The problems themselves — practice questions

Invented resource. Ngaio Apparel is a New Zealand-registered outdoor clothing brand. Its jackets are made by a contract manufacturer in Vietnam.

• one jacket in 14 from the most recent shipment has a seam that fails Ngaio's pull test
• Ngaio's written specification says only that "seams must be strong"
• no Ngaio staff have visited the factory in two years
• the shipment was 40% larger than any order the manufacturer had previously filled for Ngaio

Explain ONE possible cause of the seam failures, and explain ONE effect on Ngaio Apparel's costs.

Invented resource. One jacket in 14 from Ngaio Apparel's most recent shipment has a seam that fails its pull test. Ngaio sells through specialist outdoor retailers and prices above the market average.

Fully explain the effect the seam failures may have on Ngaio Apparel's reputation.

Invented resource. Ngaio Apparel makes 26,000 jackets a year in six shipments, and must choose between two responses to the seam failures.

Option A: engage a third-party inspection agency to check every shipment at the Vietnamese factory before it leaves, at $9,500 per shipment.

Option B: move production to a manufacturer in Portugal with an established quality record, at a unit cost $11 higher per jacket.

Which option would you recommend? Justify your recommendation, including any new information.

Invented resource. Kererū Timber Products is a New Zealand-registered exporter of pre-finished flooring to the United States west coast.

• it ships through a freight forwarder to a national wholesaler, which supplies regional distributors, which supply retailers
• the average time from the Rotorua mill to a retailer is 71 days
• all United States stock is held in one warehouse in Long Beach
• last quarter there were 19 days of port congestion at Long Beach

Explain ONE possible cause of the 71-day lead time, and explain ONE way it affects Kererū's retail customers.

Invented resource. Kererū Timber Products sells into the United States through a national wholesaler, which in turn supplies regional distributors, which supply retailers.

Fully explain how this chain of intermediaries may affect Kererū Timber Products' ability to respond to a problem in the United States market.

Invented resource. Kererū Timber Products ships 90 containers a year, all through Long Beach, and earns $6.2 million a year in United States wholesale revenue. It is considering two responses.

Option A: route half its containers through Tacoma instead of Long Beach. Inland freight would cost $340 more per container on the containers moved.

Option B: sell direct to the regional distributors, removing the national wholesaler, which currently takes an 8% margin. Kererū would have to fund its own United States sales and credit function at $520,000 a year.

Which option would you recommend? Justify your recommendation, including any new information.

Invented resource. Tarata Botanicals is a New Zealand-registered maker of skin balm. Its lead product uses an extract of a native plant.

• the preparation method came from published research recording the knowledge of a named hapū
• Tarata has applied for a patent on the extraction process
• Tarata has not contacted the hapū
• the product is marketed on its "traditional New Zealand origins"
• a European buyer has asked Tarata for evidence of ethical sourcing

Explain ONE problem this creates for Tarata Botanicals, and explain why it is a business problem and not only an ethical one.

Invented resource. Tarata Botanicals harvests the native plant its balm depends on from land where the hapū whose knowledge it used has long-standing interests. A European buyer has asked for evidence of ethical sourcing.

Fully explain the effect Tarata Botanicals' approach may have on its ability to keep supplying that buyer.

Invented resource. Tarata Botanicals' balm line earns $610,000 profit a year. The board is considering two ways forward.

Option A: withdraw the patent application, acknowledge the source of the knowledge, and pay the hapū an annual licence fee of $45,000.

Option B: withdraw the patent application and enter a partnership giving the hapū a 20% shareholding in the balm line, a place in decisions about how the plant is harvested, and joint ownership of the extraction process.

Which option would you recommend? Justify your recommendation, including any new information.

Invented resource. Kahurangi Engineering is a New Zealand-registered maker of dairy processing equipment, with a plant in Hamilton employing 140 staff and a plant in Malaysia employing 210.

• it plans to move all fabrication to Malaysia, keeping design and assembly in Hamilton
• 62 Hamilton jobs would go
• Malaysian fabricators are paid about a third of the Hamilton rate
• Kahurangi markets its equipment as "engineered and built in New Zealand"
• the Hamilton union has asked to be consulted

Explain ONE conflict the relocation may create, and explain ONE effect of it on Kahurangi Engineering.

Invented resource. Kahurangi Engineering builds custom dairy processing equipment. Much of its fabrication is one-off work, and the Hamilton fabricators it plans to make redundant have an average of 12 years' service.

Fully explain the effect the relocation may have on the knowledge held in Kahurangi Engineering's Hamilton plant.

Invented resource. Kahurangi Engineering earns $48 million a year in revenue, and independent buyers pay about 7% more for New Zealand-built dairy equipment than for the nearest Asian-built alternative. The board has two proposals.

Option A: move all fabrication to Malaysia as planned. It saves $2.1 million a year in labour and ends 62 Hamilton jobs.

Option B: phase the move over two years, transferring only standard components — about 60% of fabrication hours — and keeping custom fabrication in Hamilton. It saves $1.2 million a year, keeps 38 of the 62 jobs, and needs a $640,000 redundancy and retraining package.

Which option would you recommend? Justify your recommendation, including any new information.

Invented resource. Kāhu Pet Foods committed $1.4 million to a second production line in 2024 to supply a new Southeast Asian market. Since then, an import rule change in that market has required a certification Kāhu does not hold, and the line is running at 30% of capacity.

Explain ONE risk of expanding into an overseas market that Kāhu Pet Foods did not manage, and explain how it produced this problem.

Invented resource. Kāhu Pet Foods committed $1.4 million to a second production line in 2024 to supply a new Southeast Asian market. Since then, an import rule change in that market has required a certification Kāhu does not hold, and the line is running at 30% of capacity.

Fully explain the effect this may have on Kāhu Pet Foods' cash flow.

Invented resource. Kāhu Pet Foods has two ways forward for its idle line.

Option A: obtain the required certification. It costs $310,000 and takes about 14 months, after which the Southeast Asian market is open again.

Option B: use the line to make product under contract for an established New Zealand pet food brand. It earns $2.10 a unit on 180,000 units a year and could start within three months.

Would you recommend that Kāhu Pet Foods pursue the certification? Justify your recommendation, including any new information.