Graham has played guitar ever since he was at school. At an early age, Graham formed a rock band with his friends and played several gigs at venues in his local area, which were sell outs. His passion for music led Graham to study music at college and then become a guitar teacher. As a teacher, Graham would travel to his customers’ houses and charge £15 for a 30-minute lesson.

Graham always possessed strong communication skills and as a result built up excellent relationships with all his customers. Due to the quality of his teaching and his hard work and determination in making his business succeed, Graham found that he was often turning customers away, particularly customers who were looking for after school lessons.

At present, Graham works five hours each weekday evening and eight hours both days at the weekend. He does however, have to allow 60 minutes out of this time for travelling each day, where he is not paid.

1. Identify two personal characteristics that Graham shows as an entrepreneur (2 marks)

2. Calculate the weekly revenue of Graham’s Guitars. State the formula for revenue and show all your workings (5 marks)

Graham has recently been thinking about expanding his business, as he is turning more and more customers away. He believes he could increase his revenue significantly if he opened a shop. The shop would be fitted with three private rooms for music lessons and would also stock guitars, plus other musical instruments and music for his customers to buy.

Graham currently operates as a sole trader and is worried about the cost of setting up a shop on his own.  He has however been approached by one of his college friends, Jim, who is also just starting out as a music teacher. Jim has been playing in bands since leaving college and is able to play both guitar and drums. He has savings of £50,000 which he would be willing to invest in a business, in contrast to Graham who has savings of £10,000.

3. Graham has decided to open the shop. In making this decision, he is considering whether he should:

• Remain as a sole trader
• Go into partnership with Jim

Recommend which is the best option for Graham to take. Give reasons for your advice (9 marks)

Firstmark Ltd is a well-known high street favourite with its target market of young, fashion-conscious under 35s. Its stores are stocked high with clothing and shoes for all age groups, as well as beauty and home products. Its main success lies with selling up-to-the-minute fashion goods, at very low prices. Styles change quickly, in fact every few weeks, to keep customer interest and to encourage repeat purchases. Firstmark chooses to sell its products, which it receives from its suppliers, only through stores, rather than using e-commerce, unlike many of its competitors. The business does have a website, but this is used by customers to look at stock rather than to buy.

The firm was formed in 1969, with its first store opening in Dublin. Four years later the business expanded into the UK and in 2006, expanded into Europe. The business currently has 290 stores across the UK, Ireland, Europe and USA. Last year, the business made a profit of £673 million, which increased by 2% from the year before.

1.  Explain the channel of distribution that Firstmark uses in its business (2 marks)

2.  Explain how the objectives of Firstmark have changed over time (4 marks)

In the past, Firstmark experienced a large amount of negative publicity, as the suppliers that the business used to produce some of its products were reported to have used child labour. Other press reports suggested that a SOS note was found in a Firstmark garment. The note explained how employees worked for 15 hours a day, in very poor conditions.

As a result of these claims, Firstmark reviewed its objectives. The business now has a clear focus on both environmental and ethical standards. Regular checks are made by Firstmark employees to ensure that products are made in good working conditions and that people employed by the suppliers are treated decently and paid a fair wage. Last year, Firstmark invested in 2,629 factory inspections to ensure that its environmental and ethical standards were kept to. 

3. Analyse the impact of Firstmark’s decision to focus on more ethical and environmental objectives. In your answer you should consider:

• the impact on shareholders
• human resource implications

You must evaluate which area will have the biggest impact. Use evidence to support your answer (12 marks)

Connections plc is one of the world’s leading mobile communication companies and employs 108,000 staff in total. 13,000 of these staff are based in the UK.

The business was founded in 1984 in the UK and now has its global headquarters in London and its UK headquarters based in Newbury. Both offices take a centralised approach to decision-making.

The business operates over 500 UK stores, which has grown from 357 stores 2 years ago. The firm’s continued success and growth has been linked to the UK being part of the EU, with the freedom of movement of people, capital and goods, as well as a single legal framework.

1. Calculate the percentage of Connections’ total staff that are employed in the UK. Show all your workings. Give your answer to two decimal places  (2 marks)

2. Explain why Connections would take a centralised approach to decision-making (4 marks)

Connections, alongside many other companies based in the UK such as easyJet, has expressed its concern about keeping its headquarters in the UK, after the British general public voted to leave the EU. The majority of the firm’s 462 million customers and 15,000 suppliers are based outside the UK. Last year, 55% of Connections’ total profits came from European business, excluding the UK. The UK contributed only 11% to the firm’s total profits.

The company is currently considering its future location decision for its global headquarters, which employs approximately 500 staff. Connections is currently unsure how exactly the UK’s exit from the EU will impact the firm. The business has made a commitment to operate in the best interest of its stakeholders. In order to keep to this promise, the firm has a big decision to make in the future.

3. Analyse the impact on Connections of moving its global headquarters outside of the UK. In your answer you should consider:

• financial implications
• human resource implications

You must evaluate which area will have the biggest impact. You must use evidence to support your answer (12 marks)

Sasha had always shown a natural talent and passion for art ever since she was young.  Over the last three years, Sasha had studied an art degree at her local university, whilst living at home rent free with her parents. Having successfully completed her course and gaining top marks, Sasha was now thinking about her future career. As Sasha loved painting and was lucky enough to live beside the sea in a very popular tourist spot, she decided to hand paint pictures of the local area and sell them at the seafront on a mobile market stall.

From the start, Sasha made the decision to use job production. She decided to paint two different sized pictures to keep her pricing simple. However, each of her paintings would be unique, of a local scene and would be individually signed.

1. Identify two pricing methods that Sasha could use to price her paintings (2 marks)

2. Explain one benefit to Sasha of choosing job production to produce her paintings (4 marks)

After successfully trading from her market stall for the last year, Sasha decided that she wanted to move into her own shop and create an art gallery of her work, where she could paint and sell her paintings at the same time. She found a suitable location, on the seafront, but the rent was expensive and amounted to £36,000 per year.

Due to her low living costs, Sasha had managed to save a considerable amount of cash over the last year. She had also built up a reputation in the area and appeared in many local tourist magazines. As such, Sasha’s trade was increasing. She calculated in October that she made £3,000 in sales revenue, when she opened her market stall just at the weekends.

3. Sasha has been advised by her parents that she should draw up a business plan to help her in the development of her new store.  

Recommend whether Sasha should draw up a business plan. Give reasons for your advice (9 marks)

After George was made redundant from his manager’s post at a large garden centre chain, YesBlooms, he decided to start his own gardening business, Green Fingers. George had always shown a keen interest in plants and gardening since he was at school and had dreamt of one day being his own boss. After receiving £15,000 redundancy payment for his 10 years service at YesBlooms, he thought this was the perfect opportunity to start his own business. He decided to invest the £15,000 into buying a small van and some basic equipment to get his business started.

At first George did not gain many customers, as he only placed a small advertisement in the local newspaper for one week and three well-established gardening businesses were already operating in the local area. However, the quality of his work, together with his excellent customer service, soon meant that an increasing number of customers were choosing George over his rivals for their gardening needs.  

1. Explain one reason why George chose to start his own business (2 marks)

2. Analyse the effect on Green Fingers of George providing excellent service to his customers  (6 marks)

Recently, George has been approached by many of his customers to complete larger gardening jobs, including landscaping and tree felling. Although George is skilled in landscaping, he is not qualified to cut down trees. He is therefore considering hiring an employee, who would already have the appropriate skills and qualifications to take on this work. The alternative would be for George to complete off the job training to become a tree surgeon. He has found a suitable course which would last 6 weeks and cost him £8,000. The course would be in a different part of the country and mean that George would not be able to work during that time. The average salary for George to employ a full time tree surgeon in the area would be £18,000 per year.

3. George is unsure of how to cope with the increased customer demand for tree felling. He is considering the following two options:

• employ a full time, already qualified tree surgeon
• complete off the job training himself to become a fully qualified tree surgeon

Recommend which would be the best option for George to take. Give reasons for your advice     (9 marks)

The indoor trampolining market is growing massively in the UK, with the number of parks increasing from just four, 18 months ago, to 100 today. An additional twenty parks are also in the process of being built throughout the country.

“Bounce In” is just one of the many businesses that have entered this market. A year ago the business opened it first park in Slough, a large site which consists of 100 interconnected trampolines, with other activities such as bouncing dodgeball, a huge foam pit and tumble tracks on offer. The firm’s success in Slough resulted in the business being able to open a new park in Warwick, a few months ago.

Bounce In is once again looking to open a third site in Solihull, located 15 miles from Warwick, with a population size of 210,000 people. The firm’s finance manager has been reviewing the numerical data related to this proposed decision. He expects the Solihull site to cost £1.5 million in startup costs, but he also expects to make an extra profit of £1,125,000 each year for the next 5 years from this investment.

1. Bounce In currently serve on average 7,500 customers per week at its Slough location with an average customer spend of £10. Calculate the annual sales revenue for the Slough site. State the formula for revenue and show all your workings (3 marks)

2. Calculate the average rate of return if Bounce In expand into Solihull. State the formula used and show all your workings (5 marks)

The management team at Bounce In have decided to make the decision and expand into Solihull, having conducted only a very limited amount of primary and secondary research. The marketing manager, however, has expressed his concerns about the decision, suggesting that the business should carry out more research before a final decision is made. The rest of the team however, believe that due to the threat of competitors entering into locations where there are currently no trampolining parks, and the high potential returns on  investment, it was more important to enter areas as soon as possible rather than waiting. The team had found out that in the city of Hull (population size of approximately 250,000 people) that three different trampolining parks had opened in close proximity to each other, over the course of the last twelve weeks.

3. Recommend whether Bounce In should conduct more detailed market research before entering the market in Solihull. Give reasons for your advice (9 marks)

“Cleaning up the Market Ltd” was set up five years ago in response to the ever-increasing demand for home cleaning services. From the start, the company decided its unique selling point would be to focus on providing a quality cleaning service, rather than charging very low prices. A named cleaner would be allocated to every customer and the cleaning materials used would also be environmentally friendly. This approach has been very successful and has enabled “Cleaning up the Market Ltd” to quickly gain and retain customers in its local area. As a result, the business employs over fifty part-time employees.

1. Explain one benefit to a business of having a unique selling point (2 marks)

2. Explain one way “Cleaning up the Market Ltd” could use sales promotion in order to gain more new customers (4 marks)

“Cleaning up the Market Ltd” is concerned with Britain leaving the European Union that the economy could suffer. This might lead to an increase in unemployment and, with more people staying at home, demand for its services would fall.

In order to broaden its product portfolio, the company is now considering widening its range of customers, by aiming to win contracts to clean hospitals, schools and office blocks. This type of work would require large increases in the number of staff the business employed and a price charged that would be much lower than its usual pricing. These changes however, would be seen as essential if “Cleaning up the Market Ltd” was going to enter this market successfully, due to the cleaning market for such organisations being extremely competitive.

3. Analyse the impact on “Cleaning up the Market Ltd” of broadening its product portfolio by expanding its cleaning services into hospitals, schools and office blocks. In your answer you should consider:

• marketing implications
• financial implications

You must evaluate which area will have the biggest impact. You must use evidence to support your answer (12 marks)