IGCSE, A Level Business Student Forum

LWM uses batch production to make car tyres in 15 different sizes. Last year LWM sold 60 million tyres including 40 million tyres of its best-selling size. The Finance Director has been looking at the financial data shown in the Table. She said: ‘Liquidity is important. I need to do some ratio analysis to measure business performance. In the previous year our Return on Capital Employed was 33%.’ The directors are worried about increased competition but they cannot decide on the best way for LWM to respond. 26 Explain two ways LWM might respond to increased competition. Recommend which way LWM should
choose. Justify your answer. [6]

Possible KN Points:
• Introduce new products
• Lower prices
• Merge or takeover
• Advertise OR use promotion
• Keep costs low
• Keep improving existing products OR quality
• Provide good customer service