GAE is a multinational company. It manufactures steel. GAE has 2400 employees and has factories in 4 countries. The business regularly introduces new technology. Holding inventory is important. GAE's directors are planning to build a new factory and want to know how legal controls over location might affect this decision. The Managing Director said, 'The new factory will create many external benefits.' （d）Explain two reasons why holding inventory might be important for GAE． Reason 1： Explanation： Reason 2： Explanation： .......................................................................................................................................

Award 1 mark for identification of each relevant reason (max 2).

Award 1 mark for each relevant reference to this business (max 2).
Award 1 mark for each relevant explanation (max 2).
Points might include:
- To benefit from economies of scale / discounts for bulk buying / to benefit from special offers / *gain supplier discounts [k] reducing average / unit cost [an] for this multinational company [app]
- To maintain / not delay production / provide backup materials in case of breakdowns [k] at the factories [app] so can meet orders / demand (on time) [an]
- To protect against delays from suppliers / shortage of materials [k] which otherwise could delay production [an] in the 4 countries [app]
- To meet / satisfy demand / customer orders [k] of steel [app] which can increase revenue [an]
- To meet sudden order / unexpected changes in demand [k] helping maintain its reputation [an]
- To meet seasonal changes in demand [k]

Other appropriate responses should be credited.
- Avoid import tariffs [k] so does not make products more expensive [an]
- Reduced tax liability / benefit from favourable / lower tax rates [k]
- Access government support/grants [k]

Other appropriate responses should also be credited.
Justification might include:
One benefit is spreading risk \([\mathrm{k}]\) so a fall in sales in one country can be offset by sales in another country [an]. It also allows for easier access to raw materials [k] reducing transport costs [an]. Access to raw materials is likely to be the most important benefit because this could reduce production costs leading to lower prices helping the business remain competitive [eval] and ensuring the extra sales are achievable [eval].