24 Identify and explain two ways in which GKA could keep costs low. [6]

[BASEL Moderator]

GKA is a food retailer. It has 300 shops located in areas where average consumer incomes are low. GKA sells a limited range of own-label products including breakfast cereal and toothpaste. GKA does no promotion or market research. The Managing Director said: ‘Last year our market share increased to 5%. Profit increased by 40%. Keeping costs low means GKA can offer customers quality products at low prices.’ GKA is planning to open 100 shops in areas with high average consumer incomes.The Managing Director must decide whether GKA should change its pricing strategy (method) as the business expands.

24 Identify and explain two ways in which GKA could keep costs low. [6]

Possible KN Points:
• choose low cost locations
• pay minimum wage
• economies of scale
• set lower marketing budget
• replace workers with machinery / automation / reduce workforce
• cheaper supplier
• close some locations
• set up online
• reduce waste
• Buy direct from manufacturer