Unit 8 Marketing Management PYQ’s 25th Dec 2021 Shift 1

The correct answer is (A) – (III), (B) – (IV), (C) – (I), (D) – (II).

Key Points

• Insurance Act, 1938: The Insurance Act, 1938 is a law originally passed in 1938 in British India to regulate the insurance sector. It provides the broad legal framework within which the industry operates.
• Life Insurance Act, 1956: The Parliament enacted the Life Insurance Corporation Act in 1956 which came into force on July 1, 1956. After the enactment, the private insurance groups were nationalized and many insurance and provident societies were combined to form Life Insurance Corporation under the ownership of the State.
• Motor Vehicles Act, 1988: The Motor Vehicles Act is an Act of the Parliament of India which regulates all aspects of road transport vehicles. The Act provides in detail the legislative provisions regarding licensing of drivers/conductors, registration of motor vehicles, etc.
• The Marine Insurance Act, 1963: An Act to codify the law relating to marine insurance.

Solution

The correct answer is Health care

Key Points People processing Services:

• As the title suggests, these services are aimed at specific individuals.
• Customers must physically enter the service environment in order to receive the service they desire.
• It’s also possible that the service provider will arrive at the customer’s location with the tools needed to conduct services.
• The goal is to develop a new set of values for service industry clients.

Important Points

•  Health services can be classified into group people processing services.
• These are the services that are targeted directly provided to citizens.

The correct answer is 8 percent of the total risk weighted assets

Key Points 

BASEL Norms:

• The Basel Committee on Banking Supervision issues worldwide banking regulations known as Basel norms or Basel accords.
• The Basel rules are an attempt to harmonise banking laws around the world in order to enhance the global financial system.
• It is a set of Basel Committee on Banking Supervision agreements that focuses on the risks that banks and the financial system face.
• The Basel Committee has issued three sets of regulations which are known as Basel-I, II, and III.

Important Points

BASEL – I :

• It was introduced in 1988.
• It focused almost entirely on credit risk.
• The possibility of a loss arising from a borrower’s failure to repay a loan or meet contractual commitments is referred to as credit risk. It used to allude to the possibility of a lender not receiving the principal and interest owing to them.
• It defined capital and structure of risk weights for banks.
• Under Basel-I, banks operating internationally are required to maintain at least a minimum amount of capital (8%) based on their risk weighted assets. 
• RWA means assets with different risk profiles.
• For example, an asset backed by collateral would carry lesser risks as compared to personal loans, which have no collateral.
• India adopted Basel-I guidelines in 1999.

The correct answer is Leveraging increases risk

Key Points 

Derivatives

• A derivative is a contract between two parties which derives its value/price from an underlying asset.
• The most prevalent types of derivatives are futures, options, forwards and swaps.
• It’s a financial instrument whose value/price is determined by the underlying assets. Initially, an underlying corpus is generated, which can be made up of a single security or a group of securities.
• Since the value of underlying assets is constantly changing, the value of the underlying asset is guaranteed to alter.

Important Points 

Advantages of Derivative Market

•  Higher liquidity motivates more investors to participate in the stock market. Introduction of derivatives of the underlying stock increases the opportunity set available to investors and Hence affect the liquidity of the underlying stock.
• Derivatives are sometimes used to hedge a position (a form of insurance against the risk of an adverse move in an asset) or to speculate on future moves in the underlying instrument.
• The derivatives prove to reduce price volatility.

Statement 1: Non-Banking Finance Companies (NBFCs) are financial institutions that constitute organised component of money market.

This statement is incorrect because :

• NBFCs are financial institutions that are not organised components of the money market.
• NBFCs are financial institutions that provide various banking services but do not have a banking license.
• These institutions are not allowed to accept traditional demand deposits such as checking or savings accounts from the public

Statement 2: Money market mutual funds are allowed to sell units to corporates and individuals.

This statement is true because

• Money Market Mutual Funds (MMMF) is a short-run liquid investment with high credit rating.
• Money market mutual funds are allowed to sell units to corporates and individuals.

Statement 3: A Well-developed money market is essential for a modern economy.

This statement is true because

• A modern economy requires a well-developed money market.
• Though the money market has historically developed as a result of industrial and commercial success, it also plays an important part in a country’s industrialisation and economic development.

Statement 4: In the Indian Money Market, the predominant place is enjoyed by government and semi-government securities.

This statement is true because

• The India money market is a monetary system that involves the lending and borrowing of short-term funds.
• India’s money market has seen exponential growth just after the globalization initiative in 1992.
• In the Indian money market, the predominant place is enjoyed by government and semi government securities.

The incorrect option is “If the average lot size is large, it is better to have a longer channel.”

Key Points 

Distribution Channel:

• A distribution channel is a network of businesses or intermediaries through which a good or service is purchased by the final buyer.
• Wholesalers, retailers, distributors, and the Internet are all examples of distribution channels.
• When the manufacturer sells directly to the consumer it is called a direct distribution channel.

Important Points 

Factors determining distribution channel:

1. Size of the market: The larger the market size, the longer the channel. Conversely, the smaller the market the smaller the channel. Hence, option 1 is correct.
2. Order lot size: If the order lot size is small, it is better to have a longer channel and vice-versa. Hence, option 2 is incorrect
3. Service Requirements: If the product and market require a high level of service, and it is a major factor in buying decisions, it is better to keep a shorter channel. Hence, option 3 is correct.
4. Product variety: If a wide assortment of same type of product is available in the market, then it is advisable to select a wider channel. Hence, option 4 is correct.

The correct answer is (C), (E), (D), (A), (B)

Key Points Consumer decision-making Process:

The consumer decision-making process involves consumers becoming aware of and identifying their needs, collecting information on how to best meet those needs, weighing alternative available options, making a purchasing decision, and evaluating their purchase.

 Stages of consumer decision-making process:

1. Need recognition (awareness): Since every transaction begins when a consumer realises they have a need for a product or service, this is the first and most significant step of the buying process.
2. Search for information (research): During this stage, customers want to find out their options.
3. Evaluation of alternatives (consideration): This is the stage when a customer is comparing options to make the best choice.
4. Purchasing decision (conversion): During this stage, buying behaviour turns into action – it’s time for the consumer to buy.
5. Post-purchase evaluation (re-purchase): Consumers examine if a purchase was worthwhile, whether they would suggest the product/service/brand to others, whether they would purchase again, and what feedback they would provide afterward.

Important Points

The sequence of stages of consumer decision-making process with regard to a young person Divya:

1. Divya belongs to an executive group and all her colleagues have their own vehicles.
2. Divya feels that fuel efficiency should be the most critical factor while making a choice.
3. Divya uses media and other social channels to collect information about different models.
4. Divya looks for a specific colour and showroom delivery as she does not want to wait.
5. Divya narrows down to a dark grey car of a specific brand.

The correct answer is Dog

Key Points 

BCG Matrix:

The BCG Matrix, also known as the ‘Growth/Share Matrix/ BCG Matrix,’ was created by Boston Consulting Group, a world-renowned management consulting organisation based in the United States.

It’s a handy tool for examining the business portfolio of a diverse organisation.

This matrix has four steps:

• Dividing the business-organization into several (at least two) SBUs
• Determining the prospects of each SBU of the organisation
• Comparing each SBU against other SBUs with the help of a matrix (two-dimensional)
• Setting strategic objectives for each SBU.

Important Points 

Strategic Business Unit(SBU):

• SBU (Strategic Business Unit) is a firm in the BCG matrix that has its own mission and objectives and may plan independently from other company companies.
• A strategic business unit (SBU) is a relatively self-contained division of a company. Each business unit in a diverse firm is an SBU.
• A division of a company may also be treated as Strategic Business Units (SBUs).

There are 4 types of SBU of BCG matrix:

1. Stars: High Growth, High Share Businesses

2. Cash Cows: Low-Growth, High-Share Businesses

3. Question Marks: Low-Share Business Units in High-Growth Markets

4. Dogs: Low-Growth, Low-Share Businesses

The Incorrect option is Technology Oriented Segmentation

Key Points 

Market segmentation: 

Market segmentation is a marketing, advertising, and sales approach in which companies divide their target market into smaller, more manageable groups based on common ground they share in order to optimise their marketing, advertising, and sales efforts.

Important Points

Basis for market segmentation:

• Customer Based Segmentation: In this approach, customers are divided into smaller segments based on type of customers.
• Competition based Segmentation: In this type of market segmentation, the market is divided on the basis of the competitors. Both, direct and indirect competitors are taken into consideration.
• Product Related Segmentation: Product Related segmentationis the process of breaking a customer population into homogeneous groups depending on their relationships with the product, such as segmenting based on the benefits people seek when purchasing a product, usage rates for a product, or brand loyalty.

Technology Oriented Segmentation is not a valid basis for segmentation.