Case Study: PLG Ltd’s financial position is relatively weak. To what extent should this be the most important influence on its promotional mix given its objective of growth

This question was taken from the AQA June 2015 Unit 2 Business Studies past paper, where you can find the full case study. The most important thing with these kinds of case study based essay questions is to stick to the point. You don’t have a lot of time, so every sentence should be there to achieve marks: get in your basic definition point, expand upon it, analyse it to a reasonable extent, then apply it to the case study. Follow this scheme rigidly, even if your answers come out robotic. If you get in three main points, and an introduction and conclusion, you should have sufficient detail to get a decent mark. Here’s a rough example, it’s by no means perfect but should explain what I mean:

The promotional mix refers to the various methods by which a firm attempts to advertise their product portfolio to the target audience. PLG’s weak financial position means that they may consider reducing expenditure on promotion. This may cause issues, but there are methods which can mitigate these potential problems. Reducing promotional expenditure due to financial constraints can be a false economy, with lesser promotional expenditure in turn leading to lower sales and lower revenues. A reduced profit will then force the firm to further reduce their promotional budget if this attitude is maintained, reducing growth in market share. Given PLG’s gourmet restaurant’s chain possessing low market share in a growing market, reducing promotion may lead to a missed opportunity for PLG to expand in this sector, and reduce future profits. However, while a reduction in expenditure on promotion may not be desirable, given the deteriorating financial position of PLG it may be a necessity. The most important objective of a business will always be survival, regardless if it is attempting to achieve a growth in its market share – such growth is impossible if the firm no longer exists. As such, given the tenuous financial situation it may be necessary for PLG to rationalise their promotional mix in the short term, and return to growth in the long term. Finally, PLG’s usage of technological promotion may be unaffected by any reduction in expenditure, and may even be boosted if the firm chooses to redirect funds from other areas of the promotion mix. Online promotion can reach large amounts of consumers in a cost-effective manner compared to more traditional methods, increasing the return on investment. However, this may not suit all of PLG’s product portfolio: the bingo hall market is typically older demographically, and therefore not as receptive towards digital promotion. This may reduce the effectiveness of it. In conclusion, while financial performance is a vital influence for all business activities, it should not involve a reduction of promotional budget to the detriment of long term strategic goals. PLG must ensure that sufficient budget is maintained for effective promotion if it wants to grow market share, but must consider whether this strategy of growth itself is worthwhile given their current position.