

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 five of the promotional mix ingredients. Support your answer with examples. (19
marks)
B. Explain the difference between advertising and publicity. (6 marks)

Marking Guidelines of Question

Marketing Essentials by Dibb & Simkin, Chapter 13 ‘An overview of marketing
communications’ pp. 389-395
ITEM MARKS
Marketing mix definition 4 marks
Discussion of 5 marketing mix ingredients 5 x 2 marks = 10 marks
Examples 5 marks
Difference between advertising and publicity 6 marks
Total 25 marks

A.

Promotional mix is the specific combination of ingredients an organization uses to promote a

product, traditionally including four ingredients: advertising, personal selling, PR and sales
promotion. Sponsorship, direct mail, the Internet and direct marketing are recent additions to the
promotional mix (4 marks)

Students are expected to discuss any 5 promotional mix ingredients:

Advertising: is a paid form of non-personal communication about an organization and its

products that is transmitted to a target audience through a mass medium. + example

Personal selling: the use of personal communication is an exchange situation to inform

customers and persuade them to purchase products. + example

PR or publicity: non-personal communication in news-story about an organization and/or its

products that is transmitted through a mass medium at no charge. + example

Sales promotion: an activity or material that acts as a direct inducement by offering added value
to or incentive for the product to resellers, sales people or consumers. + example.

Sponsorship: the financial or material support of an event, activity, person, organization or

product by an unrelated organization or donor. + example

Direct mail: a method of communication used to entice prospective customers or charitable

donors to invest in products, services or worthy causes. + example

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Direct mail: a method of communication used to entice prospective customers or charitable
donors to invest in products, services or worthy causes. + example

The Internet: the Internet provides a tool that can be interactive, updated or modified quickly,
and that can produce material aimed at very tightly defined target groups or even individual
consumers. + example.

Direct marketing: A decision by a company’s marketers to select a marketing channel which

avoids dependence on marketing channel intermediaries and to focus marketing communications
activity on promotional mix ingredients which deal directly with targeted customers. + example

B.
The difference between publicity and advertising is that the placing of advertisements is paid for,
whereas publicity pieces are published free of charge by a newspaper, television, radio station or
website. These media are often prepared to carry such publicity for free because they believe that
the story has news value.

[END OF MARKING GUIDELINES]

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