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HCR Ltd is a manufacturer of mobile phones, which has operated successfully in Australia for the past 10 years - HSC - SSCE Business Studies - Question 25 - 2002 - Paper 1
Question 25
HCR Ltd is a manufacturer of mobile phones, which has operated successfully in Australia for the past 10 years. It sells mobile phones and accessories in the Asian m... show full transcript
Worked Solution & Example Answer:HCR Ltd is a manufacturer of mobile phones, which has operated successfully in Australia for the past 10 years - HSC - SSCE Business Studies - Question 25 - 2002 - Paper 1
Step 1
Explain ONE possible impact of currency fluctuations on HCR Ltd in its new production location.
Answer
Currency fluctuations can significantly impact the cost of production for HCR Ltd in its new location. For instance, if the local currency strengthens compared to the Australian dollar, the cost of exporting products back to Australia may increase. This rise in costs could lead to reduced profit margins, as HCR Ltd would have to either absorb these costs or pass them on to consumers, potentially impacting sales volumes. Moreover, if the exchange rate fluctuates unfavorably, HCR Ltd might find it more challenging to compete in the Australian market, where consumers already have established preferences.
Step 2
Evaluate ONE potential impact of increasing civil unrest and political tension in the developing country on the operation of this business.
Answer
Increasing civil unrest and political tension in the developing country could have severe implications for HCR Ltd's operations. The instability may disrupt production processes due to strikes, protests, or governmental interference. This disruption could lead to delays in manufacturing and shipment of mobile phones, impacting the supply chain and availability of products in the market. Additionally, prolonged unrest could deter foreign investment and lead to higher security costs for HCR Ltd, impacting overall profitability. Ultimately, sustained political instability could compel HCR Ltd to reconsider its operational strategy in the region.