BUSINESS STUDIES 7115 · STRUCTURED PRACTICE
PurePharm CleanCare Ltd (PCL) manufactures sterile diagnostic medical test cartridges used by hospitals and pathology laboratories globally. Diagnostic accuracy requires strict ISO-certified cleanroom conditions with zero chemical contamination.
PCL currently operates under a conventional Quality Control (QC) inspection model. Over the past year, contaminated test cartridges resulted in a 4.8% defect rate, leading to $220,000 in customer warranty refunds, discarded batches, and a formal warning from the national medical regulatory authority.
With its existing factory lease expiring, PCL's Board of Directors is evaluating two location options:
• Option 1 (Science Park in Country A): Relocate to a university biomedical science park in Country A. The site features advanced infrastructure (uninterruptible power supply and ultra-pure water filtration), strict intellectual property laws, and immediate access to graduate biochemists and certified cleanroom technicians (wages $32/hour). Annual rent is $180,000. • Option 2 (Industrial Development Zone in Country B): Relocate to an industrial zone in Country B. The government offers a 5-year corporate tax holiday, subsidized factory land (rent $45,000/year), and low general labor wages ($10/hour). However, local cleanroom technicians are unavailable (requiring 9 months of overseas training), the regional electrical grid suffers weekly brownouts, and export air freight incurs $15 per cartridge in transport and customs duties.
Explain what is meant by Total Quality Management (TQM).
Explain two reasons why achieving zero defects is essential for a medical diagnostic manufacturer like PCL.
Outline two factors other than labor costs and rent that PCL should consider when choosing a manufacturing location.
Recommend whether PCL should relocate to the Science Park in Country A (Option 1) or the Industrial Development Zone in Country B (Option 2). Justify your recommendation by comparing both options.
State two positive externalities (external benefits) that PCL's new manufacturing plant could create for the local economy in Country B.
Total: 16 marks