Understanding Markets and Customers (AQA AS Business): Exam Questions

BZT Ltd

Dean Beacon runs a family electricals business, BZT Ltd. BZT Ltd sells computers, mobile phones and household electrical items from its 15 high street stores. The stores are in prime, central locations which leads to high rent payments. BZT Ltd holds all of its inventory at its stores.

Recently BZT Ltd has received poor online reviews. Dean knows online reviews now play a large part in how many customers choose a retailer. The poor reviews were due to BZT Ltd quickly selling out of products. Dean is considering holding more inventory to prevent selling out. There is a long lead time when BZT Ltd orders these products. The suppliers offer significant discounts for large orders. Currently BZT Ltd does not get these discounts as it only orders 70% of what is needed to qualify for the discount.

Dean is concerned that profits fell in every one of the last three years. BZT Ltd’s competitors are now increasingly online only. Dean has carried out the following research comparing BZT Ltd to online competitors.

Table 1 Dean’s research

BZT Ltd is the only retailer in the market that provides a free three-year support service with every item. The business needs specialist staff to provide this service.
The support provided includes:

• setup

• installation

• cover of any repair costs for three years.

BZT Ltd spends 10% of its marketing budget advertising this support service and spends over 70% promoting its traditional price match promise. The price match promise means that BZT Ltd will always lower the price of any product to match that of any competitor offering the same product. Dean believes the business is widely recognised for its price match promise which it has offered for over 50 years.

Dean has discovered the fastest-growing demographic in the market is the over 60s. The over 60s now account for over 30% of sales. Dean has carried out the following additional research on the market

Table 2 Market research

Horizons Ltd

In 2010, Yusuf set up his own accountancy business, Horizons Ltd. Yusuf had previously been a successful manager in a large accountancy company.

Currently, Yusuf has 18 employees, all of whom report directly to him. Yusuf tells his staff to check all important decisions with him; he says this is because one wrong decision could be costly for the business both financially and in terms of its reputation.

As the business has grown, Yusuf has had to work longer hours. He is finding this workload a strain and recently had time off with stress. This delayed the completion of some jobs and Horizons Ltd had to charge some of its clients less for this accounting work as a result.

To try to increase revenue, Yusuf has recently decreased prices. Horizons Ltd now charges around 10% less than rivals. The business also spent £45 000 for the year on the promotional mix; £35 000 of this was on print advertising such as newspapers and £10 000 a year on social media advertising.

Yusuf’s team is made up of newly qualified accountants. Staff morale is very low. The productivity of the staff is lower than at several rival businesses despite the fact that they are paid 8% more than the industry average. Many staff feel they are unable to use their initiative and that they have little responsibility. Labour turnover is high at the business.

Yusuf has recently hired a management consultant to look at how he can improve the performance at Horizons Ltd.

The consultant:

• has produced some analysis of the forecasted effectiveness of print and social media advertising for Horizons Ltd (see Figure 2 and Figure 3)

• has estimated that the price elasticity of demand for Horizons Ltd work is –0.3.

The consultant has also produced a plan for a new organisational design in which she recommends that Yusuf:

a) recruits three new managers from outside of the business to manage six staff each
b) delegates to these new managers much of his day-to-day work.