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Buy it Direct has set the objective of increasing its sales revenue - Edexcel - A-Level Business - Question 2 - 2022 - Paper 2
Question 2
Buy it Direct has set the objective of increasing its sales revenue. It is considering two options, either to adopt a strategy of market penetration in the UK Electr... show full transcript
Worked Solution & Example Answer:Buy it Direct has set the objective of increasing its sales revenue - Edexcel - A-Level Business - Question 2 - 2022 - Paper 2
Step 1
Option 1 – market penetration
Answer
Market penetration involves selling existing products in an existing market. This strategy is typically the least risky according to Ansoff.
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Current Market Position: Buy it Direct is one of the largest online retailers in the UK, which could allow it to leverage economies of scale due to its size and lower unit costs.
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Expanding Existing Offerings: By maintaining its focus on existing product lines and selling to a broader range of households, Buy it Direct can increase its customer base while minimizing risks associated with venturing into new markets.
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Potential for Increased Sales: Continuing to sell its existing range of household items could lead to higher sales volumes as more customers are introduced to its products, increasing overall revenue.
Overall, adopting a market penetration strategy may provide a steadier path to achieving its sales revenue goals.
Step 2
Option 2 – diversification
Answer
Diversification, particularly into new product markets, is viewed as riskier than market penetration.
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Introduction of New Products: Buy it Direct has previously expanded into new product categories, starting with electronics and moving into kitchens. This indicates ability to adapt and innovate.
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Market Trends: The household appliance market has been growing slowly and faces challenges such as wavering consumer confidence. New products like smart appliances could attract different demographics but come with higher investment risks.
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Broader Market Opportunities: By diversifying into other categories, Buy it Direct can potentially reach different customer segments, which could increase its revenue streams in the long term.
However, this strategy introduces uncertainty due to changing market dynamics and consumer preferences.
Step 3
Recommendation
Answer
Buy it Direct should primarily focus on market penetration in the UK Electrical Household Appliance market. This approach is less risky and allows the business to capitalize on its existing brand reputation and market presence, ensuring a more certain pathway to increase sales revenue. While diversification offers potential growth, the current challenges within the market may make this a more tenuous choice at this time.