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7115 · 3.4

Marketing strategy — practice questions

Practice and worked examples for 7115 Marketing strategy. Short previews only — attempt the full question in MarkScheme against the official scheme.

Worked example 1

UK energy drink brand dominates domestic gym market. Options: (A) deeper discounting in UK, (B) launch in Germany, (C) introduce protein bars to UK gyms, (D) buy a bottled water company. Classify using Ansoff and rank risk.

Show solution outline

A — Market penetration: Same product/market — lowest risk but margin erosion if price war.

B — Market development: Existing drink, new country — moderate risk (culture, regulation 6.1).

C — Product development: New product, same gym channel — moderate; uses existing relationships.

D — Diversification: New product category (water vs energy) — related diversification; moderate-high unless water firm unrelated.

Rank risk: A < B ≈ C < D (if unrelated acquisition).

Worked example 2

EcoClean Ltd sells eco-friendly cleaning sprays in its home country. The marketing director has proposed two growth options. Option 1: Launch the existing spray in a neighbouring country. Option 2: Develop and launch a new eco-friendly laundry detergent in the home market. Using the data below, calculate the expected first-year profit for each option and recommend a course of action, justifying your answer with reference to the Ansoff Matrix.

Data:

MetricOption 1 (Market Dev)Option 2 (Product Dev)
Initial Investment$200,000$300,000
---------
Forecast Sales (Units)100,00080,000
Price per unit$5.00$8.00
Variable cost per unit$2.00$3.00
Show solution outline

Step 1: Classify the strategies using Ansoff's Matrix.

  • Option 1 is Market Development: selling an existing product (spray) in a new market (neighbouring country).
  • Option 2 is Product Development: selling a new product (detergent) in an existing market (home country).

Step 2: Calculate the expected profit for Option 1 (Market Development).

  • Contribution per unit = Price - Variable Cost = 5.00−5.00 - 2.00 = 3.003.00
  • Total Contribution = Contribution per unit × Forecast Sales = $3.00 × 100,000 units = $300,000
  • Expected Profit = Total Contribution - Initial Investment = 300,000−300,000 - 200,000 = **100,000∗∗100,000**

Step 3: Calculate the expected profit for Option 2 (Product Development).

  • Contribution per unit = Price - Variable Cost = 8.00−8.00 - 3.00 = 5.005.00
  • Total Contribution = Contribution per unit × Forecast Sales = $5.00 × 80,000 units = $400,000
  • Expected Profit = Total Contribution - Initial Investment = 400,000−400,000 - 300,000 = **100,000∗∗100,000**

Step 4: Recommendation and Justification. Both options are forecast to generate the same first-year profit of $100,000. Therefore, the decision must be based on risk and strategic fit.

  • Market Development (Option 1) carries risks associated with entering a new country: cultural differences, new competitors, and different legal regulations. However, the product is proven.
  • Product Development (Option 2) carries risks associated with R&D and product acceptance. Will the new detergent be effective? Will existing customers trust the EcoClean brand for laundry? However, the market and distribution channels are well understood.

Recommendation: If EcoClean has strong R&D capabilities and brand loyalty, Option 2 (Product Development) may be preferable as it builds on existing customer relationships and avoids the complexities of international expansion. If the company's strength is in marketing and logistics, Option 1 could be chosen. The 'best' choice depends on the company's core competencies and risk appetite.

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