A multinational company, 'TechGlobal', is planning to launch a new smartphone in a developing country.

Mark scheme

Marking points from the official mark scheme. The mark or mark type is shown in brackets.

1. Award 1 mark for identification of an advantage (e.g., reduces risk).
2. Award 1 mark for explanation of how this is an advantage (e.g., by understanding customer needs and preferences).
3. Award 1 mark for development/link to TechGlobal/smartphone launch (e.g., enabling TechGlobal to design a product that meets local demand, avoiding costly mistakes).
4. Level 1 (1-2 marks): Identifies a feature of penetration pricing or a reason for its use. Basic statements, limited application.
5. Level 2 (3-4 marks): Explains how penetration pricing works and justifies its use with application to TechGlobal/developing country context. Well-reasoned points.
6. Indicative content for Penetration pricing: involves setting a low initial price to attract a large number of customers quickly; In a developing country, consumers may have lower disposable incomes, so a low price makes the smartphone more affordable and accessible; A low price can help to quickly gain market share against competitors, especially if TechGlobal is new to this market; It can encourage brand loyalty from early adopters who are price-sensitive; Once market share is established, the price could be gradually increased.
7. Indicative content for Justification: In a developing country, price sensitivity is high, so a low price would be crucial for initial adoption and gaining a foothold in the market quickly against potentially established local brands or cheaper alternatives.