Enterprise (Cambridge (CIE) A Level Business): Exam Questions

Great Resources (GR)

GR is a business partnership that creates educational resources. It sells direct to schools and teachers via its own website.

Sanjay, Rukmal and Boris are entrepreneurial teachers who formed the GR partnership. One year ago, they identified a gap in the market to supply interactive, digital resources. GR’s website is subscription only. An online marketing campaign, which used penetration pricing, attracted 250 subscribers in the first six months of operation. The start-up costs were financed with a $5000 bank overdraft, which is GR’s only debt.

Reviews for GR’s products in teaching journals are positive but cash flow is poor. Many customers have taken advantage of a recent sales promotion for one month’s free membership and posted positive reviews. Unfortunately, few have then taken out a regular subscription.

As revenue has not increased as much as the entrepreneurs had hoped, they must now consider alternative promotion methods. They have researched possible promotion methods and decided to advertise in an educational newspaper. The newspaper has a readership of half a million people.

Expert Materials (EM) is a large national company that also advertises in the newspaper. EM is GR’s closest competitor. The EM brand is well-known and trusted in the educational resources market. Table 1.1 shows some marketing data.

Table 1.1 Marketing data

Delicious Cocoa (DC)

DC is a co-operative owned by cocoa farmers in country X. It has 500 workers. In 2022, DC produced 2000 tonnes of raw cocoa beans. Productivity is expected to increase by 5% in 2023. Although DC is profitable, it has no retained earnings.

DC focuses on the triple bottom line as its main objective. The members of the co-operative (farmers) are motivated within the current operation.

Zara, the Managing Director, has recently completed a workforce plan. She has identified that young people do not want to work on DC’s farms. Their concerns are:

• lack of investment in training

• most of the work is manual

• lack of control over earnings.

Ranjit, the Operations Director, has identified an opportunity to create added value by investing in a capital intensive factory.

The factory will process raw cocoa beans produced by DC’s farms into cocoa butter. Cocoa butter is a premium product and attracts higher profit margins than raw cocoa beans. The processing factory will require a significant capital investment (see Table 2.1).

Table 2.1 Data for the cocoa processing factory

Priya’s Bookshop (PB)

Priya lives in town R which is situated in beautiful countryside with nice walks nearby. Many tourists visit town R.

The town’s council would like town R to become branded as a ‘booktown’, a town with many bookshops selling new and used books. The council announced a new financial scheme offering grants to attract entrepreneurs willing to open a bookshop.

Priya applied for a grant to start up Priya’s Bookshop (PB). Part of her grant application included a cash flow forecast, shown in Table 1.1.

Table 1.1: Cash flow forecast, first three months of trading ($000)

Priya’s grant application was successful and she opened PB well aware of the need for both cash and profit.

Priya now wants to raise awareness of PB in town R. Priya did some market research and decided to use market segmentation. This will help her to decide on the promotional methods she could use for her bookshop. See Table 1.2.

Table 1.2: Age and gender of residents in town R

Seaside Hotel (SH)

SH is a large hotel located in a tourist area of country H. SH has 120 rooms and employs 42 workers during the peak (busiest) season which is from April to September. Table 2.1 shows employee data for SH’s peak season.

Table 2.1: Employee data for SH’s peak season

SH makes half of the cleaners and customer service employees redundant at the end of the peak season.

To break even, the hotel must sell 72 rooms per night. The hotel offers good views of the sea and it is very busy in the peak season when the weather is hot. Table 2.2 shows SH’s sales of rooms.

Table 2.2: SH’s sales of rooms 2021–2022

SH does not have a restaurant. It has a joint venture with a restaurant close to the hotel where SH’s customers receive a discount on their food and drink. The hotel advertises the restaurant on social media and the restaurant advertises the hotel on its menu.

Tia is one of the managers of SH. She has an autocratic leadership style and is responsible for the cleaners and marketing employees.

The directors of SH aim to increase the value added to the service that SH provides.

Clever Televisions (CTV)

CTV is a public limited company that produces and sells televisions. It has been operating in country A for 30 years. CTV owns 3 factories and has over 100 employees. CTV’s factories use a combination of capital and skilled labour to produce the televisions. The leadership style in all the factories is autocratic. Employees’ pay is based on time worked each week.

The CTV brand is known for high‑quality and reliability. It targets high‑income customers. CTV uses price skimming when it launches a new product.

In total, 6 million televisions were sold in country A in 2019. Table 2.1 shows market growth data.

Table 2.1: Television sales in country A

The market for televisions in country A is very competitive and the business environment is dynamic. CTV plans to introduce a lower priced television brand to appeal to the mass market. This brand will be known as STV.

CTV has decided to introduce automation into one of its factories to produce the STV televisions. This will lead to redundancies in that factory.

The employees in the other two factories are concerned they might also face redundancy and so motivation is currently low. The Human Resources Director recommends that CTV should find ways in which employees can participate in the management and control of the business.

The Shop (TS)

Thomas worked for 30 years as a manager of a factory. Although he was very good at his job he was recently made redundant.

Thomas always wanted to open a shop. He thinks he has the qualities an entrepreneur is likely to need for success. He has undertaken some primary market research to identify possible opportunities in city X where he lives (see Fig. 1.1).

Fig. 1.1: Market research

Thomas now needs to make a decision about which type of shop to open. He has used the data in Fig. 1.1 and some secondary market research to identify two options.

Option 1: Coffee shop
The coffee shop would provide hot drinks that customers could take away and drink elsewhere. It would also sell some bakery items, such as biscuits and doughnuts. There are four other shops selling takeaway hot drinks and bakery items in the city, as well as five cafés. Thomas thinks that the profit margin would be 6% to 8%.

Option 2: Sandwich shop
The sandwich shop would make sandwiches using job production. Customers can choose from a range of sandwich fillings, as well as cold drinks and snacks. There is only one competitor in the city. It is a well-known international franchise that spends a lot of money on promotion. Thomas thinks that the profit margin would be 10% to 15%.