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Cambridge IGCSE
BUSINESS STUDIES 0450/23
Paper 2 Case Study May/June 2020
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Excel Cars (EC)
EC has a good reputation for making quality cars. It is a public limited company based in country
Z. EC sells cars in both the domestic and export markets. It makes a range of petrol and diesel
cars. EC is now planning to start producing electric cars.
EC employs 2 000 skilled employees in its factory. The company has a tall organisational structure.
Senior managers often complain they have too many tasks to do. Recently senior managers have
been delegating more tasks to junior managers.
Most models of EC cars have high sales. However, market research information suggests that
customers are changing to buying more environmentally friendly cars which do less harm to air
quality. Sales of diesel cars are forecast to fall. EC may need to change production methods to
start producing new models of cars.
If EC start to produce an electric car model an investment of $200m will be needed for research
and development. All existing production employees will need to be retrained to operate new
technology.
The Operations Director is considering opening a factory in one of EC’s main export markets. He
must choose between country A and country B. Information about these countries is given in
Appendix 3.
Appendix 1
To: Managing Director
From Marketing Director
Date: 10 April 2020
Re: Changing customer needs
We should launch a new model of car next year following the results of our market research. The
markets for petrol and diesel cars are becoming more competitive. Several new car companies
have entered these markets with new models. We need to keep our costs down and we may also
need to consider importing cheaper components for cars. However, the Government of country Z
has increased import tariffs on components for cars and on imported cars.
We already know that the price of most electric cars is much higher than the prices of most petrol
and diesel cars. The market research identified a gap in the market for lower priced electric cars.
The Government is giving grants to new and existing businesses to develop electric cars so that
air pollution can be reduced in country Z. The Government is also providing support for business
start-ups because incomes are low and unemployment is high.
EC has an opportunity to take advantage of customers wanting to buy products that do not harm
the environment. Some customers may be willing to pay higher prices for electric cars than for
petrol or diesel cars because customers feel electric cars are better for the planet.
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Appendix 2
Information about two electric car models EC could produce
Electric car model 1 Electric car model 2
Selling price $20 000 $40 000
Fixed cost per month $4 000 000 $4 000 000
Variable cost per car $15 000 $20 000
Forecast sales per month 1 000 500
Appendix 3
Information about country A and country B
Country A Country B
Wage rates High Low
Skills of workers High skilled – well trained Low skilled – had little or no training
Large market for global car producers Low income country with low sales of
Car market with high sales of cars but not cars but rising incomes will lead to
increasing higher demand
Car manufacturers Many car manufacturers with many
No car manufacturers or suppliers
located in the country component suppliers
Very good road network but traffic Improving road network with little
Road network
congestion is a problem traffic congestion
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