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Business and it’s Environment Solutions Paper 2

Role of the Entrepreneur 💡

(c) Analyse two qualities that Gordon will need to be a successful entrepreneur.

Creative so he can form a brand identity for his cafe that is different from the three other cafes in city Z. To be successful customers must be willing to try his new cafe. Rather than copying his competitors, he can offer a cafe experience that is superior, through better service, better food, branding or any other USP.

This means that and he can build his own customer base by tempting shoppers away from the other cafes and restaurants in city Z, building a steady revenue stream.

Determined, to overcome set backs when his cafe gets a bad review or he has problems with his cafe staff. if Gordon is not determined and resilient he won’t be able to deal with these set backs and stay focused on his business aims, meaning his cafe won’t survive.

However, determination will mean Gordon has a much greater chance of  long term success and not join the millions of startups which fail every year as their owners don’t have the resilience to carry on when they are faced with multiple challenges.

Other Acceptable Answers:

Risk-taking – Gordon will be taking risks in setting up his restaurant. 

Confidence – Gordon needs to have confidence that he will make good decisions when setting up his new business.

Ability to make decisions – and judgement to make the right decisions.

Self-starter – Gordon will not have a boss in his new business so needs to motivate himself and use his own initiative.

Legal structures 💡

(d) Evaluate the likely impacts on the local community if EFF changes from a co-operative to public limited company. [11]

A PLC can sell shares so EFF can gain more capital. It could use the capital to train more local fishermen and it can use the capital to buy the local fish packing factory. This means that more people from the local community will be employed in the factory. As a result, there will be more money in the local economy and living standards for the local community would rise.

A PLC’s main business objective is profit maximization.   To increase profits, the prices of fish may be increased.  The rise in the price of products will impact the local community, especially the poorest, as they will be unable to buy as much and food is a necessity. This may lead to local people buying less healthy food and the local community may have more health problems as a result.

The impact on the local community will be positive as the capital invested will allow expansion and an increase in local employment for the local community, which is main objective in the mission statement. Although prices may rise many more local people will have income which will have a more positive impact on the local economy than lower prices with less employment.

Other Acceptable Answers:

Customer focused business – will it alienate their customer base

Culture of a PLC very different to a co-operative

Will it affect working relationships

Not all members agree so already causing conflict

Could provide finance for the expansion and no interest to pay

Would have to appoint Board of Directors – may cause disagreement among members

Measurements of business size 💡

b (ii) Explain one suitable way, other than market share, to measure the size of F5G. [3]

Revenue

As F5G charges it’s customers on a monthly basis.

It can compare it’s monthly or annual revenue against the revenue of it’s competitors, NN and CC

Other Acceptable Answers:

DANGER – Profit is NOT a measurement of business size​
Customer base​
Market Cap – value of shares​
Coverage – how many customers can access the services​

The Importance and Influence of Stakeholders on Business 💡

(d) Evaluate the likely impact on the stakeholders of AA of the planned expansion. [11]​

Isabel the owner will need to find the capital, for example, a loan, to finance the expansion of ​ the new production line​. She will have to recruit and train more workers, pay for the rent for the additional land and invest in machinery for the production line​. This will increase costs in the short term and mean the profit Isabel receives may be reduced as a result.​

However, in the long term, Isabel will have a strong positive impact from expansion once the expansion costs have been repaid. She will be able to sell more avocados gain more profit and strengthen long term growth strategy by also distributing to retailers. ​

Employees may feel greater job security​ in their jobs on the packing and sorting on the production line.​ If the business is expanding this reassures them that AA is profitable and will not make them redundant in the future. ​


Furthermore, the expansion may lead to opportunities for promotion if Isabel needs factory supervisors or training staff for the new employees.​

Therefore the expansion will have much less impact on employees as a stakeholder group compared to the owner. ​

As only 4 new workers will be required on the production line this means it will mean promotion for only one current employee, so most employees won’t be impacted as a result.  ​

Other Acceptable Answers:

• Local community–noise and traffic caused by construction of production line​
• Customers – could face higher prices due to the additional repayment costs 
• Competitors – AA’s expansion means they may lose customers​
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Past Paper Business Exam Guide