Photo AI
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: whether to adopt a strategy of market penetration in the UK Elect... 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, which is generally viewed as the least risky strategy according to Ansoff.
Buy it Direct, being one of the largest online retailers in the UK, can leverage its size to gain purchasing economies of scale and reduce operational costs. By continuing to sell its existing household and electrical goods to a wider audience, including its loyal customer base, it might enhance sales volumes significantly.
Moreover, Buy it Direct has consistently rolled out new products similar to the existing range, such as kitchen appliances and televisions, which allows it to tap into its current customer demographic. This strategy could lead to increasing turnover and minimizing risk when approaching the established market.
Step 2
Option 2 – diversification
Answer
Diversification, which introduces new products to new markets, is generally considered riskier than market penetration.
While Buy it Direct has expanded effectively by providing diverse products like kitchens and bathrooms, entering entirely new markets could expose it to several uncertainties. The UK Electrical Household Appliance market, although showing nominal growth of 0.5%, faces a decline in consumer confidence and may not offer a favorable environment for new entrants.
Thus, by taking on new product lines, Buy it Direct may encounter risks related to customer acceptance and market entry, which could potentially negate the benefits of diversification.
Step 3
Recommendation
Answer
In conclusion, Buy it Direct should adopt a strategy of market penetration in the UK Electrical Household Appliance market. Given its established presence and familiarity with the market dynamics, this approach minimizes risk and capitalizes on existing strengths. Market penetration offers a clearer path to achieve increased sales revenue, especially in a competitive landscape where customer loyalty and market knowledge are crucial.