A-level
BUSINESS
Paper 3 Business 3
Insert
Source 1: Vignal Babbel Motors (VBM)
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Vignal Babbel Motors (VBM)
Background information
Vignal Babbel Motors (VBM) is a car manufacturer based in Europe, with roots dating back
over 100 years.
The car industry has changed rapidly in the last 20 years and the business has struggled to
keep up with the pace of external change. VBM’s previous success was based on a core 5
competence of designing and building extremely efficient, reliable and long-lasting diesel
engines.
Over 100 European cities have now introduced legislation creating low emission zones. This
means that most diesel-powered vehicles’ owners have to pay a daily fee to enter these
zones. In addition, several European countries have announced that sales of new 10
petrol- and diesel-powered vehicles will be banned in the future (see Appendix A). As a
result, sales of diesel-powered vehicles have begun to fall rapidly in VBM’s traditional
European markets (see Appendix B).
VBM only began work on developing electric vehicles five years ago. The company does not
expect to launch an electric-powered vehicle until next year. Many competitors are already 15
selling large volumes of electric vehicles.
VBM’s sales in Europe have fallen due to increased environmental concerns. However,
demand for VBM’s traditional diesel-powered vehicles has been rising in some parts of
South-East Asia, particularly Vietnam. The directors have started to discuss plans to build
and operate a new factory in Vietnam to meet the rising demand in its South-East Asian 20
markets.
Internal conflict
Meetings of the Board of Directors have been difficult for the last few years. Several
directors have argued that the company must fight hard to maintain its share of the European
market. They argue for the need to show loyalty to the company’s employees and traditional 25
customer base in Europe. They hope this will avoid the bad publicity caused by factory
closures and the related redundancies.
However, another group of directors has stressed the need to better match capacity to
changing global patterns of demand. This group proposes a strategy of retrenchment –
closing three of VBM’s four European factories. These closures would mean around 5000 30
redundancies. VBM would maintain just one European factory that would concentrate on
producing electric vehicles for the European market. The capital released could be used to
fund the construction of the proposed factory in Vietnam.
Major changes agreed
The proposals to retrench VBM’s European operations and build the factory in Vietnam were 35
approved at last month’s annual shareholders’ meeting. Since then, plans have been
developed for the opening of the Vietnamese factory (see Appendix C). VBM’s Operations
Director is leading the project. He has drawn up a network diagram showing that the factory
could be opened in a year.
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IB/G/Jun25/7132/3/INS
BUSINESS
Paper 3 Business 3
Insert
Source 1: Vignal Babbel Motors (VBM)
7132/3
lock in and max out: tyrionpapers.com for more: tyrionpapers.com
IB/G/Jun25/G4005/E4
, 2
Vignal Babbel Motors (VBM)
Background information
Vignal Babbel Motors (VBM) is a car manufacturer based in Europe, with roots dating back
over 100 years.
The car industry has changed rapidly in the last 20 years and the business has struggled to
keep up with the pace of external change. VBM’s previous success was based on a core 5
competence of designing and building extremely efficient, reliable and long-lasting diesel
engines.
Over 100 European cities have now introduced legislation creating low emission zones. This
means that most diesel-powered vehicles’ owners have to pay a daily fee to enter these
zones. In addition, several European countries have announced that sales of new 10
petrol- and diesel-powered vehicles will be banned in the future (see Appendix A). As a
result, sales of diesel-powered vehicles have begun to fall rapidly in VBM’s traditional
European markets (see Appendix B).
VBM only began work on developing electric vehicles five years ago. The company does not
expect to launch an electric-powered vehicle until next year. Many competitors are already 15
selling large volumes of electric vehicles.
VBM’s sales in Europe have fallen due to increased environmental concerns. However,
demand for VBM’s traditional diesel-powered vehicles has been rising in some parts of
South-East Asia, particularly Vietnam. The directors have started to discuss plans to build
and operate a new factory in Vietnam to meet the rising demand in its South-East Asian 20
markets.
Internal conflict
Meetings of the Board of Directors have been difficult for the last few years. Several
directors have argued that the company must fight hard to maintain its share of the European
market. They argue for the need to show loyalty to the company’s employees and traditional 25
customer base in Europe. They hope this will avoid the bad publicity caused by factory
closures and the related redundancies.
However, another group of directors has stressed the need to better match capacity to
changing global patterns of demand. This group proposes a strategy of retrenchment –
closing three of VBM’s four European factories. These closures would mean around 5000 30
redundancies. VBM would maintain just one European factory that would concentrate on
producing electric vehicles for the European market. The capital released could be used to
fund the construction of the proposed factory in Vietnam.
Major changes agreed
The proposals to retrench VBM’s European operations and build the factory in Vietnam were 35
approved at last month’s annual shareholders’ meeting. Since then, plans have been
developed for the opening of the Vietnamese factory (see Appendix C). VBM’s Operations
Director is leading the project. He has drawn up a network diagram showing that the factory
could be opened in a year.
lock in and max out: tyrionpapers.com for more: tyrionpapers.com
IB/G/Jun25/7132/3/INS
