Wavy is a manufacturer of a well-known brand of washing machine. The directors of the company are concerned about the low rate of turnover of their products and declining total sales.

Mark scheme

Marking points from the official mark scheme (May/June 2014). The mark or mark type is shown in brackets.

1. [2] (a) (i) Any two points × 1 mark each: The number of times the average stock held is sold each year (2 marks). Measure of how quickly goods are sold. (allow formula cost of good sold average stock (at cost price)) Any other relevant point.
2. [3] (ii) Any three points × 1 mark each and up to 3 marks for a well-developed point: • washing machines are expensive and washing powder is cheap • washing machines sell slowly as people do not purchase them every day • they remain in stock for some time and the profit margin on each one sold is high • washing powder is used frequently and bought frequently • the profit margin on each packet of washing powder is likely to be lower. Any other relevant point.
3. [4] (iii) Any two ways explained × 2 marks each: • reduce prices so that the washing machines are more attractive to consumers • improve the marketing of the washing machines by more advertising/promotions • use sales promotions such as free electrical appliance with every machine sold • look for new ways of selling the washing machines, e.g. selling online • improve the after-sales service offered, e.g. maintenance contract – increases customer goodwill • look at what the company is offering - is it as good as the competition – improve the quality/design of the product • offer better credit facilities, e.g. interest free credit for a period of time • diversify into other products, e.g. other electrical appliances • introduce new products. Any other relevant way.
4. [4] (b) Any four points × 1 mark each or two well explained points × 2 marks: • so that customers will recognise their products and distinguish them from the products of their competitors • to develop brand loyalty so that they gain return business • to offer a guarantee of a certain quality of product • to enable the company to advertise more easily by using the brand name. Any other relevant point.
5. [1] (c) (i) One mark for the worldwide market/market consisting of many countries.
6. [6] (ii) Level 2 (4-6 marks) Has discussed the factors that the company should consider before making a decision about expanding within the global market. (If only one factor is considered, award 4 marks max). The question implies that Wavy is operating within the global market already. If it is selling successfully within the global market as well as in the home market, then it should consider expansion, as long as it has the expertise and the finance to do this. Before making a decision, Wavy should undertake some careful market research to see if the expansion would be worthwhile. It should consider the costs of doing this, currency exchange rates and the laws and regulations regarding electrical goods in the countries to which it is considering selling. It should also consider any transport problems, language problems, e.g. instruction books and the risk of financial loss because of non-payment. Wavy should only consider expanding into countries where it confident that it will be able to sell. It must make sure that it has sufficient supplies of washing machines and the back-up services needed before it expands into new markets. Level 1 (1-3 marks) Has commented on the factors the company should consider before expanding within the global market. The company should expand. It needs to sell more washing machines. It needs to sell in more countries. It should consider the cost of doing this. It should consider other problems such as language, currency, transport and storage of the washing machines.