UNIVERSITY OF TORONTO FACULTY OF APPLIED SCIENCE AND ENGINEERING

FINAL EXAMINATION I Dec 21, 2018

JRE4I0 HIF - Markets and Competitive Strategy DURATION: 2 and % hrs

Simple Calculator (non-programmable) allowed. Exam Type: A (Closed Book)

Examiner - S. Chuang & B. Wig naIl

STUDENT NAME: STUDENT NO.:

This exam contains three parts which add up to 100 marks, the breakdown is: Part 1: Multiple Choice (13 marks) Part 2: Short Answer (70 marks) Part 3: Mini-Cases (17 marks)

All answers must be written in this exam booklet and you may use the backside for more space; any additional pages MUST have your Student Number on it, and be or stapled on to the back.

GRADES (To be used by markers. STUDENTS PLEASE DO NOT WRITE IN THIS SECTION): I

Multiple /13 Choice

1. 2. 3. 4. 5. 6. 7. 8. 9.

Short Answer (170)

10. 11. 12. 13. 14.

1. 2. 3. 4. TOTAL Case (117)

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GOOD LUCK ©

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Part I - MULTIPLE CHOICE QUESTIONS [1 mark each; total 13 marks

Each multiple choice question is worth 1.0 point. Select the answer that best fits the question. There may be more than one answer that can be argued to fit the question; however, only the best answer will get the mark. Print your answers ALL IN CAPITAL LETTER here:

1 2 3 4 5 6 7 8 9 10 11 12 13

What marketing activities, initiatives or events did Harley Davidson NOT leverage in order to target the outreach groups?

Print ads with strong brand distinction UFC Sponsorship Facebook presence Media ads advertising BueTi's reasonable price TV Product placement

2. Which of the following is NOT a global image that Sony VAIO has? A statement computer" Distinguished by its multimedia software A premium offering A computer for enterprises Attractive to those who highly value not only functional attributes but also intangible benefits

3. Which of the following is/are a value proposition of XM Radio for listeners Provides an option to filter the advertisements during broadcast Provides a more diverse content compared to conventional radio Better accessibility of signals compared to conventional radio Only Alla,b,c

4. If Colgate decided to place Automated Dispensing Machines at select drugstores to give potential customers samples of their newest toothpaste, this would best be described as an example of

push marketing pull marketing trade show promotions public relations

5. Referring to the lecture, how did Starbucks enhance buyers' perception of its differentiated value? Advertised the experience of Starbucks store that customers fell in love with. Increased promotions during primetime TV and major sporting events on new coffee blends. Implemented word-of-mouth marketing by generating a buzz among its loyal fan base and reward influencers with limited Starbucks coffee blend Invested heavily on store external design by renovating the exterior signage as a way of advertisement to enhance brand value.

Porter Airlines, based at the Toronto City Airport, offers convenience, comfort and better service. What type of strategy is Porter Airlines adopting?

Focused differentiation Focused low-cost Broad market differentiation Broad market low-cost provider Best-cost Provider None of the above.

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Which of the following factors should a company consider when determining if an industry offers good prospects for attractive profits?

The industry's growth potential, whether competition appears destined to become stronger or weaker, how the industry's driving forces might affect overall industry profitability, the company's competitive position relative to rivals, and the company's proficiency in performing industry key success factors. An assessment of which firms in the industry have the best and worst competitive strategies, whether the number of strategic groups in the industry is increasing or decreasing, and whether economies of scale and experience curve effects are a key success factor Whether there are more than 5 key success factors and more than 5 barriers to entry Constructing a strategic group map and assessing the attractiveness of the competitive position of each strategic group Whether the market leaders enjoy competitive advantages and how hard it is to develop a strongly differentiated product

8. SWOT analysis is: A better form of Michael Porter's 5- Forces A better form of the BCG Matrix A key way to determine a company's competitively important Rs&Cs as part of an Internal Analysis A tool for organising information

9. What would be a good example of forward integration by an automotive manufacturer? Establishing new corporate-owned dealership/stores Acquiring parts suppliers to expedite production processes Extract raw materials via partnership with an explorations company Invest in human capital training for their employees to better serve customers None of the above

10. A competitive environment where there is weak to moderate rivalry among sellers, high entry barriers, weak competition from substitute products, and little bargaining leverage on the part of both suppliers and customers

Lacks powerful driving forces. Gives each industry competitor the best potential for building sustainable competitive advantage. Makes it hard for industry members to pursue a differentiation strategy. Is conducive to industry members earning attractive profits. Requires that industry members have low costs.

11. The payoff of good scouting reports on rivals is improved ability to Predict what strategic moves rivals are likely to make next (thereby allowing a company to prepare defensive countermoves and develop strategies to exploit rivals' missteps) and/or plot offensive moves against them. Determine which rivals are in the best strategic group. Figure out how many key success factors a rival has. Determine whether a rival is gaining or losing market share, whether rivals are increasing or decreasing R&D spending, and what new marketing promotions are in the works. Determine whether a rival has the best strategy and is the industry leader.

12. In which pace of market and technology change is it unlikely for the first mover to have an advantage? Both market and technology change slowly Market changes slowly, Technology changes fast Market changes fast, Technology changes slowly Both market and technology change fast

13. Disruptive technology is important to understand because they change: The competition between rivals The new entrants The source of value to customers The suppliers

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Part II— SHORT ANSWER QUESTIONS [Total 70 marks

1. Identify and Describe four common forms of consumer sales promotion [4 marks]

2. Define direct marketing communication in the promotional mix (1 marks), identify two techniques or examples of specific types of direct marketing (2 marks), and comment on what we know about the feedback loop (in the channel model) when direct marketing is used (1 mark). Total 4 marks

3. Describe four marketing uses of packaging and labelling [4 marks].

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4. Identify and define the four bases for segmenting that we discussed in lecture [4 marks, 1/2 each for identifying and defining each one]

5. Explain how and why firms implement positioning strategies and how product differentiation plays a role. [4 marks]

6. Identify four aspects of business buying behaviour that are unique to the 13213 customer [4 marks]

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7. Identify the 5 steps in the consumer buying decisions process (1/2 mark each, for 2.5 marks) and define each or list some attributes of that step (1 mark for each of the five definitions/attributes for 5 marks) [7.5 marks]

8. At what stage in the product life cycle is the North American motorcycle market? [1 mark]. Describe Harley Davidson's Marketing objective [1 mark], Pricing objective [1 mark], and Promotional objective [1 mark] = Total 4 marks.

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9. Thinking about the Colgate case, what stage is it in the product life cycle (1 mark)? Identify and explain one pull tactic and one push tactic and explain why each of these tactic would be appropriate, given where Colgate is in the product life cycle [2 marks for pull, 2 marks for push)= Total 5 marks.

10. Define "personal selling" and "advertising" [2 marks]. Comment on the 'Receiver' and the 'Feedback loop' from the model covered in class for each (4 marks) = Total 6 marks [Hint, drawing the diagram would help]

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11. Explain the concept of product life cycles [2 marks]. Please draw the product life cycle model with all axes, stages, and curves labeled. (2 marks). Explain marketing objectives for "promotions" for the first three phases (0.5 marks each; 1.5 marks) [Total = 5.5 marks]

12. The Environmental Filter Company is planning to sell air filter systems for $2,500 per unit. Variable costs are $1,500 per unit and total fixed operating costs are $1,000,000. What is the dollar value of sales necessary to break even? [3 marks]

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13. Identify and describe the stages in the new-product development process. [7 marks]

14. Complete a SWOT analysis of Coke in the early 1990s: [2 marks each acronym, total 8 marks]

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Part III —Mini Case [Total 17 marks

How Low can you go?

There is no consumer as fickle as the Canadian grocery consumer. They want high-quality products at low prices—a contradiction and near impossibility for most firms. The landscape for companies competing in the Canadian grocery market is mostly controlled by large corporations: Costco, Walmart, and Loblaws. Mixed in are some local grocery providers, but these firms often provide service to rural or dispersed geographic areas.

One of those large players is Sobeys, a retailer that is a subsidiary of the aptly named Empire Company. The Empire brands include Sobeys, Safeway, and IGA. The signature brand for Empire is Sobeys, a grocery store that has been known for years to provide quality service and products, but at a price that was not as competitive as Walmart or Superstore.

In 2016, Sobeys made a curious decision in the Saskatchewan marketplace—it was reducing prices on many of its products. This was very much against what Sobeys was known for; it had been pushing a healthy agenda, including the recruitment of famous chef and health advocate Jamie Oliver. But with healthy products come healthy prices.

However, the Western Canadian market had shifted since the economic downturn fuelled by lower energy prices sent many consumers reeling. Job losses, coupled with inflation and cost of living increases, meant that the Western Canadian grocery consumer was now a bargain hunter. The CEO of Empire, in a discussion with The Globe and Mail in 2016, echoed this sentiment: "We're not dealing with the same customer psyche that we were dealing with even a year ago. The behaviour of the customer has changed in Western Canada, and we have to acknowledge that."

Questions

The lower-price efforts started with Sobeys produce. Citing improved economies of scale and scope from the 2013 purchase of Canadian Safeway, Empire was able to push the price of fruits and vegetables lower in all of its Saskatchewan locations. However, this price reduction did not come with a promise—even with a price reduction, Sobeys could not guarantee it could be lower than at Walmart or other retailers. Keri Scobie, communications manager for Sobeys in Western Canada, admitted to Canadian Grocer magazine that, "This is the most competitive we've ever been, but we're not going to claim to be the lowest in the market."

This absence of experience with rock bottom pricing is something that is starting to impact Sobeys. Fellow Canadian-based competitor Loblaws can trot out its Superstore and No Frills stores and brands that are seen as economic and value-based. Sobeys' lowered-price strategy does threaten at least a price match from Loblaws and Walmart; it could also lead to a price war. And while Sobeys does have the bench strength from the Empire brands, it would be difficult to go toe-to-toe with retailers that have much more experience with lower prices. A retail analyst noted about the Sobeys price markdowns: "The other grocers may need to respond. The competitive environment is going to tighten in the West."

One option for Empire is to bring in its successful Ontario-based discount retail brand FreshCo. There would be issues in building brand awareness and making adjustments in HR policies, but the Sobeys brand is not positioned in the market as a discount food retailer. A Sobeys spokesperson even noted recently that this is definitely a possibility: "We are happy with the FreshCo banner's performance in Ontario and would be foolish not to explore how the franchise FreshCo model could be a solution to some of our structural challenges in Western Canada."

1. When Sobeys decided to reduce prices on many of its products in a more or less permanent way, it was using a pricing technique called Every Day Low Pricing? What do you think this means? [1 mark]. Then, contrast it to two different pricing techniques we studied in the course in relation to Sobeys case [2 marks]. =

Total 3 marks.

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2. One way that retailers like Sobeys try to entice consumers to come to their store is to offer very low (sometimes at or below cost) prices for low-involvement products like toothpaste or toilet paper. Which pricing tactic does this describe [1 mark]? Explain how retailer(s) in the case is/are adopting this tactic [2 marks] = 3 marks

3. A company considers various factors when it decides to change a price. Take the situation of Sobeys reducing its produce prices and discuss three factors that would have an influence in the company's decision [3 marks].

4. Using the product-market expansion grid, explain how the Empire Company can expand the reach of its discount grocery model in western Canada in light of issues highlighted within the case. Fist, complete the grid with proper naming and labels [4 marks]. Second, explain what Empire should do with each box. Justify and explain your rationale [4 marks]. Total 8 marks.

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EXTRA BLANK SPACE

Be sure to number your questions clearly.

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THE END

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Do not write on this sheet