Business (AS & A Level) · Feb / March 2022 · Paper 22 · Question 2

Benjamin’s Beds (BB) Benjamin’s Beds (BB) is a large manufacturer of beds and has a strong brand image for quality. Its main channel of distribution is through the producer market (B2B) to national hotel chains. Recently, BB has also entered the consumer market (B2C) by selling online direct to customers. BB uses flow production. BB’s existing machinery is old and cannot satisfy the increased demand. The directors of BB have decided its existing machinery needs replacing. Table 2.1 shows data for existing and proposed new machinery. Table 2.1 Data for existing and proposed new machinery Variable cost per unit ($) Output per year Existing machinery 50 5000 New machinery 40 7500 Fixed costs are $500 000 per year. Using new machinery would reduce this by 10%. BB sales data suggests that its market share is growing rapidly. The consumer market (B2C) is becoming more important to BB because online orders are increasing. However, online demand is for a wide range of bed styles. The consumer market requires a substantial marketing budget and some retraining of employees. Orders from national hotel chains in the producer market (B2B) are for a more limited range of bed styles. These orders remain constant with low marketing costs. However, BB is increasingly under pressure to reduce prices to hotels. BB uses non-financial motivators and until recently had a motivated workforce. Efficiency is falling due to employees having to work longer hours because of increased demand. This is decreasing staff morale and welfare. 5 10 15 20

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