ZNOTES.ORGUPDATED TO 2022 SYLLABUSCAIE A2 LEVELBUSINESS(9609)SUMMARIZED NOTES ON THE MODEL ANSWERS SYLLABUSCAIE A2 LEVEL BUSINESS (9609)Without a new factory,Li-chun believes that Inolla will need1.May/June 2021 variant 32to subcontract some production in 2022.She has identified amanufacturer in country P with a factory that has thecapacity to fulfil Inolla's demands.The manufacturer has a1.1.Inollagood reputation for quality and already supplies one ofInolla's competitors.However,there has been recentAfter graduating from university with a degree in productnegative publicity regarding the poor working conditions atdesign Li-chun worked for a leading manufacturer of electricthis factory.cars.However,Li-chun had always wanted her own business.Li-chun found her journey to work by bus and foot timeA change to human resource management?consuming and wondered if there was a better way forpeople to commute in busy cities.She researched variousLi-chun is concerned that there is declining workforceoptions before deciding that there was a gap in the marketperformance in Inolla's own factory.Labour turnover hasfor lightweight foldable scooters with an electric motor.Inincreased and productivity has decreased from a high of2011 Li-chun set up Inolla as a private limited company in2000 scooters per employee per year in 2019.Quality controlcountry Q to manufacture electric scootersinspectors ensure that the finished electric scooters meet thehigh quality standards set by Inolla.However,inspectors areA market opportunityidentifying more faults that need correcting before thescooters meet the required quality standard.Further data isInolla's sales have grown rapidly in country Q,a country inprovided in Table 1.Asia with a large urban population.Inolla targets commuters20192020with advertising on buses and trains.It also uses social mediaand viral marketing campaigns.average number of factory employees3040Inolla's range of electric scooters are of high quality and arenumber of employees leaving during the612premium priced.Battery technology is constantly improvingyearso each model is updated frequently.Over 60%of sales arenumber of days lost through absenteeism68through the internet but Inolla also distributes its scootersper employeethrough bicycle shops and three of its own retail units.Inollamonthly output of scooter50006000also exports to 10 countries in Asia using agents based inpercentage of units requiring faultthose countries.29%2.5%correctionMarket research conducted by Li-chun in 2018 found thatmillions of dollars had been invested globally in sharedNeten has been the Operations Manager since 2017 andmicromobility businesses.In the shared micromobilityuses a hard'approach to human resource management.market,customers rent scooters or bicycles to make shortEmployees are given training in the specific skill they requirejourneys.Inolla now wants to supply to businesses thatNeten sets weekly production targets and tells employees aoperate in the shared micromobility market.week in advance which shift they will work.Employees haveLi-chun has designed a new electric scooter to sell todemanded the right to join a trade union.However,Inollabusinesses in the shared micromobility market.She has set ahas refused to give permission.Production line employeescorporate objective to achieve a market share of 5%in Asiaare paid country Q's minimum wage to keep costs low.within two years.This would require a 400%increase ofLi-chun is convinced that Neten's approach to managingInolla's current annual sales volume.Li-chun recognises thatemployees has contributed to the declining workforceto achieve her target,it is necessary to:performance.increase productiondevelop a new marketing strategyproduct recallOperations close to capacityIn April 2021,there were reports that the batteries of twoInolla scooters had caught fire.Fortunately,there were noAs sales have increased,Inolla has recruited more factoryserious injuries but many customers have been phoningemployees.However,the factory is now operating at overInolla's customer services department concerned about the90%capacity and Li-chun forecasts that full capacity will besafety of their scooters.Li-chun was surprised by thereached by the end of 2021.The factory site has room forproblem as she was certain that quality control at the factoryexpansion and this would cost $10m.Li-chun believes thatwas effective.She contacted her battery supplier to checkexternal finance would be available but is concerned abouthow this could have happened.At the start of May,InollaInolla's high gearing.Altematively,Inolla could convert to aissued a product recall for all scooters produced since thepublic limited company to finance a much larger expansionstart of 2021.to build a new factory in country P where labour costs aremuch lower than country Q.This would enable Inolla to meetImproving Efficiencyits sales target for the shared micromobility market.WWW.ZNOTES.ORGCAIE A2 LEVEL BUSINESS (9609)Inolla holds inventory of components to ensure thatproduction is not disrupted.Components are imported from2.Analyse the impact ofa number of other countries.Batteries are the mostexpensive part of the scooter and these are imported fromInolla of two changes in thecountry P.Li-chun is considering investment in an enterpriseresource planning(ERP)system to improve the efficiency ofeconomic environment inoperations.She has approached a specialist ERP supplierwhich estimated an investment cost of $1m and projectedcountry Q [10]net cost savings shown in Table 2.The specialist advisedLi-chun that the ERP system would need replacing afterEconomic environment are the external factors andapproximately six years.influences that impact the operation of the businessyearnet cost savings($000)discount factors at 6%activity.[*here by defining the key word economic3000.94environment we are able to get knowledge marks.]24000.89The country Q has expected to have economic growth of5%per year for the next three years.This means the GDP34500.84level of the country is rising,this would cause incomes of45000.79the consumers to increase.Thereby the increasing55000.75purchasing power would lead to higher demand levels for65000.71the electric scooters.Therefore,Inolla could enjoy greaterrevenue and profits as she prices her scooters at aEconomic environmentpremium price.This would help Inolla to obtain the 5%market share in Asia as per the corporate objective ,ThusThe economic environment is changing in country Qenabling Inolla's growth strategy to fall into place.Unemployment has decreased to 3.8%and economic growthCountry Q is currently facing a low unemployment level ofis forecast to average 5%per year in the next three years.3.8%this means that there are few people who areThe government is concerned about the threat of inflationconsidered unemployed;those who are willing and ableand is expected to increase interest rates before 2022to work who aren't in job.Although this would be goodCountry Q has an appreciating exchange rate and this isnews as more people in Q have sufficient income toexpected to continue over the next two years.afford an electric scooter adding to the rising demand forLi-chun has asked her finance manager to evaluate howInolla,this also means that it is now more difficult tothese changes might affect Inolla.recruit workers due to low unemployment.Hence,anynew workers they recruit for the new factory will have tocorporate planningbe above the national minimum wage inorder to ensurethat workers aren't drawn to work for competitors and toLi-chun last conducted a full strategic analysis in 2018.As aavoid the labour turnover rising.This hence would makeresult of that strategic analysis Li-chun decided that Inolla,asInolla less competitive if this rise in wages is reflected intopart of its growth strategy,should target businesses that rentprices in the prices of the electric scooters in the sharedout scooters in the shared micromobility market.A summarymicromobility market.is shown in Table 3.Rising interest rates as a response to inflation will affectPower of buyersexpansion plans.Inolla might need to obtain loans if theyhigh economies of scalemarket dominated by a small numberwere to invest in an enterprise resource planning systemtechnology is relatively cheapsome companies produce their own(ERP)which costs $1m in hopes of improving thescootersefficiency levels.The rising interest rate will make cost ofPower of suppliersThreat of substitutesfinance more expensive,leaving less profits available forLi-Chun.Therefore the net cost savings in table 2 may notcomponents for scootersactually be representative of this change hence ismisleading.Li-chun also commissioned a Porter's Five Forces analysis ofAppreciation of the country Q's currency means that thethe competitive environment in the shared micromobilityprice of country Q's currency is rising against the currencymarket.An extract is shown in Table 4.of another country.Therefore this would mean thatThreat of new entrantsPower of buyersexport prices of Q willwill increase and the import priceshigh economies of scalemarket dominated by a small numbertechnology is relatively cheapsome companies produce their ownscootersmake the price of exporting electric scooters much morePower of suppliersThreat of substitutesexpensive,Inolla exports to 10 countries in Asia by thea few suppliers control the market forshared micromobility businesses havemeans of agents who will add their own profit mark up.there are multiple suppliers of otherWill the customers still continue to purchase at such apublic transport and taxishigh price?Hence making Inolla uncompetitive.Howeverthis may be compensated as appreciating currencyWWW.ZNOTES.ORG