History Module

Question 1

Which are the strategies firms can pursue to achieve profit maximisation?

Answer 1

1. sell high volumes at low prices
2. produce low volumes but with high margins
3. adopt a niche strategy

Question 2

How did the marketing mix elements developed during time?

Answer 2

During the 60s the marketing mix was composed of the 4Ps.
During the 70s more Ps were added, like PR, politics and people.
During the 80s marketing started to be considered as a part of corporate strategy.
In the 90s relationship marketing.

Question 3

What is relationship marketing?

Answer 3

The idea that enterprises are involved in a huge number of relationships. It involves developing interdependence and cooperation between the firm and outside constitutes.

Question 4

What is the contracting paradigm by Jensen and Meckling (1976)?

Answer 4

Different actors create contracts among them inside the enterprise, and the enterprise itself contracts with the outside.

Question 5

Economic development reflects 5 salient changes, which are these changes?

Answer 5

1. Sectorial shifts –> new patterns of demand
2. Urbanisation –> concentrated markets
3. Transport improvements –> wider markets and higher efficiency
4. Population growth –> greater demand and specialisation
5. Technological development –> greater product variety

Question 6

What is the difference between extensive and intensive growth?

Answer 6

Extensive growth is the rise of GDP, and it influences the level of overall demand.
Intensive growth is the rise of GDP per capita, and it reflects improvements in living standards, which in turn stimulate greater discretionary expenditures.

Question 7

How are marketing activities influenced by market structure? (as Michael Porter says in Competition in Global Industries)

Answer 7

Companies that operate in perfectly competitive markets normally act as price takers, and they focus on the control of costs levels.
Companies operating in oligopolistic sectors are price leaders, and focus on the differentiation of goods to increase their economic activity.

Question 8

What is Tedlow’s Three Phase model?

Answer 8

It is a model that represents the link between changes in industry structure and marketing strategy.
He identified three phases of marketing:
1. Fragmentation phase (before railways, beginning of IR), characterised by isolated markets in which firms charged high prices to obtain high margins;
2. Unification phase (during IR) marked by the rise of national markets and the pursuit of high volumes sales and low profit margins by oligopolistic firms;
3. Segmentation phase (end of IR), characterised by complex patters of demand which induced firms to adopt value pricing strategies combined with high volumes of sales.

Question 9

What characterises traditional markets? (before IR)

Answer 9

Community markets, travelling traders, and local shops.
Shopkeepers bought goods in bulk from producers and then weighed and packaged them for final consumers.
They also provided credit on a local basis, charging relatively high prices to cover the risk of default.

Question 10

Which are the major transformations produced by the technological development induced by the IR?

Answer 10

• A wider consumption and larger markets;
• Specialisation inside the channel;
• Segmentation;
• A process of urbanisation and unification of the market –> creation of national markets, enforced by the development of transportation systems.

Question 11

Which was the role of mass wholesalers?

Answer 11

Sellers started buying for their own account, creating a stable distribution chain.
It was an instrument for the unification of the market.

Question 12

Which were the effects of the IR in Britain? (Jeffreys)

Answer 12

1. Community markets and itinerant sellers were replaced by fixed shops.
2. The relations between manufacturers and retailers changed. Producers began branding, packaging, and advertising their goods and attempted to set retail prices.
3. Mass retailing institutions, like chain stores and cooperative shops, appeared and offered lower prices by purchasing in high volumes and demanding cash payments.

Question 13

Which types of stores appeared with the advent of mass retailing?

Answer 13

1. Chain stores
2. Department stores
3. Mail order houses

Question 14

Which were the managerial innovations inside mass retailers?

Answer 14

1. Stock turn, the number of times the entire stock was sold, was a measure of success.
2. Managerial evolution inside the enterprise through decentralisation and the creation of internal departments.
3. Introduction of cost and inventory control systems.

Question 15

Which are the characteristics of department stores?

Answer 15

1. Variety of merchandise
2. Methods of selling
3. Style of management

Question 16

Which were the target customers of the department stores?

Answer 16

The new upper middle class, which felt a need to distinguish themselves from the growing lower class and from the aristocracy.

Question 17

Which were the conditions that led to the spreading of department stores in the US?

Answer 17

1. Rapid growth of demand (due to immigration and increase in income)
2. Railways
3. Technological innovation (in line production; refrigerators)

Question 18

Which are the major innovative elements that made Marshall Field a success?

Answer 18

1. Creation of a brand, in order to have a loyal customer base and to reduce price competition.
   The creation of the brand was a matter of offering services to consumers (e.g. return policy) and creating an identity (–>loyalty).
2. Specialised managers which worked in different divisions.
3. Being both an wholesaler and a retailer.
4. Vertical integration (quality control, control of consumers’ preferences, and efficient supply chain)
5. Cash payment to producers + terms of payment.

Question 19

Which are the preconditions for the transformation of the groceries sector?

Answer 19

1. the transportation system and the industrial revolution
2. the creation of the packaging industry
3. mass production

Question 20

Which are the 5 major eras in the evolution of the supermarket industry?

Answer 20

1. Chain stores
2. Supermarket formula
3. International spread of supermarkets
4. Computerisation
5. Rise of Walmart

Question 21

What is an example of the chain store revolution and which effects did it have?

Answer 21

An example is A&P, a traditional shop that started to centralise the distribution system, managing directly a network of warehouses.
The completely controlled the supply chain, and also started to create branded products.
All these elements gave the chance to:
- have better control of the market;
- control consumers’ preferences;
- make studies and analysis, to mode efficiently the chain;
- centralised functions as store design, quality control etc.

Question 22

Which elements did Piggly Wiggly introduced?

Answer 22

• self service formula
• baskets for carrying items inside the store
• cashiers by the exit
• separate entrance and exit
• offered only pre packaged, advertised goods

Question 23

What changed with the supermarket revolution, during the 40s?

Answer 23

• firms moved closer to suburbs, and traded up for less price conscious consumers
• supermarkets started to offer services
• shopping centre location replaced free standing units

Question 24

Which were te objectives of the new superstores proposed by Cullen?

Answer 24

Operating on low margins and low expenses, making up the difference in volume

Question 25

What is Americanisation of Europe and what was it led by?

Answer 25

It was the transfer of technology and managerial practices from the US to the Western European countries.
It was led by:
- the Marshall Plan (recovery program)
- the work of US consulting firms
- US multinationals operating in Europe (know how and organisational models)

Question 26

Whose idea was to introduce supermarkets in Italy?

Answer 26

The idea came from IBEC: International Basic Economy Corporation

Question 27

Which were the challenges IBEC had to face in introducing supermarkets in Italy? How did they face them?

Answer 27

• low purchasing power, which was faced returning to the original formula (not hybrid) meaning very simple stores, with no decoration.
• different lifestyle, Italians did not use cars often –> different locations and parking spaces
• a different business environment –> need to adapt to local jurisdiction (involve local players)
• suppliers - retailers relationships

Question 28

Which further developments characterised the US supermarket industry (after 70s)?

Answer 28

• club stores
• limited assortment superettes (large store with limited assortment specialised in certain types of goods)
• specialised supprettes and natural food stores.
  (–> segmentation phase)

Question 29

Which are the main characteristics of discount retailers?

Answer 29

1. low costs
2. low margins
3. high volume
4. growth or die strategy (harsh competition on prices) –> location most important decision

Question 30

Which are the main risks of the discount sector?

Answer 30

• saturation of the market
• high price competition
• lots of substitutes

Question 31

Which are the opportunities of the discount sector?

Answer 31

• growing market
• growing demand for these types of retailers
• low barriers to entry
• economies of scale

Question 32

What was the strategy implemented by Walmart?

Answer 32

• lower prices than competitors
• invest in bigger warehouses, in rural areas and small cities
• clusterization –> stores no further than 400 miles from warehouses to increase the efficiency of the network

Question 33

Which were the objectives of Walmart strategy?

Answer 33

• higher stock turnover (centralised control of network focused on racing high turnover) –> allow good performance and to be competitive with low prices
• avoiding head to head competition –> rural or less populated areas
• create economies of scale and of scope –> environment free of competition
• creation of monopolies

Question 34

Which are Walmart competitive advantages?

Answer 34

1. Remote locations
2. Differentiation (Sam’s clubs, hypermarkets, supercenters)
3. Distribution network (proximity of stores to warehouse + direct relation with suppliers)
4. Cost strategy
5. Human Resources (low wages, non unionised + associates)
6. Corporate Finance
7. Technology (daily inventory; barcode scanning; satellite transmission of data)

Question 35

What constitutes Walmart cost strategy?

Answer 35

Walmart focused on keeping low costs through:

• no ownership of stores
• low rents
• basic stores
• aggressive negotiation with suppliers
• limited merchandise
• centralised control
• reduction of middleman

Question 36

What was Walmart corporate finance strategy?

Answer 36

• low debt/equity ratio
• short cash cycle
• activity financed by suppliers (29 days payments, but stock turned in 24)

Question 37

Which are the factors that explain why Walmart was unchallenged for so long?

Answer 37

• Localisation and the distribution network

- The creation of an internal culture and knowledge about the activity

Question 38

Which entry strategies does Walmart play and why?

Answer 38

JV and acquisitions, in order to exploit the knowledge of the locals.

Question 39

What is the general merchandise sector?

Answer 39

A sub-sector of the retail market, including establishments primarily engaged in the retail of a general line of merchandise that may or may not include groceries.

Question 40

Which are the characteristics of the general merchandise sector?

Answer 40

It is a low productivity (low avg hours of work per week) low wage sectors.

Question 41

Which are the keys of the success of the general merchandise sector?

Answer 41

• larger retail firms can achieve scale economies in acquisition and distribution
• they help suppliers achieve scale economies in production
• consumers enjoy scope economies from one-stop shopping

Question 42

What effects did the spread of discounters have?

Answer 42

1. Prices and competition: lower prices through direct effect (price advantage on competitors) and indirect effect (traditional retailer cut prices in response to competition)
2. Retail market structure: big box retailers drive out competitors or prevent them from entering
3. Labor market: destruction of labor

Question 43

Which are the spillover effects that retail FDI can produce?

Answer 43

• Backward spillover effects: impact on upstream suppliers. Multinational retailers have stronger bargaining power and can push suppliers to keep reducing costs and/or upgrading products
• Indirect horizontal spillover effects: impact on competitors