Spotting a Business Opportunity (Edexcel GCSE Business): Exam Questions

Aphrodite is a clothes shop that was formed in 1994 by two brothers, Andrew and Duncan McKenzie. They opened the shop because they had a lifelong enthusiasm for new fashion.

Andrew and Duncan visit Paris, Milan and London each year to buy their stock. They aim to buy well-known brands, such as Stone Island and Hugo Boss, and to also stock clothes from new designers. This range of stock helps provide them with an advantage over their competition.

Customer service has always been an important part of Aphrodite’s success. A polite and friendly attitude greets all customers on arrival at the shop. In 2007 the business launched its website, which sells its range of clothing using e-commerce. The owners looked to maintain existing high standards of service for customers using their website.

A new opportunity was created when the shop premises next to Aphrodite became available to buy. Andrew and Duncan are considering buying the shop in order to convert the two shops into one large premises. They have calculated that this will cost them £250 000 but are undecided on the best way to finance this.

Figure 2 shows information about interest rates that might help them when making their decision.

Figure 2

Aphrodite is a clothes shop that was formed in 1994 by two brothers, Andrew and Duncan McKenzie. They opened the shop because they had a lifelong enthusiasm for new fashion.

Andrew and Duncan visit Paris, Milan and London each year to buy their stock. They aim to buy well-known brands, such as Stone Island and Hugo Boss, and to also stock clothes from new designers. This range of stock helps provide them with an advantage over their competition.

Customer service has always been an important part of Aphrodite’s success. A polite and friendly attitude greets all customers on arrival at the shop. In 2007 the business launched its website, which sells its range of clothing using e-commerce. The owners looked to maintain existing high standards of service for customers using their website.

A new opportunity was created when the shop premises next to Aphrodite became available to buy. Andrew and Duncan are considering buying the shop in order to convert the two shops into one large premises. They have calculated that this will cost them £250 000 but are undecided on the best way to finance this.

Figure 2 shows information about interest rates that might help them when making their decision.

Figure 2

On Your Bike is a family owned business that first opened in London in 1983. Its customers include children buying their first bikes and scooters, through to experienced enthusiasts in road cycling and mountain biking.

The business offers a wide range of bikes, many imported from abroad. These include high quality brands such as Brompton, Cannondale and Ridgeback. It also stocks a wide range of clothing and helmets including brands such as Endura and Altura.

On Your Bike has large workshop facilities in its shop where qualified mechanics maintain and repair all makes of bike. All mechanics go on regular training courses to ensure they keep their skills and knowledge up to date with the latest cycling technology. This allows On Your Bike to offer exceptional customer service and advice.

The cycling market has grown over recent years. Market research has shown that an increasing number of tourists like to rent bikes when on holiday. In response to this, On Your Bike operates one of the largest bike rental services in London. Bikes can be hired by the day or week with a choice including road and electric bikes.

Figure 2 shows a customer review from a comparison website.

Figure 2

Sports Tours Ltd was established in 1989 and is one of the leading online specialist sports tour operators in the United Kingdom. It arranges tours for teams to destinations in the United Kingdom and Europe in sports such as football, rugby, hockey and netball. The business not only organises travel, accommodation and meals, but it also arranges games and entry to tournaments for the sports team whilst on tour.

Sports Tours Ltd has very high standards. It carries out full risk assessments for all tours including possible pre-tour inspection visits. Tours are licensed and authorised through official agencies. All tours have regular contact with a member of staff from Sports Tours Ltd.

In recent years the business has faced increasing competition. This is not only from other sports tour operators but also from teams organising their own tours. Changing levels of consumer income and exchange rates have also had an impact on demand for tours by sports teams.

Sports Tours Ltd are confident that the high level of service they offer will help them to remain competitive. However, it is always looking for more ways to add value to its business activities.

Ripple is an energy company aimed at providing green and renewable energy to homes and businesses across the UK. It is the country’s first consumer-owned wind farm, generating green energy that does not have a damaging effect on the environment.

Instead of customers paying Ripple to supply them with energy, they become members of the business and buy a part of a wind farm located in a remote area of South Wales. Customers are then supplied with energy to their homes based on the amount of money they invested. The amount of money that customers can invest varies on their energy needs, but Ripple claims that it can supply energy cheaper than its competitors.

The process of becoming a member is very simple. Firstly, Ripple will ask customers a few questions to identify their energy needs. It will then create a green energy plan to establish how much each customer should invest into the wind farm. Ripple manages the wind farm and provides energy to each customer’s home or business.

Ripple’s business plan fits in with the UK government’s cleaner energy strategy. This strategy includes plans for the country to have net zero carbon emissions by 2050 and to create 220,000 new jobs in the green energy sector of the economy.

JD Sports plc is a multinational sports, fashion and footwear retailer based in the UK. It owns a number of brands including Footpatrol and Kukri. It has over 2,400 stores in 18 different countries. Most of its brands are targeted at the ‘athleisure’ market. This market consists of 16–24 year olds who choose to wear sportswear outside of the gym. It uses targeted online advertising to direct customers to one of its websites. It also sponsors UK boxing star, Anthony Joshua and Bournemouth football club.

In March 2019, JD Sports announced that it was taking over loss-making, rival sports footwear retailer Footasylum for £90.1 million. Footasylum, like JD Sports, had its headquarters in Greater Manchester and was started by an ex-JD Sports director, David Makin. Footasylum had 69 stores in the UK in similar locations to JD Sports. Footasylum also targeted the ‘athleisure’ market and used to sell identical trainer brands to JD Sports such as Nike, Adidas and Puma. JD Sports brands itself as the ‘King of trainers’, in an attempt to compete with main rival Sports Direct.

In July 2019, the Competition and Markets Authority (CMA) announced an investigation into the takeover. It was worried about the impact that the takeover might have on consumers and suppliers.

Figure 5 shows the percentage of customers the website www.jdsports.co.uk received from various social media websites in 2020.

In 2004, entrepreneur Mark Zuckerberg started Facebook. Then, in 2012, the company floated on the stock exchange and became a public limited company (plc). By 2020, Facebook plc had become the largest social networking website in the world with 2.5 billion users and advertising revenues of $70.1 billion. The company has used internal and external growth to expand. Between 2012 and 2020, Facebook purchased over 60 different companies, including WhatsApp, Instagram and the virtual reality company, Oculus. However, Facebook wants to reduce its reliance on revenue from advertising on its websites and sees its future growth coming from new markets such as selling virtual reality headsets. Facebook believes that social media is now reaching the maturity phase in its product life cycle in most of its main markets.

In 2020 Facebook decided to give employees in its European headquarters in Dublin the option to work from home. Facebook believes that remote working will not result in lower productivity. It also believes it will allow Facebook to attract talented people such as coders, graphic designers and software engineers who cannot afford to live in expensive locations such as Dublin. Facebook believes that having less office space will reduce costs and give the company a competitive advantage against its rivals such as Snapchat and Twitter.

Figure 5 shows the market share for each company in the virtual reality headset market in 2018 and 2019.

Cineworld plc is the UK’s largest cinema chain. It owns 127 multi-screen cinemas in a variety of city centre and out of town locations. Several sites have 4DX screens, which have seats that move ‘in sync’ with what is happening in the movie. In 2019, Cineworld had accumulated £2.3 billion of debt due to rapid external growth. Due to the global health crisis in 2020, the government forced a shut-down of all cinemas. Since re-opening in 2021, ticket sales at Cineworld cinemas have been low. The blockbuster movies that normally attract people to the cinema, such as ‘Spider-Man: No Way Home’, have been lacking in number and quality. Home streaming services, such as Apple TV and Netflix, have made visiting the cinema less attractive. These factors led to Cineworld making a £537 million loss in 2022, leaving the company close to failure. The Cineworld share price has fallen from over £3 in 2019 to less than 2p in 2023. The company needs cash to cover its loan repayments.

Rival cinema companies, such as Vue, have encountered similar problems and have reduced the price of a ticket to £6.99 to attract people back to watching movies at the cinema. However, Cineworld has so far refused to do this. It still charges £18.69 for its most expensive tickets.

Figure 4 shows the UK market share of the four largest cinema chains in 2016 and 2019.

Digital Allies is a private limited company. It supports clients to create marketing materials that can be used in a wide range of digital communications. This includes online advertising, web design, and digital data analysis to ensure clients are getting the most from their digital communications. It also offers training to businesses on how they could use social media and digital communication to improve their marketing.

The use of social media is something Digital Allies believes is becoming a major influence on how customers interact with businesses. It manages marketing campaigns across Facebook, Twitter, Instagram, Snapchat and LinkedIn. This allows its clients to target a wide range of consumers and to analyse these communications on social media to give businesses a competitive advantage over their rivals.

In February 2019, Digital Allies announced a three-year expansion plan which involved doubling its workforce to 40 employees and moving to new offices. The business believed that this move would allow it to employ people with the most up-to-date knowledge and to become one of the main digital marketing companies in the UK.

Figure 2: Number of social media accounts in the UK in 2019

Ripple is an energy company aimed at providing green and renewable energy to homes and businesses across the UK. It is the country's first consumer-owned wind farm, generating green energy that does not have a damaging effect on the environment.

Instead of customers paying Ripple to supply them with energy, they become members of the business and buy a part of a wind farm located in a remote area of South Wales. Customers are then supplied with energy to their homes based on the amount of money they invested. The amount of money that customers can invest varies on their energy needs, but Ripple claims that it can supply energy cheaper than its competitors.

The process of becoming a member is very simple. Firstly, Ripple will ask customers a few questions to identify their energy needs. It will then create a green energy plan to establish how much each customer should invest into the wind farm. Ripple manages the wind farm and provides energy to each customer's home or business.

Ripple's business plan fits in with the UK government's cleaner energy strategy. This strategy includes plans for the country to have net zero carbon emissions by 2050 and to create 220,000 new jobs in the green energy sector of the economy.

Table 4: Percentage of different energy types used to produce electricity in the UK

Performance Fitness Centre (PFC) is an independent gym and fitness studio. It has been open for seven years and has over 200 members. Members pay a fee of £39 per month for unlimited access to the gym and fitness classes that take place five days per week. Non-members can also pay to use the gym for each individual session they attend.

The gym at PFC is stocked with high specification equipment and weight machines. As a result, it has become very popular with customers interested in maintaining a high level of personal fitness. It has an equal number of male and female customers, but the owner has noticed that there is a lower number of members from people aged over 50. He believes that this may be because they feel out of place amongst the younger membership.

Over the past year a new gym that is part of a large national chain has opened nearby. It is much larger and membership fees at the new gym are only £19 per month. PFC has seen a reduction in new members joining the gym and is now considering what it can do to compete with its larger and cheaper rival. Its current members are loyal and enjoy the high quality offered at PFC.

Table 3: Percentage of the local population with a gym membership by UK region