Business A level case study examples
1. Business Forms in the Public Sector: Analyze the characteristics and
purpose of large public sector businesses, using NHS and Network Rail as
illustrative examples.
Answer: Large businesses in the public sector, such as the National Health Service
(NHS) and Network Rail, are typically characterized by their ownership and
control by the government. Their primary purpose is to provide essential services
to the public rather than to generate profit.
NHS: As a publicly funded healthcare system, the NHS aims to provide
comprehensive medical services free at the point of use. Its scale is
immense, employing a vast workforce and managing numerous hospitals
and clinics to cater to the entire population's health needs.
Network Rail: Responsible for the infrastructure of the railway network in
Great Britain, Network Rail maintains and develops tracks, signalling,
bridges, and stations. Its role is crucial for facilitating passenger and freight
transport, contributing significantly to the nation's economy and
connectivity.
These organizations often face unique challenges related to funding, political
influence, and the need to balance efficiency with social responsibility. Their
performance is typically judged on service quality, accessibility, and accountability
to the public.
2. Price Elasticity of Demand (PED): Provide examples of products with
elastic PED and explain why their demand is sensitive to price changes, using
Twirl bars, Hovis bread, and the Sunday Express as illustrations.
Answer: Products with elastic Price Elasticity of Demand (PED) experience a
proportionally larger change in quantity demanded in response to a change in price.
This typically occurs when the product has several close substitutes, is not
considered a necessity, or represents a significant portion of a consumer's budget.
Examples include:
Twirl Bar: As a confectionery item, a Twirl bar has numerous substitutes
(other chocolate bars, sweets, snacks). If the price of a Twirl bar increases
significantly, consumers can easily switch to alternatives, leading to a
substantial decrease in demand.
, Hovis Bread: While a staple food, there are many different brands and types
of bread available. A significant price increase for Hovis bread could lead
consumers to opt for cheaper alternatives from other brands or supermarkets.
Sunday Express: As a newspaper, the Sunday Express competes with
numerous other Sunday newspapers, online news sources, and other forms
of weekend entertainment. An increase in its price might cause readers to
switch to a competitor or choose a different leisure activity.
For these products, businesses need to be cautious about price increases, as they
could lead to a significant drop in sales revenue.
3. Price Elasticity of Demand (PED): Explain why the tobacco industry is
often cited as an example of inelastic PED.
Answer: The tobacco industry is often used as an example of inelastic Price
Elasticity of Demand (PED) because the demand for tobacco products tends to
change proportionally less than the change in price. Several factors contribute to
this:
Addiction: Nicotine, the primary component in tobacco, is highly addictive.
This creates a strong dependency among regular smokers, making them less
likely to significantly reduce their consumption even if prices increase.
Limited Substitutes: While there are some substitutes like e-cigarettes or
nicotine patches, these are not perfect replacements for many smokers, who
may be attached to the ritual and specific effects of smoking.
Relatively Low Proportion of Income (for some): For habitual smokers,
the cost of tobacco, while significant, might be a relatively fixed expense in
their budget, leading to smaller changes in consumption when prices
fluctuate.
Government Intervention: Often, price increases in the tobacco industry
are driven by government taxes aimed at discouraging smoking. Consumers
may perceive these increases as unavoidable and continue to purchase
despite the higher cost.
It's important to note that while demand is generally inelastic, very large price
increases could eventually lead to some reduction in consumption or a shift to
illicit markets.
4. Boston Matrix: Analyze Apple's product portfolio using the Boston Matrix
framework, categorizing the iPhone, App Store, Apple Watch, and iPod
range.
,Answer: The Boston Matrix categorizes products based on their market share and
market growth rate. Applying this to Apple's portfolio:
Star (High Market Share, High Market Growth): iPhone: The iPhone
has consistently held a significant market share in the rapidly evolving
smartphone market. Its strong brand loyalty, innovative features, and
continuous upgrades contribute to its high growth potential and dominant
position.
Cash Cow (High Market Share, Low Market Growth): App Store: The
App Store benefits from the massive installed base of Apple devices. While
the app market's overall growth might be slowing, the App Store generates
substantial revenue through commissions on sales and subscriptions due to
its large user base and established ecosystem.
Problem Child (Low Market Share, High Market Growth): Apple
Watch: While the smartwatch market has growth potential, the Apple
Watch initially had a lower market share compared to established players or
its potential. It requires significant investment in marketing and innovation
to increase its market share and become a Star. (Note: Depending on current
market data, the Apple Watch might now be considered a Star in some
analyses due to its increased market share.)
Dog (Low Market Share, Low Market Growth): iPod Range: The iPod
range has seen a significant decline in market share and the overall market
for dedicated music players has shrunk due to the prevalence of smartphones
with music capabilities. These products generate low revenue and have
limited growth prospects.
This analysis helps Apple understand the strategic position of each product and
allocate resources accordingly.
5. Penetration Pricing: Explain the concept of penetration pricing and
illustrate its application with IKEA's entry into the Chinese market.
Answer: Penetration pricing is a strategy where a new product is introduced at a
low initial price to quickly gain a large market share. The goal is to attract a mass
market and build customer loyalty, often with the expectation of raising prices later
once a strong market position is established.
IKEA in China: When IKEA entered the Chinese market, it adopted a
penetration pricing strategy. Despite being perceived as a premium brand in
some Western markets, IKEA offered its furniture and home goods at
, relatively low prices in China. This allowed them to rapidly attract a large
customer base, particularly among young urban consumers. By offering
affordable, stylish furniture, IKEA successfully established a strong
presence and brand recognition in a new market. Over time, as their brand
became more established and consumer acceptance grew, they likely had
more flexibility in their pricing strategy.
Penetration pricing is effective in price-sensitive markets, when there are
significant economies of scale to be achieved through high sales volumes, and
when there is a threat of potential competitors entering the market.
6. Price Skimming: Define price skimming and explain its common use in the
electronics industry, using Apple as an example.
Answer: Price skimming is a pricing strategy where a firm initially charges a high
introductory price for a new product, often coupled with heavy promotion. The aim
is to capture the willingness to pay of early adopters who are less price-sensitive
and value being among the first to own the latest innovation. As demand from this
segment is satisfied, the price is gradually lowered to attract more price-sensitive
customers.
Apple in the Electronics Industry: Apple frequently employs price
skimming with its new electronic devices, such as iPhones and iPads. When
a new model is launched, it typically comes with a premium price tag.
Enthusiasts and loyal customers are willing to pay this high price to be the
first to experience the new features and technology. Over time, as the initial
excitement subsides and competitors release their own products, Apple
gradually reduces the price of the older models to appeal to a broader market
segment. This strategy allows Apple to maximize profits from early adopters
and then capture a larger market share later in the product lifecycle.
Price skimming is most effective when there is a perceived uniqueness or
technological advantage to the product, when there is a segment of customers
willing to pay a premium, and when high initial prices do not attract too many
competitors too quickly.
7. Multi-Channel Distribution: Describe multi-channel distribution and
illustrate its application by analyzing Apple's distribution strategy, including
its retail stores, online presence, and partnerships.
1. Business Forms in the Public Sector: Analyze the characteristics and
purpose of large public sector businesses, using NHS and Network Rail as
illustrative examples.
Answer: Large businesses in the public sector, such as the National Health Service
(NHS) and Network Rail, are typically characterized by their ownership and
control by the government. Their primary purpose is to provide essential services
to the public rather than to generate profit.
NHS: As a publicly funded healthcare system, the NHS aims to provide
comprehensive medical services free at the point of use. Its scale is
immense, employing a vast workforce and managing numerous hospitals
and clinics to cater to the entire population's health needs.
Network Rail: Responsible for the infrastructure of the railway network in
Great Britain, Network Rail maintains and develops tracks, signalling,
bridges, and stations. Its role is crucial for facilitating passenger and freight
transport, contributing significantly to the nation's economy and
connectivity.
These organizations often face unique challenges related to funding, political
influence, and the need to balance efficiency with social responsibility. Their
performance is typically judged on service quality, accessibility, and accountability
to the public.
2. Price Elasticity of Demand (PED): Provide examples of products with
elastic PED and explain why their demand is sensitive to price changes, using
Twirl bars, Hovis bread, and the Sunday Express as illustrations.
Answer: Products with elastic Price Elasticity of Demand (PED) experience a
proportionally larger change in quantity demanded in response to a change in price.
This typically occurs when the product has several close substitutes, is not
considered a necessity, or represents a significant portion of a consumer's budget.
Examples include:
Twirl Bar: As a confectionery item, a Twirl bar has numerous substitutes
(other chocolate bars, sweets, snacks). If the price of a Twirl bar increases
significantly, consumers can easily switch to alternatives, leading to a
substantial decrease in demand.
, Hovis Bread: While a staple food, there are many different brands and types
of bread available. A significant price increase for Hovis bread could lead
consumers to opt for cheaper alternatives from other brands or supermarkets.
Sunday Express: As a newspaper, the Sunday Express competes with
numerous other Sunday newspapers, online news sources, and other forms
of weekend entertainment. An increase in its price might cause readers to
switch to a competitor or choose a different leisure activity.
For these products, businesses need to be cautious about price increases, as they
could lead to a significant drop in sales revenue.
3. Price Elasticity of Demand (PED): Explain why the tobacco industry is
often cited as an example of inelastic PED.
Answer: The tobacco industry is often used as an example of inelastic Price
Elasticity of Demand (PED) because the demand for tobacco products tends to
change proportionally less than the change in price. Several factors contribute to
this:
Addiction: Nicotine, the primary component in tobacco, is highly addictive.
This creates a strong dependency among regular smokers, making them less
likely to significantly reduce their consumption even if prices increase.
Limited Substitutes: While there are some substitutes like e-cigarettes or
nicotine patches, these are not perfect replacements for many smokers, who
may be attached to the ritual and specific effects of smoking.
Relatively Low Proportion of Income (for some): For habitual smokers,
the cost of tobacco, while significant, might be a relatively fixed expense in
their budget, leading to smaller changes in consumption when prices
fluctuate.
Government Intervention: Often, price increases in the tobacco industry
are driven by government taxes aimed at discouraging smoking. Consumers
may perceive these increases as unavoidable and continue to purchase
despite the higher cost.
It's important to note that while demand is generally inelastic, very large price
increases could eventually lead to some reduction in consumption or a shift to
illicit markets.
4. Boston Matrix: Analyze Apple's product portfolio using the Boston Matrix
framework, categorizing the iPhone, App Store, Apple Watch, and iPod
range.
,Answer: The Boston Matrix categorizes products based on their market share and
market growth rate. Applying this to Apple's portfolio:
Star (High Market Share, High Market Growth): iPhone: The iPhone
has consistently held a significant market share in the rapidly evolving
smartphone market. Its strong brand loyalty, innovative features, and
continuous upgrades contribute to its high growth potential and dominant
position.
Cash Cow (High Market Share, Low Market Growth): App Store: The
App Store benefits from the massive installed base of Apple devices. While
the app market's overall growth might be slowing, the App Store generates
substantial revenue through commissions on sales and subscriptions due to
its large user base and established ecosystem.
Problem Child (Low Market Share, High Market Growth): Apple
Watch: While the smartwatch market has growth potential, the Apple
Watch initially had a lower market share compared to established players or
its potential. It requires significant investment in marketing and innovation
to increase its market share and become a Star. (Note: Depending on current
market data, the Apple Watch might now be considered a Star in some
analyses due to its increased market share.)
Dog (Low Market Share, Low Market Growth): iPod Range: The iPod
range has seen a significant decline in market share and the overall market
for dedicated music players has shrunk due to the prevalence of smartphones
with music capabilities. These products generate low revenue and have
limited growth prospects.
This analysis helps Apple understand the strategic position of each product and
allocate resources accordingly.
5. Penetration Pricing: Explain the concept of penetration pricing and
illustrate its application with IKEA's entry into the Chinese market.
Answer: Penetration pricing is a strategy where a new product is introduced at a
low initial price to quickly gain a large market share. The goal is to attract a mass
market and build customer loyalty, often with the expectation of raising prices later
once a strong market position is established.
IKEA in China: When IKEA entered the Chinese market, it adopted a
penetration pricing strategy. Despite being perceived as a premium brand in
some Western markets, IKEA offered its furniture and home goods at
, relatively low prices in China. This allowed them to rapidly attract a large
customer base, particularly among young urban consumers. By offering
affordable, stylish furniture, IKEA successfully established a strong
presence and brand recognition in a new market. Over time, as their brand
became more established and consumer acceptance grew, they likely had
more flexibility in their pricing strategy.
Penetration pricing is effective in price-sensitive markets, when there are
significant economies of scale to be achieved through high sales volumes, and
when there is a threat of potential competitors entering the market.
6. Price Skimming: Define price skimming and explain its common use in the
electronics industry, using Apple as an example.
Answer: Price skimming is a pricing strategy where a firm initially charges a high
introductory price for a new product, often coupled with heavy promotion. The aim
is to capture the willingness to pay of early adopters who are less price-sensitive
and value being among the first to own the latest innovation. As demand from this
segment is satisfied, the price is gradually lowered to attract more price-sensitive
customers.
Apple in the Electronics Industry: Apple frequently employs price
skimming with its new electronic devices, such as iPhones and iPads. When
a new model is launched, it typically comes with a premium price tag.
Enthusiasts and loyal customers are willing to pay this high price to be the
first to experience the new features and technology. Over time, as the initial
excitement subsides and competitors release their own products, Apple
gradually reduces the price of the older models to appeal to a broader market
segment. This strategy allows Apple to maximize profits from early adopters
and then capture a larger market share later in the product lifecycle.
Price skimming is most effective when there is a perceived uniqueness or
technological advantage to the product, when there is a segment of customers
willing to pay a premium, and when high initial prices do not attract too many
competitors too quickly.
7. Multi-Channel Distribution: Describe multi-channel distribution and
illustrate its application by analyzing Apple's distribution strategy, including
its retail stores, online presence, and partnerships.
