Wednesday 10 June 2009
Section A – This ONE question is compulsory and MUST be attempted
The following information should be used when answering question 1.
1 greenTech was established in 1990. The company began by specialising in the supply of low voltage, low emission,
quiet, recyclable components to the electronic industry. Its components are used in the control systems of lifts, cars
and kitchen appliances. Two medium-sized computer manufacturers use greenTech components in selected ‘green’
(that is, environmentally-friendly) models in their product range. Recent market research showed that 70% of the
global electronics industry used greenTech components somewhere in its products.
In 1993 the company began a catalogue mail order service (now Internet-based) selling ‘green’ components to home
users. Most of these customers were building their own computers and they required such components on either
environmental grounds or because they wanted their computers to be extremely quiet and energy efficient. From
2005, greenTech also offered fully assembled computer systems that could be ordered and configured over the
Internet. All greenTech’s components are purchased from specialist suppliers. The company has no manufacturing
capability, but it does have extensive hardware testing facilities and it has built up significant technical know-how in
supplying appropriate components. The management team that formed the company in 1990 still runs the company.
Finance and revenue
The company has traded profitably since its foundation and has grown steadily in size and revenues. In 2008, its
revenues were $64 million, with a pre-tax profit of $10 million. The spread across the three revenue streams is shown
in Figure 1:
All figures in $million 2008 2007 2006
Component sales to electronics industry 40 36 34
Component sales to home users 20 18 16
Fully assembled green computers 4 3 2
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Total 64 57 52
— — —
Figure 1: Turnover by revenue stream 2006-2008
The company has gradually accumulated a sizeable cash surplus. The board cannot agree on how this cash should
be used. One beneficiary has been the marketing budget (see Figure 2), but the overall spend on marketing still
remains relatively modest and, by April 2008, the cash surplus stood at $17 million.