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INTERNAL ASSIGNMENT APPLICABLE FOR SEPTEMBER 2019
EXAMINATION
Strategic Financial Management
1. Rajshree Limited’s
equity shares trade in the market at Rs. 40 per share. Dividend paid in the
current year is Rs.8 per share. You expect the dividend to grow at a constant
rate of 4% year on year. Is the stock underpriced or overpriced? State the
appropriate reason. Assume 16% cost of equity. (10 Marks)
2. A shoe manufacturer
is considering buying a machine which will enhance its production efficiency.
The machine would cost Rs 2,40,000 and has a useful life of 5 years. A salvage
value of Rs 40,000 is realizable at the end of 5 years. The machine will bring
in cost savings of Rs 70,000 every year The tax rate is 30%. Assume 20% cost of
capital. Compute the NPV of the proposal. (10 Marks)
3. Allied Industries
has raised capital by way of Equity, Preference Shares and Debt at
a cost of 18%, 12% and
10% respectively.
Capital (in Rs million)
Book Value Market Value
Equity 500 1000
Preference 250 250
Debt 250 250
Calculate the weighted
average cost of capital based on
a. Market Values (5
Marks)
b. Book Values. (5
Marks)
Brand Management
1. Even for the most
dedicated of ice cream lovers this multicultural marketing blunder may prove a
little hard to swallow. Meerut-based MVF Products launched ice-cream cones by
the name of “Hitler”. The brand’s cartons carried a picture of a stern-looking
Adolf Hitler dressed in a brown blazer. In response to its marketing, critics
tweeted extensively with crude remarks such as “Height of tastelessness; Indian
ice-cream named after Hitler. Would the Germans name a sausage after
Godse?" The brand marketers however justified their stance by stating that
the brand name was inspired by an uncle in the family known for his
short-temper; and nick-named Hitler. Needless to say, the brand’s name and
identity suffered from severe criticism for being inappropriate and
insensitive. Not just the brand name, but even while choosing other elements of
the Brand, the marketer must keep in mind certain criteria to avoid such
multi-cultural blunders. Discuss the six-point criteria for choosing the Brand
elements. (10 Marks
2. Nestle is planning
to come up with a range of coffee-based products such as face wash, face
exfoliating scrub, face mask, face cream, body mist, lip balm etc. under its
Nestle brand. What is the branding strategy that Nestle should adopt for this
new product range? Suggest how the company can create brand associations for
its new product range leveraging secondary associations from its existing
brand. (10 Marks)
3. Chocberry has undergone
a major transformation over time. It has evolved from being a confectionery
business into an international business with significant interests in
confectionery and entertainment for kids worldwide. Growth through acquisition
had enabled the group to build up a large portfolio of well-known brands. However,
slowly it started becoming clear that not all of its products were contributing
equally well to its overall profitability. This case study looks at how Chocberry
adopted a business philosophy of selling chocolate products to children either
directly or through their parents.
Revitalising
brands
Chocberry's famous
brands include: Chocberry's Milky Way, Nutty Buddy and SilkyChoc. Good brands
are valuable assets, but still need support especially when children are the
main consumers and parents the main buyers. There is also a time lag challenge.
Children, who stop being consumers of their parents' chocolate purchases when
aged 12 or 13, have to be encouraged back to the product as buyers of it when
they themselves become parents, perhaps 15 years later. Chocberry decided that
its chocolate products aimed at children were most in need of a new approach.
But how best to achieve it?
Advertising
dilemmas
Since different chocolate-based
products appeal to different age groups, Chocberry needs to offer a wide
product range. Each product needs promotion, which implies an advertising
budget for each product line, which is very expensive. One approach is to
promote the firm as a whole, that is, raise awareness of Chocberry's, in the
hope that this in itself will boost sales across Chocberry's product range.
However, a catchall approach can be rather hit or miss and may produce a poor
return. Another way around this is to promote chocolate consumption in general.
This approach would require co-operation between competitive producers and
implies some loss of control for Chocberry's. In line with its adding-value
approach, the challenge to Chocberry was to promote its child-orientated products
in a cost-effective manner. From within Chocberry came an interesting, attractive
proposal based on some solid propositions:
·
For children, consumption is linked to having fun. Any consumption
that children regard as fun will also appeal to their parents, who do the
spending.
·
Other companies manage to associate consumption with children
having fun. For example, Disney offers Disneyland, where, in the course of
having a good time, children meet loveable characters whom they link with the
purchases that parents make on their behalf, such as cinema tickets, videos,
cuddly toys.
·
On somewhat similar lines, the company Chocberry, also has 'a
place where chocolate is made'. This place is an asset that can be further
developed into a Chocolate World. Chances are, that it shall prove to be a huge
attraction to thousands of visitors each year.
Out of this line of
thinking came a new Chocberry creation - Chocberry LAND – a chocolate world, chocolate
factory of its kind. Chocberry already has separate chocolate lines aimed
principally at children: Chocberry Shots, Stars, Perky. What was needed was a
new 'umbrella' that gave them some togetherness whilst preserving their
separate identities. The concept of Chocberry LAND had to be suitable for
promotion through the various media forms and flexible to survive the addition
and subtraction of brands. Chocberry LAND will capitalise on children's love of
likeable characters placed in a world of their own. A character shall be
attached to each brand. The character's persona will reflect the brand. For
instance, Buttons will be 'a bit dizzy and will giggle a lot', Wildlife will be
'an eccentric old buffer' and Fudge will be 'a bit of a loony'. In Chocberry
LAND, each character will contribute in an endearing way to the making of
'their' product. A child consumer and his chocolate-related adventures will
offer the route by which the visitors shall enter and enjoy Chocberry LAND. Children
will feel comfortable with all this, because they are already familiar with the
brands. The experience of seeing their favourite chocolates being made – a tempting
world of chocolates – will be a one of its kind. The challenge before the
marketers will be to build the brand equity for Chocberry LAND.
a. Who should be the
key target consumer (s) for Chocberry LAND and what should be the positioning
to reach out to them? (5 Marks)
b. What are the various
communication tools which can help in building the brand equity of Chocberry
LAND? (5 Marks)
Integrated Marketing Communications
1. You have just opened
your own Restaurant. You have planned an inaugural rate for customers to visit and
taste the food. Describe the P’s of marketing mix. Describe the Promotion plan
on How would you market your brand to maximize your sale? (10 Marks)
2. You are the brand
manager of a Toddler’s toys Brand. Your company has tied up with a kid’s movie
to attract the toddler’s. How will you leverage this association to build
equity for your brand? (10 Marks)
3. Case Study
Increase Market Share
for Online Pharmacy
Source: PTI feed India
Today
The overall Market size
of online Pharmacies is at Rs. 800 Cr. It is estimated to grow at 20% as more
and more people move into buying online medicines. Metlife offers the medicines
at a 20% lower rate. While it has been growing, the overall share of all the
top players put together is only 2%. Metlife aims to increase its market share
thereby increasing the volume of medicines bought online.
a. In a growing market
with other serious players, how would you approach IMC to increase the market
share? (5 Marks)
b. Metlife has created
an audio visual ad for creating awareness about authentic medicines delivered
at the doorstep. Explain the 9 elements of communication for the ad. (5 Marks)
B2B Marketing
1. Fortis Hospitals
wants to increase its sales by focusing the Business markets where
Organizations would buy preventive health check-up packages for their
employees. They have developed various packages to attract business markets.
Propose a suitable
pricing strategy that Fortis should use for its organizational customers. (10
Marks)
2. Excellent Roller,
company are the famous rubber roller manufacturers in India. They have got into
a technical collaboration to produce Teflon rollers which are used in coating
and printing machines. Rubber rollers which is used generally are prone to
damages compared to Teflon rollers. ERPL is planning to launch product using
advertisements. Do you agree for an advertisement campaign for an industrial
product? If so why? What are the ways in which ERPL can advertise? What are
alternate methods? (10 Marks)
3. Read the following
Case & solve the questions given:
Mr. Sunil Mathur,
Director, Raj Doors Pvt Ltd, was not sure what kind of marketing strategies,
segment and target market he should use in order to achieve the company goals
on sales and profitability. The sales and profits were not growing as per
expectations of Mr. Mathur.
Sunil Mathur joined the
family business in 2006 after completing graduation in Electronics engineering
and MBA from a reputed institution in India.
The company
manufactures and markets plastic doors (GTEX brand) for bedrooms, bathrooms,
office rooms, balcony etc. These non-wood doors can be used for residential
houses, institutions like schools, office, hospitals as well as commercial
shops, malls etc. The market for plastic doors was growing at the rate of 50%
annum. Raj Door was having a market share of 14% in the year 2008. Kintex and
Aptak were the leading players with market share approximately 28% and 20%
respectively. Balance market was dominated by smaller players as well the
players in the unorganized sector. The market was overall dominated by wooden
doors. The market was highly fragmented with no player commanding more than 4%
of the market. Unorganized sector was the dominant player in the wooden door
market. Mr. Sunil was determined to make the company as market leader of the
overall door market (both wooden and plastic) in the next ten years.
The company had
segmented its market into the following segments(a) government organizations
like CPWD, Ministry of Defence, Railways etc.;(b) Residential house built by
builders ;( c) commercial organizations and institutions ;( d) individual house
owners built by individuals ;( e) fabricators. ‘We have targeted all the above
market segments for plastic doors, excepting those who want wooden doors’ said
Sunil Mathur. He further added that their sales personnel regularly contacted
contractors who get business from government organizations, where lowest price
and good after-sales-service are the key buying factors. However, when sales
personnel call on builders for residential and commercial complexes for getting
orders, Superior product quality and services are the most important factors
that they have to keep in mind. For house owners and fabricators indirect
channel of dealers are used. They mostly look for low prices and delivery
service. The company developed three sub-brands under GTEX brand. These are
Solidex, Fibrex and Lightex. Solidex brand was suitable for government firms,
institutions, individual houses with medium quality and medium to low prices.
Fibrex brand with high quality was suitable for builders and a few individual
house owners. Lightex brand offered lower quality and low prices for
replacement market and a few individual house owners.
a. Evaluate how the
buying behavior is likely to be different in the Commercial offices from
individual households. (5 Marks)
b. Develop a marketing
strategy with focus on: Strategic orientation (whether you would like to be
leader, challenger or follower)? Discuss its implications.
(5 Marks)
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