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GCE JAN 2007 : (AS 3) External Influences Business Enterprise

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ADVANCED SUBSIDIARY (AS) General Certificate of Education January 2007 GCE Applied Business assessing External Influences on the Business Enterprise A3B31 Assessment Unit AS 3 [A3B31] WEDNESDAY 10 JANUARY, MORNING TIME 1 hour 30 minutes. INSTRUCTIONS TO CANDIDATES Answer all six questions. INFORMATION FOR CANDIDATES The total mark for this paper is 80. Quality of written communication will be assessed in all questions, except Question 1 and 2. Figures in brackets printed down the right-hand side of pages indicate the marks awarded to each question or part-question. This paper is accompanied by a Case Study. You must not use your own annotated copy of this Case Study. ADVICE FOR CANDIDATES You are advised to take account of the marks for each part-question in allocating the available examination time. A3B3W7 2864 BLANK PAGE A3B3W7 2864 2 [Turn over 1 (a) What Market Sector did Adria Ltd operate in? Give a reason for your answer. [3] (b) Explain the importance of this sector to the Northern Ireland economy. [4] 2 Explain how competition in the textile industry influenced the way Adria Ltd operated. [4] 3 Analyse three pricing strategies that Adria Ltd might have used for survival. [9] 4 Analyse Adria Ltd s policy of improving quality as a way of making the business more competitive. [12] 5 Evaluate how the closure of Adria Ltd will affect six of its stakeholders. [24] 6 Following the closure of Adria Ltd, evaluate how government influence and policies might affect the Strabane area. [24] THIS IS THE END OF THE QUESTION PAPER A3B3W7 2864 3 [Turn over S 8/06 600 9-017-2 [Turn over ADVANCED SUBSIDIARY (AS) General Certificate of Education January 2007 GCE Applied Business Case Study Assessment Unit AS 3 assessing External Influences on the Business Enterprise [A3B31] WEDNESDAY 10 JANUARY, MORNING You must use this clean copy of the Case Study in the examination and not your own annotated copy. A3B31CSI A3BW7 2864.02 CSI Adria Ltd Background Adria Ltd was established in 1962 as a subsidiary of Charnos, a United Kingdom based producer of ladies tights, stockings, knitwear and lingerie. In addition to its UK operations, the company also manufactures in Turkey, Italy and Colombia. Adria Ltd was located in Strabane and Londonderry and it experienced substantial growth in the 1990s, quadrupling in size. It became the largest supplier of its kind in the United Kingdom to Marks and Spencer, providing almost one million items per week. This initial success was based on Adria s commitment to design, development and quality and its provision of a consistent service. The company also prided itself on being a one stop shop and on its commitment to ethical trading. For many years the company performed well and the Strabane plant was the main source of employment in that region. Outline Map of Northern Ireland Portrush Derry/Londonderry Strabane Belfast Irvinestown Cheap Foreign Imports In recent years Northern Ireland s textile industry has suffered drastically as a result of cheaper foreign imports. Adria Ltd was initially able to resist these global pressures and was able to remain as the largest textile plant in Northern Ireland. However in 2001, the firm announced that it was to cut 165 jobs. This was followed in 2002 by a take over from a local consortium which was led by Amicus Partners, a private equity group, and Invest NI. A3BW7 2864.02 CSI 2 [Turn over Amicus Partners is an organisation that is involved in taking over businesses that are in out of favour sections of the economy. It also targets new start ups and turn-around opportunities. Invest NI, Northern Ireland s main economic development organisation, was keen to become involved in the deal as it was confident that Adria s existing management team could increase the capability of the company and add value to its operations. Invest NI provided assistance totalling 2.3 million, including 1.35 million in ordinary and preference share capital. Despite this, a further 55 job cuts were made in September 2003 and another 58 in July 2004. A lower demand than was anticipated for their products was blamed for the redundancies. In 2004 the company was taken over again, this time by an international firm, Quantum Clothing Group. This take over led to criticisms being made against Invest NI who made 400,000 from the deal. Fortunes were no better in 2005 with sales in the first quarter down by 25% on the same period in 2004. Management believed that 2005 was about trying to survive in the global market place with the hope that sales would improve in 2006. Closure These sales figures resulted in management reviewing how they operated as they tried to return the company to profitability. Part of the review involved even more job losses. Despite these efforts, it was announced on Wednesday 5 April 2006 that Adria Ltd was to close its manufacturing facilities. This announcement was a particular blow to Strabane as the town had relied very heavily on the company as a source of employment for 40 years. Overall, Strabane lost more than 2000 workers in the textile industry between the years 2000 and 2006. The announcement caused anger from both local Members of Parliament and employees of the firm who claimed that management had dealt with the situation badly. Accusations were also made that employees had been kept in the dark while the company planned to relocate its operations in developing and third world countries. In addition, the employees had only been told at short notice that they were being laid off and they were offered the very minimum redundancy packages. One local Member of Parliament called for the area to be designated as an area of Special Economic Need and for the government to provide a package of economic regeneration measures for the district. Industrial De-Rating Against this backdrop, the Northern Ireland Manufacturing Focus Group warned that more manufacturers in Northern Ireland will also close if government plans to phase out industrial de-rating take place. Their spokesman, Basil McCrea, warned the government that, although the plans had no bearing on Adria Ltd s decision to close, they would mean that Northern Ireland companies would lose their advantage over competitors. He also claimed that if the phasing out of industrial de-rating went ahead, many businesses across Northern Ireland would either move to the Republic of Ireland, invest abroad or close down altogether. The Northern Ireland manufacturing sector faces difficult times ahead. Sources: Belfast Telegraph 7th April 2006, 10th April 2006, 24th April 2006, Strabane Chronicle 6 April 2006. A3BW7 2864.02 CSI 3 [Turn over S 8/06 A3BW7 600 9-017-1 2864.02 CSI 4 [Turn over

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Additional Info : Gce Applied Business January 2007 Assessment Unit AS 3 - External Influences Business Enterprise
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