Identify and evaluate marketing opportunities answers

Assessment Task 2 BSBMKG501 Identify and evaluate marketing opportunities

© 2015 Innovation and Business Industry Skills Council Ltd 1st edition version: 1

Page 1 of 10

Evaluate marketing opportunities

Submission details

Candidate’s name Phone no.

Assessor’s name Phone no.

Assessment site

Assessment date/s Time/s

The assessment task is due on the date specified by your assessor. Any variations to this

arrangement must be approved in writing by your assessor.

Submit this document with any required evidence attached. See specifications below for

details.

Performance objective

For this task, you will demonstrate the skills and knowledge required to investigate

marketing opportunities and evaluate required changes to current operations.

Assessment description

In response to a simulated business scenario, you will evaluate three marketing

opportunities that have been identified for you, rank them in terms of viability and likely

contribution to the business, and assess the impact of the top-ranked opportunity on

operations. You will then prepare a report for the Board of Directors documenting

identified marketing opportunities and required changes.

Procedure

There are two parts to this assessment task. Both parts relate to three new opportunities

that need to be evaluated. Part A requires you to read all materials and to evaluate and

complete the information in the BBQfun sales data worksheet. In part B you will prepare a

report for a Board of Directors to outline, evaluate and rank the opportunities.

Assessment Task 2 BSBMKG501 Identify and evaluate marketing opportunities

© 2015 Innovation and Business Industry Skills Council Ltd 1st edition version: 1

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Part A

1. Read all materials required for this activity: this procedure, BBQfun simulated

business, information supplied in the scenario, and information supplied in the

BBQfun sales data worksheet of this assessment task.

Scenario

You are the Marketing Manager at BBQfun. You and your team have

identified three marketing opportunities to evaluate. They are:

● manufacture and sell own brand

● sell products through e-commerce

● sell products at bargain prices.

The first opportunity is to manufacture and retail own-branded barbecues

and products. Manufacture would take place at a leased plant in India as

BBQfun has no manufacturing capability. Also, manufacture in Australia

would be too expensive.

The second opportunity is to offer all products in an online store. Stock

could be stored at no extra cost at existing stores. Customers would cover

delivery costs.

The third option is to aim to increase market share by cutting the cost of

products and aiming at mass appeal.

Further information is provided in the BBQfun sales data worksheet.

Each opportunity will be promoted through a $500,000 television, internet

and email advertising campaign (cost accounted for in approved budget).

You will need to review the BBQfun simulated business information to

determine organisational fit, profitability and operational implications for

each of the three opportunities.

On the basis of the profitability index (opportunity cost estimated to be 8%)

and a full appreciation of other, non-financial factors, you will need to rank

these opportunities and choose one top-rated opportunity for further

evaluation.

After ranking the three opportunities, you will complete your evaluation in

terms of impact on operations. Information is provided in the BBQfun sales

data worksheet.

You will then need to provide a report to the Board of Directors

documenting your evaluation of identified marketing opportunities and

required changes to operations.

Assessment Task 2 BSBMKG501 Identify and evaluate marketing opportunities

© 2015 Innovation and Business Industry Skills Council Ltd 1st edition version: 1

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2. Using all the information that you have been provided, fill in the blank spaces (the

shaded boxes) in the BBQfun sales data worksheet in the following order:

a. Forecast the total market potential for the coming financial year.

b. Use the market share for each opportunity and the total market potential to

forecast the number of buyers in each category for the e-commerce market

opportunity.

c. Use the number of buyers from market potential tables to calculate the unit

sales volumes for the e-commerce and bargain market opportunities.

d. From this information, calculate estimated total revenue and gross profit.

e. Use the additional fixed costs and the BBQfun simulated budget to determine

the net profit for each opportunity.

f. Use gross profit and total fixed costs from each opportunity to calculate the

profitability index for each opportunity.

g. Use information from this assessment task and the BBQfun simulated

business to calculate total cost of operational changes.

3. Complete your own research to supplement the information you have been

provided with. Ensure that you have all the information that will enable you to

address all the requirements of the report.

Part B

1. Complete a report according to the following requirements.

2. Referring to the BBQfun simulated business documentation, analyse the three

opportunities outlined in the scenario in terms of likely fit with organisational goals

and capabilities. Consider:

a. organisational marketing plan, structure, products and services

b. principles of marketing and the marketing mix

c. additional marketing information such as survey results in the BBQfun sales

data worksheet.

3. Using information in the BBQfun sales data worksheet, evaluate each opportunity in

terms of impact to current business and customer base. Evaluation should include

investigation of:

a. sales volume for each opportunity in upcoming financial year

b. gross and net profit for each opportunity

c. use numerical analysis or statistical methods to forecast, for example, the

size of potential markets.

4. consider also:

a. impact on growth plans

b. market share

c. knockout factors to rule out opportunities.

Assessment Task 2 BSBMKG501 Identify and evaluate marketing opportunities

© 2015 Innovation and Business Industry Skills Council Ltd 1st edition version: 1

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5. Assess external factors that may be relevant to each opportunity. Identify

(in outline) all of:

a. codes of practice and models

b. regulations

c. relevant legislation.

6. Refer to relevant BBQfun policies and procedures.

7. Referring to BBQfun simulated business documentation, summarise major costs,

benefits and risks associated with each opportunity, including risks associated with

potential competitors. Identify at least two strategies or approaches to mitigate risk.

8. Using information in the BBQfun sales data worksheet, assess the return on

investment for each opportunity. Calculate the profitability index for each

opportunity.

9. Based on your analysis so far, rank the three marketing opportunities. Justify your

ranking in terms of both financial and non-financial factors (such as organisational

fit).

10. Using information from the BBQfun sales data worksheet, for the top-ranked

marketing opportunity, identify changes to current operations in order to take

advantage of the opportunity. Ensure changes identified are adequate to:

a. service an increased or different customer base

b. ensure continued quality of service.

11. Ensure you can justify changes on the basis of maintaining quality.

12. Using information from the BBQfun sales data worksheet, estimate and justify

resource requirements and costs for changed operations. Consider:

a. additional staff

b. distribution costs

c. equipment

d. promotional costs

e. staff training.

13. Prepare the report for the Board of Directors to document your evaluation of the

three marketing opportunities and operational changes for the top-ranked

opportunity. Ensure you include the following in your report:

a. An executive summary.

b. The results of your investigation of marketing opportunities in steps 3–8.

Document the results of your investigation at each step. Consider

documenting each step separately, under its own section heading.

c. For the top-ranked opportunity, the results of your evaluation of required

changes to operations in steps 9–10. Document the results of your

evaluation at each step. Consider documenting each step separately, under

its own section heading.

Assessment Task 2 BSBMKG501 Identify and evaluate marketing opportunities

© 2015 Innovation and Business Industry Skills Council Ltd 1st edition version: 1

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14. Ensure your report is written with appropriate language and level of formality to

satisfy needs of your readers:

a. formal language

b. technical vocabulary, for example, no need to define terms such as

‘marketing mix’

c. assume knowledge of organisational policies, marketing strategies.

15. Submit your report as per specifications below. Keep a copy of your report for your

records.

Specifications

You must submit:

● evaluation report for the Board of Directors that covers all of the listed

requirements.

Your assessor will be looking for:

● literacy skills to identify and interpret market information, to write in a formal style

appropriate to a professional audience and to document outcomes and

requirements

● numeracy skills to calculate and evaluate financial information on new marketing

options

● knowledge of key provisions of relevant legislation from all forms of government,

codes of practice and standards that may affect aspects of business operations,

such as:

○ anti-discrimination legislation and the principles of equal opportunity, equity

and diversity

○ ethical principles

○ marketing codes of practice and conduct such as the Australian Direct

Marketing Association (ADMA) Code of Practice, the Free TV Australia

Commercial Television Industry Code of Practice, and the Australian

Guidelines for Electronic Commerce

○ Competition and Consumer Act 2010

○ privacy laws.

● knowledge of the organisational marketing plan, structure, products and services

● knowledge of principles of marketing and the marketing mix

● knowledge of statistical methods and techniques to evaluate marketing

opportunities, including forecasting techniques.

Adjustment for distance-based learners

● No variation of the task is required.

● A follow-up interview may be required (at the discretion of the assessor).

● Documentation can be submitted electronically or posted in the mail.

Assessment Task 2 BSBMKG501 Identify and evaluate marketing opportunities

© 2015 Innovation and Business Industry Skills Council Ltd 1st edition version: 1

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BBQfun sales data worksheet

Performance

Market share (projected*):

Assume market share constant across all products.

Financial year (FY) Local

independents

The Yard BBQs R us Outdoorz BBQfun

FY 2013–14 30% 0% 25% 23% 22%

FY 2014–15 30% 0% 27% 23% 20%

FY 2015–13 30% 0% 22% 25% 23%

*FY 2016–17 30% 0% 22% 24% 24%

Sales performance:

Financial year (FY) Total sales

FY 2013–14 8,500,000

FY 2014–15 10,000,000

FY 2015–13 9,000,000

FY 2015–16 9,500,000

Estimated total market potential for FY 2012–13 (SE Qld)

Calculate potential sales for marketing opportunities.

Total market potential (with potential online sales included)

Use to calculate potential sales with e-commerce included in FY 2012–13.

Financial year (FY) BBQs Outdoor

Furniture

BBQ

Accessories

Total

FY 2012–13 25,000 13,000 42,000 80,000

FY 2013–14 35,000 15,000 58,000 108,000

FY 2014–15 40,000 17,000 68,000 125,000

FY 2015–13 45,000 19,000 75,000 139,000

FY 2016–17

Assessment Task 2 BSBMKG501 Identify and evaluate marketing opportunities

© 2015 Innovation and Business Industry Skills Council Ltd 1st edition version: 1

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Own branded products

Assume market share of 24% for BBQfun to calculate projected number of units to sell for

each item in FY 2012–13.

BBQs Outdoor Furniture BBQ Accessories

Number of buyers 30,000 13,000 56,000

Quantity 1 1 3

Average price $600 $850 $50

Bargain market

Assume market share of 25% for BBQfun.

BBQs Outdoor Furniture BBQ Accessories

Number of buyers 40,000 20,000 70,000

Quantity 1 1 3

Average price $500 $650 $40

With E-commerce

Assume market share of 24% for BBQfun.

BBQs Outdoor Furniture BBQ Accessories

Number of buyers

Quantity 1 1 3

Average price $620 $880 $55

Assessment Task 2 BSBMKG501 Identify and evaluate marketing opportunities

© 2015 Innovation and Business Industry Skills Council Ltd 1st edition version: 1

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Opportunities and profit figures for calculation

Own brand E-commerce Bargain market

Sales volume (units) BBQ: 7,200 BBQ: BBQ:

Furniture: 3,120 Furniture: Furniture:

Accessories: 40,320 Accessories: Accessories:

Price BBQ: $600 BBQ: $620 BBQ: $500

Furniture:$850 Furniture: $880 Furniture: $650

Accessories:$50 Accessories:$55 Accessories:$40

Unit contribution margin BBQ: $500 BBQ: $300 BBQ: $200

Furniture: $600 Furniture: $420 Furniture: $220

Accessories: $40 Accessories: $20 Accessories: $10

Total revenue

Total gross profit

FY 2016–17

Additional fixed costs Add lease:

$1,000,000

Add labour:

$500,000

Add plant

(depreciation):

$500,000

Add training:

$50,000

Add online store

development:

$100,000

Add new plant and

equipment

(depreciation):

$150,000

Add labour:

$250,000

Add reconfiguring of

warehouse/

office: $50,000

See approved

budget (no change

in fixed costs)

Total net profit

FY 2016–17

Assessment Task 2 BSBMKG501 Identify and evaluate marketing opportunities

© 2015 Innovation and Business Industry Skills Council Ltd 1st edition version: 1

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Profitability index figures for calculation

Own brand E-commerce Bargain market

Cash flow 2016–17 (Use gross profit) (Use gross profit) (Use gross profit)

Opportunity cost 8% 8% 8%

Present value of future

cash flows

Present value of initial

investment

(Use total fixed

costs)

(Use total fixed

costs)

(Use total fixed

costs)

Profitability index

Operational changes

After consulting with the management team at BBQfun, you determine:

● high risk of customer service quality problems for online customers

● high risk of staff misunderstanding changes and considering online sales as threat

to jobs

● eight online sales and customer service people will be needed to manage increased

online customers

● since stores are overstaffed, need for online people could be met from drawing

from existing employees at the two stores

● currently no staff have online customer service skills

● management would like to develop people through retraining rather than hire new

staff to handle online sales

● six delivery trucks needed to enable distribution

● website will take 50 days to develop

● three forklifts needed

● four additional warehouse workers needed

● six additional drivers needed

● office space may need to be reconfigured.

Assessment Task 2 BSBMKG501 Identify and evaluate marketing opportunities

© 2015 Innovation and Business Industry Skills Council Ltd 1st edition version: 1

Page 10 of 10

Available resources and costs

Resources Costs

Additional staff $25,000 year average Additional staff costs:

Plant and equipment

depreciation

● Delivery trucks

($20,000 each)

● Forklifts ($10,000 each)

Plant and equipment costs:

Promotional costs $500,000

Website developers Contractors ($2,000/day) Website development cost:

Staff training Online customer service

training

($3,000 per staff member)

Staff training cost:

Management change

leadership training for

store managers and

team leaders

$3,000 each Management and leadership

training cost:

Warehouse and office

reconfiguration

Reconfiguration cost: