F242/CS. APPLIED BUSINESS Understanding the Business Environment ADVANCED SUBSIDIARY GCE. Tuesday 11 January 2011 Morning CASE STUDY

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1 ADVANCED SUBSIDIARY GCE APPLIED BUSINESS Understanding the Business Envirnment F242/CS CASE STUDY *OCE/36194* Tuesday 11 January 2011 Mrning Duratin: 1 hur 30 minutes INFORMATION FOR CANDIDATES This is a clean cpy f the case study which yu shuld already have seen. Yu shuld refer t it when answering the examinatin questins which are printed in a separate bklet. Yu may nt take yur previus cpy f the case study int the examinatin. Yu may nt take ntes int the examinatin. This dcument cnsists f 8 pages. Any blank pages are indicated. INSTRUCTION TO EXAMS OFFICER / INVIGILATOR D nt send this case study fr marking; it shuld be retained in the centre r destryed. [M/102/8208] DC (LEO) 36194/2 OCR is an exempt Charity Turn ver

2 2 Fd 4 Thught Ltd (F4T) A winner! The credit crunch has seen many lsers but sme winners. The wner f Fd 4 Thught Ltd (F4T), Jeremy Green, is ne f the lucky nes. Situated in a picturesque village n the utskirts f Birmingham, F4T has seen its sales sar by 20% ver the last tw years. Starting ut as a sle trader, Jeremy always had a visin f prviding lcal custmers with fresh prduce. This visin was made pssible by changes in lifestyle as the general public became mre cncerned abut where their fd riginated (see Appendix 1 and Appendix 2). Indeed, sme fd critics believe that we are literally eating ur planet t death! F4T s prduct range was small t start with, mainly cmprising lcal prduce frm its wn farm. F4T prides itself n its rganic and free range fds; frm seasnal fruits and vegetables t dairy prducts and meat. Due t lw verheads, F4T s prices are very cmpetitive, even when cmpared with the big fur supermarkets in terms f their rganic and free range gds. The custmer base at F4T has expanded rapidly, frm lcal residents t thse in the surrunding areas. The rad ahead Jeremy cannt believe hw much the business has grwn frm its rigins f selling his wn farm s fd in a disused barn, t a well-stcked ethical fd stre, albeit in the same building. He is certainly glad that he dismissed the pprtunity t becme a franchisee f a chain selling similar prducts, even thugh the idea seemed very tempting when he first started t expand the business. This led him t turn the business int a private limited cmpany (see Appendix 3). Maybe ne day, Jeremy thinks, he might be able t franchise his business ut t ther retailers, r flat F4T n the Stck Exchange his ultimate gal! F4T s rapid grwth has brught with it the need fr an expansin plan. The existing building is cramped, with prduce piled dangerusly high. Custmers have t fllw a ne-way system in the stre t avid bumping int each ther. The queue at the till is beginning t make custmers irritable. Jeremy des nt want t upset these custmers, many f whm are his friends and lyal, familiar faces, wh d their weekly shpping at F4T. The mst bvius and ecnmic way t expand wuld be t build an extensin nt the existing barn. This wuld enable Jeremy t display F4T s prducts mre effectively and give the fruit and vegetable sectin a mre pen and welcming lk. Tw mre tills culd be included, in additin t the existing single ne, t serve custmers mre quickly. Expansin csts With this visin in mind, Jeremy started t wrk ut the budgets which he wuld need t allcate fr the building wrks. He discvered that there are different types f budgeting and that budget figures are nt always abslute. The cheapest qute fr building the extensin is Redesigning the fruit and vegetable sectin and the prvisin f new shelving and redecratin wuld add a further New tills culd be bught nline fr each, plus delivery. On tp f all this capital expenditure, tw mre cashiers wuld have t be emplyed n minimum wage. Jeremy estimates that the new average wage bill alne wuld be a mnth. With a bigger building wuld cme higher verheads. Insurance premiums wuld increase. Heating and lighting wuld cst mre, especially after the increase in the cst f gas and electricity supplies in the last three years

3 3 The building wrks are estimated t take apprximately three mnths t cmplete. Jeremy is hping t be able t cntinue trading thrughut the prcess in rder t minimise the lss f revenue. Hwever, he anticipates sales t be affected during the three mnths due t the disruptin caused by the cnstructin. Althugh F4T has been ding exceptinally well and there is sme retained prfit in the business, this will nly partially cver the expansin csts. Jeremy wuld have t find the additinal funds frm ther surces. Lve thy neighburs Being an ethical retailer, Jeremy cares a great deal abut the impact f the expansin n his neighburs and the envirnment. He is cnscius f the pssibility f an increase in the vlume f lcal traffic and nise caused by the additinal custmers. He wuld have t have a prper car park built; Jeremy made a mental nte t add this t the cst f the expansin. Is planning permissin needed fr the car park? He knws that he certainly needs planning permissin fr the extensin. Mre imprtantly, he wuld have t carry ut a survey t find ut hw the lcal cmmunity feels abut the expansin. The Internet generatin Having tw teenage sns, Jeremy realises the imprtance f nline shpping. It is ne f the cheapest ways f reaching a wider custmer base. This bth excites and wrries Jeremy, whse ICT skills d nt extend beynd wrd prcessing. Develping a website is ne f the many tasks which Jeremy knws he needs t priritise. His sns have lng urged him t explre the pssibility f cmputerising sme f the day-t-day running f F4T in rder t save time. The future is full f pprtunities, but at what cst? SWOT, PEST r SLEPT? Michael, Jeremy s eldest sn, is studying business at a lcal cllege. While Jeremy understands what a SWOT analysis is, he has never heard f PEST r SLEPT analyses. Michael is adamant that all three marketing tls are equally imprtant. Each examines a business and its envirnment frm a slightly different perspective. Maybe yu can lk at PEST and SLEPT fr me Michael, I have enugh t wrry abut as it is, said Jeremy. Michael replied, If yu dn t understand anything Dad, just search fr it n the Internet. Alright Dad, I ll have a g fr yu this time. Dn t say I dn t cntribute at all in this family! Turn ver

4 4 Appendix 1 Ethical fd sales t break 2bn barrier Sales f ethical fd gds will hit 2bn this year as cnsumers try t shp with a clear cnscience, accrding t a recent reprt ut tday. Spending n Fairtrade, free-range and rganic prducts has sared by 62% since 2002, research analysts Mintel said. The huge increase in demand fr rganic fd has led t shrtages in rganic milk and beef, and prmpted cncerns that prducers are under pressure t lwer their standards in rder t meet supermarket rders. Hwever, Mintel said the ethical sectr, which includes prduce frm farmers markets and the RSPCA s freedm fd scheme, was n track t becme even bigger. It predicted that Fairtrade prducts, the sectr s star perfrmer with expected sales f 230m by the end f this year, wuld enjy a further 138% grwth ver the next five years, pushing annual sales t arund 547m. Mintel said the rise in sales was driven by increased dispsable incmes and changing custmer attitudes. Mre than ne-third (34%) f cnsumers nw bught Fairtrade where available, cmpared with 26% in 2002, it said. And 40% chse free-range prducts whenever they can, up frm 33% in Mintel said arund 70 new ethical prducts were launched in the UK alne last year, up frm 25 in 2002.

5 5 Appendix 2 What are fd miles? Half the vegetables and 95 per cent f the fruit eaten in the UK cmes frm beynd ur shres. Thanks in part t cncerns abut climate change, mre peple are stpping t cnsider the impact which everyday gds including fd have n the envirnment. Fd miles, the distance fd travels frm field t plate, is a way f indicating the envirnmental impact f the fd we eat. Increasingly, it arrives by plane air travel is ne f the frms f transprt which gives ff the mst CO 2. Agriculture and fd accunt fr nearly 30 per cent f gds trucked arund Britain s rads and, accrding t a Gvernment reprt in 2005, the resulting rad cngestin, accidents and pllutin cst the cuntry 9bn a year. Turn ver

6 6 Appendix 3 The Leader Supermarkets franchise includes the fllwing: Full training which is bth ffice based and n the jb. This cvers all aspects f running a Leader Supermarkets franchise Trading under the Leader Supermarkets brand name An exclusive territry fr yu t trade in Permanent nging head ffice supprt in all aspects f running yur Leader Supermarkets business Cmplete shp start-up package which includes: stck cmputer system and sftware including stck cntrl shp signage flring racking shp cunter fridge freezer Leader Supermarket unifrms plastic shpping bags scales initial marketing and advertising launch Full training n ur cmpany, peratins, prducts and all aspects f running yur wn Leader Supermarkets franchise Operatins and resurce manual A dedicated and integrated web presence and 500 letterheads 500 envelpes 5000 leaflets

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