Scale of Operations (AQA A Level Business): Exam Questions

Source B: Tata Steel UK

Tata Steel UK is part of the Indian multinational Tata Steel. Its largest site in Britain is Port Talbot in south Wales, which for decades made steel from raw materials in two blast furnaces.

On 25 April 2024 the company confirmed that it would close those blast furnaces and spend £1.25 billion on an electric arc furnace on the same site instead. Blast furnace number 5 closed at the end of June 2024 and blast furnace number 4 closed on 30 September 2024, ending the making of primary steel at Port Talbot. The change put up to 2 800 jobs at risk and around 2 500 roles have since gone.

The two kinds of furnace work in completely different ways. A blast furnace turns imported iron ore and coking coal into new iron, runs continuously and cannot easily be turned down. An electric arc furnace melts scrap steel using electricity, can be started and stopped far more easily, emits far less carbon dioxide and needs far fewer people. It also depends on being able to buy enough scrap steel and on having a large enough electricity supply.

Steel was expected to be made at Port Talbot again in 2027 or 2028, but delays to the electricity grid connection mean the electric arc furnace is now not expected to be running until late 2028 or early 2029. In the meantime Port Talbot imports steel from other Tata Steel sites and rolls it there.

Port Talbot was chosen as a steel town for reasons that no longer all apply. It has a deep-water port built for importing iron ore, and rolling mills that are still in use. It does not sit close to where most of Britain's scrap steel is collected.

Source: Tata Steel UK announcements, 2024 to 2026

Appendix F: A blast furnace compared with an electric arc furnace

Source: Analyst

Appendix H: Port Talbot output, emissions and employees

Source: Analyst

Assess the impact of the change at Port Talbot on Tata Steel UK's competitiveness.

Calculate the steel made for each employee under the electric arc furnace plan to support your answer.

Source B: Lush

Lush makes and sells fresh handmade cosmetics: bath bombs, soaps and shampoo bars, often sold loose and unwrapped. It is unusual among cosmetics companies because it makes almost everything it sells. Most beauty brands design a product and pay someone else to manufacture it. Lush manufactures and retails, and it says the freshness of what it makes is the reason people buy it.

In the year to 30 June 2025 turnover reached £736.2 million, up £63.5 million or 9.4%. Like-for-like turnover grew 8%, with retail shops up 7% and digital up 13%. The loss before tax narrowed sharply, from £52.1 million the year before to £6.7 million, and earnings before interest, tax, depreciation and amortisation returned to a profit of £28.4 million. A surge in the price of cocoa, which Lush uses in large quantities, held the result back.

At the end of June 2025 the group had 869 permanent shops, 665 of them run by the group rather than franchised, selling in 50 countries. It manufactured in six countries. During the year it spent about £6.5 million restructuring, bringing manufacturing in Europe and Canada together into fewer sites.

That restructuring is the question the business keeps returning to. Making everything in a small number of large factories is cheaper for each product made. Making it close to the shops that sell it keeps it fresh, which is what Lush tells customers it is selling. The two pull against each other, and both have an environmental consequence, which matters to a company that has built its brand partly on that.

Source: Lush audited accounts for the year ended 30 June 2025

Appendix E: Selected data for Lush, year to 30 June 2025

Source: Lush

Appendix F: Where Lush sells and where it makes

Source: Lush

Assess the impact of the scale of Lush's shop estate, 869 shops, on its profitability.

Source B: Kielder Timber Products Ltd

Kielder Timber Products Ltd runs a sawmill in Northumberland, fourteen kilometres from the nearest gate into the forest it buys most of its logs from. It cuts fencing, pallet wood and construction timber, employs 150 people and had revenue of £24.6 million in the year to March 2025, with an operating profit of £1.9 million.

The mill is full. It takes in 90 000 cubic metres of logs a year and runs for 110 hours out of a possible 112 every week. Whatever does not come out as sawn timber is sold on as chips and sawdust to a board mill and a biomass plant, so very little of the log is wasted, but the amount that leaves as timber is the number the directors watch.

Demand is the problem rather than the solution. Housebuilding and fencing orders have grown every year since 2021, and last year Kielder turned away 11 000 cubic metres of orders it had no way of cutting. A second mill would roughly double what the company can produce, and would lower the cost of every cubic metre, because logs bought in larger quantities cost less and the fixed costs would be spread over twice the output.

Where to put it is the difficult part. One site sits beside the existing mill, a short haul from the forest and run by the team that is already there, but it is expensive to build and the planning application is being contested. The other is a former colliery site sixty-five kilometres south, cheaper to build, grant-aided, already consented and much closer to customers, but every log would travel five times as far to reach it.

Source: Kielder Timber Products Ltd

Appendix E: Kielder Timber Products Ltd selected data, year to March 2025

Source: Kielder Timber Products Ltd

Appendix G: What a second mill would change

Source: Analyst

Assess whether a second mill would lower Kielder Timber Products Ltd's cost for each cubic metre of sawn timber.

Source B: Hallerton Cold Stores Ltd

Hallerton Cold Stores Ltd keeps frozen food for other people. It runs one store near Hull with 18 000 pallet spaces, holds it at about minus 24 degrees Celsius every hour of every day, and moves 1 900 pallets in and out daily. It employs 110 people, had revenue of £14.2 million in the year to March 2025 against operating costs of £12.4 million, and made an operating profit of £1.8 million.

What makes the business unlike a warehouse is electricity. Keeping 18 000 pallet spaces that cold cost £4 464 000 last year, which is by a wide margin the largest thing the company spends money on, more than it spends on wages. The bill also moves with the weather: a pallet space uses about 83 kilowatt hours in July and 58 in January.

The store is nearly full. It runs at 92% of its pallet spaces on average, picks 97.8% of pallets inside the hour it promises, and has been outside its agreed temperature range three times in a year. The oldest refrigeration plant is nineteen years old.

Customers want more space than Hallerton has, so a second store is agreed in principle. Two things are not. One is where to put it: beside the existing store, where the grid connection exists and the night shift could be shared, or in the East Midlands, far closer to the three customers who provide over half the revenue. The other is what to build: the same again, or something that uses a third less electricity for every pallet space and costs several million pounds more.

Source: Hallerton Cold Stores Ltd

Appendix F: What the store is judged on

Energy used for each pallet space, kilowatt hours

Source: Analyst

Appendix G: A second store, and where it could go

Source: Analyst

Assess whether a second store would make Hallerton Cold Stores Ltd more efficient.

Source A: Ryeworth Bakeries Ltd

Ryeworth Bakeries Ltd bakes bread and morning goods for supermarkets from two plants, one in Doncaster and one in Swindon. It employs 740 people, makes about 320 million items a year, and in the year to March 2025 had revenue of £44.8 million against operating costs of £38.4 million, leaving an operating profit of £6.4 million. Six customers buy from it and the three largest provide 71% of revenue.

Size buys its inputs cheaply. Ryeworth takes 20 000 tonnes of flour a year and pays £318 a tonne; a baker buying 2 000 tonnes pays £347. On 20 000 tonnes that difference is worth more than half a million pounds a year.

Size has also bought it machinery that a smaller baker could not justify. Eighty-four per cent of the process is automated, a line that needed twenty-nine people ten years ago now needs eleven, and every batch of dough is tracked electronically, so a loaf can be traced back to the flour delivery it came from in four minutes rather than the six hours it used to take by hand.

What size has not bought is tidiness. There are now five levels between the managing director and a baker, and fourteen items are made at both plants to different recipes, because each plant developed its own. The oldest line is seventeen years old and causes 61% of the twenty-three unplanned stops the company has each week.

A supermarket has asked for 130 million more items a year. The board has to decide where to make them.

Source: Ryeworth Bakeries Ltd

Appendix A: Ryeworth Bakeries Ltd selected data, year to March 2025

Source: Ryeworth Bakeries Ltd

Appendix B: What size does to Ryeworth's costs

Price paid for a tonne of flour, by the tonnage bought in a year

Source: Analyst

Assess the benefits to Ryeworth Bakeries Ltd of its scale of operations.

Calculate its operating cost for each item made to support your answer.

Source B: Portmeirion Group plc

Portmeirion Group plc makes and sells homeware and home fragrance. It is a public limited company listed on AIM, based in Stoke-on-Trent, and it owns six heritage brands: Spode, Portmeirion, Royal Worcester, Nambé, Pimpernel and Wax Lyrical. It has over 650 employees worldwide and the majority of them are in Stoke-on-Trent.

The last five years have been hard. Revenue reached £110.8 million in 2022 and then fell two years in a row, to £91.2 million in 2024, before holding at £91.1 million in 2025. Profit fell much further than revenue. Headline profit before tax was £8.0 million in 2022 and £1.0 million in 2024. The headline operating margin went from 7.8% in 2022 to 4.7% in 2023. Earnings for each share fell from 46.59p in 2022 to 8.04p in 2024, and the dividend from 15.50p to 1.50p. By the end of 2025 the group had net debt of £17.5 million, and although operations still generated cash, they generated only £0.5 million of it, against £2.1 million the year before.

Portmeirion Group owns a factory in Stoke-on-Trent, but approximately 26% of its branded tableware is actually made there. The rest is bought in from suppliers, much of it in Asia. The company has a stated strategy called Made in Stoke-on-Trent and says it intends to increase the share it makes itself.

Something outside the business has pushed that plan along. When the United States introduced tariffs, orders that Portmeirion Group had sourced from Asia for the American market were cancelled, and the company decided to speed up parts of the Made in Stoke-on-Trent plan in response.

Source: Portmeirion Group plc annual results and interim statements, 2024 to 2026

Appendix D: Two ways of increasing the share made in Stoke-on-Trent

Source: Analyst

Portmeirion Group plc is considering two ways of increasing the share of its branded tableware made in Stoke-on-Trent. Appendix D shows information on both options.

Evaluate both options and recommend which one Portmeirion Group plc should choose.

Calculate the cost of making each piece in Stoke-on-Trent under Option 2 to support your answer.

Source B: Glanmor Dairy Ltd

Glanmor Dairy Ltd processes milk into cheese, butter and cream at a single creamery in Carmarthenshire. It employs 130 people, takes in 94 million litres of milk a year from 180 farms within about thirty miles, and in the year to March 2025 had revenue of £58 million and an operating profit of £2.3 million.

Milk is an unusual raw material. It arrives every day whether the creamery wants it or not, because cows do not stop. It cannot be stored for long before processing. And it is heavy and mostly water, so moving it is expensive: a tanker costs much the same to run whether the milk inside is worth a lot or a little.

The creamery is close to full. It can process 96 million litres a year and took 94 million last year, and the farms around it are producing more each year. Glanmor must either make its existing site bigger or build a second one.

If it builds a second creamery, where it goes matters. A site deep in the milk-producing country would sit close to the farms but a long way from the motorway network and from the supermarket depots that take the finished cheese. A site near the motorway would be the opposite: cheap to send the finished product out from, expensive to bring the raw milk into.

The managing director, Rhian Pugh, has asked for both questions to be answered: bigger here, or a second site, and if a second site, where.

Source: Glanmor Dairy Ltd

Appendix E: Glanmor Dairy Ltd selected data, year to March 2025

Source: Glanmor Dairy Ltd

Appendix F: Two possible sites for a second creamery

94 million litres of milk a year

Source: Analyst

Appendix H: Two ways of handling more milk

Source: Analyst

Glanmor Dairy Ltd is considering two ways of handling more milk:

Option 1: make the existing creamery bigger

Option 2: build a second creamery

Evaluate both options and recommend which one Glanmor Dairy Ltd should choose.

Calculate the cost of processing each litre under Option 1 to support your answer.

Source A: Ryeworth Bakeries Ltd

Ryeworth Bakeries Ltd bakes bread and morning goods for supermarkets from two plants, one in Doncaster and one in Swindon. It employs 740 people, makes about 320 million items a year, and in the year to March 2025 had revenue of £44.8 million against operating costs of £38.4 million, leaving an operating profit of £6.4 million. Six customers buy from it and the three largest provide 71% of revenue.

Size buys its inputs cheaply. Ryeworth takes 20 000 tonnes of flour a year and pays £318 a tonne; a baker buying 2 000 tonnes pays £347. On 20 000 tonnes that difference is worth more than half a million pounds a year.

Size has also bought it machinery that a smaller baker could not justify. Eighty-four per cent of the process is automated, a line that needed twenty-nine people ten years ago now needs eleven, and every batch of dough is tracked electronically, so a loaf can be traced back to the flour delivery it came from in four minutes rather than the six hours it used to take by hand.

What size has not bought is tidiness. There are now five levels between the managing director and a baker, and fourteen items are made at both plants to different recipes, because each plant developed its own. The oldest line is seventeen years old and causes 61% of the twenty-three unplanned stops the company has each week.

A supermarket has asked for 130 million more items a year. The board has to decide where to make them.

Source: Ryeworth Bakeries Ltd

Appendix A: Ryeworth Bakeries Ltd selected data, year to March 2025

Source: Ryeworth Bakeries Ltd

Appendix D: Two ways of making 130 million more items

Ryeworth would then make 450 million items a year, and its operating costs would be £49.5m. It costs 12p an item to make them now.

Source: Analyst

Ryeworth Bakeries Ltd is considering two ways of making 130 million more items a year:

Option 1: add a third line at the Doncaster plant

Option 2: open a third plant in the south-west

Evaluate both options and recommend which one Ryeworth Bakeries Ltd should choose.

Calculate the operating cost for each item afterwards to support your answer.