GCSEBusinessEdexcelExam Questions2. Building a Business2.3 Making Operational Decisions

Making Operational Decisions (Edexcel GCSE Business): Exam Questions

Exam code: 1BS0

3 hours49 questions
Easy
Medium
Hard
1
1 mark

Case Study

In August 2017, UK supermarket group Sainsbury’s decided to cut its costs by £500 million to remain competitive.

One of the changes Sainsbury’s made was to end its membership of Fairtrade. The Fairtrade scheme gives farmers in countries such as Kenya a higher price for their crops, such as tea. In return, Sainsbury’s can use the Fairtrade logo on its products. This makes its groceries, such as bananas, more attractive to ethically-minded customers.

Sainsbury’s has decided to replace Fairtrade with its own scheme called ‘Fairly Traded’. Critics of the change believe that it confuses customers. Protests about this change have already been held in London

Sainsbury’s also decided to reduce its head office workforce by 1,000. This allowed the company to increase wages for its shop floor employees, including checkout operators and shelf stackers, by 4.4% to £8 per hour. This reduced the wage difference with Aldi, which pays £8.53 per hour. Sainsbury’s wants to retrain shop floor employees to improve the customer service in its stores.

State one stage of the sales process.

How did you do?

2
2 marks

Case Study

In August 2017, UK supermarket group Sainsbury’s decided to cut its costs by £500 million to remain competitive.

One of the changes Sainsbury’s made was to end its membership of Fairtrade. The Fairtrade scheme gives farmers in countries such as Kenya a higher price for their crops, such as tea. In return,

Sainsbury’s can use the Fairtrade logo on its products. This makes its groceries, such as bananas, more attractive to ethically-minded customers. Sainsbury’s has decided to replace Fairtrade with its own scheme called ‘Fairly Traded’. Critics of the change believe that it confuses customers. Protests about this change have already been held in London.

Sainsbury’s also decided to reduce its head office workforce by 1,000. This allowed the company to increase wages for its shop floor employees, including checkout operators and shelf stackers, by 4.4% to £8 per hour. This reduced the wage difference with Aldi, which pays £8.53 per hour. Sainsbury’s wants to retrain shop floor employees to improve the customer service in its stores

Outline one advantage to Sainsbury’s of improving its customer service.

How did you do?

3
1 mark

Which one of the following is a stage in the sales process?

Select one answer.

  • Product knowledge

  • Product quality

  • Production

  • Productivity

Choose your answer

4
2 marks

Case Study

Kentucky Fried Chicken (KFC) is a fast food chain that sells fried chicken. Amongst its most popular products are Popcorn Chicken, Boneless Chicken boxes and Zinger Tower burgers. These are freshly cooked in batches in each of its 900 restaurants across the UK.

In 2017, KFC changed the company it used to transport its supplies of chicken. It replaced Bidvest with DHL. Bidvest had three distribution centres across the UK, but DHL only had one. In February 2018, DHL started to have logistical problems causing many KFC restaurants to run out of chicken. This led to a temporary closure of many KFC branches due to poor supplier reliability.

As a result of these closures, KFC started losing market share to rival fast food restaurants such as Burger King. KFC used social media and a viral advertising campaign to apologise to customers. It also considered lowering the prices of its most popular food items to win back lost customers and recapture market share

Outline one benefit to KFC of using batch production in its restaurants.

How did you do?

5
1 mark

Procurement involves a business having a strong relationship with which one of the following stakeholder groups?

Select one answer.

  • Local community

  • Managers

  • Pressure groups

  • Suppliers

Choose your answer

6
1 mark

Which one of the following is a feature of flow production?

Select one answer.

  • Bespoke products are manufactured

  • Specialist, skilled workforce is required

  • Labour-intensive process

  • Standardised output

Choose your answer

7
2 marks

Outline one benefit to a business of producing good quality products.

How did you do?

8
2 marks

Case Study

Iceland is a supermarket that sells frozen food. Although the grocery industry is very competitive, Iceland enjoyed a successful 2017. Sales revenue increased by 2.0% allowing profits to increase by £9.5 million to £160 million.

Iceland believes this success has been due to improved marketing. It has introduced new products using the Slimming World and Millie’s Cookies brand names. It also launched a new advertising campaign called ‘The Power of Frozen’. In addition it has developed a new store format called ‘The Food Warehouse’. These stores are much larger than a normal Iceland store which allows them to stock more luxury products. Iceland hopes that The Food Warehouse will help it to appeal to high-income customers and it plans to open more stores.

Figure 3: Iceland’s new packaging
Figure 3: Iceland’s new packaging

In 2018, Iceland received positive publicity from its decision to ban all plastic packaging on its own-brand products by 2023. It intends to replace plastic with recycled paper, as shown in Figure 3. A survey of 5,000 of its customers showed that 80% of them agreed with the change. Pressure groups, such as Friends of the Earth, have welcomed Iceland’s decision. Plastic waste has caused pollution of the world’s oceans and has killed marine life. Pressure groups hope that Iceland’s decision will be repeated by other supermarkets in the UK.

Outline one impact for Iceland of using just in time (JIT) stock control in its new Food Warehouse stores.

How did you do?

9
1 mark

Which one of the following is likely to lead to a business seeking a new supplier for a key component?

  • Flexible deliveries

  • Availability of extended credit terms

  • Long lead times

  • Convenient after-sales service

Choose your answer

10
1 mark

Which one of the following is a common feature of a business that has adopted a quality assurance system?

Select one answer.

  • Quality is the responsibility of a single employee

  • Quality is inspected at the end of the production process

  • Quality standards, such as ISO 9000 are met

  • Suppliers are not involved in quality management

  • A small percentage of defective products is to be expected

Choose your answer

11
1 mark

Which one of the following is the minimum level of stock held by the business in the bar gate stock graph shown in Figure 1 below?

Line graph titled Figure 1 showing stock held in units over 60 days, with stock repeatedly falling then being replenished to higher levels before falling again

  • 200 units

  • 300 units

  • 600 units

  • 800 units

Choose your answer

12
1 mark

Which one of the following is a stage in the sales process?

  • Advertising

  • Customer engagement

  • Product quality

  • Use of different payment systems

Choose your answer

13
1 mark

Which one of the following is an example of a service?

  • Accountancy

  • Biscuits

  • Furniture

  • Hair straighteners

  • Shoes

Choose your answer

14
1 mark

State one stage of the sales process.

How did you do?

15
1 mark

Which one of the following is a stage in the sales process?

Select one answer.

  • Maturity

  • Longer opening hours

  • Market data

  • Product knowledge

  • Product promotion

Choose your answer

16
1 mark

Case Study

Popeyes is an American fried chicken fast-food chain. It is well known for its Louisiana-style fried chicken that is marinated overnight in a mix of spices. As well as traditional chicken sandwiches and chicken wings, Popeyes has unusual items on its menu, such as American-style biscuits and Cajun gravy. The success of its restaurants has surprised the company. To meet the high level of demand for its fried chicken, Popeyes had to redesign the layout of its kitchens and serving areas and re-train employees. Since opening in 2021, its Stratford restaurant in London has become Popeyes’ best-performing outlet in the world, often with queues of between 50 to 100 people waiting outside.

However, Popeyes is not the only American fast-food chain that has found the UK attractive. Wendy’s, Shake Shack and Wingstop have all entered the UK market since 2018. Together with established chains, such as KFC and Burger King, this has made the UK fast-food market highly competitive. This has created problems for restaurant managers since they are struggling to find enough trained employees in places such as London and Birmingham. Skilled chefs and kitchen staff are in high demand, which has led to higher wage rates.

State one example of stock that Popeyes is likely to purchase from a supplier.

How did you do?

17
2 marks

Case Study

Greggs plc is a company that produces baked goods such as sausage rolls, savoury snacks and cakes. It has more than 1,900 shops and a number of factories located across the UK.

In 2018, Greggs planned to open a further 130 shops to cope with its continued growth in sales. It wanted to increase the use of technology in its factories, where it uses batch production. To be able to cope with this expansion, Greggs also planned to invest in improved logistics.

The growth of Greggs has been a UK high street success story. From originally being based in Newcastle and the north-east, it has expanded rapidly across the whole of the UK. It has switched away from selling traditional bakery products, such as bread, to become more like a fast food chain. As a result, Greggs now sell a variety of takeaway goods such as pizza, soup, coffee and sandwiches and operates in the very competitive ‘food-to-go’ market. Its main rivals are Pret a Manger, Costa and Starbucks.

In 2019, Greggs gained national publicity by becoming the first food retailer to start selling vegan sausage rolls. It is hoped that products such as this will help Greggs stand out from its rivals. The vegan sausage roll is priced at £1, 10p more than the meat-based equivalent.

Outline one drawback to Greggs of using batch production in its factories.

How did you do?

18
2 marks

Case Study

Ocado plc is an online grocery retailer that does not own physical shops. Ocado purchases its groceries from food manufacturers such as Heinz or from other grocery retailers such as Marks & Spencer. It then sells these groceries through the Ocado website or through its app. Groceries are then delivered to each customer's home. The company already has a 62% 'excellent' rating on Trustpilot for its customer service. This is higher than other supermarkets, such as Asda, that also offer online grocery shopping. Ocado is considering introducing a one-hour, same day delivery service.

In 2020, Ocado's sales rose by more than 40% as demand for online grocery shopping increased. Ocado has invested in new technology in its warehouses. This has allowed Ocado to use a just in time (JIT) stock management system. As part of this investment, Ocado's robots now can pick a customer's order in less than 5 minutes. The robots have artificial intelligence and know that they should place heavy items such as milk at the bottom of a bag. This level of automation allowed Ocado to process an extra 30,000 orders each week during 2020. In order to increase its share of the grocery market, Ocado is considering expanding its range of 'own label' products to improve its offer to customers.

Outline one drawback to Ocado of using just in time (JIT) stock control. (2)

How did you do?

19
2 marks

Case Study

Popeyes is an American fried chicken fast-food chain. It is well known for its Louisiana-style fried chicken that is marinated overnight in a mix of spices. As well as traditional chicken sandwiches and chicken wings, Popeyes has unusual items on its menu, such as American-style biscuits and Cajun gravy. The success of its restaurants has surprised the company. To meet the high level of demand for its fried chicken, Popeyes had to redesign the layout of its kitchens and serving areas and re-train employees. Since opening in 2021, its Stratford restaurant in London has become Popeyes’ best-performing outlet in the world, often with queues of between 50 to 100 people waiting outside.

However, Popeyes is not the only American fast-food chain that has found the UK attractive. Wendy’s, Shake Shack and Wingstop have all entered the UK market since 2018. Together with established chains, such as KFC and Burger King, this has made the UK fast-food market highly competitive. This has created problems for restaurant managers since they are struggling to find enough trained employees in places such as London and Birmingham. Skilled chefs and kitchen staff are in high demand, which has led to higher wage rates.

Outline one benefit to Popeyes from having a good relationship with its suppliers.

How did you do?

1
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2 marks

Case Study

Kentucky Fried Chicken (KFC) is a fast food chain that sells fried chicken. Amongst its most popular products are Popcorn Chicken, Boneless Chicken boxes and Zinger Tower burgers. These are freshly cooked in batches in each of its 900 restaurants across the UK.

In 2017, KFC changed the company it used to transport its supplies of chicken. It replaced Bidvest with DHL. Bidvest had three distribution centres across the UK, but DHL only had one. In February 2018, DHL started to have logistical problems causing many KFC restaurants to run out of chicken. This led to a temporary closure of many KFC branches due to poor supplier reliability.

As a result of these closures, KFC started losing market share to rival fast food restaurants such as Burger King. KFC used social media and a viral advertising campaign to apologise to customers. It also considered lowering the prices of its most popular food items to win back lost customers and recapture market share.

Line graph of chicken stock over 30 days, showing steep falls after deliveries A and B, with dashed re-order level and lower buffer stock line.

Using the information in Figure 2, calculate the number of days that KFC’s Exmouth restaurant ran out of chicken. You are advised to show your workings.

How did you do?

2
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2 marks

Case Study

Kentucky Fried Chicken (KFC) is a fast food chain that sells fried chicken. Amongst its most popular products are Popcorn Chicken, Boneless Chicken boxes and Zinger Tower burgers. These are freshly cooked in batches in each of its 900 restaurants across the UK.

In 2017, KFC changed the company it used to transport its supplies of chicken. It replaced Bidvest with DHL. Bidvest had three distribution centres across the UK, but DHL only had one. In February 2018, DHL started to have logistical problems causing many KFC restaurants to run out of chicken. This led to a temporary closure of many KFC branches due to poor supplier reliability.

As a result of these closures, KFC started losing market share to rival fast food restaurants such as Burger King. KFC used social media and a viral advertising campaign to apologise to customers. It also considered lowering the prices of its most popular food items to win back lost customers and recapture market share.

Figure 2 shows a bar gate stock graph which details the delivery of chicken portions to KFC’s Exmouth restaurant during February 2018. During this time it received two deliveries of chicken portions. These are marked as A and B.

Graph of chicken portions over 30 days, with falling stock lines, buffer stock at 250, re‑order level at 1000, and deliveries marked A and B

Using the information in Figure 2, calculate the size of order A. You are advised to show your workings.

How did you do?

3
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3 marks

Explain one drawback to a business of using job production.

How did you do?

4
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3 marks

Explain one advantage to a business of producing a high quality product.

How did you do?

5
Sme Calculator
3 marks

Explain one benefit to a business of having a good relationship with its suppliers.

How did you do?

6
Sme Calculator
3 marks

Explain one disadvantage to a business of having poor customer service.

How did you do?

7
Sme Calculator
3 marks

Explain one reason why having a post-sales service may be important to a business.

How did you do?

8
Sme Calculator
6 marks

Case Study

Kentucky Fried Chicken (KFC) is a fast food chain that sells fried chicken. Amongst its most popular products are Popcorn Chicken, Boneless Chicken boxes and Zinger Tower burgers. These are freshly cooked in batches in each of its 900 restaurants across the UK.

In 2017, KFC changed the company it used to transport its supplies of chicken. It replaced Bidvest with DHL. Bidvest had three distribution centres across the UK, but DHL only had one. In February 2018, DHL started to have logistical problems causing many KFC restaurants to run out of chicken. This led to a temporary closure of many KFC branches due to poor supplier reliability.

As a result of these closures, KFC started losing market share to rival fast food restaurants such as Burger King. KFC used social media and a viral advertising campaign to apologise to customers. It also considered lowering the prices of its most popular food items to win back lost customers and recapture market share

Analyse the impact on KFC of providing poor customer service.

How did you do?

9
6 marks

Case Study

Kentucky Fried Chicken (KFC) is a fast food chain that sells fried chicken. Amongst its most popular products are Popcorn Chicken, Boneless Chicken boxes and Zinger Tower burgers. These are freshly cooked in batches in each of its 900 restaurants across the UK.

In 2017, KFC changed the company it used to transport its supplies of chicken. It replaced Bidvest with DHL. Bidvest had three distribution centres across the UK, but DHL only had one. In February 2018, DHL started to have logistical problems causing many KFC restaurants to run out of chicken. This led to a temporary closure of many KFC branches due to poor supplier reliability.

As a result of these closures, KFC started losing market share to rival fast food restaurants such as Burger King. KFC used social media and a viral advertising campaign to apologise to customers. It also considered lowering the prices of its most popular food items to win back lost customers and recapture market share

Analyse the impact on KFC of poor supplier reliability.

How did you do?

10
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6 marks

Discuss the disadvantage to a business of using a just in time (JIT) system of stock control.

How did you do?

11
Sme Calculator
6 marks

Case Study

Tesla is a public limited company based in California, USA. Its founder and main shareholder, Elon Musk, wanted to produce an electric car that is affordable to a large number of potential customers. This car is called the Tesla Model 3 (Figure 3).

Introduced in 2017, the basic version of the Model 3 was originally priced at $50 000 and the company wanted to reduce this price to $35 000 by 2019. However, this was difficult to achieve because Tesla’s California factory suffered from low levels of productivity. These problems resulted in Tesla making a $976 million loss in 2018.

Figure 3: Tesla Model 3 electric car
Figure 3: Tesla Model 3 electric car

Following the introduction of tariffs on US imports by the Chinese government in 2018, Tesla decided to invest $5 billion in the construction of a new car factory in Shanghai, China. This factory will use flow production. However, with only $2.4 billion of available capital, Tesla needs to raise external finance to fund it.

In 2019, Tesla decided to close most of its showrooms to reduce costs. The company believes customers will be happy to purchase electric cars using e-commerce.

Analyse the benefit to Tesla of using flow production in its new factory.

How did you do?

12
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3 marks

Explain one drawback to a business of introducing a system of quality assurance.

How did you do?

13
3 marks

Explain one impact of the use of technology on product quality.

How did you do?

14
3 marks

Explain one benefit to a business of holding buffer stock.

How did you do?

15
3 marks

Explain one disadvantage to a business of using job production.

How did you do?

16
3 marks

Explain one disadvantage to a business of using a just in time (JIT) system of stock control.

How did you do?

17
3 marks

Explain one impact on a business of using flow production.

How did you do?

18
Sme Calculator
2 marks

Figure 2 shows the deliveries of raw materials to a business in June 2021. These deliveries are labelled A, B and C.

Line graph of raw material stock levels over 30 days, showing falling usage, restocking at labels A, B and C, with buffer, re-order and maximum stock lines

Using the information in Figure 2, calculate the total amount of stock that was delivered to the business in June 2021. You are advised to show your workings.

How did you do?

19
3 marks

Explain one disadvantage to a business of having a poor relationship with its suppliers.

How did you do?

20
3 marks

Explain one advantage to a business of using just in time (JIT) stock control.

How did you do?

21
3 marks

Explain one method a business could use to improve the quality of its products.

How did you do?

22
Sme Calculator
2 marks

Figure 1 shows the bar gate stock graph for a business in June 2023. A and B represent deliveries of stock to the business.

Line graph of stock held versus days, showing two sloping lines A and B that both start near 30,000 units and fall to zero over a 30‑day period

Using the information in Figure 1, calculate how many days it took for the business to run out of stock after receiving its last delivery in June 2023. (2)

How did you do?

23
6 marks

Case Study

Greggs plc is a company that produces baked goods such as sausage rolls, savoury snacks and cakes. It has more than 1,900 shops and a number of factories located across the UK.

In 2018, Greggs planned to open a further 130 shops to cope with its continued growth in sales. It wanted to increase the use of technology in its factories, where it uses batch production. To be able to cope with this expansion, Greggs also planned to invest in improved logistics.

The growth of Greggs has been a UK high street success story. From originally being based in Newcastle and the north-east, it has expanded rapidly across the whole of the UK. It has switched away from selling traditional bakery products, such as bread, to become more like a fast food chain. As a result, Greggs now sell a variety of takeaway goods such as pizza, soup, coffee and sandwiches and operates in the very competitive ‘food-to-go’ market. Its main rivals are Pret a Manger, Costa and Starbucks.

In 2019, Greggs gained national publicity by becoming the first food retailer to start selling vegan sausage rolls. It is hoped that products such as this will help Greggs stand out from its rivals. The vegan sausage roll is priced at £1, 10p more than the meat-based equivalent.

Analyse the impact on Greggs from increasing the use of technology in its factories.

How did you do?

24
6 marks

Case Study

Greggs plc is a company that produces baked goods such as sausage rolls, savoury snacks and cakes. It has more than 1,900 shops and a number of factories located across the UK.

In 2018, Greggs planned to open a further 130 shops to cope with its continued growth in sales. It wanted to increase the use of technology in its factories, where it uses batch production. To be able to cope with this expansion, Greggs also planned to invest in improved logistics.

The growth of Greggs has been a UK high street success story. From originally being based in Newcastle and the north-east, it has expanded rapidly across the whole of the UK. It has switched away from selling traditional bakery products, such as bread, to become more like a fast food chain. As a result, Greggs now sell a variety of takeaway goods such as pizza, soup, coffee and sandwiches and operates in the very competitive ‘food-to-go’ market. Its main rivals are Pret a Manger, Costa and Starbucks.

In 2019, Greggs gained national publicity by becoming the first food retailer to start selling vegan sausage rolls. It is hoped that products such as this will help Greggs stand out from its rivals. The vegan sausage roll is priced at £1, 10p more than the meat-based equivalent.

Analyse the impact on Greggs from improving its logistics.

How did you do?

25
6 marks

Case Study

Ocado plc is an online grocery retailer that does not own physical shops. Ocado purchases its groceries from food manufacturers such as Heinz or from other grocery retailers such as Marks & Spencer. It then sells these groceries through the Ocado website or through its app. Groceries are then delivered to each customer’s home. The company already has a 62% ‘excellent’ rating on Trustpilot for its customer service. This is higher than other supermarkets, such as Asda, that also offer online grocery shopping. Ocado is considering introducing a one-hour, same day delivery service.

In 2020, Ocado’s sales rose by more than 40% as demand for online grocery shopping increased. Ocado has invested in new technology in its warehouses. This has allowed Ocado to use a just in time (JIT) stock management system. As part of this investment, Ocado’s robots now can pick a customer’s order in less than 5 minutes. The robots have artificial intelligence and know that they should place heavy items such as milk at the bottom of a bag. This level of automation allowed Ocado to process an extra 30,000 orders each week during 2020. In order to increase its share of the grocery market, Ocado is considering expanding its range of ‘own label’ products to improve its offer to customers.

Analyse the benefits to Ocado of good customer service.

How did you do?

26
6 marks

Case Study

Ocado plc is an online grocery retailer that does not own physical shops. Ocado purchases its groceries from food manufacturers such as Heinz or from other grocery retailers such as Marks & Spencer. It then sells these groceries through the Ocado website or through its app. Groceries are then delivered to each customer’s home. The company already has a 62% ‘excellent’ rating on Trustpilot for its customer service. This is higher than other supermarkets, such as Asda, that also offer online grocery shopping. Ocado is considering introducing a one-hour, same day delivery service.

In 2020, Ocado’s sales rose by more than 40% as demand for online grocery shopping increased. Ocado has invested in new technology in its warehouses. This has allowed Ocado to use a just in time (JIT) stock management system. As part of this investment, Ocado’s robots now can pick a customer’s order in less than 5 minutes. The robots have artificial intelligence and know that they should place heavy items such as milk at the bottom of a bag. This level of automation allowed Ocado to process an extra 30,000 orders each week during 2020. In order to increase its share of the grocery market, Ocado is considering expanding its range of ‘own label’ products to improve its offer to customers.

Analyse the benefit to Ocado of using new technology in its warehouses.

How did you do?

27
6 marks

Case Study

Popeyes is an American fried chicken fast-food chain. It is well known for its Louisiana-style fried chicken that is marinated overnight in a mix of spices. As well as traditional chicken sandwiches and chicken wings, Popeyes has unusual items on its menu, such as American-style biscuits and Cajun gravy. The success of its restaurants has surprised the company. To meet the high level of demand for its fried chicken, Popeyes had to redesign the layout of its kitchens and serving areas and re-train employees. Since opening in 2021, its Stratford restaurant in London has become Popeyes’ best-performing outlet in the world, often with queues of between 50 to 100 people waiting outside.

However, Popeyes is not the only American fast-food chain that has found the UK attractive. Wendy’s, Shake Shack and Wingstop have all entered the UK market since 2018. Together with established chains, such as KFC and Burger King, this has made the UK fast-food market highly competitive. This has created problems for restaurant managers since they are struggling to find enough trained employees in places such as London and Birmingham. Skilled chefs and kitchen staff are in high demand, which has led to higher wage rates.

Analyse the drawback to Popeyes from trying to improve productivity.

How did you do?

1
Sme Calculator
12 marks

Case Study

ASOS plc is an online fashion retailer which targets customers in their 20s. The company started in 2000 and since then it has grown significantly. One of the main reasons for its growth is what Chief Executive Nick Beighton calls, the ‘ASOS Experience’.

The company focuses on high quality logistics to distribute its products and increased use of warehouse technology. This has resulted in a warehouse and distribution system which is almost fully automated (Figure 4). This allows ASOS to deliver customer orders the next day, so long as the order is placed online before midnight. Automation has also given ASOS the ability to increase the range of clothes it can sell on its website.

However, the market for clothes in the UK is becoming increasingly competitive. Despite a significant growth in sales, ASOS’s profits have fallen. This has caused the company’s share price to fall. ASOS has responded by focusing on viral advertising. Its latest campaign is to get customers to use the hashtag #AsSeenOnMe (Figure 5) when they are showing off their latest ASOS outfit on social media. In return, ASOS gives customers the opportunity to be featured on the ASOS Instagram feed which has 7.1 million followers

Evaluate whether high quality logistics will give ASOS a competitive advantage. 
You should use the information provided as well as your knowledge of business.

How did you do?

2
9 marks

Case Study

Tesla is a public limited company based in California, USA. Its founder and main shareholder, Elon Musk, wanted to produce an electric car that is affordable to a large number of potential customers. This car is called the Tesla Model 3 (Figure 3).

Introduced in 2017, the basic version of the Model 3 was originally priced at $50 000 and the company wanted to reduce this price to $35 000 by 2019. However, this was difficult to achieve because Tesla’s California factory suffered from low levels of productivity. These problems resulted in Tesla making a $976 million loss in 2018.

Figure 3: Tesla Model 3 electric car
Figure 3: Tesla Model 3 electric car

Following the introduction of tariffs on US imports by the Chinese government in 2018, Tesla decided to invest $5 billion in the construction of a new car factory in Shanghai, China. This factory will use flow production. However, with only $2.4 billion of available capital, Tesla needs to raise external finance to fund it.

In 2019, Tesla decided to close most of its showrooms to reduce costs. The company believes customers will be happy to purchase electric cars using e-commerce.

In order to ensure quality in its new Chinese factory, Tesla is considering two options:

Option 1: Employing quality control inspectors to carry out comprehensive tests on finished vehicles

Option 2: Implementing a system of quality assurance

Justify which one of these two options Tesla should choose.

How did you do?

3
9 marks

Case Study

Kentucky Fried Chicken (KFC) is a fast food chain that sells fried chicken. Amongst its most popular products are Popcorn Chicken, Boneless Chicken boxes and Zinger Tower burgers. These are freshly cooked in batches in each of its 900 restaurants across the UK.

In 2017, KFC changed the company it used to transport its supplies of chicken. It replaced Bidvest with DHL. Bidvest had three distribution centres across the UK, but DHL only had one. In February 2018, DHL started to have logistical problems causing many KFC restaurants to run out of chicken. This led to a temporary closure of many KFC branches due to poor supplier reliability.

As a result of these closures, KFC started losing market share to rival fast food restaurants such as Burger King. KFC used social media and a viral advertising campaign to apologise to customers. It also considered lowering the prices of its most popular food items to win back lost customers and recapture market share.

In order to improve its sales process, KFC is considering two options:

Option 1: Introduce a click and collect service

Option 2: Provide table service 

Justify which one of these two options KFC should choose.

How did you do?