OCR Economics - Pre release material

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1985/02/CS 1985/04/CS

ECONOMICS Papers 2 and 4

CASE STUDY PRE-RELEASED MATERIAL FOR 2010 EXAMINATION JUNE 2010 * O C E / 1 6 4 1 0 *

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2 Mobile Phones Introduction Mobile phones have become another one of life’s necessities. In the UK in 2008 just under 85% of the adult population owned a mobile phone.

Fig. 1 – Mobile phone market share

UK Mobile phone market share (2008) (% of market sales) 17%

Manufacturers 42%

8%

Nokia Samsung Motorola LG

9%

Sony Ericsson Others 9% 15%

Fig. 2 – Nokia increases market share for mobile phones

Nokia has increased its market share for mobile phones in the UK from 38.4% to 42%.

The intense battle for market share is resulting in price wars. In 2008 Nokia reduced its prices by 10% due to the economic downturn.

© OCR 2010

1985/02 & 04/CS Jun10

3 Fig. 3 – New iPhone unveiled On 11 July 2008 Apple unveiled a second generation of its iPhone, with support for faster 3G wireless networks.

The company is hoping to boost its share of the smartphone market, which is dominated by Nokia and Blackberry.

The new devices were launched by Apple boss, Steve Jobs, who said the phone would be “more affordable” for consumers, starting at £100 compared to £300 previously.

The new iPhone also comes with GPS satellite navigation built-in for location-based services.

Fig. 4 – Subsidies for Nokia Nokia receives subsidies from the European Union (EU) to make mobile phones in some of its factories.

Nokia has received a total of 60m in subsidies from the EU. The EU gave Nokia these subsidies so that it would locate some of its factories in regions of high unemployment.

Fig. 5 – A recent newspaper report

Outrage as Nokia closes its Bochum mobile phone factory Nokia announced the closure of its mobile phone assembly plant in Bochum in Germany. The factory employs 2,300 workers. A further 2,000 jobs at the factory’s suppliers are also in danger.

Nokia said production of mobile phones in Germany is no longer competitive because of market changes and high production costs. Most of the work will shift to a new plant in Romania, a member of the European Union.

Fig. 6 – UK National Minimum Wage increases Manufacturers in the UK are also becoming increasingly concerned about production costs. For example, in October 2008 the Government increased the national minimum wage:

© OCR 2010

Age range

2007

2008

16 – 17 years

£3.40

£3.53

18 – 21 years

£4.60

£4.77

22 and above

£5.52

£5.73

1985/02 & 04/CS Jun10

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4 Fig. 7 – Newspaper headlines – 2008

Data points to a weaker UK economy UK mobile phone retailers fearing slowdown ‘Credit crunch’ hits UK consumer confidence Apple, the manufacturer of the iPhone, is particularly concerned by changes in the UK economy. It regards the future UK market as a very important one for sales of its mobile phones.

The following information is available to Apple and other mobile phone manufacturers to help them make decisions about the UK mobile phone market.

Fig. 8 – UK Inflation 2007 – 2009 % 6 5 RPI 4 3 CPI 2 1 0 Feb

May

Aug

Nov

2007

Feb

2008 RPI

© OCR 2010

May

1985/02 & 04/CS Jun10

Aug

Nov

Feb 2009

CPI

5 Fig. 9 – Price rises and falls in the UK – 2008 ESSENTIALS RISING ... % 25

PROPERTY VALUES FALLING ...

20 15 10 Petrol 24%

5 0

Food 9.7% House prices –8.1%

–5 –10

Fig.10 – UK Economic Growth 2003 – 2008 % 4

3

2

1

0

–1

–2

–3 2003 2004 2004 2005 2005 2006 2006 2007 2007 2008 2008 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 annually

© OCR 2010

1985/02 & 04/CS Jun10

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6

interest rates %

Fig. 11 – Interest Rates 2006 – 2009

© OCR 2010

6.0 5.5 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0

Aug Nov Jan May Jul 2006 2007

Dec Feb Apr

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Oct Nov Dec Jan Feb Mar 2008 2009

7 Fig. 12 – UK unemployment 2002 – 2008

UNEMPLOYMENT OVER 5 YEARS Million people

April 2008

2.00

1.75

1.50

1.00

1.00 Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul 02 03 03 04 04 05 05 06 06 07 07 08 08

UNEMPLOYMENT 2007 – 2008 Quarterly change in unemployment 1.0 0.5

0.8%

0.0 –0.6%

–1.1%

–1.9%

July 07

October 07

January 08

–0.5 –1.0 –1.5 –2.0

© OCR 2010

1985/02 & 04/CS Jun10

April 08

8

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1985/02 & 04/CS Jun10