Explain two reasons why the owners of CC might want to expand the business.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2022). The mark or mark type is shown in brackets.

1. [1] To possibly gain higher profits for the owners
2. [1] as expansion will lead to increased sales in new markets
3. [1] leading to increased revenue
4. [1] CC shareholders may want higher dividends paid / increase in share price
5. [1] To lower average/unit costs
6. [1] gain from economies of scale
7. [1] such as bulk buying of cocoa beans
8. [1] a discount could be received for bulk purchases
9. [1] To gain a larger share of the market
10. [1] increase in the proportion of total sales in the market may increase revenue
11. [1] as the home market is saturated so limited potential for growth in this home market
12. [1] To gain more status and prestige for the owners
13. [1] may be listed on stock exchanges in other countries
14. [1] To spread risk / diversify markets
15. [1] Opportunity: Start selling exports of products to other countries – increases the number of markets operating in – increases revenue
16. [1] Opportunity: May become cheaper to produce chocolates than in country X – as it may start operating in other countries that may have lower costs – e.g. lower wage costs in country Z
17. [1] Opportunity: Easier to import products such as cocoa beans into the home country – no trade restrictions may lead to lower unit costs in country X too
18. [1] Threat: Increasing imports of chocolates into the home market from multinational companies – increases competition - sales from abroad may reduce market share at home
19. [1] Threat: Increased investment from multinational companies in the home market - setting up factories making chocolate for the home market – may also lead to increased competition at home
20. [1] Threat: Employees may leave to go and work for the multinational companies setting up in the home market - increased wages and more opportunities may be attractive – higher labour turnover for CC – increased costs of recruitment and training for CC
21. [1] Threat: Lack of knowledge of new markets, competition and local tastes – may make it more difficult to successfully export into global markets
22. [1] Conclusion: More opportunities for CC from globalisation (e.g., lower unit costs, increased competitiveness and revenue from country Z) outweigh threats.
23. [1] Conclusion: Threats from multinational businesses (e.g., difficulty competing, reduced market share from imports) may be greater for CC as a relatively new multinational.