Business Choices (Edexcel A Level Business): Revision Note

Do not confuse opportunity cost with a sunk cost. Opportunity cost is the value of the next best alternative given up when a choice is made; a sunk cost is money already spent that cannot be recovered, and it should not influence future decisions. Examiners often reward students who can correctly tell the two apart in an evaluation

Pulse Sports

Pulse, a mid-sized sportswear manufacturer, chose to spend its annual budget upgrading its running shoe range rather than developing a new yoga mat product, giving up the opportunity to enter the yoga market that year

A major supermarket then offered Pulse a large supply contract at a low price - accepting would have meant losing its more prestigious independent sports shop customers, so Pulse turned the contract down

To launch its new shoe range faster than a rival, Pulse skipped a full round of market research, accepting the risk that some features might not fully match what customers wanted

The founders also debated whether to convert Pulse from a partnership into a private limited company; remaining a partnership meant giving up easier access to the finance a company structure would provide

Pulse chose to sponsor a rising athletics team rather than run a national radio campaign, giving up the wider reach of radio for a more targeted, emotional connection with fitness-focused customers

Finally, Pulse adopted a competitive pricing strategy to match rivals, accepting that this meant giving up the higher short-term profits a price-skimming strategy might have delivered on its new range