Read the information supplied and answer the question which follows - Leaving Cert Business - Question 5A - 2019
Question 5A
Read the information supplied and answer the question which follows.
Vodafone Retail Ireland has blamed lower demand for new mobile handsets for a 9% drop in sales ... show full transcript
Worked Solution & Example Answer:Read the information supplied and answer the question which follows - Leaving Cert Business - Question 5A - 2019
Step 1
Reduction in profits
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Answer
A decrease in sales revenues directly impacts the profit margins of a business. When revenues decline, it becomes difficult to cover fixed costs, leading to reduced profits. This can ultimately affect the overall financial health of the company.
Step 2
Restructuring of costs required
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Answer
Businesses may have to restructure their costs to manage the reduced income. This restructuring can involve cutting non-essential expenditures, renegotiating contracts with suppliers, and finding efficiencies within operations.
Step 3
Employee numbers may have to be reduced
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Answer
In response to lower sales, a company may need to reduce its workforce. This can lead to layoffs and a potential decrease in employee morale, which can further impact productivity.
Step 4
Sales Promotions may need to be increased
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Answer
To counteract decreased sales, businesses might need to implement more aggressive sales promotions or discounts, which could help attract customers but may also reduce profit margins.
Step 5
Identify alternative suppliers
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Answer
With reduced revenues, a business might seek to find alternative suppliers who can provide goods or services at lower prices to help maintain profitability.
Step 6
Product modifications
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Answer
A drop in revenue might prompt a company to rethink its product offerings. Modifying existing products or developing new ones might be necessary to align better with market demands and increase sales.
Step 7
Market Research - new markets required
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The decline in sales could signal the need for market research to identify new market opportunities. Expanding into new markets can help sustain and grow revenues.
Step 8
Price of Shares/Stock Exchange/Investors
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Answer
A consistent decline in sales revenues can negatively impact a company's stock price, affecting investor confidence and potentially leading to challenges in raising capital.
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