
	Trending ▼ ICSE CBSE 10th ISC CBSE 12th CTET GATE UGC NET Vestibulares ResFinder

GCE JUN 2007 : (A2 3E) Objectives and The Business Environment, People in Organisations, Accounting and Finance, Marketing and Operations Management

8 pages, 1 questions, 0 questions with responses, 0 total responses,

	gce	+Fave Message
	Profile Timeline Uploads Q & A

Home > gce >

Instantly get Model Answers to questions on this ResPaper. Try now!
NEW ResPaper Exclusive!

Formatting page ...

ADVANCED General Certificate of Education 2007 Business Studies Assessment Unit A2 3e Module 1 to 5 Objectives and The Business Environment, People in Organisations, Accounting and Finance, Marketing and Operations Management A2T51 assessing [A2T51] MONDAY 4 JUNE, AFTERNOON TIME 1 hour 40 minutes. INSTRUCTIONS TO CANDIDATES Write your Centre Number and Candidate Number on the Answer Booklet provided. Answer the one question. INFORMATION FOR CANDIDATES The total mark for this paper is 63, which includes a maximum of 3 marks for quality of written communication. Figures in brackets printed down the right-hand side of pages indicate the marks awarded to each question or part question. A2T3eS7 2919 Gymquip Ltd 1 Sonia Ridclaff graduated from university twelve years ago with an engineering degree. Her first employment was with Runwell, a local business that manufactured treadmills. Unfortunately, two years after she joined the business, Runwell ceased trading and Sonia became unemployed. However she had learned a lot about the market for exercise equipment during the two years with Runwell. 2 Sonia was convinced that a gap existed in this market for a business to manufacture a range of high quality exercise equipment. She drew up a business plan for a new venture and invited family and friends to buy shares in it, even selling her recently purchased new car to increase her own stake in the proposed business, Gymquip Ltd. Sonia s determination and thorough market research impressed everyone so much that she soon raised enough capital to set up Gymquip Ltd. She became Managing Director of the company. 3 Gymquip Ltd acted quickly to buy stock and machinery from Runwell s receivers and then moved into the same factory unit occupied by Runwell. A few of Runwell s original staff were re-employed although most left, unconvinced of Gymquip Ltd s long-term viability. Sonia set about increasing the product range to include a rowing machine, an exercise bike and a weights machine. From the outset, the emphasis was placed on producing high quality products. Success of the Glide brand 4 Under Sonia s leadership, Gymquip Ltd progressed steadily. Five years ago it transferred to a larger factory and opened a small retail store in the centre of Belfast. The workforce had, at this stage, grown to forty. Confident that she understood the needs of her customer base, Sonia worked tirelessly to design and patent a unique style of equipment based on a combination of hydraulics and springs. A complete new range of exercise equipment was launched under the brand name Glide . 5 An expensive promotional campaign helped establish Glide as a quality brand in the market and, as a result, Gymquip Ltd continued to expand. It now employs sixty-five workers. Last year sales reached 20 million, all within the UK and Republic of Ireland markets. Approximately 80% of sales were made to gymnasiums and fitness clubs with the remainder being to individuals for home use. Market research indicated that users were impressed by the unique design and smooth operation of the product range. A considerable proportion of company sales was made by Tom Sellit, the senior salesperson, whose experience and contacts within the industry proved invaluable. A2T3eS7 2919 2 6 Competition has been growing in the market though, almost entirely from foreign manufacturers. These competitors use cheaper materials in production and consequently have not achieved the same quality of product as the Glide brand. However, Gymquip Ltd has aggressively cut prices and profit margins over the last two years in order to increase its market share. This strategy has been successful to date but Sonia knows that some of the foreign firms have economies of scale that Gymquip Ltd cannot match. People problems 7 Sonia was fortunate to begin trading with a small group of highly committed and experienced employees. As this group expanded over the years, she managed to maintain a strong culture of teamwork and loyalty to the business. She invested heavily in training in order to increase the skills and flexibility of the workforce. This placed significant demands on company finances, as Gymquip Ltd used a very labour intensive production process. To counter this expenditure, Sonia relied heavily on non-monetary methods of motivation. Consequently, workers have always felt valued and empowered within the business. 8 Several recent problems threaten to disrupt this harmony. Assembly line workers and cleaners were awarded a pay increase in line with inflation, whereas Tom Sellit was rewarded with a very large bonus for exceeding personal sales targets. As details of this spread through the business via the grapevine, it caused considerable discontent in the workplace, prompting various groups of workers to question their status within Gymquip Ltd. 9 In addition to this unrest, a personal disagreement between the Finance Manager and the Operations Manager is causing problems within the company. Although its origin lay outside the business (apparently connected with the sale of a house), it seems that the two managers rarely communicate with each other at work. Sonia cannot allow this worsening communication to impact upon their respective departments, but has so far been unable to properly resolve the issue. Both managers are key members of her team. Market trends 10 Concerned that Gymquip Ltd needed more information on how its market was developing, Sonia requested Peter Williams, the Marketing Manager, to report on current trends. Peter began by carrying out some secondary research using the Internet. Information found, relating to UK sales of gym equipment, is shown overleaf in Fig. 1. Peter also discovered that products in this market tended to be more price inelastic than he had previously thought and that they invariably had a positive income elasticity of demand. A2T3eS7 2919 3 [Turn over Sales m Fitness club sales 100 Home use sales 40 15 1998 2005 2007 Year Fig. 1 UK sales of fitness equipment 1998 2007 11 Excited by the prospect of an expanding home use market, Peter quickly conducted some primary market research. One Saturday morning, three hundred randomly selected city centre shoppers were asked to complete a short questionnaire. The prospect of winning a meal for two in a local restaurant enticed one hundred and twenty shoppers to return completed questionnaires. Of these, 40% revealed that they would like to purchase a piece of gym equipment for home use over the next year. 12 These results led Peter to suspect that the way forward for Gymquip Ltd was to exploit the home user segment. He then visited some branches of BBJ plc, a national retailer of sports goods, and found that they stocked a range of fitness equipment, although, in his opinion, not of the same quality as the Glide brand. Aware of a growing concern amongst the population about more healthy lifestyles, Peter, in his report, argued the case for Gymquip Ltd shifting its focus, from gymnasiums and fitness clubs, to home use customers. Production facilities 13 Faced with steadily increasing raw material costs, Sonia began to investigate whether production in the factory could be made more efficient and was amazed to discover the technological advances in production methods made in recent years. A leading machinery manufacturer claimed that modern production machinery could save up to 15% on the amount of raw materials needed, in addition to being more energy efficient and highly automated. 14 Although the production machinery was very expensive, Sonia thought it was worth investigating further. She asked Eve Cash, the Finance Manager, to carry out an investment appraisal. Using the payback method of investment appraisal, Eve reported back that an entire factory upgrade would pay for itself in four years, assuming all output could be sold. At the moment Gymquip Ltd was producing and selling to approximately 80% of factory capacity. A2T3eS7 2919 4 15 However, Eve was reluctant to borrow more in order to finance this machinery as Gymquip Ltd was still paying off loans taken out to cover major expenditures over the past five years launching the Glide brand, a warehouse extension and staff training. This had reduced the working capital ratio of the business from 2.3:1 to 1.7:1 over the period. Combined with the reduction in profits needed to increase market share, some of the major shareholders were becoming uneasy. Eve also supplied Sonia with some UK economic forecasts, shown in Table 1 below. Table 1 UK economic forecasts Indicator 2008 2009 2010 2011 GNP growth 2.8% 2.7% 2.5% 2.3% Inflation rate 3.2% 3.5% 3.3% 3.1% Unemployment 1.6 million 1.7 million 1.7 million 1.8 million Rate of interest 5.4% 5.8% 6% 5.5% Recent developments 16 Following the launch of a company website, which incorporated an on-line store, there have been numerous enquiries about, and orders for, products from the Glide range. A high percentage of these have been from other European countries. The brand has also just been listed as a top buy product in a popular magazine Lifehealth . An article in the magazine praised both the innovative products and the social awareness of the business. 17 An opportunity has also arisen to acquire a greenfield site for a new factory. The site, located at Hillmount, some twelve miles from the existing premises, would allow Gymquip Ltd to design and build a state-of-the-art factory with up to three times the current capacity. Buying Hillmount would be very expensive but it would pave the way for future expansion of the company. Furthermore, it has much better access to both railway and port facilities, an important factor in the face of rising oil prices and distribution costs. However, there is no prospect of additional capital from existing shareholders. NB: Candidates should be aware that all information in this Case Study is fictitious. A2T3eS7 2919 5 [Turn over Answer the one question. 1 Sonia Ridclaff, the Managing Director of Gymquip Ltd has just received a business proposal from BBJ plc, the national sports retailer. BBJ plc wants Gymquip Ltd to manufacture a range of exercise equipment for it under the BBJ brand. Accepting this substantial and highly profitable order, would guarantee Gymquip Ltd full capacity production and a high level of sales for the next five years. However, producing an order this size would mean that Gymquip Ltd would be unable to continue production of its own Glide brand. Faced with this proposal, Sonia decided that it was time to seek independent advice on whether to accept the BBJ offer or continue with the Glide brand. You are a consultant employed by Gymquip Ltd. You have been asked to prepare a formal report entitled The way forward for Gymquip Ltd . The aim of the report is to undertake a SWOT analysis for Gymquip Ltd, evaluate two strategic options open to the company and make recommendations to the management team about how they should proceed. Your report should: be in the correct format; draw on the information given in the case study and any other relevant information or issues you have considered; show your knowledge and understanding of business. [60] THIS IS THE END OF THE QUESTION PAPER A2T3eS7 2919 6 SP (NF/CGW) T39890/2

Formatting page ...

Additional Info : Gce Business Studies June 2007 Assessment Unit A2 3E Modules 1 to 5: Objectives and The Business Environment, People in Organisations, Accounting and Finance, Marketing and Operations Management
Tags : General Certificate of Education, A Level and AS Level, uk, council for the curriculum examinations and assessment, gce exam papers, gce a level and as level exam papers , gce past questions and answer, gce past question papers, ccea gce past papers, gce ccea past papers

gce chat

Horizontal lines at:
Guest Horizontal lines at:
AutoRM Data:
Box geometries: