Analyse one opportunity and one threat to WSC of the appreciation of its currency ($) against other major currencies (lines 19-22).

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2021). The mark or mark type is shown in brackets.

1. [Knowledge] Explanation of terms: exchange rate is the price of one currency in terms of another
2. [Knowledge] currency appreciation – $ becoming stronger/more valuable against other currencies
3. [Knowledge] opportunity is an external influence that the business can exploit to its benefit
4. [Knowledge] threat is an external influence that could negatively impact the business
5. [Knowledge] Opportunities: lower cost of imports
6. [Knowledge] Threats: exporting less price competitive
7. [Knowledge] Credit understanding that currency appreciation may be linked to other economic variables, such as growth and stability.
8. [Application] WSC imports many raw materials (spices) which will be cheaper with stronger currency.
9. [Application] Exported spice products will be more expensive to foreign customers.
10. [Application] Reference to Table 1 and Table 3: evidence of decreasing demand in three regions in 2020
11. [Application] increased profit in 2020 compared to 2019.
12. [Analysis] Cheaper imported raw materials may lead to either lower prices or higher added value.
13. [Analysis] Lower prices could result in higher sales quantity and increasing market share. This could result in higher profit.
14. [Analysis] If prices unchanged there will be higher added value which will increase profit margins and profit.
15. [Analysis] There may be opportunities to import other items, for instance packaging and jars at lower cost and therefore increasing profit.
16. [Analysis] Higher export prices may well lead to lower sales if there is competition.
17. [Analysis] If appreciation continues, WSC could find themselves being 'priced out' of the market in some countries. This could be linked to declining demand in US and Asia in 2020.
18. [Analysis] Long term, continued appreciation could slow down the company's growth, due to lower export sales.