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Assess the likely effects of protectionism on Northfield Cycles. - Edexcel - A-Level Business - Question 2 - 2022 - Paper 3
Question 2
Assess the likely effects of protectionism on Northfield Cycles.
Worked Solution & Example Answer:Assess the likely effects of protectionism on Northfield Cycles. - Edexcel - A-Level Business - Question 2 - 2022 - Paper 3
Step 1
Knowledge of Protectionism
Answer
Protectionism refers to government policies that restrict international trade to help domestic industries. This can include tariffs, import quotas, and subsidies. For Northfield Cycles, protectionist measures may lead to increased production costs as they might need to source more materials locally, thus potentially raising prices for consumers.
Step 2
Application of Protectionism Effects
Answer
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Increased Demand: Local consumers may prefer domestic brands over more expensive imports, leading to a boost in sales for Northfield Cycles.
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Cost Adjustments: Northfield Cycles may face lower competition, allowing them to adjust prices without losing customers.
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Market Share Growth: If foreign competitors face higher tariffs, Northfield Cycles could capture a larger market share in the local bicycle market.
Step 3
Analysis of Long-term Implications
Answer
While protectionism can initially benefit Northfield Cycles by increasing sales and reducing competition, it may lead to higher prices for consumers and fewer choices. If local suppliers face reduced competition as well, it could eventually lead to increased costs for Northfield Cycles. This can result in shrinking profit margins unless they can find ways to cut costs effectively.