Stakeholders in a Business (Cambridge (CIE) A Level Business): Exam Questions

Charlie’s Chocolates (CC)

CC is a large public limited company that manufactures a wide range of chocolate bars. Production takes place in low wage countries so that costs can be kept low. CC has suffered recently from poor publicity due to the high levels of sugar used in the production of its chocolate. A national newspaper has recently published an article about how CC exploits employees in low wage countries. The Marketing Director, Alan, is aware of recent trends showing that consumers are becoming more ethical in their buying decisions. He thinks this might explain why sales decreased by 10% last year.

He has asked to meet with the Managing Director, Ikram, to discuss a major change towards more ethical production methods. This could mean re-locating production back to the home country. This will increase costs and involve the recruitment of additional employees. In response to recent Government guidelines to improve health, Alan wants to decrease the amount of sugar used in the chocolate bars.

Alan is also thinking about the financial accounts for this year that he received this morning from Ikram (see Table 1 and Table 2).

Table 1 – Extract from Income Statement

Table 2 – Extract from Statement of Financial Position

With sales declining from last year, Alan has to think carefully about the next steps for marketing. He knows that the product range is of good quality – the problem is the poor image of the company. For example, he is aware that a local consumer group is trying to organise a demonstration outside one of CC’s factories in the next few weeks.

Farm Produce (FP)

FP is a primary sector co-operative made up of six farms in country G. Each farm grows a range of fruit and vegetables. FP employs 26 workers across the farms and distribution centre. Each farm transports its fruit and vegetables to the distribution centre where they are packaged and sent to customers’ homes. Table 1.1 contains data about the farming industry in country G.

Table 1.1: Data about the farming industry in country G

FP’s customers pay for a box of seasonal fruit and vegetables that is delivered each week. Data about the different box sizes sold by FP is shown in Table 1.2.

Table 1.2: FP’s cost and price data

FP is concerned about the profitability of the small box size. It believes it should stop selling this product.

Tin Mines (TM)

TM is a private limited company in the primary sector. Tin is found underground and is extracted by mining. TM operates seven mines in country C. There are several job roles at each mine including skilled engineers, managers and miners.

TM has recently discovered a new source of tin in a remote area of country C. TM has permission to develop a tin mine but will have to construct transport links. It will need new buildings such as offices, warehouses and employee housing. The Human Resources Director is developing a workforce plan to recruit miners and managers for the new mine.

TM’s Financial Director has produced a cash flow forecast for the new mine for the next five years. This is shown in Table 2.1.

Table 2.1: Cash flow forecast for the new mine ($m)

The remote area of country C where the new tin mine will be located has a high level of unemployment and average incomes are low. TM intends to recruit employees from the local area and buy resources from local suppliers, if they are available. The market for tin is likely to be affected by increased demand for electric vehicles. The batteries in electric vehicles contain tin. The government of country C believes that the tin mine will be of great benefit to both the local community and national economy. However, tin mining can result in pollution of local water supplies.

Energy Solutions (ES)

ES is a public limited company in country X. The business was set up in 1980. For 25 years most of ES’s revenue came from coal mining. Although ES still owns many coal mines, the business now specialises in hydraulic fracturing, known as fracking. This is a process used to extract gas from underneath the ground.

The government of country X encourages firms like ES to grow. The growth of ES has led to economies of scale and lower unit costs.

ES considers the effects of fracking on all the stakeholders of the business. Fig. 1.1 is an extract from a recent newspaper article about fracking.

Fig. 1.1: Extract from a recent newspaper article about fracking

Despite the complaints from some external stakeholders, ES plans to increase the number of fracking sites in country X. This will require ES to buy licences from the government of country X. Each licence costs $50m and ES will require both internal and external sources of finance to fund this purchase.

ES employs over 1000 people. Every worker benefits from a profit-sharing scheme (see Table 1.1) as well as their basic pay.

Table 1.1: Profit-sharing scheme at ES