University Examinations 2011/2012 year I semester it examination for the master of business administration hcb 3109: marketing management



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University Examinations 2011/2012

YEAR I SEMESTER IT EXAMINATION FOR THE MASTER OF BUSINESS
ADMINISTRATION


HCB 3109: MARKETING MANAGEMENT


DATE: JANUARY 2012
TIME: 3 HOURS


INSTRUCTIONS: ANSWER QUESTION ONE (COMPULSORy) AND ANY OTHER THREE QUESTIONS
NATIONAL BREWERIES

While attending sessions during a four week marketing program at the International marketing Institute in


Boston in July 1991, Herb Maridadi's thoughts were divided between what the speakers were saying and
what was transpiring at National Breweries. Maridadi, marketing and Public Affairs Director for National
Breweries (NatBrew), would have to "hit the ground running" when his plane touched down in
Zimbabwe the first week of August.

Since its inception in 1876, NatBrew had been the sole manufacturer of beer in Zimbabwe


market-one through a wholly owned South African subsidiary funded primarily by an American company
and the other through a Zimbabwean conglomerate in a joint venture with a German brewery. The issue
was magnified by escalating price increases, declining volume in sales and a generally negative
perception of NatBrew by its consumers.

Zimbabwe

Zimbabwe, a land-locked country in southern Africa of about 151,000 square miles, is surrounded by


Zambia, Mozambique, South Africa, Botswana, and Namibia. The capital of Zimbabwe is Harare. In
1990, the population was around 9 million, comprised of 30 per cent urban residents and 70 per cent rural
with English as the official language. The labour force comprised a little over 25 per cent of the
population, with a civilian labour force of about 2 million and armed forces of 38,000.

Historically, political stability in Zimbabwe had been poor. From 1889 to 1922, Zimbabwe was


administered by the British South Africa company. In 1923, it became a self governing colony renamed
Southern Rhodesia. When Britain refused to grant independence to Zimbabwe, due to its proposed
undemocratic style of government, a unilateral declaration of independence was made in 1963. Following
that, the United Nations imposed economic sanctions against Zimbabwe, and nationalist guerrilla warfare
ensued throughout the 1970s. Independence and majority rule was finally accepted in 1979, with the new
majority government formed in 1980. Since then, socialist policies have existed for Zimbabwe, yet some
suggest only modest implementation of such policies. Military aid and training were received from the
United Kingdom and the Democratic People's Republic of Korea. Economically an I.M.F./World Bank
package was adopted by the government in 1990, where prices and labour were decontrolled and
government spending cut. In the short term, this led to high inflation, high unemployment stronger growth

in Gross Domestic Product, (GDP), reduction in balance of payments (B.O.P.), deficit and a budget
deficit. GDP growth was approximately 4.5 per cent with inflation of 17 percent and expected to continue
to rise. There was growth in the private sector, with the government having a policy of purchasing shares
in private sector enterprises. Zimbabwe exports (around US $ 1,690 million) included gold, tobacco,
metals, and cotton to such destinations as the United Kingdom, Germany, South Africa and the U.S. The
country imported (around US$ 1,260 million) such items as machinery, chemical and energy from these
same countries. Per capita income was around Z$ 1,930(approximately US$ 850) in 1990.

Beer Industry

Manufacturing. The production of clear beer consists of eight basic steps:



  1. Malting -soaking the barley to start germination to unbind amylase enzyme (turns starch into
    sugar when heated).

  2. Mashing- adding heated water to convert starches to sugar and filtering out liquid, making
    "wort".

  3. Brewing- boiling, the wort win hops to stop the conversion to sugar, adds a bitter flavor to the
    wort

4. Fermenting-filtering and cooling wort, adding yeast to convert wort into beer.

5. Lagering- storing beer at freezing, yeast settles out and beer becomes clearer and tastier.

6. Carbonation-purified water added to rid beer of oxygen which destroys flavour.

7. Pasteurizing-boiling at 142 to 145 degrees Fahrenheit to stop fermentation.

8. Packaging- bottling or canning of the beer.

In order to diversify products, brewers altered and manipulated the basic brewing process, by, for


example, adding stirring mechanisms or raising the temperature in the fermentation stage to speed the
process or adding chemicals such as Tannin to speed the lagering process.' However, the product
differentiation was very difficult among competitive breweries because very few changes could be made
in the manufacturing process to alter the product. Thus much emphasis was on the marketing of the beer
product to enhance perceptual differences among products.

Worldwide Market. Beer brewing was a worldwide industry with sales in 1989 totaling US$200
billion. The brewing industry was highly concentrated with seven countries domination in the market:

United States (23 per cent), Germany (12 per cent of the world market), England (6 per cent of the world


market), Russia (5 per cent of the world market), Brazil 4 per cent of the world market, and China 4 per
cent of the world market). Beer production and sales increased yearly as countries became more and more
sophisticated in their marketing operations. The largest exporters of beer, ranked by volume, were The
Netherlands, Germany, Czechoslovakia, Belgium, and Canada. The largest importers of beer by volume
were the United States, the United Kingdom, France, Italy and Germany.

The internationalization of the beer brewing industry occurred by three major means: (1) across


the border buying and selling, (2) licensing agreements, and (3) foreign direct investment. As such, there
was heavy concentration in the beer industry. In volume, world trade in beer tripled from 1965 to

1990, with an average annual growth rate of 6.55. Such factors as lower trade barriers, more efficient


communication and transportation technology, and growth in real personal income contributed greatly to
this cross border trade expansion.

Zimbabwean Beer Market. The alcoholic beverages industry represented approximately 7% of


Zimbabwe's gross output of manufacturing of Z$4,196,267,000. Major players in the industry included
National Breweries, Chibuku breweries (an opaque beer brewer), African Distillers, and Cairms Wineries.
Beverages and tobacco accounted for almost 25% of Zimbabwe's exports and less than 1 % of imports.

Two types of beer were popular in Zimbabwe. "Clear" beer was an alcoholic beverage brewed


from malts and hops."Opaque" beer was made from beans, maize and sorghum. Opaque beer was cheaper
and healthier than clear beer. National breweries(Natbrew) was the sole clear beer manufacturer in
Zimbabwe. The main opaque brew was "chibuku".

Economic difficulties limited the local in take of clear beer in the early 1990s. The effects of the


world Bank and International Monetary fund austerity measures introduced in 1990 were expected to
double the already high inflation rate of 25% as well, drought conditions caused carbon dioxide, a key
ingredient in beer to be in short supply. (Carbon dioxide is a product of cane). Additionally,
unemployment was expected to be around 75% during the early 1990s. (Agriculture and manufacturing
were the biggest contributors of employment in Zimbabwe). Total employment was slightly over 1
million in 1990, with very little increase predicted.

All in all, such economic difficulties were expected to place stress on the highly price-sensitive


brewing industry. The price of a pint of beer was expected to double from 1990 to 1992.

National Breweries

A private company founded in 1876 as a wholly owned South African subsidiary, NatBrew. With


expected 1991 sales of Z$750 million, the company's principal mission was to manufacture, distribute,
and market clear beer and malt for both the domestic and export markets. NatBrew operated one malting
plant and two breweries. The malting division located in Kwekwe, had an annual capacity of 45,000
tonnes and exported about 18,500 tonnes of this. This division employed 90 individuals. The two
breweries were located in Southernton and Harare, employing 2000 workers.

Product. NatBrew maintained five or six brands in the market place at any point in time. The major
market shareholder was the Castle Lager brand with 80% of the market. The brand was positioned as the
mainstream, heritage brand in South Africa with the slogan, "The taste that has stood the test of time."
The beer was medium alcohol that was considered neither bitter nor sweet. Lion Lager had 12% market
share .The brand was targeted at the upper mainstream and masculine markets."Go all the way with Lion
Lager" was the advertising theme. Carling black Label was NatBrew's third runner in the market, with six
per cent share. The target consumer for Carling Black Label was the manual worker. The beer which was
strong and cool with a slighfly sweet taste, was positioned as "America's lively, lusty beer."

The remaining 2% of the market went to what Natbrew referred to as niche brands. These


included Amstel (Lager), Castle Pilsener, Castle MilkS tout, Bohlingers Export premium Lager, and
Zambezi Premium Lager.

Price. NatBrew followed a differentiated pricing structure for each of its brands. Lion Lager, targeted to
the upper mainstream as its premium-priced beer, followed by Castle Lager and Carling Black Lager. The
average wholesale price of a NatBrew beer was Z$1.35 per 375ml unit. The export wholesale price was
about 20 per cent lower than local market wholesale prices.

NatBrew did not have any control over retail price setting. A wide range of prices was reported,


basically dependent upon retail outlet and packaging (e.g., draft/bottle, 1 bottle/6 pack). By 1991, retail
outlets had taken price increases ranging from 20% ("off' consumption) to 80% ("on consumption).

The price of beer was expected to double by 1993 with the structural adjustment program introduced by


the world bank and International Monetary Fund. This would be reflected in both whole sales and retail
prices. Naturally, the removal of price controls would affect raw materials used to produce a beer with
cost of goods sold increasing at a rate comparable to wholesale and retail prices. There was concern that
combined factors such as price deregulation, the drought, a drop in disposable consumer income and a 41
per cent excise duty on wholesale draught beer would push clear beer to luxury item status.

Communications. Natbrew's 1990 communications budget was approximately Z$4 million, allocated
across all of its brands. The media advertising budget was comprised of television (2 channels), radio (4
channels), press and magazines. Promotional components of the budget went to support sporting events
and point-of-purchase displays.

NatBrew's three major brands and its niche brands were represented by different advertising


agencies. The castle lager account was with Lintas; Barker McCormak was in charge of Lion Lager;
Mathewmann, Banks &Associates handled the Carling Black Label business; and Young and Rubicam
serviced the niche brands.

The sales force at NatBrew was broken down into three levels. Two general sales managers


worked with six sales managers who in turn managed 18 sales representatives. The sales force
compensation system was two-thirds salary and one-third commission.

Distribution. NatBrew's brands of beer could be found in approximately 4,400 retail outlets including
supermarkets, bottle stores, restaurants, beer gardens and hotels. The company operated 23 distribution
depots throughout Zimbabwe. Accounts were serviced via 340 NatBrew trucks.

Sales volume. Sales volume had more than doubled from 1980 to 1990, with a moving average growth


of around 13 per cent while increases were budgeted for both 1991 and 1992, there was doubt amongst
management that such increases would be imminent in the local market. One local bottle store had
reported a 50 per cent drop in weekly clear beer sales. Additionally, nightclubs were unusually quiet
during the week.

NatBrew hoped to cover at least some part of the expected drop in domestic market sales with its


export business. The company exported to South Africa, Zambia, Mozambique, Tanzania, Australia, and
Great Britain. Reportedly, however exports accounted for only one per cent of NatBrew sales.

Competition. Since 1876, Natbrew was the sole manufacturer of clear beer in Zimbabwe. However, this
was expected to change as two new players entered the Zimbabwean market place. Little competitive
information was available to NatBrew regarding the marketing plan of the two breweries.

Nisbitt Breweries had plans to launch one draft and one bottled beer brand into the Zimbabwean


market by September 1991. Nisbitt was a wholly owned South African subsidiary funded primarily from
the American Brewing Company. The American company held around 5 per cent of U.S. market share.
The Zimbabwean partner in this arrangement was a former NatBrews employee who was considered to be
very bright and "self-made."

A major Zimbabwean conglomerage, T.A., Holdings, specialized in hotel, restaurants, and


engineering industries. The conglomerate had just begun building a brewery in a joint venture with a
German brewery. Rumour was that a well known German beer brand would be launched from the new
Zimbabwe Brewery. T.A. Holdings was a rich, aggressive company with substantial financial and skills
backup.

The Situation

Herb Maridadi's departure date was approaching rapidly. He had enjoyed the marketing programs and felt


that he had learned a lot about marketing. But, would he be able to apply this knowledge at his own
company, National Breweries?

Herb knew that N at Brew was headed for difficult times. After 20 years of a "command


economy," the government had lifted price and wage controls. As a result, retail outlets had taken
tremendous price increases. Consequently, sales volume had dropped, as had consumer disposable
income. In addition, two competitor breweries were expected to be commissioned within 1991. As
Zimbabwe's sole clear beer manufacturer since 1876, NatBrew had never experienced direct competition.
To add injury, recent market research had shown that consumers perceived NatBrew to be a "fat cat"
(rich, monopolistic, arrogant, extravagant, and uncaring) and would welcome competition.

Maridadi had to decide where to begin. He had to have concrete, implementable ideas


immediately upon his return to Zimbabwe.

Questions

Ql.

(a) What marketing recommendations would you make to Maridadi for moving Natbrew


forward profitably?(S marks)

(b) Explain FIVE Positioning strategies that Natbrew may use to avert imminent dwindling

of its sales and market position.(S marks)

(c) Herb maridadi had t.o face the imminent competition fast approaching from licensing of


new beer companies in Zimbabwe. Explain FIVE strategies that N atbrew could employ
as a market leader to deal with the competition in the growing beer market. (10 marks)

(d) Natbrew uses a differentiated pricing policy for its brands. Explain FIVE possible


benefits of using this policy. (5 marks)



Q2. Cital Limited intends to carry out research to find out the attitudes of consumers regarding
the company's products. Explain the steps the company should follow when conducting the
research. (15 marks)

Q3.


(a)The price sensitivity of customers differs from market to market and it affects their reactions
to prices of products. Explain FIVE factors that influence this price sensitivity. (10 marks)

(b)Marketing of services is difficult due to the intangible nature of services. Explain FIVE ways


in which a hospital can reduce its services intangibility in order to increase the ease of marketing.
(5 marks)

Q4.


(a) Marketing segmentation is useful in enabling a company to select the most profitable
segments. Explain FIVE variables that a marketer should consider in industrial market
segmentation.(lO marks)

(b) The Boston Consulting Group (BCG) is a useful portfolio model used by many


organisations. Explain FIVE limitations of this model.(5 marks)

Q5.


(a) Marketers have to make appropriate decisions regarding distribution of their
products Explain FIVE factors that marketers consider in selecting an appropriate
channel of distribution. (5 marks)

(b) The hierarchy of effects model is useful in explaining consumers' responses to an


organisation's marketing communications efforts. Explain the steps in the model.

(10 marks)

Q6.

(a) Many organizations are increasingly using direct mail to promote their products. Explain


FIVE reasons for this. (l0 marks)

(b) Explain FIVE ways in which product branding enhances an organisation's


competitiveness. (5 marks)
Directory: centres
centres -> The constructive role of the conceptual metaphor in children’s arithmetic: a comparison and contrast of piagetian and embodied learning perspectives carol Murphy University of Exeter, uk
centres -> School History, National History and the Issue of National Identity Ann Low-Beer, University of Birmingham, Westhill, Birmingham
centres -> Strategic culture: a reliable tool of analysis for eu security developments? Strategic Culture: the concept
centres -> A historical analysis of democracy in mathematics and mathematics education in european culture
centres -> Empire, Englishness and Elementary School History Education, c. 1880-1914
centres -> White myths, black omissions: the historical origins of racism in Britain
centres -> English Local History M. A. Dissertations
centres -> Black and British? History, Identity and Citizenship Andrew Wrenn Abstract
centres -> A case for National History Raphael Samuel Abstract


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