BUSS4 - 2014 China - Practice exam question and example answer with examiners comments

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Volume 20, Number 3, February 2014
Activity
BUSS4 practice exam question
Luke Perry and Phil Waterhouse
Use this question to help you prepare for the BUSS4 exam.
Does the growth of China's middle class represent a threat or an opportunity for
British businesses? (40 marks)
Sample answer
Examiner comments are provided in bold.
The answer depends on the nature of the British firm and what market segment it is
targeting. For firms that offer a niche and high-end product, the answer is that the rising
incomes in China offer a major opportunity, but for firms that may be in competition in, for
example, the manufacturing sector, the need to compete effectively with such a low-cost rival
is likely to be more of a threat. In this response I will look at firms that are likely to benefit and
seize the opportunity as well as looking at British firms that are likely to find the growing
Chinese economy more of a threat to their livelihood.
Opening paragraph sets the scene and explains the format of the response. Gives a
sense of purpose and direction.
With the growing middle class and upper class in China, largely due to the continued
economic growth rates of over 10% in GDP for the last 10 years, both the Chinese public's
tastes and sociological factors have led to huge opportunities for firms that offer high-end
and expensive products. The Chinese middle and upper classes have shown a preference
for established luxury brands from around the world and this has been beneficial for UK firms
such as Burberry, Jaguar Land Rover (JLR) and the high-end suit maker Gieves & Hawkes
of Saville Row. These companies have made the most of the high growth rates, especially as
their traditional Western customers have suffered due to the economic downturn in these
countries.
Understanding the factors that have caused China to become so important --
reasonable application.
The growth of Asia and in particular China has seen these firms shift their attention to these
areas, as they are mindful that an increase in disposable income has meant that customers
in China not only have more to spend, but are also keen to display this increased wealth
through the purchase of designer items that carry a high ticket value. As the roads and
infrastructure have improved significantly, the demand for cars -- in particular cars with an
established reputation and brand -- has increased. This has resulted in JLR seeing sales
growth of over 46% in China and over 29% in the wider Asia-Pacific region. This has led the
company to set up a number of parts distribution centres within China in the last 2 years, as
Philip Allan Publishers © 2014 1

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JLR cars sold in this region, as well as lowering the costs
for the firm and improving customer service by reducing lead times to get the parts to
customers in a shorter space of time.
Decent chain of analysis, looking at the benefits that can be realised by targeting
China for sales. Nice use of JLR as an example, indicating independent research.…read more

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Chinese rivals. Firms such as McLaren that have particular
skills and ingenuity to produce goods with high value added are likely to have a greater
chance of success in China than firms that have many competitors.
This is an okay paragraph but is a little muddled and brings in a variety of themes
when perhaps it would have been better to develop just one line of argument in more
detail.
A further opportunity for British firms is for those that specialise in educational
services.…read more

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Germany has made China a priority in recent years, though as the country is famed
for high-quality products it clearly makes sense for it to make the most of the opportunity.
Clear final judgement that is supported and justified. Candidate has answered the
question set and brought in good examples throughout.
Overall
Application: Good -- nice range of examples that are different and used well.
Analysis: Good (­) -- just about good analysis. Chains of argument are put together
and arguments are developed.…read more

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