Business management · 2003 · May · Paper 2 · HL · Markscheme

MARKSCHEME May 2003 BUSINESS AND MANAGEMENT Higher Level Paper 2 22 pages M03/370/H(2)M+ INTERNATIONAL BACCALAUREATE BACCALAURÉAT INTERNATIONAL BACHILLERATO INTERNACIONALc [6 marks]1. (a) Describe the main features of each stage of the product life cycle. Stages of the product life cycle: y Research and development - High cost phase - Most ideas are rejected - Product and market audits are conducted - Planning is put into place to accompany the launch y Launch and introduction - Low sales - Heavy promotion (to develop awar eness of the product and supply information about it) - Loss making in most cases - Purchase of the product by “Innovators” y Growth - Increasing sales volume and wider distribution - Lower costs as more economies of scale in production - Promotion becomes more persuasive - Brand loyalty develops - Profits more likely as sales revenue rises and costs fall - Purchased by “Early Adopters” y Maturity - Significant market share in most cases - Sales revenue rising, but more slowly - Promotion becomes reminding, empha sizing brand loyalty, image and product attributes - Economies of scale means the company is more able to compete effectively against newer rivals, possibly on price - Purchased by the “Early Majority” y Saturation - High market share, but sales level off or even start to fall as newer rivals take market share - Price reductions are likely to maintain sales - Promotion may be more aggressive and competitive - New product design and packaging features may be necessary to compete, or get existing customers to repurchase - Purchased by the “Late Majority” y Decline - Sales and profits fall - Substitute products appear and/or the product becomes obsolete - Extension strategies may be introduced - Promotion and support is cut - Prices may tumble - Purchased by “Laggards” y Death – 2 – M03/370/H(2)M+