Sitara Bhojwani
9609/11
Paper 1 Short Answer and Essay May/June 2020
Section A (Short Answer)
1)
a) Leadership is the act of motivating a group of people towards achieving a common
objective, such as corporate aim.
b) Creative. Creativity helps develop new ways of improving an existing product or service
and optimizing a business. Not only is creativity needed in order to innovate, and come up
with new products in the market, to stay relevant and competitive, however it is needed to
generate or recognize ideas, alternatives, or possibilities that may be useful in solving
problems, communicating with others, and entertaining ourselves and others.
Good leaders must show initiative, in order to motivate employees, and keep the business
running. It brings in new ideas to generate more business. Initiative can also reset setbacks,
in the sense, it can encourage leaders to face setbacks and try to win again.
2)
a) Opportunity cost is the benefits of the next best alternative foregone due to the choice of
another option.
b) New businesses may fail due to a lack of finances. Often these businesses find it hard to
raise finances and find it difficult to find sources as investing in new businesses is risky. A
lack of capital makes it hard for a new business to start up its operations and get them
running.
New businesses may fail due to a lack of experience and knowledge of the market they are
entering, therefore not be able to target the right market with their products or satisfying
gaps in the market, therefore not receiving demand and sales for their product.
3) Inventory management is where a business finds out how to source, store and sell
inventory, this being both raw materials and finished goods.
This is vital for a manufacturing firm because if the business does not have enough
inventory, this could prevent them from meeting demand and therefore potentially lose out
on sales revenue. If the business cannot tend to the needs and demands of the customer,
then not only do they lose out on the deal, however this creates a bad impression as the
firm could be seen as inefficient and unproductive to work with affecting future relations
with the consumer.
Another reason a manufacturing firm must have an efficient overlook and management on
their inventory is to avoid unnecessary additional costs. Too much stock will need storage,
and acquiring space to accommodate this may be expensive to buy or rent, therefore adding
costs to the business due to a lack of management which could have been prevented.
4)
a) Price discrimination is a pricing mechanism that charges different prices for same product
or services to consumers, based on PED and the businesses information on their income and
ability to pay.
b) A disadvantage of this is that consumers being charged more for the same thing may see
this as partiality and unfair, as well as unethical. This may cause the customer to boycott the
business as the discrimination is not in favor of them.
If the price discrimination charges significantly lower prices to lower income consumers, and
these are their predominant demand is from this income bracket, they may lose out on
revenue and profits.
Section B (Essay)
5)
a)
Market share is the percent of total sales in an industry generated by a particular company.
Increasing its market share, means a business is gaining sales, and therefore sales revenue,
and more consumers are buying from them. This is beneficial as an increase in sales means
the business has increased cashflow input to keep the biasness running, and it this increase
is enough the profits can be reinvested or ploughed back into the business in order to
further expand and grow the business. Furthermore, due to the increase sales, the business
needs to respond to this growth in demand by expanding its production. This therefore
gives them the opportunity to produce in a more cost and time effective way, takin
advantage of eventual economies of scale, as they expand. This is extremely beneficial as
this allows them to lower costs of production per unit, which means producing more output
for cheaper, resulting in lower production costs. These lower costs can then be passed onto
customers who will be attracted by the lower prices and by from them instead of
competitors therefore, increasing competitive advantage as well as sales of the business,
with an increase in market share.
Furthermore, increasing the market share if a business, and its sales, this increases the
awareness of the business in the market, helping it gain popularity. This will overtime,
through advertising such as word of mouth, help the business gain a reputable image and s
stable position, further increasing its market share. Eventually, this may make the business a
monopoly and therefore a market dictator. This means they will be able to control the
market as per their convenience as they have a hold on demand and the consumers, which
run the market, and can set prices that define the market.
Therefore, increasing the market share of a business helps it, eventually, exploit the market
as well as increase their sales and therefore revenue.
b)
A change in income, may well be a significant factor influencing the demand for restaurant
meals. This is because dining at restaurant is not seen as a necessity, and more of a
recreational activity done for leisure. Therefore, rise in overall income, may mean more
people have an increased disposable income which they can then spend on extra luxury
goods such as eating restaurant meals. However, if incomes decline, consumers may want
to cut unnecessary expenses such as food from restaurants as this is not viewed as a need,
and will take up a larger proportion of their income. Additionally, in most cases, it is more
cost effective to make meals in the household.
Moreover, a change in income may affect restaurants depending on who is affected and
whether or not this is the demand for restaurant meals. If the majority of restaurants meals
are demanded by middle to higher income consumers, and the change in income is specific
to lower income consumers, then this would not have an impact or a negligible one on
restaurants as it is not their predominant consumers that are affected by the income change
and therefore, this hardly impacts them. However, if high income consumers are affected by
this change, then the business catering for meals consumed by them would be affected but
not the demand for meals acquired but the lower income band.
Impact however, could be affected by the other weightage of factors, such as groceries. If
the prices of groceries were to significantly rise, then this would make cooking domestically
less cost effective and restaurant meals cheaper for some therefore increasing overall
demand for restaurant meals.
Therefore, the influence of the change in income on the demand for restaurant meals is
dependent on the extent to which this change occurs and who incurs the change, as well as
the weightage of other factors on this demand.