4.5.

1 Product Exam Practice questions [134 marks]

1. [Maximum mark: 4] SPM.1.SL.TZ0.3

Refer to the Mapping Tech Ltd. (MT) case study (SL/HL specimen paper 1).

Describe two elements of MT’s marketing mix. [4]

2. [Maximum mark: 10] 22N.2.SL.TZ0.2
Florian Stones (FS)

Florian Stones (FS) sells handmade bracelets made from natural stones. FS enjoys
strong
brand awareness.

Table 2: Forecasted figures for FS for the year ending 31 December 2022

(a) Define the term brand awareness. [2]

(b) Using Table 2, draw a fully labelled break-even chart, to scale, for FS
for 2022. [4]
(c.i) Using Table 2, calculate the profit or loss in 2022 for FS if production
and sales increase to 1200 bracelets
(show all your working). [2]

(c.ii) Using Table 2, calculate the price FS would need to charge per
bracelet if it sells 800 bracelets and wants to make a profit of $10000.
Assume that the costs remain the same (show all your working). [2]
3. [Maximum mark: 20] 22N.2.SL.TZ0.3
Tijeras (TJ)

Tijeras (TJ), a private limited company, manufactures surgical scissors. It has four
shareholders and operates one factory in Peru. TJ sells in Central American and
South American markets. Its sales have grown for the last 10 years, which has led
to both economies of scale and diseconomies of scale.

The chief operating officer (COO) analysed the situation. He discovered that:

current work areas are overcrowded

workers are specializing more than in previous years
maintenance costs are increasing
the firm now buys raw materials in bulk.

The market for surgical equipment, including scissors, in the United States (US) is
large and highly competitive. Recently, some hospitals in the US purchased TJ’s
scissors.

Table 3: Selected financial information for TJ on 31 May 2021 and

2022 and for the years ending 31 May 2021 and 2022

The COO determined that TJ needed more manufacturing capacity and put
forward two options:

Option 1: Keep the current factory in Peru and build a second one in
Mexico, closer to the North American market. TJ’s bank has agreed to provide
a long-term loan to finance the new factory.
Option 2: Build a new factory that is large enough for all of TJ’s
manufacturing-capacity needs and sell the old factory for $400 000. This
new factory cannot be financed solely with external borrowing.
Table 4: Forecasted costs of Option 1 and Option 2

(a) State two features of a private limited company. [2]

(b) With reference to TJ, explain one economy of scale and one
diseconomy of scale. [4]

(c) With reference to TJ, explain the relationship between investment,

profit and cash flow. [4]
(d) Recommend whether TJ should choose Option 1 or Option 2. [10]
4. [Maximum mark: 20] 22N.2.SL.TZ0.5
Musical Musings (MM)

Musical Musings (MM) manufactures musical keyboards, using batch production to

produce a limited range.

MM’s products are designed for use in schools and homes. MM sells directly to
schools, and, for the home market, sells through shops specializing in
technology. MM’s costs are kept low by:

limiting its product range

focusing on a small target market, which enables MM to limit the features on
its keyboards and keep the appearance functional.

MM provides free online “Teach yourself to play the keyboard” training courses
for all customers.

In 2021, MM employed an average of 50 people. During that year, however, 12

people left the company. Their reasons for leaving are shown in Table 5.

Table 5: Stated reasons for employees leaving MM in 2021

[Source: Chang, Y. Y., 2021. [musical keyboard]. [image online] Available at:
https://unsplash.com/photos/VnEIGgL6c-k
[Accessed 2 December 2021].]

MM’s labour turnover rate for 2021 was 24 %. The manufacturing industry average
was 15 %.

In 2021, MM’s sales declined. MM is now considering targeting the niche market of
professional musicians. MM would change its product design by adding a range
of different sound features and improving the appearance of its keyboards. To
achieve this change, MM would eventually stop supplying its existing market.
Professional musicians would pay a higher negotiated price for improved
keyboards made to their individual specifications. Changing its production
process to job/customized production would be expensive for MM, however, and
it would have to invest in a new marketing strategy.
(a) State two characteristics of a niche market. [2]

(b) Explain two methods that MM could use to reduce its labour turnover. [4]
(c) Explain two ways in which MM’s profits could be affected by
changing from batch production to job/customized production. [4]

(d) Discuss the impact on MM’s marketing mix if MM changes its target
market to professional musicians. [10]
5. [Maximum mark: 10] 20N.1.SL.TZ0.2
Refer to the Ducal Aspirateurs case study (DA) (SL/HL paper 1 Nov 2020).

(a) Outline two STEEPLE factors that have influenced DA’s business
strategy. [4]

(b) Explain how knowledge of the product life cycle may have
influenced DA’s product range. [6]
6. [Maximum mark: 20] 20N.2.SL.TZ0.4
Nigris & Speroni (NS)

Nigris & Speroni (NS) is a national grocery store chain. In the tertiary sector, it benefits
from economies of scale, including purchasing economies of scale. Its stores use
sophisticated computerization to manage stock and monitor customers’
purchasing habits. NS is currently experimenting with cleverly placed products
and short-term promotions to increase impulse purchases, which occur when a
customer makes unplanned purchases. Something in the store – a smell, a vivid
display, samples of products – triggers a customer’s desire for items.

NS has above-average prices compared to the industry average, but at least one
other chain is more expensive. The grocery store industry is competitive and
grocery stores use many different pricing strategies. NS is considering adopting
an online ordering and delivery service for customers, which would operate
from its stores.

Each of NS’ stores is given a number to identify it. Store number 507 is called NS 507.

Table 3: Selected financial information for NS 507 for 2019

On 1 January 2020, an organic grocery store, U-Foods, opened near NS 507. U-Foods
sells high-quality foods, including organically produced fruits and vegetables,
organically raised meats and sustainably sourced seafood (not from fish farms). It
charges higher prices than NS 507 and has higher margins. The few processed
foods that it sells are organic and low in salt. Unlike NS 507, U-Foods does not sell
cigarettes or high-sugar beverages and cereals. It is also not considering an
online ordering and delivery service like NS is.

In the first six months of 2020, however, NS 507 lost market share. Sales revenue
was 12 % lower than in the first six months of 2019, even though the number of
customers and transactions did not change.
(a) State two types of business, other than grocery stores, that operate
in the tertiary sector. [2]

(b) Explain two elements of U-Foods’ marketing mix other than price. [4]

(c.i) Calculate, for 2019, NS 507’s gross profit margin (no working required). [1]

(c.ii) Calculate, for 2019, NS 507’s net profit before interest and tax (no working
required). [1]
(d) Explain one economy of scale, other than purchasing economies of
scale, from which NS might benefit. [2]

(e) Discuss two possible methods that NS 507 could use to regain lost
market share. [10]
7. [Maximum mark: 10] 18N.1.SL.TZ0.2
(a) Refer to the As Fair As case study (SL/HL paper 1 Nov 2018).

Describe two external stakeholders of AFA, other than customers. [4]

(b) Refer to the As Fair As case study (SL/HL paper 1 Nov 2018).

With reference to AFA, explain the importance of branding. [6]

8. [Maximum mark: 20] 18N.2.SL.TZ0.3
Jacob Strutz (JS)

Jacob Strutz (JS) is an American multinational company that produces jeans.

Founded in 1860, for 100 years JS enjoyed steady growth in sales, mostly in the
United States and then in Canada and Mexico. In the 1960s and 1970s, when
teenagers worldwide began wearing jeans, JS’s sales increased significantly. JS’s
premier product is Strutz’s No.5 jeans, one of the best-known brands in the
world.

In the late 1970s, JS operated 71 factories in the United States. In 1994, its sales
peaked at $7.6 billion worldwide, but then began to decline. In 2002, JS made the
decision to close its last remaining factories and outsource manufacturing to
foreign manufacturers, whose quality was more difficult to control. By 2017,
annual sales were only $4.5 billion. Even sales of Strutz’s No.5 jeans declined, and
JS faced intense competition, including foreign competition.

JS briefly experimented with fast fashion, an industry practice developed in the

United States in response to cheap, foreign imports. In fast fashion, new design
concepts are quickly manufactured once they have been tested at fashion
shows. Unfortunately, fast fashion worked against JS’s brand identity. Surveys
indicated that JS’s brand has value and inspires loyalty, though focus groups of
young consumers did not perceive JS as cool.

JS has been a leader in corporate social responsibility (CSR). Since the 1890s, it has
pursued profits through values. More recently, JS introduced Strutz’s chemical-
free jeans. Because many of JS’s suppliers operate in areas with few pollution
regulations, to remain consistent with its image of CSR, JS is insisting that
suppliers follow innovative but expensive chemical-free processes.

(a) Define the term multinational company (MNC). [2]

(b.i) Explain the importance to JS of brand value. [2]

(b.ii) Explain the importance to JS of brand loyalty. [2]

(c.i) Draw and label a product life cycle for Strutz’s No.5 jeans. [2]
(c.ii) Explain the position of Strutz’s No.5 jeans on the product life cycle. [2]

(d) Discuss the role and impact of globalization on the growth and
evolution of JS. [10]
9. [Maximum mark: 20] 18M.2.SL.TZ0.3
JVS

JVS is a successful manufacturer of designer clothing. A marketing expert

described JVS’s brand name, Izzys, as one of the business’s major strengths.
Because of its market orientation approach, JVS spends significantly more on
market research than its competitors.

JVS’s products are:

• Izzys, a range of high-quality fashion jeans, which contributes 70 % towards
JVS’s revenue and profit. The market for this range is not growing.
• IzzDen, a range of denim jackets, which is near the end of the product life cycle.
Manufacturing of this product will cease later this year.

Izzys and IzzDen are sold through high-end independent retailers throughout
countries in Europe. JVS uses a price leadership strategy for these two products.
Consumers perceive JVS as fashionable. They also believe that JVS’s products are
worth the premium price.

JVS is considering launching a new product, a range of fashionable shorts –

Izzless – aimed at the 15–19 age group. With this product, JVS would reach a
different, but highly competitive, market. Focus groups revealed that many low-
income young consumers want to purchase fashion shorts. JVS would sell the
new shorts to mass market discount retail stores. Consumers would also be able
to order online for next-day delivery.

[Source: © International Baccalaureate Organization 2018]

(a) State two stages of the product life cycle. [2]

(b) Apply the Boston Consulting Group (BCG) matrix to JVS’s current
product portfolio. [4]

(c) Explain one advantage and one disadvantage for JVS of using focus
groups for its market research. [4]

(d) Recommend whether JVS should launch the new product, Izzless. [10]
© International Baccalaureate Organization, 2023