Rojaz Home is an online furniture business. It plans to set up a new warehouse to serve customers in two countries. Managers are considering an option near ...
Question 1 Report
Rojaz Home is an online furniture business. It plans to set up a new warehouse to serve customers in two countries. Managers are considering an option near a major port or an option close to the capital city. The port site has lower rent and is near imported materials. The capital site has more skilled employees, but wages and land prices are higher. Rojaz has used market research to estimate that 60% of its sales are delivered to customers in the capital region. The business needs to protect cash flow while increasing profit.
(a) Define the term location. [2]
(b) State two reasons why being near a port could help Rojaz Home. [2]
(c) Analyse whether Rojaz Home should locate its warehouse near the port. [6]
Answer Details
(a) Location is the geographical place or site where a business chooses to operate or set up its premises. [2]
(b) Being near a port can reduce transport costs for imported materials and allow imports to arrive more quickly. It can also make exporting easier and provide access to freight and logistics firms. Any two are credited. [2]
(c) A warehouse near the port could reduce inbound transport costs and delays for imported furniture materials. This may improve cash flow and profit margins. The lower rent also reduces fixed costs. However, 60% of sales go to customers in the capital region, so locating at the port may increase final delivery distances and costs. The capital site is nearer the largest market and has more skilled employees. Therefore, Rojaz should choose the port only if its savings on imports and rent exceed the extra delivery and recruitment costs. [6]
Download The App On Google Playstore
Everything you need to excel in your exams
