Importing from Sweden Flashcards
Import
Buying goods produced by businesses in other countries
Advantages of importing from Sweden
No import tax
More products can be produced
Disadvantages of importing from Sweden
Exchange rates
Harder to control quality
Transport costs
(Total) Revenue
Money received from sales (in a given amount of time)
Costs
Expenses of a business, used to obtain the resources required to make and market the products
How do you calculate total costs?
Total fixed cost + Total variable cost
How do you calculate profit?
Revenue - costs
How do you calculate gross profit?
Revenue - variable costs
How do you calculate net profit?
Gross profit - fixed costs
Why has the price of an Egerton fallen by £100 in the last 4 years?
Competitors have reduced their price, so AFL reduced theirs to keep their market share
How much less does it cost to make an Egerton in Sweden than the UK?
£70, AFL make a profit on the Swedish ones
In order to manufacture profitably in the UK, what 4 options must AFL consider?
Cheaper supplier
Reduce levels of stock hold
Invest in new machinery
Improve quality control
How can AFL get a cheaper supplier?
Get it from an overseas company as they have cheaper labour
They must not compromise on quality though
Why should they reduce levels of stock hold?
It means that there’s less storage which is cheaper
Why should they invest in new machinery?
Example?
It would reduce costs in the long term
Biomass burner- eliminate energy costs
Why would improving quality control increase profitability?
It would lower the costs arising from poor quality
ie customer service, waste materials
What’s the problem with falling timber prices for AFL?
It will lower their competitors variable costs too, meaning they will lower their prices further
What would happen to the town of Bowton in AFL closed their factory in the UK?
Small businesses would close- no one could afford to spend their money there
High unemployment rate
What would have to local suppliers if AFL moved to Sweden?
They would see a fall in sales, and a fall in profit
Why would it be expensive for AFL to close the Bowton factory?
How could this be overcome?
Lots of redundancy payments
Redeploy them, into marketing or warehousing
