IGCSE, A Level Business Student Forum

HGH makes truck (lorry) engines using batch production. Quality assurance is important. Last year profit decreased by 30%. The Managing Director has decided to close one of its two factories based on the information in the table below. He said: ‘The problems are high energy costs and increased competition from imports.

The Government should introduce measures such as import quotas to help protect businesses like us. If it does not then both factories may close'.

Cost and other information about the two factories in given table 04 Identify and explain two ways the Government might help HGH become more competitive. [6]

Possible Points:
[KN] By subsidizing the costs of electricity for the production sector industries like HGH.
[APP] Since HGH is experiencing high costs of elec, means their cost of production is higher, after lowering the rates they may start producing more & enjoy economies of scale in future.
[AN] ....

[KN] Either allowing the local extraction of the raw materials or lowering the custom duties on imported raw materials.
[APP] Since one factory is about to close due to higher costs, reducing custom taxes will reduce the costs of operations for business, making it offer trucks at better prices.
[AN] ....

[KN] : The Government could provide training to help workers become more skilled at the job.
[APP] : Learning will make the workers trained and skilled and the workers can produce engines faster and with fewer mistakes.
[AN] : higher productivity will reduce costs and will help the HGH compete better with the other countries competitors leading towards increased exports & GDP for the country.

[KN] : The government could help by cutting energy costs or give money to help businesses.
[APP] : This would make HGH electricity and fuel cheaper which would lead to the factory spending less money on running machines.
[AN] : Since costs are lower HGH can reduce the price of its engines. this makes its engine and imports balance out and it will help the business sell more and get higher profits leading to factories staying open.

Examiner Comments; Stand Corrected