Discuss factors that could determine the success of a business that has decided to set up an online shop to sell beauty products. (12 mark) [9609/12/O/N/16]
To ensure that the online shop is successful, the business must have the right marketing mix. The business must offer the products that can meet customers' needs and wants'. Failure to do so will result in not getting sales and subsequently it will have to close shop. Therefore, it is important that the business find the right target segments and offer the right product. Also beauty products are considered to be luxury. So in times of recession, people will have less money and must spend on necessity goods and service. They will have less disposable income and therefore they will not choose to buy beauty products. As such, the business will fail.
The price must be made affordable. If the products are too expensive, then the customers cannot afford to buy because there is high inflation. If the products are too cheap, then the customers may view the products as having low quality and refuse to purchase. The business must also decide the right pricing strategy and determine whether to use penetrative pricing or skimming pricing. Penetrative pricing is where the business sell the products at low price and then later increase it when the demand grows. This is often applies when businesses want to encourage trial purchase and when the brand of the products are not so well-known. Skimming pricing is where the price is firstly price high and then be reduced when the demand becomes stagnated. This is highly important to business that manufactures technology-based products as they need to recover the cost of R&D fast. Also, technology product have very short product life-cycle and can quickly become obsolete when more sophisticated products are produced and introduced by the competitors.
For the business to be successful, the business must have good promotion. The online shop must consider using 'above-the-line' promotion and 'below-the-line' promotion. It must advertise on many different platforms so customer will be aware. Therefore, the online shop must use both traditional and contemporary media of advertisement like newspapers, magazines, television, billboards, Internet, social media, and mobile marketing. It needs to shows sexy women using the beauty product so the users can see the benefit. For 'below-the-line' promotions, the online shop needs to offer discounts or rebates. This will make it attractive for the customers to buy. Also, the online shop can have contest and use celebrity to promote its products.
For place because the shop is online, there will be no physical retail. This means the business is selling directly to the customers. Direct selling can eliminate intermediary costs and this means the business can reduce the price of the products when selling online as costs will be reduced.
After reading the above answer, how many marks you will award the above answer. Give your justification. Analyse whether there are any weaknesses in the above writing. Do you think the ideas presented above are relevant to the context of the question? Do you think that the scope of discussion is adequate. Identify also if you think there are any ideas which may be relevant (but perhaps not appropriately written).
After evaluating the above answer, ask yourself can your provide a better one. For those who are my students, you may want to show to me your draft answer for the above question. You are recommended to submit a handwritten answer directly to me. Or (if you don't have time) just discuss with me about your evaluation of the above answer on this blog.
IMPORTANT NOTE: THE ABOVE IS NOT CONSIDERED AN IDEAL ANSWER BUT A SAMPLE TO SHOW TO YOU HOW A LOWER GRADE ANSWER IS WRITTEN AND FOR YOU TO THINK FOR YOURSELF HOW THIS ANSWER CAN POSSIBLY BE IMPROVED.
CHAN CHICKEN FARM [9707/31/M/J/15, Q4]
Discuss the importance to CCF of corproate social responsibility when aiming to maximise shareholder value. (16 marks)
Consider the comment that was made in the examiner's report for this question.
"Many candidates started well with a definition or
explanation of corporate social responsibility and went on to give examples of
this. Occasionally a contrast was made between the stakeholder concept and the
shareholder view of business. However, many responses simply quoted passages
from the case study without adding to them. These answers tended to just
describe the problems that CCF faced from its approach of cutting costs. Many
answers wrongly conflated CSR with observing legal or regulatory constraints.
Most answers contained a general assumption that CCF should consider CSR
without giving supporting reasons making effective links to profit, increasing
dividends and the value of shares. Only the better answers gave detailed
reasons why CSR should be considered. Very few candidates looked at the concept
of shareholder value – an integral part of what the question required. The
better responses gave commercial reasons for considering CSR and made links
between some of the problems faced by CCF and the consequent potential impact
on shareholder value. Good evaluation often contrasted the short term cost of
CSR with the long term benefits."
GRADE A ANSWER
Corporate social responsibility is understood as how businesses works to fulfill the triple bottomline. These profit-making organisations do not only function to create economic wealth to benefit the financial interest of their economic masters (i.e. the shareholders) but also work to promote the community interest in addition to preserve and protect welfare of the natural environment. However, such responsibility does not cover external stakeholders but should also include the consideration of looking after the welfare of the internal stakeholders namely the employees where these people are part of the community.
We must appreciate that corporate social responsibility has the potential to maximise shareholder value in terms helping the company to earn more profit and thereby can provide more dividend payout. Furthermore, through CSR, the reputation of the company can be build and this subsequently can help increase the share capital value.
Unfortunately, as we see in case study, it appears that CCF has ignored or abandoned its CSR in pursuit of cost reduction. For example, the reduction in training would be a probable cause of poor quality control leading to the production of products that are harmful upon consumption. This is highlighted in line 19-20 where consumers suffer from food poisining. Such incidence will negative affect the reputation of the company. This can result in customers losing confidence of CCF's brand and refuse to purchase. As such, CCF will experience lower sales turnover and be incapable to provide shareholder higher dividend. Moreover, as the reputation is spoiled share capital value will drop.
Furthermore, the act of CCF in putting its chicken in confined spaces may be perceived by others as animal abuse. This can be problematic when animal activisit highlight such practice which can invite backlash from the community and result in customers boycotting CCF's products.
Another issue to consider is where CCF failed to appreciate how employees are social creature. By abandoning teamwork, those employees may experience isolation and this may result in them experience some psychological problems and also low motivation. Such outcome will have a negative impact on the performance output leading to poor quality of products being generated. Again, as stated in earlier paragraph, this can result in lower sales and poor reputation which will diminish shareholder value.
The act of reducing wage rates may lead to CCF to be perceived as not being socially responsible. This is because for the sake of reducing cost in hope to get higher profits, it ignore the economic needs of the employees who want to receive adequate earning especially if the economic environment is undergoing inflation. The basic needs of the employees may not be fulfilled leading to lower motivation which may be the cause of lower productivity (stated in line 15). Perhaps, the employees, seeing how CCF is not being considerate of their welfare, they may react and retaliate by not providing their dedication to their work.
As we can look at the above analysis, we can safely conclude that corporate social responsibility is indeed very important and has the potential to maximise shareholder value in the long term by promoting employee motivation, building a more positive reputation, and instill confidence in the customers to encourage more sales. Eventually, the act of doing good to the other stakeholders can help CCF to increase the dividend and share capital which are the economic return of the shareholders.
