4.1 Introduction to Marketing (DP IB Business Management: SL): Exam Questions

Sunrise Cafe is a family-owned coffee shop in a busy urban neighbourhood. Known for its high-quality artisan coffee and cosy atmosphere, the cafe recently introduced a new menu item: "CoffeeFusion," a premium cold brew infused with exotic flavours. The owners took a product-orientated approach when creating CoffeeFusion, focusing on unique flavours and innovative brewing techniques.

Despite the product’s launch, sales have been lower than expected, with customers expressing a preference for simpler, more affordable options. Meanwhile, a competing chain, QuickBrew, is thriving by catering to consumer demand for convenience and cost-effectiveness. The owners of Sunrise Cafe must now decide whether to continue perfecting CoffeeFusion’s recipe or adopt a market-orientated strategy to better meet customer preferences.

Sunrise Cafe is a family-owned coffee shop in a busy urban neighbourhood. Known for its high-quality artisan coffee and cosy atmosphere, the cafe recently introduced a new menu item: "CoffeeFusion," a premium cold brew infused with exotic flavours. The owners took a product-orientated approach when creating CoffeeFusion, focusing on niche flavours and innovative brewing techniques.

Despite the product’s launch, sales have been lower than expected, with customers expressing a preference for simpler, more affordable options. Meanwhile, a competing chain, QuickBrew, is thriving by catering to consumer demand for convenience and cost-effectiveness. The owners of Sunrise Cafe must now decide whether to continue perfecting CoffeeFusion’s recipe or adopt a market-orientated strategy to better meet customer preferences.

Bloom Petals is a mid-sized florist operating in a competitive urban market. The business primarily caters to special occasions such as weddings and corporate events, offering bespoke floral arrangements. However, it recently expanded into a new niche: eco-friendly flower arrangements. These are made using locally sourced, seasonal flowers and marketed under the tagline “Sustainably Beautiful.”

Bloom Petals operates in a niche market but aims to grow its share by appealing to environmentally conscious customers. While its new products are priced higher than standard arrangements, they align with its values and branding. Despite this, larger competitors offering mass-produced bouquets at lower prices dominate the overall market.

Bloom Petals is a mid-sized florist operating in a competitive urban market. The business primarily caters to special occasions such as weddings and corporate events, offering bespoke floral arrangements. However, it recently expanded into a new niche: eco-friendly flower arrangements. These are made using locally sourced, seasonal flowers and marketed under the tagline “Sustainably Beautiful.”

Bloom Petals operates in a niche market but aims to grow its share by appealing to environmentally conscious customers. While its new products are priced higher than standard arrangements, they align with its values and branding. Despite this, larger competitors offering mass-produced bouquets at lower prices dominate the overall market.

EduBooks is a publishing company specialising in educational resources for students aged 12 to 18. The company has built its reputation on producing high-quality, detailed textbooks for specific subjects, such as Advanced Physics. However, market trends indicate a growing demand for digital resources, including online study platforms and interactive eBooks.

EduBooks faces the challenge of adapting to these changes while maintaining its position as a market leader in traditional print publishing. Its main competitors have already launched subscription-based study platforms, gaining a share of the growing market for digital learning tools.

EduBooks is a publishing company specialising in educational resources for students aged 12 to 18. The company has built its reputation on producing high-quality, detailed textbooks for specific subjects, such as Advanced Physics. However, market trends indicate a growing demand for digital resources, including online study platforms and interactive eBooks.

EduBooks faces the challenge of adapting to these changes while maintaining its position as a market leader in traditional print publishing. Its main competitors have already launched subscription-based study platforms, gaining a share of the growing market for digital learning tools.

FreshStart Ltd operates in the organic beverages market. In 2023, the market size for organic beverages was $480 million. By 2024, the market had grown, driven by increased consumer interest in healthier lifestyles. Management is reviewing the market growth to assess expansion opportunities.

EcoDrive Ltd. sells electric bikes in a growing market. In 2024, the market size for electric bikes was $300 million. EcoDrive’s revenue reached $24 million, placing them among the market leaders. The company wants to calculate its market share to benchmark against competitors.

Brno Manufacturing Ltd produces high-quality tractors and heavy farm machinery for agricultural businesses worldwide. Established over 20 years ago, the company is known for its reliable and precise equipment. Brno is one of the top three companies in its market and aims to increase its market share to become the leading manufacturer of farm machinery by 2026

Brno mainly sells to mid- to large-scale farming businesses that need strong and efficient machinery. The company’s products are considered premium due to their high quality and after-sales service. Brno’s prices are about 10% higher than the industry average because of its strong brand and focus on innovation. However, competitors are attracting price-sensitive customers with lower-cost options. To counter this, Brno has introduced trade-in discounts for old equipment and flexible payment plans

Brno currently holds 28% of the market, making it one of the top three companies in its industry. Its two largest competitors hold 30% and 32%, respectively, while smaller companies make up the remaining 10%. To narrow this gap, Brno’s marketing team is working to improve brand awareness by promoting the durability and efficiency of its products. Incentives, such as trade-in discounts and extended warranties, are being used to attract large-scale farming businesses. The new robotics system is expected to reduce production costs, enabling Brno to compete on price while maintaining healthy profit margins

To achieve its goals, Brno is investing $2.5m in a new flow production line that incorporates robotics. Management must decide whether to use the straight-line method or units-of-production method to depreciate the system. The finance manager has expressed concerns about both options, stating, “The straight-line method might oversimplify depreciation for such a high-use system, but the units-of-production method could complicate financial forecasting if usage varies significantly”

Brno’s leadership believes the robotics investment will be a turning point, allowing the company to produce more at consistent quality levels. However, they must assess how the investment will impact cash flow, profitability and the company’s market position

Table 1: Financial indicators (2023)

Table 2: Depreciation details for new robotics system

Appendix: Memo from the Finance Director

To: CEO, Brno Manufacturing Ltd
From: Finance Director
Subject: External concerns affecting business operations

Dear CEO,

As we continue to modernise production and work towards increasing our market share, I’d like to highlight some challenges we may face:

1. Rising raw material costs: Steel and other material costs have increased, which will affect production expenses and reduce profit margins

2. Fluctuating exchange rates: With 40% of our products exported, changes in exchange rates could make our prices less competitive in international markets

3. Environmental regulations: New government rules on emissions from farm machinery may increase costs for product development

4. Opportunities for subsidies: On the positive side, government subsidies for modernising agricultural equipment could help boost demand for our advanced products

I recommend that we conduct a detailed risk analysis to address these factors and include them in our future plans.

Yours sincerely,
Finance Director

Sunrise Cafe is a family-owned coffee shop in a busy urban neighbourhood. The cafe is known for its high-quality artisan coffee and cosy atmosphere. Recently, the owners introduced a new menu item called CoffeeFusion, a premium cold brew infused with exotic flavours. The recipe for CoffeeFusion was developed using a product-orientated approach, focusing on creating unique flavours and using innovative brewing techniques

Despite their efforts, CoffeeFusion sales have been lower than expected. Many customers say they prefer simpler and more affordable options. In contrast, a competitor, QuickBrew, has seen strong sales growth by offering low-cost, convenient drinks. Sunrise Cafe’s revenue last quarter was $51,275, while QuickBrew earned $99,862, showing the difference in their strategies

The owners of Sunrise Cafe are considering a shift to a market-orientated approach. They want to understand their customers better and adjust their menu to meet customer preferences. To do this, they plan to carry out market research. They will use surveys to ask customers about their tastes, how much they are willing to pay for premium products and which new drinks they would like to see. Focus groups with regular customers will provide detailed feedback on CoffeeFusion and alternative products. The cafe also plans to study QuickBrew’s prices, promotions and customer satisfaction to learn what works well for competitors. Additionally, the owners will look at their own sales data to identify which products are most popular with their customers

Sunrise Cafe’s goal is to attract more loyal customers, grow its market share and reach a quarterly revenue target of $65,425 within the next year. The owners are deciding whether to improve CoffeeFusion’s recipe or offer simpler, lower-cost cold brews to compete more directly with QuickBrew

Table 1: Comparative performance metrics

Table 2: CoffeeFusion customer feedback