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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: to either 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 within an existing market, which typically involves lower risk.
Buy it Direct, being one of the largest online retailers in the UK, can leverage its size and established customer base to increase sales. By continuing to sell existing electrical goods, such as appliances from brands like Bosch and Zanussi, to a broader audience, they may effectively increase their sales volume while benefiting from economies of scale. More extensive marketing of their current product range could also attract more customers who are already familiar with the brand.
Step 2
Option 2 – diversification
Answer
Diversification introduces new products into a new market and carries a greater degree of risk compared to market penetration. Although this strategy can offer opportunities to reach a broader range of customers, it can also lead to challenges if Buy it Direct moves into untested markets.
The introduction of new products, such as bathrooms, showcases a willingness to innovate. Given the current slow growth of the market at 0.5%, there might be significant competition to attract customer interest amid existing rivals. Offering novel products may stimulate a different segment of the market, potentially leading to increased traffic and sales.
Step 3
Recommendation
Answer
In conclusion, while both options have their merits, market penetration appears to be the more prudent choice for Buy it Direct in achieving its sales revenue objectives. The company's existing presence in the electrical household appliance sector, combined with robust marketing efforts and a focus on leveraging existing products, may yield a quicker return on investment,
Conversely, while diversification holds potential for long-term growth and tapping into new markets, it involves significant risks and uncertainties that could outweigh potential benefits at this stage of development.