PAPER 2 PAST YEAR QUESTIONS
December 29, 2020 at 8:36:57 AM
May/June Version 2
Benefits: Easier and faster to achieve economies of scale
Explanation: As ES will be taking over another company and not expanding its current by operation, ES will not need to waste time acquiring a new premise, hiring new employees and training them. This will enable ES to save cost and continue earning revenue and profit as usual, while expanding its market share with the new company. ES will also benefit from the good reputation the new company has, to expand its market share.
Problem: Employees in new company may be demotivated
Explanation: As the new company is taken over by ES, the existing employees may leave their jobs as they may be uncertain with the new management's objectives (ES). This may increase the cost for ES, should ES need to hire new employees that may require training. Additional cost may also incur on branding and promotion as new packaging may be required. ES may also lose market share should quality of existing product not meet ES's customers expectation.
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