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Shaydz produces high quality sunglasses - HSC - SSCE Business Studies - Question 24 - 2008 - Paper 1
Question 24
Shaydz produces high quality sunglasses. It faces rising costs, decreasing profit margins, and increasing competition in the domestic market. Management is consideri... show full transcript
Worked Solution & Example Answer:Shaydz produces high quality sunglasses - HSC - SSCE Business Studies - Question 24 - 2008 - Paper 1
Step 1
Why might global expansion increase profits for Shaydz?
Answer
Global expansion may increase profits for Shaydz by opening new markets, which can lead to higher sales volume. By entering international markets, Shaydz can access a broader customer base, ultimately increasing demand for their sunglasses. Additionally, global expansion may enable Shaydz to benefit from economies of scale, reducing costs per unit as production increases. Furthermore, tapping into international markets can help mitigate the risk of relying solely on the domestic market, especially in response to rising costs and competition.
Step 2
Describe ONE method of international expansion that will allow Shaydz to control product quality.
Answer
One effective method for international expansion that allows Shaydz to control product quality is through direct exporting. This approach involves Shaydz manufacturing its sunglasses domestically and then shipping them directly to international distributors or retailers. By maintaining control over the production process and selecting trusted partners abroad, Shaydz can ensure that its quality standards are upheld, safeguarding the brand's reputation and customer satisfaction.
Step 3
Explain ONE financial strategy that Shaydz could use to minimise risk in managing a global business.
Answer
One financial strategy Shaydz could adopt to minimize risk in managing a global business is diversification. By expanding operations into multiple international markets, Shaydz can spread its financial risk across different economies. This approach reduces dependence on the performance of a single market and provides a buffer against economic downturns or adverse conditions in any specific region. Additionally, diversification can help Shaydz benefit from various revenue streams, which may provide greater stability.