Analysis and Decision Senior Examiner Assessment Review Report March 2011

Transcription

1 Chartered Postgraduate Diploma in Marketing Analysis and Decision Senior Examiner Assessment Review Report March 2011 The Chartered Institute of Marketing 2011

2 Senior Examiner Assessment Review Report UNIT NAME: AWARD NAME: Analysis and Decision Chartered Postgraduate Diploma in Marketing DATE: March 2011 Background to the paper: Prior to the examination, candidates were provided with an extensive case study (Apple Inc.,) reflecting a real life situation. The case study included extensive information about history of company (eg, established in 1977 in USA), its strategic focus (provide innovative products and solutions to different segments), its product/brand range (eg, iphone, ipad, imac etc), its distribution strategy (eg, a combination of own specialist stores, retail outlets, online shopping sites, third party wholesalers and retailers), its markets (B2C and B2B markets) and the company value (eg, $222 billion, surpassing Microsoft with the help of the ipad sales). Extensive information was included about Apple s innovation strategy (focus on delivering cutting edge products to discerning customers), creative focus (eg, being different to the point of seeming idiosyncratic or even anarchic), the competitive nature of markets in which Apple operated (characterised by rapid innovation in hardware and software). Further detailed information was included about the Apple brand (eg, third world leading brand behind Google and IBM), brand equity elements such as loyalty (devoted and faithful customers actively seeking new products as soon as these become available), brand associations (a blend of quality, innovation, reliability and trendy sophistication), brand lifestyle associations (eg, celebration of freedom and originality) the brand value ($83.2 billion last year), the brand logo (new monochrome logo since 1998), brand strategy (using same logo across markets and across product categories, using the Mac brand at the centre of product range acting as a hub, using flagship products to boost others brands), brand pricing (eg, premium prices), brand strengths including stronger supply chains, high quality customer service delivery via highly motivated and knowledgeable staff. The case study also included some challenges facing the brand including higher than ever customer expectations and the need to live up to these repeatedly. The PR disaster in July 2010 due to problems with built-in aerial of inferior quality badly affected customer perceptions and generated bad publicity and in the short term affected company value and share prices. A range of strategic risks facing the company were listed (based on the annual report of 2009), including the potential impact of bad economic conditions, rising competition, the need for frequent innovations, substantial inventory and other asset risks, reliance on third party suppliers, software developers and applications, huge retail business, quality problems, the continued availability of key personnel, etc. The case study provided detailed information about the ipad and its rapid popularity (eg, selling three million in 80 days; 11,000 unique applications for the ipad), its competition (eg, initially no direct rival in the tablet market), the ipad markets (laptops and high end net books, gaming platform, an e-reader, movies player), its success factors (eg, ability to present books, magazines and newspapers in a highly attractive and readable format) and a range of other features.

3 The case study also highlighted many of the problems facing the printed medium/industry (eg, drop in revenues, popularity of e-readers, environmental concerns over consumption of wood for paper, the loss of jobs in the industry), falling advertising revenues, online newspapers and relevant issues facing these (eg, charging subscriptions), the ipad competitors (e-readers such as Sony Reader, Kindle, Nook), including their brief profiles, future trends (eg, all segments of the entertainment and media industry will experience an increased impact from digital technologies. The case study also included material relevant to the demise of traditional business models and critical factors for the successful operation in the new value chain, including the need for strategic flexibility, delivery of engagement and relationships with customers, economies of scale and scope, speed of decision making and execution, agility in talent management, ability to monetise the brand and rights across different platforms, and strong capabilities in partnership structuring and in marketing and advertising targeting and integration. The case study included information on the ability of technology to transform a number of key relationships such as between users and digital content, between vendor and user and between supplier and vendor. Twenty two appendices were included providing further relevant information ranging from financial performance (eg, balance sheets, shareholder equity, statement of operations, sales figures by segment and products to ability of the ipad to save newspapers, the issue of charging online readers, rising competition (Sony teaming up with Google and Dell s entry to tablet market), price war (eg, Kindle lowering its prices), new emerging markets such as India and e-book sales to overtake prints within five years. Prior to the examination, candidates were required to carry out a six page audit of the case study and bring it to the examination venue where it was to be attached with their answer sheets. No marks were to be awarded for the audit itself but for how the audit was used to answer the tasks during the examination. Candidates were provided with a Candidates Brief prior to the examination. The brief required candidates to imagine being employed as a marketing consultant working for Apple Inc. As part of the marketing team they were required to analyse the factors that had contributed to the success of the company and in particular of its ipad. They were asked to consider the changing nature of the print industry and the role of technology in addressing the challenges it faced. Apple was said to be keen to explore the opportunities that the ipad created and the potential impact that the ipad had on the traditional value chain model. They were also briefed that the company was seeking insights into how it could maintain its reputation and position in the market as a brand leader and successful innovator. The examination paper included some additional information to the Apple case study (not seen by candidates prior to the examination), including a media report about Nokia filing a range of lawsuits against Apple in an escalating dispute over alleged patent violations, with Nokia, accusing Apple of stealing Nokia technology for its iphone, ipod and ipad touch screen devices. The lawsuits were filed in the UK, Germany and Netherlands with an intention to increase the cost and difficulty for Apple to defend itself in multiple countries. Apple, as per the report, also faced disputes with Motorola of the US and HTC of Taiwan reflecting intense competition and rivalry among major players in the industry. When answering tasks, candidates were expected to consider this additional information provided at the time of the exam alongside the information contained within the case study. The examination paper consisted of three tasks, all of which were compulsory. Task One (50%) had three elements each worth15 marks, 25 marks and 10 marks respectively. Task Two had two elements with the first element worth 10 marks and the second element worth

4 15 marks. Task Three had a single element and was worth 25 marks. All three tasks were interlinked and candidates were expected to answer all of them using information from the Apple case study, the six page audit and the additional information presented on the day of the examination. Comments on how the marking scheme was applied in terms of: o o o o o Concept, Application and Evaluation Syllabus coverage Use of command words and the extent to which answers reflected what was required The relative weighting of each part of a question/task and an indication of what aspects of the question/task required most care and attention What differentiated the A, B, C, or D grades Throughout the assessment, candidates were expected to show a good understanding and knowledge of relevant concepts from a range of syllabus areas and evaluate and apply them in appropriate detail. For instance, via the six page audit, candidates were expected to demonstrate insights into the following: - A knowledge of a range of techniques, processes and market information to assess the external marketing environment, including the market environment (eg, major players including Dell Computers, Samsung, Sony, Amazon, Barnes and Noble, Google, etc), customers (eg, consumers, small and medium sized businesses, educational institutions such as schools and government bodies, etc), market trends (eg, declining print industry, the growing market for e-readers and e-books, the greater acceptability of tablets including the ipad, online readerships, the growth in developing markets, more demanding customers, decline in net sales of the Apple Mac, etc), market challenges and risks (eg, greater competition, a price war by Amazon, current economic conditions, new players with low cost features, faulty products and potential negative publicity, supply chain issues, reliance on cellular networks in certain markets, the different stages of market development, etc), the impact of technology (eg, rapid changes in technology and need for new product innovations), competition (eg, direct and indirect competition). - An understanding of techniques/models to assess the internal environment, including resource and competency audit (eg, skills and resources supporting the ability for new product development and launches, quality control; managing employees and distribution outlets, both online and on the high street, the supply chain and strategic partners), innovation audit (eg, a very strong brand with an excellent history of introducing cutting edge products and solutions through design and development of hardware and software etc.); core competency (eg, hard core customer base with a strong brand equity, rapid innovation in hardware and software exceeding customer expectations, loyal/well informed employees, an extensive distribution network, etc), key success factors (eg, an innovative approach to meeting customer needs with enhanced functionality and product features, continuous innovation, strong brand personality, operational effectiveness, etc) and financial performance (eg, ipad sales helping surpass Microsoft; strong financials in 2009, compared with 2008 and 2007). - A resource based view of Apple including an analysis of the company s approach to meeting customer needs, managing innovations and enhancing brand equity and customer value, and the value of this approach in developing further resources and capabilities - An understanding of strategic uncertainty/risks in the external market facing Apple

5 - An appraisal of the determinants of strategic options including past and current strategies; new product introduction, leveraging brand equity, marketing strategies, strengths and weaknesses, capabilities, resources, constraints and opportunities, value chain analysis, Porter s Five Forces analysis, etc. Task One The first part of Task One required candidates to critically evaluate Apple s existing core capabilities, resources and competencies that have contributed to the success of the ipad to date, utilising a relevant conceptual framework. The mark scheme allowed ten marks for knowledge/evaluation and five marks for application. Drawing upon and referring to the six page audit summary, the case study material and the new information presented at the time of examination, the candidates were expected to argue that core competencies are capabilities that are critical to a firm achieving competitive advantage. The true capability of Apple included technology and product design, and its core competency originated from superior resources (eg, significant brand equity, customer service), skills (eg, human resource and innovative systems) and technology (eg, which allows the delivery of cutting edge products), that enabled Apple to provide a range of benefits to customers generating a very clear competitive advantage. An example of Apple s core competency included providing innovative products and solutions via design and development of hardware and software. The outcome was products that were elegant and trendy with sophistication reflecting a lifestyle celebrating freedom and originality, providing superior customer value and competitive differentiation. Such core competencies allowed Apple to introduce a wide range of new products and services. Good candidates were expected to assess the relevant criteria for core competence, including being able to create customer value, sustain competitive differentiation and with being capable of leading with a wide array of new products that would be difficult to imitate. Candidates were expected to relate answers to a relevant conceptual framework (eg, Prahalad and Hamel 1990) and to argue that Apple needed to change given the significant changes in the company s environment. Candidates were also expected to link their discussion to the key factors contributing to the success of the ipad to date, including the business models relevant to saving the print industry, etc. Candidates may argue that Apple s approach to business is fresh, innovative and imaginative; that it combines high quality products offering style and design, slick and enticing personal communications, and a user friendly interface with exceptional after sales service support. Candidates were rewarded for showing a good knowledge of relevant concepts and their ability to apply their knowledge to Apple s context. They were also rewarded for revealing strategic insights and thinking based on a good understanding of theory (eg, competitive advantage, key success factors, value propositions, and core competencies). The second part of Task One required candidates to assess (in the context of rising competition facing the ipad and changes in new technology) a range of strategic marketing options available to Apple to sustain its competitive advantage in the global market place. The mark scheme allowed ten marks each for knowledge and evaluation and five marks for application. The case study provided extensive information about the market for books and e-books and competition facing the ipad (eg, Sony Reader, Kindle, Nook and imitators and highlighted the strengths and weaknesses of key competitors). The case study also emphasised the continued and ever changing impact of digital technologies on entertainment and media

6 industry, including changes in consumer lifestyle, acceleration of market fragmentation, the rising power and mobility of devices, the growing dominance of the internet experience over all other mediums, and the ability of technology to transform relationships. The new information presented further information about new challenges being faced by Apple (eg, the Nokia lawsuit). The information was in addition to a range of challenges faced by the print industry already discussed in the case study. Candidates were expected to draw upon their six page audit, the case study material and the new information presented at the time of the examination, and assess different strategic options available to Apple, which could contribute to sustaining competitive advantage in the global market place. Candidates were expected to demonstrate an understanding of competitive advantage (ie the means by which Apple can outperform its competitors and achieve higher than average profits), the various sources of competitive advantage (eg, utilising core competency, resources, skills and capabilities) and the different strategic options available to Apple, given the rising competition and changes in new technology. There were many potential answers and candidates were expected to reveal strategic thinking and insights while assessing and evaluating options. They were expected to link their discussion to the rising competition and changes in technology. It was expected that some candidates would refer to the Ansoff Matrix (market penetration, product development, market development or diversification), utilising it as a framework. Others were expected to quote the BCG matrix or Porter s Generic Strategies to achieve or maintain competitive advantage. Still others were expected to utilise information from the PESTEL framework with a view to outline opportunities and assess some relevant options (eg, a strategic partnership with publishers/newspapers, etc). Good candidates were expected to reflect on Apple s business model of focusing on three broad industry categories, including software development, hardware and retail, and in doing so were expected to comment on its relevance and effectiveness in designing growth strategies. Candidates were rewarded for demonstrating good understanding of relevant concepts, and strategic insights, based on a sound understanding of theory (eg, reference to some model) and practice, rather than tactical solutions and ideas. The third part of Task One required candidates to recommend with justification, one strategic option Apple could adopt in relation to their answer for Task One b that would ensure the long-term sustainability of the company. The mark scheme allowed three marks for knowledge and seven marks for evaluation and application. There were a number of possible answers and a recommendation fitting the needs of Apple could be made while reflecting on competitive advantage, value creation, proposition and differentiation, Apple s institutional strengths, the views of stakeholders and checking against the distinctive competencies of Apple. Candidates were expected to recommend one option and provide a rationale or justification for their recommendation. Candidates were expected to recommend and justify a valid and viable strategic option rather than a tactical solution or ideas. Candidates were also expected to provide some valid justification. Those showing strategic insights and linking their discussion with some criteria such as suitability, feasibility, potential, validity and vulnerability were rewarded. The first element of Task Two required candidates to analyse the financial implications of their recommended strategic option in relation to their answer for Task One c, demonstrating the financial benefits to Apple in the short to medium term.

7 The mark scheme allowed five marks for knowledge and evaluation and five marks for application. The case study included relevant financial information in the form of Apple s balance sheets, liabilities and shareholders equity, statement of operations and sales figures by segment and products. Candidates were expected to draw upon the case study information and their six page audits. They were expected to demonstrate insights into an application of understanding of the financial performance indicators and criteria for assessing feasibility, viability and capability to deliver. In doing so, candidates were expected to provide an analysis of the financial assessment of their chosen strategic option, utilising a range of financial benefits and risks for Apple, when selecting strategic options including ratios (eg, Return on Investment ROI; initial financial descriptors), investment appraisal techniques (eg, Payback, Net Present Value NPV, discounted case flow), the cost of capital, etc, and an understanding of corporate and reputational risks associated with selecting strategic options. Variations in candidates responses and the ways in which they could attempt this task were expected. They were rewarded appropriately for showing some good insights of relevant underpinning knowledge, such as an understanding of profit/value maximisation approaches via cost reduction and revenue increasing strategies. The second element of Task Two required candidates to assess three strategic risks facing Apple that might limit its ability to continue to be recognised as an industry leader, and propose strategies to address these concerns. The mark scheme allowed five marks for knowledge/evaluation and five marks for application. Candidates were expected to draw upon the case study information and their six page audit. The case study provided information about a range of strategic risks facing Apple that could potentially limit its ability to continue to be recognised as an industry leader. Examples included the risk of economic conditions getting worse, global markets becoming highly competitive and the company s inability to compete effectively, the failure to handle frequent product introductions and transitions, the lack of ability to manage substantial inventory and other assets, the inability/ability to obtain key components at favourable prices and in sufficient quantities, the lack of ability to handle supply chain and distribution issues (eg, component, product manufacturing and logistics services provided by third parties outside the USA, third party suppliers of digital content and applications, access to third party patents and intellectual rights, third party software developers, distributors, carriers and resellers etc), the lack of ability to invest substantially and commit resources, the inability to initiate and implement high risk business strategies, the inability to handle product quality failures, the inability to recruit and manage human resources including key personnel, the inability to handle uncertainty in markets and risks of technology failures, the inability to manage financial resources wisely, and the inability to manage shareholder value and relationships, etc. The case study highlighted the risk of intellectual and property right infringement and the new information presented further reinforced this risk and the unfavourable results of legal proceedings that could adversely affect Apple. Candidates were expected to assess three strategic risks and demonstrate an understanding of the resource based view of firm assessing Apple s resources, including its key strengths (eg, financials, human resources, brand equity and loyalty, effective use of technology, etc), against organisational constraints and propose strategies designed to address constraints or reduce risks (eg, scenario planning, forecasting, changing approach/direction and avoidance strategies; strategic training of employees; stakeholder strategy matrix, etc).

8 Both elements of this task were marked as a whole (the assessment of strategic risks proposing strategies to address the risks) and candidates were reward appropriately for evidence of strategic insights and thinking based on good understanding of theory and practice, rather than tactical solutions and ideas. Task Three required candidates to analyse the impact that the ipad might have on the value chain of the print industry, and the implications this might have for generating competitive advantage for Apple. There were two elements (impact of value and implications) and the mark scheme allowed ten marks each for knowledge and evaluation and five marks for application. The case study provided extensive and detailed information about the ipad and its innovative features (portability, flexibility, user friendliness, interoperability and multi-functionality), with a very strong potential to affect different areas of the value chain of the print industry. The print industry value chain includes papermaking at the front end, the printing in the middle and the publishing industry at the other end of the value chain. The case study included important information about the ipad and its impact on newspaper publishers (eg, the likely saviour of the newspaper industry, allowing to charge for online contents without alienating readers and replicating what Apple did for the music industry with itunes; by combining a new visual approach with the itune payment system, the ipad is helping to change consumer attitudes towards paying for digital contents), the ipad and ebook publishers (eg, ibook allowing prices to be set by publishers, easy downloading and saving of books on virtual bookshelves, authentic page turning, book marking, multiple sites to download books via the ibook, etc), the ipad and journalism (eg, funding for quality journalism), etc. The case study also presented seven critical factors for the successful operation in the new value chain: strategic flexibility, delivery of engagement and relationships with customers through consumption experiences, economies of scale and scope, the speed of decision making and execution, agility in talent management, the ability to monetise brands across platforms and strong capabilities in partnership structuring and in marketing and advertising targeting and integration. The case study also presented information about various opportunities (eg, an altered subscription model with the potential of generating more revenue via online advertisements etc), the ability of the technology to transform a number of key relationships (eg, between user and digital content, between vendor and the user, and between supplier and the vendor) with the ipad expected to break new ground and support and sustain the huge reputation of Apple. While answering this task, the candidates were expected to draw upon this information, as well as their six page audits and the new information presented. Candidates were expected to demonstrate a good understanding of the concept of the value chain (at industry level) and how the value chain could be used as a tool for generating competitive advantage, and in doing so they were expected to refer to a relevant theoretical framework (eg, Porter). Marking took into account both elements of this task (both elements were marked as a whole). Candidates were expected to analyse the impact of the ipad on the value chain of the print industry and not Apple itself and good answers were expected to achieve a balance between analysing the value chain and assessing competitive advantage implications. The six page analysis was expected to include a value chain model as applied to the print industry, making a reference to Porter, and candidates were expected to draw from the model.

9 Candidates were expected to demonstrate a good understanding of the concept of competitive advantage arguing that the value chain is a useful tool to establishing core competency which Apple could pursue to achieve a competitive advantage; this could include either creating cost advantage or creating better differentiation via value chain activities. Candidates were rewarded for evidence of strategic insights and thinking based on a good understanding of the theory (eg, value chain and competitive advantage) and practice, rather than tactical solutions and ideas. There were no A grade scripts. There were quite a few B grade scripts revealing a very good understanding of various areas of the syllabus, including a strong ability to critically appraise, evaluate and apply material from the case study and the new information presented on the exam day. B grade scripts provided an effective evaluation of Apple Inc. s core capabilities, resources and competencies, an effective assessment of strategic options, justification of a strategic option using financial implications, an effective assessment of strategic risks and strategies to address the risks, and effective analysis of the impact of the ipad on the value chain of the print industry with an effective assessment of competitive advantage implications. B grade answers demonstrated a very good understanding of relevant theoretical principles, strategic insights and application to the given context. C grade scripts demonstrated a reasonable level of understanding of various areas of the syllabus, including some reasonable ability to critically appraise, evaluate and apply material from the case study and the new information presented on the exam day. C grade scripts provided a reasonable evaluation of Apple s core capabilities, resources and competencies, a reasonable assessment of strategic options, justification of a strategic option using financial implications, a reasonable assessment of strategic risks and strategies to address the risks, and reasonable analysis of the impact of the ipad on the value chain of the print industry with a reasonable assessment of competitive advantage implications. B grade answers demonstrated a reasonable understanding of relevant theoretical principles, strategic insights and application to the given context. A general overview of how the assessment (exam or assignment) was tackled, including a statistical analysis on the assessment as a whole. The overall pass rate for the March 2011 paper was 56.63%. The grade profile was as follows:

10 There were some very good answers and overall understanding of the case study was very good. Candidates continued to append high quality and comprehensive audits reflecting the teaching quality and standards applied at most centres. However, significant variations were noted in the way candidates used insights from respective audits when responding to specific tasks, and higher marks were awarded to those who went beyond a simple/generic referencing to the audit without providing the required analysis. For future assessments, candidates are advised to integrate material from their appendix into their answer and use it for discussion, analysis, evaluation and conclusions, rather than using it as a simple referencing mechanism. Generally speaking, candidates responded well to Task One in comparison with Tasks Two and Three, and more time and energy went into answering Task One providing a lot of details. Candidates should be encouraged to practise lay out and exam technique and should aim to provide enough details for each element of the task. Task One a was answered well with many achieving very good marks by revealing a good understanding of Apple s core capabilities, resources and competencies, though not many were able to link this to the success of the ipad. There were variations in the way Task One b was handled. Some referred to the Ansoff Matrix, whereas others used Porter s Generic Strategies to assess options, though not many were explicit in elaborating how best to achieve or maintain competitive advantage. Generally speaking there was a good understanding of the basic theory (eg, growth options), though weaker candidates were unable to utilise any theoretical framework. Important marks were lost when candidates assessed options that did not make any strategic sense, which then had a compounding effect for Task One c and Two a. In other cases, the assessed options were not really strategic marketing options and reflected a personal line of thinking rather than anything else. Good candidates were able to respond well to Task One c with many linking their discussion with criteria such as suitability, feasibility, potential, validity and vulnerability. Weaker responses were visibly shorter lacking justification and sufficient details/evaluation to merit higher marks. There were rarely any good answers when responding to Task Two a, revealing a continued and long standing problem with this particular area of the syllabus (financial implications). Significant variations were noted here with many providing a generic justification of their recommended choice (often a repeat from the previous section) or citing some financials without any links to the chosen option. Task One b was generally handled well by a majority, though there were variations when recommending mitigation strategies. Good candidates responded well by highlighting the risks and pointing to some reasonable strategies to mitigate. Weaker candidates failed to assess the risks properly and were unable to recommend/discuss mitigating strategies. The ability to provide sufficient details was also a differentiating factor between stronger and weaker candidates. There were very few who handled Task Three properly. There were some who focused entirely on assessing the new digital value chain for Apple and ignoring the required focus of the question. Others produced discursive and chatty answers lacking insights into relevant theory. Not many were able to properly assess the impact of the ipad lacking insights into how the value chain could be used as a tool for generating competitive advantage. This was quite surprising given the extensive detail provided in the case study and the presence of high

11 quality value chain analysis in the six page audits. Many made simple references to their audit without elaborating on the impact of the ipad on the value chain of the print industry. Centres and tutors are therefore reminded to cover this area of the syllabus in further depth with students. Feedback on the academic quality of the cohort(s) that has just been examined and the quality of the teaching, as judged by the results There were no A grade scripts, but there were some good B grade scripts and many C grade scripts. Understanding of some basic concepts (eg, core competencies, capabilities and resources, strategic options and generic risk assessment) appeared to be good across the board and centres/tutors are hereby congratulated for their efforts in encouraging candidates and guiding them when producing excellent quality six page audits. Often, the quality of commentary contained in the audits was quite admirable reflecting good practice. Candidates are, however, strongly advised to make most of their audits by integrating insights from the audits into their answers. On the whole, good candidates provided sufficient details and responded to the required focus of each task very well. They showed a good understanding of underlying theory and there were some who even cited some academic papers that appears to be a good trend. However, weaker candidates were unable to provide sufficient details and were not able to show critical and strategic insights. Also, certain areas of the syllabus need further attention such as financial analysis and the value chain analysis. Commentary as to whether recommendations made in previous years have been properly followed up Areas of improvements include following: - Develop an understanding of how various elements of syllabus and theories can be interlinked - Develop the ability to provide sufficient details, analysis and evaluation - Develop the ability to make reliable and valid recommendations - Demonstrate a mature and analytical understanding of strategic level thinking, decisionmaking and risk assessment strategies in a complex and unpredictable marketing environment - Demonstrate greater understanding of relevant theories and their implications for strategy formulation - Improve time management skills - Answer each part of a question - Further referencing to course content, models, frameworks, etc. - Move beyond simple description to include analytical and critical insights and thinking, and make good use of the additional material included at the front of the exam paper. Guidance about how candidates can avoid making similar errors and strategies for improving performance Common Strengths In general, the strengths of the cohort appeared to be as follows: - The Apple case study was well understood and generally handled very well.

12 - The six page analysis was prepared to a very high standard in a majority of cases. The analytical approach taken by a particular tutor at a centre was quite visible and this might be a reflection of particular teaching approaches adopted at a local level. There were some variations, with a tendency for some candidates to produce written/descriptive analysis rather than visual analysis via graphs/figures/tables was noticed. - Many candidates referred to their six page audit while responding to the requirement of the task at hand, which is a good trend in itself. However, tutors need to remind candidates that simple referencing to the audit without further explanation is not enough to merit higher marks. - Many demonstrated a good understanding of core capabilities, competencies and resources, though there were variations in linking them with competitive advantage and the success of the ipad to date. - Generally speaking, a good understanding of strategic options was visible among stronger candidates. - There were many also who demonstrated a good understanding of strategic risks facing Apple, though there were significant variations when it came to proposing mitigating strategies to address risks. - Stronger candidates were able to provide useful strategic insights and responded to the additional material provided to them in the exam by integrating it in their answers. - Stronger candidates demonstrated a good understanding of relevant theoretical concepts (eg, core capabilities, resources and competencies, strategic options, risk assessment and value chain analysis). - Stronger candidates demonstrated a strong ability to appraise, evaluate and apply material from the case study and the additional information provided at the time of the examination. - Task One and Task Two b were generally handled very well in comparison with other tasks. - Stronger candidates managed their time well allowing them sufficient time to address all parts of the three tasks. - Candidates appeared to be well prepared for the required format (report, introduction, and memo etc) and answers were generally well presented and the writing was legible and coherent. - There was some clever use of tables to answer tasks and some useful value chain diagrams were drawn illustrating the impact of the ipad. Examples of Good Practice While there were variations in candidates answers across the board, some examples of good practice include the following: a) Following the required report format (eg, starting with a proper memo heading) b) Introduction highlighting the importance of task in a broader context making references to the six page analysis and the Apple case study material as and when needed. c) Understanding the required focus of the question and responding with appropriate details.

13 For instance, while response to the requirement of first element of Task One, a candidate wrote the following: Apple is a strong market leader in the technology marketplace. They have developed this position through unique positioning through a highly optimised value chain. This has enabled Apple to become a key player and developed their capabilities through the marketing and operations carried out. Apple s resources can be seen through technology, staff, supply chain and procurement with their key competencies developing through the positioning of the brand and innovation. Porter created the concept of the value chain to enable companies to fully understand how to maximise their resources. Appendix 7 displays Apple s value chain by indicating their strengths in each area. Apple s capabilities Marketing: Apple is a market leader and as a result they have developed strong capabilities in sales and marketing. Apple have created an image that is based on innovation and sophistication using the latest technology. Their capabilities have enabled them to achieve this through strong marketing communications strategy and informed sales staff.. [candidate continues and assesses further capabilities including operations]. Resources Technology: Innovation and new product development are key to Apple. With the rapid changes in marketing, staying ahead of competition is vital Appendix 14 illustrates the ipad s positioning indicating the higher personality combined with high product attributes. As a result of this resource, it has continued to contribute to the success of Apple by enabling significant points of differentiation over competitors. [candidate continues and assesses further resources such as supply chain and procurement processes making a reference to Appendix 11]. Competencies Brand Position: Brands affect all audiences or all stakeholders and groups from customers to staff and if the brand is highly regarded then they behave in a more favourable way towards the organisation which drives up the value Chris Fill. Branding is imperative for a company to survive and Apple has created a company individual brand that is positioned as unique and taps into consumers emotional beliefs. The brand asset valuator values a brand under differentiation high brand awareness and loyalty. The intangible benefits from the emotional values created through relationships and product values through quality and innovation has provided Apple with core competencies that have resulted in significant success for the ipad [candidate continues and further assesses competencies such as innovation and culture]. In response to the second element of Task One, a candidate wrote the following: Strategic Marketing Options Porters 5 Forces shown in Fig 18 clearly shows that there is a potential for new products and competitors to encroach on Apple s success and marketing position. Along with rapid changes in technology and changing demands from customers (Fig 3) Apple not only needs to grow in the market but also defend its position. Ansoff s Matrix (Fig 13) is a useful model for generating strategic options and there are several available to Apple. Market Penetration Increase Cross-Selling. Apple has a mixed portfolio of products (Fig 20) of which some are incredibly successful and generating considerable revenue (Fig 22) whereas some for example the desktop computers and ipod are experiencing a reduction in sales. In addition Apple has 100m credit card accounts on its itunes application (Fig 23). Apple could use these accounts as well as owners of current products to sell their other Apple products and services. This strategy could use a position defence strategy and help Apple defend itself from the competition. It requires relatively low investment and Apple can leverage its strong customer loyalty (Fig 1) to achieve this. It also helps them maintain their brand position (Fig 24) and their focus differentiation strategy (Fig 19). However, it is not meeting their customer expectations of launching new products (Fig 3) nor does it correlate entirely with Apple s brand identity of being innovative (Fig 24). Finally it could limit profitability

14 Apple s strategy is focused on frequent product introductions (Fig 7) and their revenues are greater for new products (Fig 22d) so by focusing on current products this could impact the revenue. There is also a risk of cannibalisation in that they iphone as a product has replaced the ipod for example. Product Development Continue new Innovations. One option available to Apple is to continue doing what they do today. Their current strategy of regular new product introductions (Fig 7) has been incredibly successful, boosting Apple s reputation (Fig 2) and its financial standing (Fig 22). By using an offensive strategy like a bypass strategy, Apple can try and leapfrog the competition and remain at the front of new technologies. Apple s intuitive technology (Fig 11) has already been successfully used across its product range and they could adapt this to develop a television or home automation device for example. This strategy would allow Apple to continue to focus on its niche differentiation strategy (Fig 19) as well meeting their customer expectations with a new innovation maintaining their segmentation and positioning strategy (Fig 5 and 6). As the market is experiencing rapid change as shown in the PESTEL analysis (Fig 3) this allows Apple to keep up with the changes and maintain their competitive advantage Market Development Strategic Alliance with Newspaper/Publisher. A third strategic option is to look into the market development and develop a strategic alliance with a newspaper company (eg, NEWS Corp) or a book publisher (eg, Pearson). The print industry is going through a rapid period of change as detailed in Fig 3. There is a considerable decline in traditional forms of newspapers and books and an increase in digital editions and ebooks, combined with a rapid change in technology and decrease in advertising revenues and this becomes and potentially lucrative option for Apple. Their customers are seeking out new functional benefits that support their digital lifestyle (Fig 5) and therefore there is a strategic fit between newspapers like the Times and Apple [candidate continues to assess further strategic options]. Similarly, another candidate while responding to the second element of Task One wrote the following: The current industry within which ipad is currently operating is very competitive and determined by the rapid technological changes in the environment. For a detailed analysis of the ipad competitive environment refer to Fig 1.3 Porters 5 Forces. The evidence is that the barriers of entry are high considering the costs involved in designing and introducing a high technical product like ipad.. The strategic marketing options available for Apple to sustain its ipad in the market can be categorised into two a) how to compete either through differentiation focus or cost leadership refer to Fig 2.2 Porter s Generic Strategies) and b) directions for growth. Overall cost leadership will not be feasible because Apple brand is associated with quality and if Apple wants to compete on the basis of price and be a cost leader then it will have to dilute its brand equity Differentiation currently Apple is using the differentiation strategy to compete in the highly competitive market. And it uses product differentiation though constant innovation and service differentiation to gain competitive advantage. Through differentiation which has resulted into so many sources of competitive advantage (Fig 2.3) for Apple. In my view, Apple is best able to compete in the market by continuing with the differentiation strategy. It is through differentiation that Apple can be able to command a high level of customer loyalty which has become a resource to the organisation. Directions for growth refer to Fig 3.1. Apple has got various options which it can use to grow the ipad sales. Because the focus for Apple is to increase market share and be able to

15 remain market leader the growth options it can use are market penetration, product development, market development and diversification (refer to Fig 3.1). Market Penetration Apple already commands a strong loyalty from its customers Apple can use existing relationships with its clients to move and make ipad more popular and can use relationship-marketing strategies. It can go back its CRM and try to encourage their existing customers to buy an ipad Apple has got a very strong brand equity and it should make this stronger through marketing communications and hence penetrate the market quite easily. The second option for growth is though product development (refer to Fig 1.2 PESTEL analysis and Fig 2.1 SWOT analysis). The external environment is posing a threat to the print industry through concern for environment and pollution caused by the print industry and the print industry sees ipad as its saviour hence an opportunity to develop ipad into a complete package where users of ipad can use it to read books, e-books and magazines. From Fig 2.1, the opportunities represented to ipad as a result... include product development through collaboration and alliances with book authors and participants in the print industry. The third option under methods of growth is market development. Here Apple has an opportunity to venture into new geographical regions such as India and N. America where there is the potential [candidate continues to assess options including diversification] In response to the third element of Task One, a candidate wrote: The strategic options presented earlier would push Apple into completely different directions. Using Johnson and Scholes (2002) model of evaluation, the most suitable option is product development and to continue developing new products for the market. As discussed previously competition is intensifying (Fig 3 and 18) and companies like Nokia are really beginning to push Apple (additional information). It would be easy for Apple to sit on its laurels and simply defend its position but this does not fit with its brand and key competencies. Apple s strengths, as shown in Fig 1 and 23, lie in developing new innovative market leading products and by continuing to do this they will sustain their competitive advantage. As well as being suitable in terms of environment and resources and capabilities it also matches shareholders expectations. All the stakeholders, in particular those with a high interest in the company as show in Fig 12 will want to see Apple continuing to push the market and maintain their focus differentiation strategy (Fig 19)... In terms of implementation, there is minimal impact to the value chain (Fig 17) the main risk is around the high investment required and the new innovation itself. In response to the first element of Task Two, a candidate wrote following: Currently Apple s return on capital employed is relatively high at 23% (see Fig 1) which means the company is in a good position to generate future profits. The company current ratio is 1.88 (Figure 2) which means that they are highly capable of meeting short term debt. However, the current ratio of 1.88 does highlight that the company may not be utilising their earning potential as a figure of 1 is normally acceptable. The proposal of forming a strategic alliance with News Corporation to introduce personalised content to ipad users (see Figure 10; the Figure presented Future ROI in the UK/USA for 4 years based on 30% share of profits; Apple to introduce a new daily newspaper with personalised contents specific to individual reader) would mean releasing funds to add both shareholder value (SHV) and customer value (CV). Figure 10 highlights gross revenue and net income until As you will see, by forming a strategic alliance with News Corporation, the company will only be risking investment of up to 30% of what it would have cost to establish an Apple onlinecommunication (see Figure 11; this Figure presented ROI figures for 4 years for the introduction of daily newspaper for all ipad users).

16 Not only does the strategic alliance entails less overall investment, but it allows for a wider number of subscriptions as the company will be joining forces with a reputable company that currently holds % share of the UK newspaper market (Appendix 10 of Case Study). News Corporation published reputable titles like The Times, The Sunday Times which have similar identity and brand attributes to Apple. [candidate continues and further assess financial implications of their chosen strategic option] In response to the second element of Task Two, a candidate wrote following: 1. Risk of reputation visibility. Apple is run by a strong leader Steve Jobs - he drives the company forward through innovation. Appendix 19, illustrates who the other competitors are run by With the announcement of Jobs health deteriorating the possibility of him standing down, this could greatly affect the direction of the company. Apple needs to ensure this part of brand reputation of Apple is not damaged. Constant communication needs to be kept in place with the media to give them information on where is company is heading. It is vital that the culture is maintained to ensure Apple remains the brand leader and continues to innovate new products. A new leader needs to be ready to take the company forward who has as much drive and passion as Jobs. 2. Risk of changing technology The market Apple operates in is immensely competitive (Fig 6 5 Forces Analysis). If NPD is not kept high then Apple risk not being able to compete efficiently. Apple continues to invest a lot in research and development (R&D) to ensure they have the latest product with the correct features With the threat of lawsuits over patent violations Apple need to have mitigating strategies in place. This can be achieved through fully understanding the market and using forecasting techniques to comprehend the direction of the market Scenario planning is best to be used here 3. Risk of competition Apple has had a large success in recent years. There is the threat that Amazon, Sony, Dell could fight back by guerrilla attacking Apple by undercutting on price. This could lead to random attacks over a sustained period of time with high unpredictability. Apple needs to implement a pre-emptive defence position and strike at competition before they hit As Apple has strong brand loyalty this will be an important element in mitigating their risk... Similarly, another candidate while responding to the second element of Task Two, wrote the following: 1. From the additional information provided in support of the case study, we see that Apple is facing several lawsuits over intellectual property rights. Apple is engaged in patent disputes with Nokia, Motorola and HTC all competitors in the consumer electronics business. The litigation will be costly to Apple both in terms of financial resources it requires to defend itself especially since the cases have been filed in several countries US, UK, Germany, Netherlands with the cases overseas most costly due to distance and also due to Apple s lack of familiarity with the laws of all the different countries. It will also be costly in terms of reputation and these cases would impinge on its brand identity, time and management or resources Apple has a reputation for being creative and different. This could be hurt if it was proven that indeed it stole patents. It would also give customers reasons to switch to competitors as they could be seen as just as good. Therefore Apple should fight to defend its position. In the meantime, it should also use publicity to resources its customers of its innocence and in so doing protect its brand equity. 2. Competition the markets within which Apple operates are intensely competitive (Figure 2A). To compete effectively and retain leadership, the company should continue to build on its strengths of innovation and customer loyalty. It can leverage the success of some products to support slower selling products such as it does with the imac. To compete effectively a

17 strategy of focused differentiation where it focuses on a particular segment and provides a differentiated product will enable it to reach its objectives. 3. Global sourcing the company relies on 3 rd party component manufacturing and logistical services located outside US. This has an effect on its value chain (Fig 6) which could introduce a risk to the business if there was an interruption to the supply. To manage this risk, the company should do the following: a) It should not rely on only one manufacturer or logistic provided but spread the risk in case of the failure of one b) The company should enter into written and binding contracts which are mutually beneficial to mitigate risk and c) the company should develop a contingency plan that would detail how to deal with an adverse situation and minimise risk to the firm. In response to Task Three, a candidate wrote following: Candidates correctly draws and labels Print Industry Value Chain. Using Porter s Primary Value Chain Analysis model, we can assess how the ipad may affect the print industry. Inbound logistics and operations The print industry suffers large overheads in terms of production. Starting from scratch to build a model, you would not need pulp from lots of trees, use trucks and paper boys to deliver a screenshot of yesterday s news. The ipad may offer a new way of distributing the news. People want instant news whilst they are on the go and the ipad can provide this. In order to save itself, the print industry must embrace the mobile web and tablets. HR Management The newspaper industry needs to reposition itself so that their website is at the forefront of all that they do. Designers need to be employed or trained from within in order to ensure their news pages and contents are stylish and readable through the web, on phones, and through applications. Journalists need to be trained so that they can provide content suitable for both the web and the newspaper. Some newspapers may need to ditch some print runs during the week as their focus becomes online. That way they could charge more for adverts in the newspapers and move online. Technology development Newspapers should look to work with Apple and marketers to enable advertising and content personalisation. If Apple can provide the print industry with meaningful marketing metrics then advertisers will be more willing to utilise online ads. As a minimum they will need to know preferences and profiles of user. Adverts and suggestions can then be tailored to individuals. This allows advertising to become much more interactive and deals of the day may become popular. Procurement The print industry has time to develop to the new world. The progression to tables will be gradual, although the growth of smart phones is exponential. Worldwide the print industry continues to thrive in China and India but as Fig 9.3 and 9.4 show the sales and advertising revenues from newspapers are in serious decline in the Western world. Apple does have the potential to make large revenues from its mobile devices as people have shown a willingness to buy newspaper apps allowing them access on the move. The print industry is falling over itself to develop apps and mobile friendly websites for mobile devices. Inbound Logistics Currently journalists place their news stories via newspapers and authors via publishers but this model could be altered in the future years. There is no reason why authors could not get straight to e-reader providers like the ipad or Kindle and cut out publishers. This would mean Apple could pick up a share of revenues, which would under the old model, have gone to the publisher. Likewise journalists may set up their own apps and blogs which cut out the newspapers. Apple should keep tabs on such developments. If the

18 current system of publishers pushing books ensures Apple can see to take a percentage of their revenues through further development of its ibook Store Similarly, another candidate while responding to Task Three wrote the following: With the launch of Apple ipad, many players in the print industry were affected badly and were anticipating more damage. Moreover the advent of re-readers has reduced the profit share of print industry which showed slump in revenues and numbers since the era of internet. Print industry mainly includes the newspaper companies, book publishers and others (refer to Fig 24 and Fig 26). The introduction of the ipad changes the value chain of print industry upside down with many areas of change (Fig 27). The following are the impacts the print industry value chain: Inbound Logistics The traditional value chain of print industry comprises of paper, ink materials, human labour sources, news information etc which will be converted to digital value chain cutting down on all these components. Only few labour (IT experts), graphics, content developers will be required. This causes social problems like job losses among journalists (see Fig 2) and unemployment issues. 2. Operation the content development to physical printing of newspapers will be replaced by means of digital soft copy formats. This will lead to unutilised assets of the printing industry where less physical printing is done affecting the revenue of companies. 3. Outbound logistics Physical distributions using the existing distribution channels are warehousing will be totally eradicated and replaced by total online distribution. Distribution will only be in the form of soft copy and through secured portals. Here too social issues will be faced by suppliers and distributors losing their share of business. 4. Marketing and sales Physical cash, cheques will be replaced by credit cards and smart cards. The physical stock management, promotional activities (in the form of flyers etc) will be largely replaced by promotional activities where more customers are targeted via online using s and SMS. The impact on employees and suppliers will be felt here too. 5. Services The service maintained so far will be electronically replaced with more efficient after sale assistance offered and more customer relationship management practised than is the case currently in the print industry. E-CRM will be more active and effective method for getting feedback from customers. Overall this changes the dynamic nature of the traditional value chain print industry (Fig 27). The implications of these changes for Apple will be more favourable competitive advantage. The changing and more influencing nature of Apple in print industry will lead to a number of strategic options like tie ups with e-reader providers, forward integration with online or e- readers of their own and online portals and new business models. For Apple, a strategic tie up will ensure a long sustainability via its innovative products like ipad. With many in the newspaper industry already looking at going online and charging the customers (see case study), Apple with ipad applications for newspapers will allow them to penetrate the market further and gain distribution by collaborating with existing newspapers. The bargaining power of Apple will be stronger (Fig 3) than others in the print industry (Fig 25) and more opportunities will open for Apple at a global level Common Mistakes and Weaknesses In general, the weaknesses of the cohort appeared to be as follows: - Task Two a and Task Three were not handled well by many, pointing to a strong weakness in syllabus coverage.

19 - Many candidates produced much shorter answers for Tasks Two and Three in comparison with Task One, with some doing extremely badly for both Tasks Two and Three. - A significant majority could not handle financial implications of their recommended strategic option, with many producing generic or less relevant or descriptive details. Tutors and centres are reminded to cover this area of the syllabus with greater care in the future. - Lack of ability to respond to the required focus was an important issue particularly for Task Three, where candidates were required to analyse the impact of the ipad on the value chain of the print industry. Instead, weaker candidates tended to rely on answers prepared beforehand (eg, focusing on digital value chain and failing to analyse the value chain of the print industry altogether). Also, not many were able to assess the implications for generating competitive advantage for Apple. - Weaker candidates were unable to utilise insights from their six page audits and hence this continues to be an important issue that tutors should address in exam preparation. Candidates need to be advised that a generic tendency to make repeated and simplistic references (eg, see Figure 2.20 etc) is not enough on its own to merit higher marks. Instead, they need to be encouraged to use insights from their audits and provide sufficient explanation/details as part of their answer. - Weaker candidates were unable to make valid recommendations and address the specific requirements of the tasks. - Lack of ability to provide sufficient critical evaluation and sufficient insights into the relevant theories continued to be an issue. In some cases, some candidates did not attempt all tasks and hence lost some crucial marks - Weaker candidates tended to provide superficial answers revealing little strategic insights into relevant theory and practice. - For instance and in response to Task Two b (worth 25 marks), weaker candidates tended to focus on generic issues rather than assessing strategic marketing options. Other noticeable problems included a tendency to base answers on common sense and personal experience and not on relevant concepts/models. Also, assessed options were often tactical rather than strategic in nature, revealing lack of strategic insight into decision-making at a higher level. - Weaker candidates were largely unable to integrate the additional material provided to them in the exam and appreciate the additional challenges facing Apple. Suggestions of possible alternative approaches to tackling a question/task or parts of a question/task while making it clear that it is not the only way There are alternative approaches in tackling a question and in each case high marks can be achieved as long as there is enough evidence suggesting the achievement of learning outcomes and a relevant and valid response is provided in the given context. Recommendations for how performance can be improved in future assessments Candidates should be encouraged to: - Study all areas of the syllabus. For instance, not many were able to handle Task Two very well, which is a bit surprising and an area of concern for most centres. - Make extensive use of the six page audit and refer it throughout as and where needed. In other words, encourage candidates to apply the insights they gained from the audit to the

20 tasks posed in the examination. This is a skill that may be new to some candidates and something that tutors must address in exam preparation. - Consider each element of the task and its value in terms of marks allocation, and assign efforts accordingly. - Make sure that each and every response is labelled, making it clear when they move from one task to the other or from one element to another. For instance, each individual task should be clearly numbered and candidates should be advised to make sure that they start each task on a new page. - Score through their rough working notes inside the exam scripts to avoid confusion as to what the examiner is being asked to mark. - Identify the required focus of the task; in other words make them think about what the task is asking them to do. Candidates should be encouraged to read the tasks carefully and ensure that each task requirement has been sufficiently addressed. - Appreciate that all tasks in the examination can be inter-linked; their responses as such need to demonstrate this while responding to all three tasks. Candidates must be encouraged to read the whole exam paper and think about how each task links with others in the paper before commencing their answers. - Engage in deeper learning (rather than surface learning), apply theory to context and develop abilities to evaluate the given topic in certain depth and detail. It is important that candidates are able to demonstrate not only their knowledge but their abilities and skills to apply and evaluate in the given context. - Consult the reading list and read from the core texts and other wider publications. This is significant as very rarely do candidates refer to any journals or core texts while answering questions. Clarification about any syllabus or assessment changes None anticipated at the moment. Possible future assessment themes There are some areas of the syllabus that are likely to appear on future examination papers and hence tutors should ensure that candidates are familiar with the theory and practices in these areas. Examples such as critically evaluating an organisation s strategies, including: brand strategies with consideration of value creation and sustainable competitive advantage; evaluating and prioritising a range of strategic marketing options, recommending with justification strategic options given a particular analysis; analysing financial implications associated with strategic marketing options; critically evaluating the concept of relationship marketing as a means of achieving growth and profitability; staffing policy; evaluating potential risks for the company involved and measures for mitigating risks; assessing the potential for organisational constraints to limit an organisation s success in using any given strategic choice and a range of strategies to address these successfully.