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Transcription of this question: 3.The Sl.99 toy shopJames Lai’s toy shop is popular with no toy priced above S 1.99. The toy shop uses psychologicalpricing at a level much lower than its competitors. James imports 90% Of his stock from China.It is located in a poor part Of the city centre. Its target market is low-income families. The shopis very busy at weekends with a long queue (line) at the one cash register. Most employees areteenagers, who are very low paid.Several stakeholder groups have complained:parents are concerned about the quality and safety Of the toys and have set up an online socialnetworking web site urging people to stop purchasing from the shopOlder customers have complained about the long queue at the one cash registerone employee representative (union official) contacted James about employing teenagers on verylow wages• local toy manufacturers have questioned James’ use Of Chinese suppliers.Competitors have argued that the Sl_99 toy shop’s psychological pricing method is unethical.James replied to stakeholder concerns, in a letter to a local newspaper, by stating that his shopallows young children to purchase affordable toys and provides job opportunities for teenagers.James has decided to create a social networking web site to respond to critics and to managecustomers’ perceptions.James admits that the rate Of stock turnover could be improved. He admits that the long queueis causing many customers to leave without buying anything. James is considering opening asecond, larger toy shop called $4.99. He announced the opening on his social networking web site,informing stakeholders that he would stock higher quality products and have more cash registers.However, he immediately received negative online feedback from customers who saw the$4.99 toy shop as just a $3 price increase for the same toys.(a)(b)(c)(d)Define the following terms:(i) tcuget market(ii) stock turnover.Explain two disadvantages Of James using psychological pricing.Analyse two possible conflicts between stakeholders Of the S I .99 toy shop.Discuss whether the introduction Of the $4.99 toy shop as a new strategy willchange customer perceptions Of James’ two shops.[2 marks][2 marks][6 marks][6 marks][9 marks]

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