Foreign competition often poses a threat to the

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foreign competition often poses a threat to the survival of local companies. (a) Explain the benefits that a firm enjoys when it grows in size. [10] (b) Evaluate the various strategies a firm can adopt to respond to the challenges posed by globalisation. [15] Price strategy? Non-price strategy? Benefit due to EXPANSION “threat to the survival” Initial Question Dissection
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Essay Q2: As globalisation continues, the tearing down of trade barriers has provided some companies opportunities for growth while it has been harmful for others. Accustomed to dominant positions in protected markets, the influx of foreign competition often poses a threat to the survival of local companies. (a) Explain the benefits that a firm enjoys when it grows in size. [10] Benefit due to EXPANSION 1) Expand market (↑AR) 2) Expand output IEOS Understanding the preamble
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Essay Q2: As globalisation continues, the tearing down of trade barriers has provided some companies opportunities for growth while it has been harmful for others. Accustomed to dominant positions in protected markets, the influx of foreign competition often poses a threat to the survival of local companies. (a) Explain the benefits that a firm enjoys when it grows in size. [10] (b) Evaluate the various strategies a firm can adopt to respond to the challenges posed by globalisation. [15] Benefit due to EXPANSION 1) Expand market (↑AR) 2) Expand output IEOS Understanding the preamble 1) Competition ↓AR ↓profits 2) Competing demand for resources ↑AC ↓profits 3) Threat to survival may shut down Strategies to raise profits (↑TR, ↓TC) and survive the competition by foreign firms
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(a) Explain the benefits that a firm enjoys when it grows in size. [10] Benefits due to EXPANSION Cost savings (iEOS) Revenue advantages Marketing EOS Financial EOS Expand into different markets Increase market share
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(a) Explain the benefits that a firm enjoys when it grows in size. [10] Suggested Intro: Clarify what “size” of a firm is: the idea of greater quantity of production or market share must be expressed. Firm’s objective: Benefits to a firm must be expressed in the idea of achieving profit maximisation Direction statement: Benefits a firm enjoys comes in the form of cost savings from exploiting EOS or from revenue advantages that a firm may gain from being large.
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(a) Explain the benefits that a firm enjoys when it grows in size. [10] Suggested Body: Firms can enjoy cost savings when they grow large through exploiting internal economies of scale . [Point 1] One source of EOS that firms can enjoy comes from marketing EOS . [Elaboration and example] When firms are larger, they can enjoy lower average costs from purchasing inputs in bulk. Some examples include supermarkets where these larger firms are likely to make up a larger proportion of a supplier’s revenue stream and thus are more important customers than a smaller firm such as neighbourhood provision shops. These larger firms will then have stronger
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