Describe two differences for MM between marketing its minerals (a product) and marketing its hotels (a service).

Explain strategies MM could use to improve cash flow in its palladium mine in South Africa (Table 1).

PLEASE NOTE: This content is not included in the syllabus for 2024 exams onward. Related parts of this multi-part question may be used.

Marketing minerals

• B2B so advertising may not be necessary
• Role of promotion unclear
• Based on contracts
• Based on market prices
• Targeted at other industries
• Long-term contracts

Marketing hotels

• B2C so essential to promote
• Some promotion has not worked (ads in travel mags, price promotion)
• Customers are general public
• Market competitive but relatively stable. Fierce competition from Homehol/Airbnb

Accept any other reasonable difference.
Award [1] for each difference up to a total of [2].
Award [1] for putting the difference into context up to a total of [2].

Refer to Paper 1 markbands for May 2016 forward, available under the "Your tests" tab > supplemental materials.

• Delay spending on major improvements – one month delay will improve Q2 cash flow but will make Q3 worse
• Reduce credit terms on sales. These are on 2 months credit which is quite a long time. What is industry norm
• Get a short-term loan – however this impacts on the profits/liquidity/gearing and does not solve the problem
• Wages are not suitable for change, nor, probably are other costs
• Investigate ways to spread out maintenance costs or reduce them. Different credit terms?
• Incentivize early invoice payment;
• Renegotiate credit options if possible and delay vendor payments as long as possible; (e.g. credit terms are currently 60 days—could be reduced to 30 days)
• Consider invoice factoring

Explanation should come from how relevant the strategies are.

Marks should be allocated according to the paper 1 markbands for May 2016 forward section A.

Award maximum 2 marks for only explaining one strategy.
Award maximum 3 marks for a theoretical answer or an answer that describes two (or more) strategies without explaining them.
Award maximum 5 marks if the answer is mainly descriptive but in context.

This was generally well answered with candidates usually including very good contextual discussion. Some made excellent reference to the seven Ps (although this is not part of the SL syllabus and was not expected) of the extended marketing mix to illustrate the differences between product and service marketing. The discussion of the service (The hotel) and the product (The minerals) was often well distinguished.

The discussion of cash flow was often descriptively done with some reluctance to make use of the data in Table 1. Use of the data in Table 1 would have enhanced the chances of gaining clear context marks. Better answers did provide some data and mention of changing credit terms, rescheduling capital expenditure etc. Overall, the answers seemed a little better than similar finance-based questions set on previous papers. It remains important to ensure questions are read carefully. In this case the question required strategies MM could use to improve cash flow.