Question Tag: Market Risk

Oasis Bakeries is a producer of all kinds of bread, servicing only the Lagos market. In response to the anticipated increase in the demand for bread, the company decided to increase its installed production capacity from 1,000 loaves to 5,000 loaves per day, having secured regulatory approval from the federal authority.

However, the market for bread in Lagos is largely dominated by bigger producers, and there is some stability in the price of bread across all brands in the market. Thus, the risk of a price war is low. However, owing to the short shelf life of loaves of bread, most are sold to retailers on credit, and due to a combination of reasons, the credit default rate is increasing. The company by experience has also discovered that ovens, mixers, and other equipment for the production of bread rarely break down within the first 5 years of usage. However, procurement of raw materials such as flour and butter has become more challenging due to the activities of bigger bakeries and the recent increase in import duty on all processed food.
Required:
a. Advise Oasis Bakeries on the level of exposure to any FIVE categories of risk inherent in its growth strategy. (10 Marks)

b. Analyze the impacts of risk on any FIVE of the stakeholder groups of Oasis Bakeries. (10 Marks)
(Total: 20 Marks)