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IB3L70
Global Issues in Marketing
Exam questions
This paper is comprised of TWO sections. You are required to complete ALL question from Section A and ONE question from Section B
Section A: Please answer all questions
Question 1 [20 marks]. Which model would you select to best explain the competitive advantage (and successive decline) of the Algerian wine industry? Explain your answer.
Question 2 [50 marks]. In order to understand the demand for Algerian wine, SGCO commissioned a study with a sample of potential Canadian consumers in Quebec and
Ontario. The study used the Van Westendorp method to elicit willingness to pay for Algerian wine: the wine was however presented to potential consumers as either as Algerian-rooted
wine (left figure), in a blind test (middle figure) or as French-rooted (right figure),
emphasizing its colonial origins and the deep impact of France on development of Algerian
wine. The lines shows the prices indicated as too cheap (in blue), cheap (in purple), expensive (red) and too expensive (green). The x-axis indicates price in Canadian dollars.
Your task is as follows:
1. Analyse what the graphs from the Van Westendorp experiments imply.
2. Combining the case information, the output of the Van Westendorp experiments and the
information from the exhibits, recommend a product and pricing positioning for market entry of SGCO in Canada. Your answer should include (not necessarily in the given order):
• (A) target segment(s)
• A critical evaluation of your product and pricing positioning, in particular why your strategy is best, potential disadvantages of your positioning strategy, and why you think they are not a fatal limitation
Section B : Please answer ONE question only [30 marks]
Question 1. Barilla is aiming to enter in Japan, with the long-term objective of acquiring a sizeable market share. Leading Japanese retailers are shown in Table 1. Online grocery shopping has also been rising in Japan, following the Covid-19 epidemic (Figure 1). In particular, Aeon retail has conquered a large market of online retail sales. However, sales value of online retail trade is still a fraction of offline shopping: in 2021, Japanese consumer spent $ 20.7 billions on food and beverage purchases, vs. over $ 300 billion via conventional channels (supermarkets and convenience stores).
Table 1. Market share for Japanese retailers Table 2. Hofstede dimensions for Italy and Japan
|
Offline superstores |
Online supermarkets |
|
Aeon retail 11.1 % |
46.7 % |
|
Ito-Yokado 6.9 % |
38.9 % |
|
LIFE corporation 5.0 % |
- |
|
Others 77.1 % |
14.4 % |
|
Figure 1. Online edible grocery market sales in Japan, in billion US $
|
Source: data compiled from Statista
Focusing exclusively on distribution issues (and thus ignoring other issues which may affect mode of entry), identify a suitable mode of entry for Barilla in Japan. Clearly explain with which agents you would interact when specifying your entry mode (in particular, at which stage of the distribution channel do they operate). Your answer should also critically appraise the number of agreements that you expect would be required for a successful entry (i.e. a qualitative assessment in favor of few vs. many agreements).
Question 2. You work for a global company, based in country A, currently exporting its product to two markets, country B and country C. The company is a major player in all 3 markets. Your task is developing a global pricing strategy for the product. Exchange rates between the home and the foreign currencies for the past 12 months are given in Figures 1 and 2. Table 1 provides information on: the Big Mac index between country A and country B, tariff rates when exporting the product (the tariff rate is paid on the final sale price),
Herfindahl-Hirschman Index of market concentration, and the current price charged in the home market for the product (that is, 10 $).
Figure 1: Exchange rate home A-country B Figure 2: Exchange rate home A-country C
|
|
Big Mac index |
Tariff Rate |
HH Index |
Price |
|
Home Country |
1 |
NA |
.1 |
10 $ |
|
Country B |
.85 |
0 % |
.4 |
… |
|
Country C |
7.5 |
10 % |
.1 |
… |
Based on market research, consumer segments and consumer valuation for the product is similar across markets, and other costs (shipping, etc.) are negligible. However, we export directly in Country B through a foreign-based subsidiary, whereas the marketing channel for country C is indirect: products are exported through an export agent, who is in turn responsible for distribution through multiple retailers. Your task is as follows:
1. Compute the prices the company should charge based on the Big Mac index and tariff rates.
2. Taking into account the information given in the case, propose a pricing strategy for the company in either country. Clearly explain how and why the company should deviate from the prices identified under 1.