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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 lead to increased profits for Shaydz by accessing new markets, which diversifies their customer base beyond domestic sales. This can enhance sales volume and reduce dependency on local market fluctuations. Additionally, entering international markets can enable Shaydz to take advantage of lower production costs or economies of scale, further improving profit margins.
Step 2
Describe ONE method of international expansion that will allow Shaydz to control product quality.
Answer
One effective method for Shaydz to control product quality while expanding internationally is through joint ventures. By forming a partnership with a local company that is familiar with regional market standards and consumer preferences, Shaydz can ensure that quality control measures are adhered to while benefiting from local expertise.
Step 3
Explain ONE financial strategy that Shaydz could use to minimise risk in managing a global business.
Answer
One financial strategy Shaydz could implement to minimize risk is hedging against currency fluctuations. By using financial instruments like forward contracts, Shaydz can lock in exchange rates for future transactions, reducing the uncertainty of overseas profits and ensuring stable pricing for international sales. This method helps protect the business from adverse shifts in currency values.