Question
Refer to the Accord case study
Aran and Kayla decided to launch Detox using batch production. It has now been on the market for six months. Detox is showing strong growth, although sales for the first six months were less than a quarter of Kayla’s target of 160000 bottles for the first year. The price of Detox is $\$ 2.50$ per bottle. The cost of goods sold is $\$ 160000$ and the operating costs before interest and tax are $\$ 20000$ per year.
Enrich sales have not grown much and Aran is very disappointed. Customers, mainly athletes, do not use the product frequently and it is difficult to find new customers. However, research into customer perceptions indicates a very strong brand, resulting largely from Accord’s corporate social responsibility (CSR) and strong customer loyalty.
Aran does not like the way the business is organized by product and wants to change it so that it is organized by function instead.
Following the success of Detox, Kayla wants to produce a range of snack bars based on Enrich flavours and recipes. Accord would use the Enrich brand name for the snack bars. The market for healthy snack bars is very competitive and dominated by a few large companies who spend large amounts of money on advertising. The market is growing rapidly – some market researchers estimate by $34 \%$ per annum. There are many examples of small businesses entering the market successfully on a small scale. Kayla estimates the proposal would involve an investment of $\$ 100000$, with forecast net returns of $\$ 80000$ for four years. Aran thinks that the money could be better spent on marketing Enrich drinks.
a. Define the term batch production.[2]
b.i. Based on a target of 160000 for the first year of production at Detox, calculate the gross profit generated by Detox.[2]
b.ii.Based on a target of 160000 for the first year of production at Detox, calculate the net profit margin of Detox.[2]
c. With reference to Accord, explain one advantage and one disadvantage of an organizational structure based on product.[4]
d. Discuss Kayla’s plan to produce a range of snack bars.[10]
Question
Refer to the Accord case study
a. Outline two advantages for Accord of using job/customized production.[4]
b. Explain how Accord can differentiate Enrich from the products of its competitors.[6]
▶️Answer/Explanation
Ans:
a.Advantages could include:
Product: adjusting recipes to meet customer needs.
Packaging: producing individually designed packaging for each customer.
Marketing: could reinforce USP, which is not strong as Aran does not have it right.
Accept any other reasonable description.
Award [1] for each advantage up to a total of [2].
Award [1] for putting the advantage into context up to a total of [2].
b.
Refer to Paper 1 markbands for May 2016 forward, available under the “Your tests” tab > supplemental materials.
Key aspects:
The product is aimed at the specialist “gym” market rather than the mass market.
Greater emphasis on natural, healthy ingredients.
More intimate relationship with customers as it is small.
Positive features of small versus multinational.
Explanation/analysis should come from discussing these in relation to the situation that Accord is in.
Marks should be allocated according to the paper 1 markbands for May 2016 forward section A.
Award maximum [3] for a theoretical answer or for only analysing one feature.
Award maximum [5] if the analysis of two features or more is mainly descriptive but in context.