14 Bowland’s management believes that improving quality has been the most important reason......[6]

[BASEL Moderator]

Bowland manufactures bicycles from components purchased from suppliers. The production method makes use of specialisation. The Finance manager said: ‘It has been a successful year because profit is up. However cash flow is still negative. Trade receivables (debtors) have increased and we have purchased a lot of new equipment.’ Bowland’s management believes that improving quality has been the most important reason why bicycle sales have increased.

14 Bowland’s management believes that improving quality has been the most important reason why sales have increased. Do you agree? Justify your answer. [6]

Possible KN Points:
• Quality can lead to a good reputation / brand loyalty
• Can charge higher selling price
• Less mistakes
• More efficient