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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 can increase profits for ShaydZ by opening up new markets and customer bases. This allows the company to diversify its revenue streams, reducing dependency on the domestic market, which is currently facing competition and decreasing profit margins. Additionally, expanding into international markets can lead to economies of scale, where increased production lowers the cost per unit, thereby enhancing profit margins.
Step 2
Describe ONE method of international expansion that will allow ShaydZ to control product quality.
Answer
One effective method of international expansion for ShaydZ is setting up wholly-owned subsidiaries in foreign markets. This approach ensures that ShaydZ retains full control over production processes and quality standards. By owning the facilities, the company can implement its quality assurance protocols and maintain consistency in product quality across different markets.
Step 3
Explain ONE financial strategy that ShaydZ could use to minimise risk in managing a global business.
Answer
One financial strategy that ShaydZ could use to minimise risk is to implement hedging techniques against foreign exchange risks. By using financial instruments such as options and futures contracts, ShaydZ can protect itself from fluctuations in currency values that may adversely affect profit margins when operating in different countries. This strategy allows the company to forecast its financial outcomes more accurately and allocate resources effectively.