Ch9. Past Exam Error Analysis — The Most Commonly Missed Concepts

Marketing — Common Errors

① STP sequence: Segmentation → Targeting → Positioning
   → Positioning does NOT come first

② The 4Ps "Promotion" ≠ advertising alone
   → Includes advertising, personal selling, sales promotion, and PR

③ Maturity stage of the Product Life Cycle:
   → Revenue peaks but profit growth slows
   → Intensifying competition drives up promotional spending

④ Skimming vs. penetration pricing:
   → Skimming = premium price at launch; penetration = low price to capture market share

⑤ Positioning = a place in the customer's mind
   → May differ from actual product characteristics

Finance and Accounting — Common Errors

⑥ ROE vs. ROA:
   → ROE = Net Income / Equity (shareholder perspective)
   → ROA = Net Income / Total Assets (overall asset efficiency)

⑦ NPV takes priority over IRR for mutually exclusive investments
   → IRR ignores the scale of investment

⑧ Current Ratio vs. Quick Ratio:
   → Current = Current Assets / Current Liabilities (includes inventory)
   → Quick = excludes inventory (more conservative measure)

⑨ Operating Income = Gross Profit − Operating Expenses
   → Does NOT include interest expense or non-operating items

⑩ Dividend Payout Ratio = Dividends / Net Income
    → Dividend Yield = Dividends / Stock Price (a different metric)

HR and Organizational Behavior — Common Errors

⑪ Maslow's hierarchy has 5 levels:
   Physiological → Safety → Social → Esteem → Self-Actualization
   → Safety comes before Social — a common mistake

⑫ Herzberg: Salary is a hygiene factor
   → Raising pay does NOT inherently motivate

⑬ OJT = on-the-job, at the workstation
   → Off-JT = structured classroom or group instruction away from work

⑭ 360-degree feedback = multi-source assessment
   → Not a supervisor-only evaluation

⑮ Transformational leadership ≠ charisma alone
   → Includes vision articulation, intellectual stimulation, and individual consideration

Operations Management — Common Errors

⑯ EOQ = the order quantity where ordering cost equals holding cost
   → Total inventory cost is minimized at this point

⑰ JIT = minimize inventory
   → Highly vulnerable to demand volatility and supply disruptions

⑱ Six Sigma = 3.4 DPMO (defects per million opportunities)
   → Do not confuse with 4σ or 5σ — the numbers differ significantly

⑲ Product layout = continuous (assembly-line) production
   → Process layout = intermittent / job-shop production

⑳ TQM = total organization quality management
   → NOT the responsibility of a single quality department

Key Concept Cards

Maslow — 5 Levels ★★★★★ : Physiological → Safety → Social → Esteem → Self-Actualization. Memory hook: Safety before Social — they do not swap

NPV over IRR for Mutually Exclusive Choices ★★★★★ : When choosing between competing projects, NPV is the more reliable criterion. Memory hook: mutually exclusive = use NPV

Hygiene ≠ Motivator ★★★★☆ : Herzberg: salary and working conditions are hygiene factors (prevent dissatisfaction); achievement and recognition are motivators (create satisfaction). Memory hook: salary = hygiene = removes dissatisfaction only

Practice Quiz

Q. Which is the more conservative liquidity measure — current ratio or quick ratio?

The quick ratio is more conservative. The current ratio includes all current assets, including inventory, which may take time to convert to cash. The quick ratio excludes inventory, giving a clearer picture of immediately liquid assets. A company with large inventory holdings can show a strong current ratio while its quick ratio is quite weak. For assessing short-term debt repayment capacity, the quick ratio is the more accurate indicator.

Q. What is the recommended strategy in the Maturity stage of the Product Life Cycle?

Revenue peaks but growth stalls. Competition intensifies, creating pressure to cut prices. Recommended responses: reduce costs, differentiate to defend margin, focus on loyal niche segments, and strengthen brand loyalty programs. Begin preparing the next product generation before Decline begins. Protecting and extending market share is the primary objective.