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THE NUFFIELD A2 CHOCOLATE CASE STUDY, 2007

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THE NUFFIELD A2 CHOCOLATE CASE STUDY, 2007 ...

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    THE NUFFIELD A2 CAR CASE STUDY, 2008

    Contents page……………………..…………………………………………… i How to use this resource ..……………………………………………………… ii

    Chapter 1 What forces have shaped the car industry? …………………… 1 1 The benefits of car ownership …………………………………………………... 1 1 High technology ………………………………………………………………... 2 2 Globalisation ……………………………………………………………………. 3 3 The growth of new markets …………………………………………………….. 4 4 The external costs of car use ……………………………………………………. 5 5

    Chapter 2 Linking the car industry to the Unit 4 specification ……………. 9 9 Enquiry 1.1 What makes a difference? ............................................................... 9 9 Enquiry 1.2 Is there a strategy? ………………………………………………… 10 10 Enquiry 1.3 Is the price right? ………………………………………………….. 12 12 Enquiry 1.4 Is the product right? ………………………………………………. 14 14 Enquiry 1.5 In search of dominance? …………………………………………... 15 15 Enquiry 2.1 An enterprising environment? …………………………………….. 17 17 Enquiry 2.2 Power or competitiveness? ………………………………………... 18 18 Enquiry 2.3 Is the market competitive? ………………………………………… 20 20 Enquiry 2.4 Is power controlled? ………………………………………………. 21 21 Enquiry 2.5 Whose advantage? ………………………………………………… 23 23

    Chapter 3 Detailed commentary on the case study ………………………….. 25 25 Evidence A Major car companies ……………………………………………….. 26 26 Evidence B UK motor manufacturing industry is booming ……………………. 30 30 Evidence C Nissan awards UK plant the Qashqai ……………………………… 32 32 Evidence D VW chief forced out .. Toyota poised to become world’s biggest ... 33 33 Evidence E Dealerships ………………………………………………………… 36 36 Evidence F Are Chinese car makers trying to do too much too soon? ………… 38 38

    Chapter 4 Power Point Quizzes (also on CD) ………………………………… 41 41 Quiz 1 on the Case study in Power Point format (answers in Chapter 5) ………... 42 42 Quiz 2 on Unit 4 specification, linked to chocolate in Power Point format ……... 52 52

    Chapter 5 Sample papers, using the Case Study and Additional Evidence 65 65 Practice Paper 1 …………………………………………………………………… 66 66 Practice Paper 2 …………………………………………………………………… 69 69

    Appendix: Suggested answers, with additional material for all chapters ......... 72 End page ………………………………………………………………………….. 94

    www.geraldwood.com

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    How to use this resource

Who is it for?

    Students sitting the 2008 Unit 4 car case study as part of the Nuffield Economics and

    Business Studies A level run by Edexcel, and their teachers.

Can I photocopy it?

    It is sold by the author with a licence to photocopy any material for internal use within

    the single purchasing institution. Equally, the CD may be copied for use within that

    purchasing institution.

What principles lie behind it?

    The basic principle is that the best way to do well in the Unit 4 case study is for students

    to immerse themselves both in the case study and the industry on which it is based.

    Reading around the industry, and the issues that it raises, will increase student confidence,

    generate interest and you never know when an apparently minor piece of information

    may be useful in an examination context.

    Furthermore, the best way to revise the Unit 4 specification is to see if you can apply it in

    the context of the case study industry. An ability to do this will result in a far deeper

    understanding than if principles have been learned without any practical application.

So how do I actually use it?

    Each of the main chapters contains enough material (and questions) for at least two or

    three hours work, either in a class room context or for private study or a combination of

    the two. They are not lesson plans, but contain all the background material teachers need

    to create their own lesson plans. The questions assume some basic knowledge of the Unit

    4 specification and the AS course.

    Chapter 1 provides a background to the car industry. It should be accessible to students straight from the AS course.

    Chapter 2 goes through the specification line by line, applying it to the car industry. It can be used either as an introduction to the course, or as a means of revising its content.

    Chapter 3 examines the case study itself, and needs to be read alongside the case study. Reading through this chapter and answering the questions that follow provide an in-depth

    look at the case study.

    Chapter 4 contains two Power Point quizzes for use in the class room. This chapter is provided on CD as well as in hard copy format. Typically, a teacher might print off the

    quizzes in either the Word or the Power Point Version to give to students. Then the

    Power Point answers version could be used from the CD with a projector to go through

    the material.

    Quiz 1 can be done on the basis of a thorough knowledge of the case study and the Unit 4

    specification

    Quiz 2 needs the information provided in Chapters 1 and 2 of this publication as well.

    www.geraldwood.com

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    Chapter 5 consists of two sample papers, with questions and Additional Evidence in the usual format. Students would need their own copy of the case study as well.

The appendix contains extended answers on all the previous chapters, with much more

    information than a student could be expected to know. They are not therefore ‘model

    answers’, but provide an additional, deeper source of information.

What’s new this year?

    ? Each chapter begins with a ‘How to use this chapter’ introduction - to remind

    students how the chapter fits into the wider objective of doing well in the

    examination.

    ? Chapter 2 is entirely new, and is designed to reinforce the message that students

    are tested on the specification, not the car industry.

Obviously the chapters can be photocopied individually or altogether. All the answers

    have been left to the end, so it is possible to photocopy everything else without giving

    any suggested answers away.

What is the CD for?

    All the material is available as hard copy, as this will be the most convenient way for

    teachers to photocopy it. Additionally, Chapter 4 (and the answers to Chapter 4) are

    provided on CD, so that Power Point quizzes can be placed on the institution’s intranet...

Gerald Wood

    August 2007

    www.geraldwood.com

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    EXCERPT FROM CHAPTER ONE - order online at www.geraldwood.com

     Chrysler

     GM

     Ford

     Honda

     Toyota

     Nissan

    Globalisation Starting with the development of Japanese car manufacturing after World War 2,

    globalisation has transformed the market structure of the car market from a series of

    regional oligopolies in America and Europe into a genuinely competitive market structure.

    With the exception of Japan and Korea, where significant entry barriers still make it

    impossible for foreign makes to compete on equal terms, consumers in the three key

    markets of North America, Europe and the Far East can buy a very wide range of cars

    from companies based anywhere in the world and manufactured anywhere in the world.

    In the new marketplace of genuine, unfettered competition there are inevitably both

    winners and losers. The undoubted winner at the moment is Toyota, whose North

    American car sales overtook those of General Motors in early 2007. While

    manufacturing excellence and customer orientation have both played their part in

    Toyota’s success, their key advantage over the big three US car companies is that they

    are not locked into the generous health and pension provisions of their US rivals - who

    cannot now escape from their commitments made in times past when they had the money

    to pay for them.

    Diagram 1.2 overleaf shows how Toyota has a market value far in excess of that of

    General Motors, even though Toyota has only just emerged as world market leader.

    www.geraldwood.com

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    EXCERPT FROM CHAPTER TWO - order online at www.geraldwood.com

Chapter 2 Specification summary for Unit 4: linked to the car

    industry

HOW TO USE THIS CHAPTER

    In this chapter, each heading corresponds to a specification (syllabus) heading in Unit 4,

    the unit linked to the pre-release material on the car industry. It is followed by a brief

    explanation of the term, which is then illustrated with reference to the car industry. As

    well as learning and understanding the Unit 4 specification thoroughly, students also need

    to revise the AS content for both this examination as well.

    The purpose of this chapter is to provide a handy revision/reinforcement tool for students.

    If students know and understand everything in here, then they have a sound knowledge of

    the background need for the Unit 4 examination. Remember, you do not have to learn

    the specific examples used to illustrate the economic and business theory. But they

    should be useful background for your understanding both of the car industry, and of the

    technical terms themselves.

Investigation 1.1 What makes a difference?

    Perfect competition A perfectly competitive market is one where there are so many buyers and sellers selling an identical product that no individual buyer or seller has any

    control over the price he charges. From this it will be obvious that no car market is

    perfectly competitive, because there are too many ways to differentiate the product. The

    market structure ranges from very competitive in somewhere like Greece, which imports

    all its cars to oligopolistic in a country like South Korea with its strong support for a few

    local manufacturers. But even in the most competitive national markets, the industry will

    be a long way from perfect competition.

    Commodity products These are raw materials. A car is a highly engineered, branded construction - the exact opposite of a commodity product. However, cars will use

    commodity products in their construction - for example, steel, plastic and rubber.

    Tactics for differentiation These are ways of making your product stand out from its competitors. They are a vital part of the production and marketing strategy of any car

    company. Tactics for differentiation in the car industry include:

    1. Range of optional extras such as alloy wheels, sunroofs, GPS navigation, in-car

    entertainment and climate control systems

    2. Safety features and safety record

    3. Running costs, particularly linked to fuel economy and level of environmental impact

    4. Performance e.g. top speed and acceleration

    5. Size e.g. small for ease of parking or large for number of passengers and loads that

    can be carried.

    6. Level of interior luxury e.g. leather seating, steering wheel

    www.geraldwood.com

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    EXCERPT FROM CHAPTER THREE - order online at www.geraldwood.com

Chapter 3 Detailed commentary on the case study

HOW TO USE THIS CHAPTER

    This chapter should always be read with the actual case study alongside... You need to go

    into the examination with a thorough grasp of the contents of the case study and the

    issues that it raises. The commentary below discusses some of these issues - there will

    be others that readers will find for themselves. In the days before the examination,

    students may wish to read through this commentary together with the case study and then

    sit down and write out between 2 and 5 key points from each piece of Evidence.

    If you read and understand Chapters 1 to 3, you will have a good grasp both of the

    specification (syllabus) and of its application to the car industry.

Introduction

    The carefully chosen Evidence in your pre-release material covers most of the major

    themes that are driving the car industry forward. The ultimate cause of many of these

    changes is increasing global competition in the car industry, in other words the

    processes of globalisation and competition. This simple fact is the best single

    explanation for the following phenomena:

    1. Low profit margins, as can be deduced from the Evidence A table.

    2. Increasing concentration within the industry, as economies of scale mean that

    small-medium size brands cannot survive on their own - see Evidence A table.

    As part of this process, standardisation of parts takes place - see Evidence A text.

    3. Individual management weaknesses are ruthlessly exposed - see the fate of VW

    chairman in Evidence D.

    4. Competitive pressures are felt up and down the supply chain, with both car-parts

    manufacturers and retail car dealers feeling the pinch - see Evidence E.

    5. As fuel costs rise and concerns about global warming take root, companies that

    quickly respond before the competition by manufacturing cars that use less petrol

    will be rewarded - see the rise of Toyota in Evidence D.

    6. Companies whose freedom of action is limited by trade unions will suffer - see

    VW in Evidence D and the relative decline of the American ‘Big Three’ car

    companies, again in Evidence D.

The second main point is that globalisation is resulting in the relative decline of both

    car manufacturing and car production in North America and Europe and its

    relative rise in the Asia Pacific region

    7. India and China (and Brazil) are becoming increasingly important both as

    producers and consumers of cars - see Evidence F.

    8. After 76 years as global market leader, General Motors of the US is relinquishing

    that title in 2007 to Toyota of Japan - see Evidence D.

    EXCERPT FROM CHAPTER FOUR - order online at www.geraldwood.com

This chapter is provided in Power Point on CD, as well as in hard copy.

    www.geraldwood.com

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     Evidence A Major car companies, common platforms & collaboration and shared ownership

     1. From Table:What are the profit margins of Chapter 4General Motors, Ford and Toyota respectively?Quiz 1: Case study 2. From Table:What does this tell you about the likely market structure in the global car This quiz requires knowledge of industry? the case study and the Unit 4 3. From Table:What is the connection between specificationrevenue per employee and labour productivity?

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     Evidence A slide 2Evidence F slide 6

    4. From Table:The highest revenues per 70. Lines 54-55 Of the 3 competitive employee are achieved by Porsche (?378,000) advantages of cost competitiveness, and Toyota (?326,000). What are the likely reasons for their success in this regard?nationalistic buying and technological leadershipin which area do the Chinese 5. From Table:The lowest profit margin is that still lag behind? of Volkswagen (1.4%), which also has the lowest revenue per employee (?100,000). Why might these two measures go together?

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    www.geraldwood.com

     - viii - EXCERPT FROM ANSWERS - order online at www.geraldwood.com

The questions for Chapter 4 together with their answers are also provided on CD in

    Power Point format.

     Answers for Chapter 4 Evidence A Major car companies, common

    platforms & collaboration and shared ownership

     1. From Table:What are the profit margins of General Motors, Ford and Toyota respectively?

    5.5%, 7.9% and 6.6%Quiz 1: Case study, with answers2. From Table:What does this tell you about the likely market structure in the global car industry?

    These are low figures, suggesting that the global car industry is fundamentally competitive.This quiz requires knowledge of the 3. From Table:What is the connection between revenue per case study and the Unit 4 specificationemployee and labour productivity?

    Labour productivity measures output per worker, so the higher the revenue per employee, the higher labour productivity will be.

    www.geraldwood.com

    Evidence A slide 2Evidence F slide 6

    4. From Table:The highest revenues per employee are achieved by 70. Lines 54-55 Of the 3 competitive advantages of cost Porsche (?378,000) and Toyota (?326,000). What are the competitiveness, nationalistic buying and technological leadershiplikely reasons for their success in this regard?in which area do the Chinese still lag behind?Porsche only sells expensive cars, so its high figure is Technological leadership. Its other two strengths are not surprising. Toyota is famed for its productive efficiency, using lean manufacturing techniques.likely to propel it rapidly to a market-leading position at

    5. From Table:The lowest profit margin is that of Volkswagen the cheap end of its domestic market: it will take time (1.4%), which also has the lowest revenue per employee to move up from there.(?100,000). Why might these two measures go together?

    If any company has labour productivity significantly lower than its competitors, then unit costs will be higher and so it will struggle to make a profit.

    www.geraldwood.com

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