PPE remake

20 marker (e) Section A

Competitive pricing is a strategy used where a business sets its prices based on their rival’s prices. In Extract C, Tesco has announced in May 2017 that it would lower its prices of thousands of products, with vegetables being reduced by 5%, in order to improve its competitiveness. This could help Tesco attract price-sensitive customers away from rivals such as Aldi and Lidl, recovering from market-share it lost failing from 31.2% to 27.8% by 2017. A higher volume of sales and focusing on improving its profitability.

However, competitive pricing could damage profitability rather than improve. When profit margins decreases, the profit ade on each sale goes down too. Unless a lot more customers start shopping at Tesco as a result, total profit will fall. Considering that Tesco is engaged in a price war with supermarkets such as Lidl and Aldi, which have lower cost bases, meaning Tesco cannot realistically undercut them. If cutting prices even more may simply result in the bottom market share unrecovered but margins being squeezed. This goes against Tesco’s main goal of making more profit.

The other option is innovation. Tesco has already introduced PayQwiq app, which lets costumers pay by tapping their phone on the card reader and the BYOD scheme, where staff use their own phones to scan barcodes and help costumers find products and their prices. This innovation helps Tesco to stand out from their rivals and not reducing their prices.

That said, innovation has its risks too. The PayQwiq app can only be used for purchase up to £30 due to contactless limits, which means it is not useful for some costumers for a bigger food shoppings. Developing and introducing a new technology requires a lot of money upfront. If not enough people adopt these new features, Tesco will have spent a lot without seeing much benefit to its profit.

Overall, innovation is the better option for Tesco. Cutting prices reduces the profit margins Tesco is trying to protect and cannot compete with the cheaper rivals like Aldi and Lidl. Innovation, on the other hand, can lower operating costs over time and improve costumer service, helping Tesco improving its profitability.

A design mix looks at the way function, cost, manufacture and aesthetic are mixed in different ways. Function is importantly because it ensures that the product meets costumer needs - without this, costumers have no reason to buy it regardless of how good it looks or how cheaply it is made.

For Samsung, function in central to its strategy. The S23 features advanced camera improvements and longer battery life - both direct functional upgrades that improves what the phone does for the costumer. At a price of over $1,600 for the S23 Ultra, costumers in the premium segment, making function essential to justifying the price and supporting Samsung’s goal of achieving higher average selling prices.

Furthermore, Samsung’s foldable phones demonstrates a function innovation strategy - a wider display - giving Samsung a technology advantage over rivals. This functional innovation allows Samsung to differentiate from other Chinese competitors like Huawei. Without this advantage, Samsung would struggle to differentiate itself from cheaper Chinese rivals in the mid-range market.

However, function alone is not sufficient. Apple has enjoyed record revenues partly due to the appearance of its apps and the appeal of its IOS software - suggesting that aesthetic and user experience play and equally important role in the design mix.

(10)

(d) Assess the likely usefulness of price skimming to Samsung's pricing strategy. (12)

Here’s the rephrased version:

Price skimming can be an effective strategy for established companies like Samsung, as setting a high initial price enables the business to extract maximum value from loyal customers. Given that the phone features foldable technology, new buyers may also be drawn in, potentially driving strong early sales volumes. That said, the presence of a competitive market means the price cannot be set too high, as consumers may simply opt for cheaper alternatives, limiting overall revenue potential.

On the other hand, price skimming carries risks — most notably, a gradual decline in brand perception as prices are lowered over time. As rivals like Apple release comparable devices, consumers’ willingness to pay decreases due to greater choice, which can force deeper price cuts and trigger dissatisfaction among early buyers who paid a premium. However, if Samsung manages price reductions carefully and incrementally, it could actually build goodwill, as budget-conscious consumers gain access to the product when newer models launch.

Overall, price skimming is useful for Samsung as it maximises early revenue from loyal customers willing to pay a premium. However, competition from rivals like Apple may force price reductions, risking brand reputation. Therefore, skimming is only effective if Samsung manages price changes gradually.

"In order to remain competitive in the luxury watch market, Rolex could become a public limited company or remain a private limited company."

(e) Evaluate these two options and recommend which one is more likely to support

Rolex remaining competitive in the luxury watch market.

Rolex could become a PLC to access greater capital by selling shares, which could fund research and development and help it compete with rivals like Swatch, who use PLC status to grow through “expensive new product development.” However, this would come at a cost — shareholders typically demand short-term profit growth, which could pressure Rolex into mass production, undermining the exclusivity that justifies its premium pricing of over £10,000 per watch.

On the other hand, remaining a private limited company allows Rolex to retain full control over its strategy. Extract B confirms that private ownership enables Rolex to “limit production and restrict its product range,” directly building the exclusivity that drives its competitive advantage. This aligns with Extract C, where Wilsdorf insisted that every watch be “a product of quality” and that Rolex must “think and act differently from the rest” — values that are far easier to protect without shareholder interference.

Overall, Rolex should remain a private limited company. Its competitive advantage is built on exclusivity, craftsmanship and brand prestige, none of which can be compromised. Whilst PLC status offers additional funding, the risk of losing brand exclusivity outweighs the financial benefits. Therefore, private ownership is the most effective strategy for Rolex to remain competitive in the luxury watch market long term.