Memorandum

SP Wholesalers PLC

To: The Board of Directors Date: 15 October 20—

From: D. Logan, Sales Director

Introduction of Mail Order Service

I have now completed the research we began in July of this year into developing a mail order service. You will find all the statistical and graphic data attached to this report, but in summary, the research team came to the following conclusions.

Market

Over the past six years there has been a steadily expanding market both here and in the other single European market economies towards mail order buying. This has been due to three main reasons - range of selection, convenience, and the credit facilities this form of selling offers. However, the main area of development, which has expanded by 8 per cent over the period, has been in clothes purchasing, especially children's clothes in the age range of 4-15 years, see p.9 of Statistical Analysis, attached.

With regard to other sales items such as electrical appliances, household utensils, carpeting, linens, and general furnishings, we found that although there has been a 2.7 per cent increase in sales over this period, the investment in stocks would be too large to undertake in the initial period, see pp 23-27 of Analysis. We can reconsider these areas in the future.

Finance

If we concentrate on the garment area of the market supplying all age groups, we estimate an increase in investment of our annual budget of 4.8 per cent, and this includes administration, warehousing, expanding stock, producing catalogues, advertising, distribution, agents' commissions, and bad debts. This will increase our present turnover in this area by 7 per cent over a two year trial period, see pp 15-18 of Analysis.

Our finance department suggests that this increase in capital investment should come from share issues rather than loans because increasing rates of interest will cut into profits.

Conclusions

With our main competitors already considering this market, and its international potential in the European community, we suggest that on the basis of what has been said, and the data we have collected, it would be feasible to enter the mail order business by 19—. Once you have studied the details, I would suggest a meeting before the end of this financial year.

D. Logan

Sales Director

Delta Computers

Bradfield Estate. Bradfield Road, Wellingborough, Northamptonshire NN8 4HB

To: Date: 31 August 20—

From: J.M. NORMAN

Declining Sales in Germany

1. I was sent out to Germany last month to find out why sales have fallen by 40% over the past two years, and while there I interviewed a number of our leading customers who were very helpful in explaining how and why German demand for our products has contracted.

2. Between 1983 and 1990 we were one of the leading exporters to Germany from this country, with an annual turnover of £2,6m from that market, with our share of the market never below 10% of their imports for our product. However, in 1991 it was evident that we were losing ground despite increased advertising and promotion. Although our customers maintained regular orders, the orders themselves were smaller, in some cases half their previous net values.

This fall in demand continued until two years ago when we found our share of the market had fallen to six per cent, and from that time has shrunk to three per cent.

3. Our market researchers have already produced two reports explaining the decrease in demand, and my trip and interviews have confirmed their findings.

Our exports have become more expensive to buyers, despite the European single market economy, and as our customers saw this as a trend, they began to look for new suppliers, which they found in the Far East.

These countries, who were keen to earn hard currencies and develop their Information Technology industries, were prepared to cut their prices, in some cases by 60%, while at the same time maintaining the quality and standard of the products. They also offered first rate after-sales service, long-term guarantees, cheap transportation, and short-term delivery dates.

It may be of little consolation, but in the face of this competition most of our rivals in the West have also experienced a decline in sales to this market.

4. The solution to the problem calls for drastic price cuts and a total reorganization of our methods of production and service. But if we are prepared to force our way back into this market, I would suggest the following:

a) Review production methods and introduce improved technology to cut costs, and enlarge production capacity to effect economies of scale, producing in mass units regardless of whether there are orders or not, so that we can supply immediately from stock.

b) Improve distribution and order processing so orders can be met quickly and delivery dates guaranteed.

c) Find new suppliers of raw materials who are prepared to allow generous trade, cash, and quantity discounts, so that we can pass the reduced prices on to the customers.

d) Offer extended guarantees on products and improve quality control to strengthen our reputation in the market.

e) Establish a service base, and agents in Germany.

f) Increase advertising and promotion so that our brand becomes identified with the product, and expand our sales force in Germany, again, possibly through agents.

5. I realize that this will mean increased capital investment, but unless we are prepared to invest in our future in this market, we will find within five years that we have no market to invest in.

J.M. Norman

Sales Manager (Europe)

15.4.2

Sales Manager's report

This internal report suggests far-reaching changes in production and marketing. A report of this sort may be even more detailed and supply figures and forecasts to help Directors make a decision on whether they wish to increase their capital investment to stay in the market.

Questions

1. How did the Sales Manager who wrote the report get his information?

2. Did customers stop ordering?

3. Have there been any previous reports on the German market?

4. Where did the German customers get their new supplies from and why were they buying from their new suppliers?

5. What recommendations does the Sales Manager make with regard to prices, distribution, agents, and advertising?

6. Which words in the report correspond to the following: discover, become smaller; obvious; fashion; maintenance (of products); fall; maintaining standards; putting money into a business?

ace advertising associates

B.R.M House, Kensington Church Street, London W8 4BN

Preliminary Market Research Report for Date 1 April 20—

Katz Electric Ltd.

We have completed our market research on testing consumer reaction to your brands and products, and attached you will find a statistical analysis which is the result of that research. This preliminary report is a summary of our findings, conclusions, and suggestions which you might like to discuss with us after you have considered the results.

Our survey was based on discussions moderated by a psychologist who took a number of groups, some who used and some who did not use your products. On the results of the discussions we constructed a questionnaire which was presented to a random sample of 500 people reflecting the population distribution of this country. We asked them about their preferences and awareness of your products compared to others on the market, and from this Usage and Attitude Study we produced a profile of your brands compared to other companies' brands.

The lists attached show the statistical breakdown in answers to our questions, and in summary they suggest the following:

1. Although your products are stocked in leading stores and your name is well known, there is a feeling that in spite of their dependability, they are over-priced and old-fashioned. Younger people, 15-25 age group, associate your brands with appliances used by their parents, and the 25-35 age group associate the brands with the 1970s.

2. Your name featured very low on the list when people were asked to name a brand of electric fire, vacuum cleaner, iron, and refrigerator. You will see from the attached survey that less than 10% of the sample knew that you had recently put the 'Popup' toaster on the market.

We believe that poor marketing is the mam reason for the old-fashioned image people have of your products, and there is a lack of brand identification which we are sure can be overcome with a well-presented advertising campaign. So we have compiled the following suggestions which we think will develop a new image for you.

1. Establish a symbol that will be identified with all your products.

The most obvious appears to be a cat, a domestic animal for domestic products, which is also associated with your name.

2. Your present advertisements give the impression of functionalism. We suggest glamourizing the ads, maybe with an exotic cat and girl which will always be recognized when seen.

3. Improving the packaging of the products, perhaps by using bright colours, and maybe even eccentric designs, with your symbol always standing out.

4. We noticed you have not been selective in placing your advertisements. For example, it would be better to concentrate on women's magazines rather than national newspapers, and we would suggest afternoon television commercials rather than just evenings, as more women are at home and that is the market you are aiming for.

You will also get a cheaper rate than during prime time.

There are many other points we could make, but we think they could be better illustrated at a presentation. So if, after studying the information enclosed, you are interested in us going ahead with a full presentation, please let us know. I am sure that if we handle your account we could effectively improve your sales.

G. Grover

Marketing Director

15.4.3