| Date | November 2018 | Marks available | 2 | Reference code | 18N.2.SL.TZ0.3 |
| Level | Standard level | Paper | Paper 2 | Time zone | Time zone 0 |
| Command term | Explain | Question number | 3 | Adapted from | N/A |
Question
Jacob Strutz (JS)
Jacob Strutz (JS) is an American multinational company that produces jeans. Founded in 1860, for 100 years JS enjoyed steady growth in sales, mostly in the United States and then in Canada and Mexico. In the 1960s and 1970s, when teenagers worldwide began wearing jeans, JS’s sales increased significantly. JS’s premier product is Strutz’s No.5 jeans, one of the best-known brands in the world.
In the late 1970s, JS operated 71 factories in the United States. In 1994, its sales peaked at $7.6 billion worldwide, but then began to decline. In 2002, JS made the decision to close its last remaining factories and outsource manufacturing to foreign manufacturers, whose quality was more difficult to control. By 2017, annual sales were only $4.5 billion. Even sales of Strutz’s No.5 jeans declined, and JS faced intense competition, including foreign competition.
JS briefly experimented with fast fashion, an industry practice developed in the United States in response to cheap, foreign imports. In fast fashion, new design concepts are quickly manufactured once they have been tested at fashion shows. Unfortunately, fast fashion worked against JS’s brand identity. Surveys indicated that JS’s brand has value and inspires loyalty, though focus groups of young consumers did not perceive JS as cool.
JS has been a leader in corporate social responsibility (CSR). Since the 1890s, it has pursued profits through values. More recently, JS introduced Strutz’s chemical-free jeans. Because many of JS’s suppliers operate in areas with few pollution regulations, to remain consistent with its image of CSR, JS is insisting that suppliers follow innovative but expensive chemical-free processes.
Define the term multinational company (MNC).
Explain the importance to JS of brand value.
Explain the importance to JS of brand loyalty.
Draw and label a product life cycle for Strutz’s No.5 jeans.
Explain the position of Strutz’s No.5 jeans on the product life cycle.
Discuss the role and impact of globalization on the growth and evolution of JS.
Markscheme
A multinational corporation is a company that operates in two or more countries. A multinational company needs to have a base in those countries, not just sell goods and services there.
Award [1] for a partial understanding that conveys some understanding and [2] for a complete response that shows full understanding. Candidates do not have to word exactly as above. If candidates equate being a multinational corporation with being a global organization without any further qualification or explanation, maximum award: [1].
Brand value refers to the premium customers or potential customers are willing to pay for a product compared to the competition. For example, if jeans roughly comparable to Jacob Strutz’s products sell for $10 less, some dollar amount can be specifically attached to the value of the JS brand.
For [2], candidates must define, explain, and apply the concept of brand value to JS. Award [1] for some partial response.
Brand loyalty refers to the loyalty that customers attach to a particular brand, whether for repeat purchases of the same product (jeans) or the purchase of new products traded under the brand name (jeans jackets, for example). In the case of JS, it has strong brand loyalty based upon on 100 years of successful marketing. Many customers are loyal to JS even though they could buy other jeans for less or buy jeans that have a certain trendiness now.
For [2], candidates must define, explain, and apply the concept of brand loyalty to JS. Award [1] for some partial response.
Award [1] mark for some idea of the product life cycle. Award [2] if a candidate draws a product life cycle and correctly provides at least four stages. Maximum award: [2].
N.B. If the candidate has not labelled the axes or has incorrectly labelled the axes, maximum award: [1]. Please be flexible if the candidate uses wording slightly different than in the markscheme: sales or revenue rather than sales revenue is fine. However, for the Y-axis, do not accept “market value” or “value of the product” or other wording that suggests some limited understanding but is otherwise inaccurate.
JS’s position is in the decline stage of the product life cycle. Despite strong brand loyalty, an ageing baby-boomer population is buying fewer jeans (thus, JS’s sales are down) while, presumably, young people are buying cheaper jeans made outside the US or more “fashionable” jeans made by designers. Regardless, JS’s sales are down considerably from their peak.
For [2], candidates must explain and apply the concept of product life cycle to JS. Award [1] for some partial response.
PLEASE NOTE: This content is not included in the syllabus for 2024 exams onward. Related parts of this multi-part question may be used.
The role and impact of globalization on JS has been considerable and includes:
- sales growth to $7.6 billion dollars, which, the stimulus implies, was based upon sales around the world
- the opportunities for offshoring, which has led to the closure of all of JS’s manufacturing facilities in the US and, presumably, allowed JS to cut costs and remain competitive
- foreign competition, which has proven significantly challenging for JS, whose sales have decline considerably
- the nature of JS’s program of corporate social responsibility (CSR), which has a very globally fashionable “triple bottom line” focus, especially its Strutz’s chemical-free jeans.
Accept any other relevant point.
In each of these ways, Strutz has been influenced by globalization. Some have been very positive for JS (increased sales for many years and lower costs), and some have taken a toll on JS (foreign competition and pressure for more expensive programmes of CSR).
JS must continue to seek out opportunities and minimize threats from a changing world. Of importance for JS is either to find extension strategies that will makes its core products relevant again in the global market place or find new products to sell under its highly recognized and valued brand.
For a balanced argument, a candidate must have two arguments showing the benefits of globalization and two arguments showing how globalization has posed some challenges. At least one of the arguments for and against can be purely theoretical, while at least one argument for and one argument against must be based upon application to the stimulus. If the candidate does not make judgements on conclusions, maximum award: [6].
