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

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%.

Kiln (KL)

Priya worked for twelve years as a secondary school art teacher in country X. She has always made handmade ceramic tableware in her spare time and sells it at local craft markets. Last year she decided to leave teaching and set up Kiln (KL) as a sole trader, producing handmade plates, bowls and mugs to sell to homeware shops.

Priya has $18,000 in personal savings. She estimates that KL needs $45,000 before it can begin trading, as shown in Table 1.1. She approached two banks for a loan. Both refused, saying that KL has no trading record and no assets to offer as security.

Table 1.1: KL estimated start-up costs

The homeware market in country X is dominated by three established manufacturers. The largest holds 40% of the market and supplies plates to retailers at $12 each. Priya has calculated that KL's cost of making one plate is $9.

Before KL can begin production, its workshop must pass a safety inspection. Priya has been told that the certification process usually takes about four months.

Priya is confident about the quality of her designs. However, she has no experience of pricing, managing cash flow or negotiating with suppliers. A friend has advised her to write a business plan before going any further.

Lattice (LT)

Lattice (LT) is a private limited company based in country Y. It was founded fourteen years ago and now employs 320 people. LT develops software that helps delivery companies plan their routes.

Almost all of LT's income comes from a single product, RouteMaster, which was launched eleven years ago. Two competitors have released newer route-planning software in the past eighteen months, and several of LT's customers have asked why RouteMaster has changed so little.

Table 1.1: LT selected data

Several of LT's software developers have suggested ideas for new products, but they have no time to work on them because they are fully occupied maintaining RouteMaster for existing customers.

LT's Managing Director, Anika, wants to encourage intrapreneurship. She has proposed that every developer is given one day each fortnight to work on their own project, and that LT sets aside an annual fund of $200,000 to develop the most promising employee ideas.

LT's Finance Director disagrees. He estimates that the lost development time would cost LT around $900,000 each year, and points out that most employee ideas never become products that customers will pay for.

Thread (TH)

Thread (TH) makes school uniforms in country Z. It was set up four years ago by Mariam, who had spent nine years working as a buyer for a large clothing retailer.

While working as a buyer, Mariam noticed that schools in her region were paying high prices for uniforms imported from overseas. She believed the same garments could be made locally for far less. She left her job, invested $30,000 of her own savings, and formed a partnership with her sister, who contributed a further $20,000.

Mariam rented a small factory unit and bought twelve industrial sewing machines. She recruited 60 workers from the local area, most of whom had never used industrial equipment before, and trained them herself over three months. She also negotiated directly with a fabric mill in a neighbouring country, cutting out the wholesalers that her competitors use.

TH now sells a hard-wearing cotton blend that Mariam developed with the mill. Schools report that the uniforms last around a year longer than the imported ones they replaced.

Table 1.1: TH selected data

Mariam is now considering whether TH should begin supplying schools in a neighbouring region.

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.

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%.