MIDTERM EXAM 1 COMMENTS - SU02

One of the pedagogical problems with "grading" is that it generally doesn't provide any positive feedback of what was done correctly and it generally doesn't provide any useful tips for improvement.  My hand-written comments on your answer sheet tend toward raising objections to what you say or indicating that something is missing for the purpose of assigning a score.  There just isn't enough time in a work day to provide personalized written feedback that is more useful from a learning perspective.  I hope, however, that the discussions below, however general, are a useful substitute.

With regard to heuristics used to assign a score, my general thinking is that a discussion that is "good enough for the real world" should be in the "A" range.  A discussion that is "good enough for a classroom discussion" should be in the "B" range.  A discussion that is not in the context of discussions in our class and that doesn't substantively address the issues of the question is necessarily scored no higher than a "C".

A common difficulty that I had in reading these is that many class members don't use paragraphs!  This makes it difficult for me to figure out how your thoughts are organized.  If the reader cannot find the important points in your writing, you cannot blame the reader.  I cannot spend the time to try to figure out what you mean to say; if it isn't clear, then it is not good enough for the real world and you cannot get an "A" for unclear writing.

Another problem that makes it difficult to understand what you mean to say is with the use of vague, informal language and incorrect spelling.  For example, many class members made statements such as, "Alice could make $100 if sells reach that point."  Would we expect Alice to reach ("make") a break even point that is at the level of $100, or is Alice hoping to reach $100 in total revenues, or is she hoping to reach this level in total contribution toward fixed costs and contribution, or is she hoping to reach this much in profits, or is she going to print one hundred dollar bills on a color photocopy machine?  And what does the verb "sells" mean in this sentence?  We are learning to use the "terms of art" in this course, and you cannot expect a good mark if you cannot use the terms of art to clearly convey your thoughts in formal business writing.

PART I: analysis

You MUST answer the following required question.  50% of the total exam score.

1.   Alice, a young girl, wants to run a lemonade stand at the end of her driveway in a suburban neighborhood.  Her father has agreed to build the stand, but he expects to be reimbursed for lumber and any other materials that he uses.  Her mother has agreed to make the lemonade and to supply other associated materials, but she expects to be reimbursed for these materials.  Write a brief but persuasive report that Alice can submit to her parents to convince them that she is likely to be able to pay back their material assistance.

This question should be fairly simple to answer.  Merely make some reasonable assumptions about the variable costs per unit of sale (a glass of lemonade), and some reasonable assumptions about the fixed start-up cost (a stand and signage).  Calculation of a breakeven point then provides a number from which to argue for the likelihood of selling such an amount.  Any assumptions that are required can easily be verified if not common knowledge, such as the cost of sugar or of disposable cups.  For example, if you will need five dollars for signage and a borrowed folding table, and paper cups and lemonade mix at a cost of thirty cents per cup, and if you price a glass of lemonade at fifty cents, then you would need to sell twenty five glasses to break even.  Your argument of payback centers around the the likelihood of being able to sell at least twenty five glasses.  Note that some people considered a minimum amount of material to purchase, with a focus on payback of start-up costs rather than per-unit variable costs; that is also an acceptable approach (and perhaps even more realistic).

On initially reading these, it became clear that answers could be classified into the following piles: 1) an interesting narrative sort of analysis that is quick and easy to read, 2) a dry mechanical analysis that is difficult to understand and requires the reader to fumble with a calculator, 3) an analysis with needlessly fabricated information that cannot reasonably be assumed, and 4) a discussion of controllable and/or uncontrollable variables that ignores the question regarding payback on costs.

Re. assumptions vs. fabrication: An assumption that the ice is free since it can be made at home (or that Mom would not want home-made ice to be stored in the fridge) is reasonable, and can be used as if it is a given fact.  Stating costs for sugar and disposable cups is reasonable even though this is not given in the text since these costs are "common knowledge" and can be verified.  Making an assumption that Alice lives on a busy street and that the weather is warm is reasonable because it is unlikely that we would be asked to consult on this case if the issue was otherwise as a broad generalization.  However, stating that a marketing research study was done to determine that one hundred cars per hour pass Alice's driveway is a convenient fabrication that does not flow logically from the facts that are given in the case.  Minor fabrications that are not relevant to the final answer were usually ignored, but in general, fabrications keep the answer from being "good enough for the real world" and could not be scored in the "A" range.

A common problem was with statements on the order of, "If I sell X glasses I will make Y dollars."  Does "make" mean revenue, contribution, or profit?" If I had to use a calculator to understand what you mean, then you didn't do your job.  Don't expect to get a small business loan if you make the potential lender do a lot of work!  Such an answer isn't quite  good enough for the real world,  and so usually could not be scored in the "A" range.

Another common problem was the presumption of some level of sales.  This presumption goes against the grain of everything we discussed in class!  Remember that we can often use breakeven analysis when we cannot make a prediction of sales.  It is one thing to say that a requirement to sell 20 glasses would cover costs, and that it is reasonable to presume that at least 20 glasses could be sold.  It is NOT reasonable, however, to predict that 100 glasses per day would be sold, and to then to presume that some level of profits would be generated from this fabricated level of sales.  You will never get the small business loan if you forecast sales out of thin air!  Since such an answer is counter to our class discussions, it could not be scored in the "B" range.

General Advice: Keep things as simple as possible!  If you are are merely asking for a business loan, consider the lender's objectives: s/he wants assurance that the investment will be payed back.  Forecasting high sales with absolutely no history of sales to show does not assure someone, but will always elicit the unanswerable objection, "Prove it."  However, if the lender agrees that you could at minimum reach a break even level of sales, then s/he probably will not care what you might project in sales beyond that point.

PART II: controllable and uncontrollable factors

Choose ONE of the following two questions.  25% of the total exam score.

2.   You are at a party and a stranger hears that you are an MBA.  She pulls you into a corner and asks you for an opinion about why her small manufacturing business has suffered a small but steady decline in sales over the last 18 months.  What kinds of questions should you ask under these circumstances?  From the perspective of our class discussions, why are these the sorts of questions that should be asked?

This question is merely asking for general questions associated with controllable factors (mktg. mix, 4Ps, internal) and uncontrollable (environmental, external) factors.  Some answers also included questions regarding this person's goals and personal understanding of the industry or environment. 

Some answers only questioned issues of the 4Ps.  Not complete - scored as "B" if you didn't include both controllable and uncontrollable factors.  Scored as "C" if just a laundry list of questions without any attempt to relate to controllable/uncontrollable factors.

General Advice: Keep things as simple as possible!  Don't fire off a laundry list of questions, but just ask a few that target issues of the 4Ps and a few that target the environment of this business's industry.  Some of you suggested that if you can quickly ask the right questions, she will have an "ahah!" experience and discover the solution for herself -- allowing you to return to your significant other before you get into trouble!

3.   In discussing issues associated with case analysis, your textbook authors mention that "there are usually several reasonable alternative solutions."  (p. 226, no. 2)   In class, we discussed the case involving a car and a dump truck, arriving at several "reasonable" solutions that were each very, very different.  What were these solutions, and what made each of them reasonable even though they were so drastically different?

This question is merely asking if you can recognize how different situational factors can cause a particular solution to be "reasonable."  A good answer, then, outlined situational factors and possibly individual differences (in peoples' backgrounds) that would cause each of various potential solutions to be considered reasonable.

General Advice: Always recognize that someone else could have a different view of what would be a "right" answer to a marketing or management problem.  To increase your chances that your decision or proposal will be accepted, you must persuade a listener that your solution is at least reasonable under the circumstances even if s/he might have arrived at a different solution.

PART III: readings, topics

Choose ONE of the following two questions.  25% of the total exam score.

4.   We briefly mentioned the idea of product portfolio management.  Under what conditions would this be a useful idea?  Under what conditions would this not be a very useful idea in strategic planning? 

Several answers were outside research manuscripts on almost everything ever written about product portfolio management from a marketer's perspective.  Unfortunately, "almost everything" often neglected an answer to the simple question of when useful vs. when not useful. 

5.   Your professor has mentioned several times the "twig wreath" business that was a class consulting client several years ago.  The primary reason for mentioning this example was to illustrate that a brief marketing plan was successful while a long and detailed marketing plan failed.  Although the document that was successful in obtaining venture capital was short, it was persuasive because it contained some important, basic elements.  Discuss the components that are the most important to include in any marketing plan.

Why do so many people think that a BRIEF planning document needs an executive summary?  Some answers even added an additional summary at the end!  An answer that was a textbook summary of all components to be included in a complete and thorough planning document were scored as a "B".  To be scored as an "A", the answer had to consider what issues are absolutely necessary to consider in a brief document -- such as the bare bones issues that belong in an executive summary.

Many class members left out some sort of situation or environmental analysis (that could be classified under various terms).  That is, many indicated that listing objectives is important and discussing strategy and implementation is important, but did so without any indication of how an assessment of the situation is necessary to the formation of objectives and strategy.  Such an answer is missing a crucial step and was normally scored in the low, low "B" range.

Note that not all marketing plans are a proposal to obtain a loan.  They are often an internal document that is updated every year to assist in planning -- and no one outside of the department or organization or business owner will ever see the document.

Someone mentioned that a short marketing plan is always better than a long one - not so!  Everything should be as simple as possible -- but not one bit simpler.  Although I am trying to get you folks to simplify whenever possible, do keep in mind that a planning document sometimes would necessarily be hundreds of pages in length, such as a detailed plan outlining the need for, execution of, and budgeting of an international advertising campaign.  That is the sort of plan that requires an executive summary!