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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 HCR Ltd’s operational costs and pricing strategies in its new production location. For instance, if the local currency depreciates against the Australian dollar, HCR Ltd will receive less revenue when converting the local sales back to AUD. This could reduce profit margins, as the cost of importing materials might remain constant or even increase due to the weaker local currency. Consequently, HCR Ltd may need to reassess its pricing strategy, potentially raising prices which could affect its competitiveness in the market.
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 can jeopardize HCR Ltd’s operations in several ways. Firstly, it can disrupt the supply chain, making it difficult to obtain necessary materials or to ship products to market. This instability may lead to increased operational costs due to the need to ensure security measures, such as hiring security personnel or insurance costs. Additionally, the political climate could lead to changes in regulations or the risk of expropriation, which could threaten HCR Ltd's investment and long-term viability in that market. Ultimately, this may necessitate a strategic reevaluation of their presence in the region.