IB BUSINESS MANAGEMENT SL, Paper 2, May, 2014, TZ0, Solved Past Paper

LuxEclairage (LE) is a company founded by Maurice Dahman, an Electrical Engineer from Algeria. With his extensive experience in the lighting industry, Maurice established LE in 2007 after working for a large lighting business in Luxembourg. LE specializes in producing energy-efficient lighting parts for both indoor and outdoor applications. A key aspect of LE's business strategy is its unique selling point (USP) of offering the lowest prices in the market. Although most of its sales occur in Europe, all production is based in Algeria, where costs are significantly lower. This strategic decision has led to rapid and substantial growth in sales revenue, allowing LE to gain market share each year.

The financial data provided for LE covers the years 2009 and 2013, highlighting significant changes in various financial metrics. The data includes sales revenue, cost of goods sold, gross profit, net profit before interest and tax, creditors, stock, debtors, total current assets, and total current liabilities. This information is crucial for understanding the financial health and performance of the company over the specified period.

Despite the impressive growth in sales revenue, LE has encountered some challenges related to diseconomies of scale, particularly in the administration of its business operations. The company's production is spread across 12 small factories around Algiers, rather than being centralized in a single large facility. This decentralized structure complicates coordination between factories and administrative offices, especially given occasional internet connectivity issues. Additionally, language barriers exist as French is the primary language used by managers and customers, while the workers generally speak basic French and prefer Arabic. Non-verbal communication patterns also differ significantly between Europe and Algeria, adding another layer of complexity to effective communication.