Business Ownership (AQA GCSE Business)

Park Designs Ltd (PDL) is a family business that makes high quality wooden furniture to order. The Park family owns all the shares.

As part of its commitment to training, PDL run an annual team building day for all 72 employees which is good for staff motivation. The factory is closed for the day and the staff go off-site for the day. Group challenges are run which help develop team skills and improve communication.

“I loved the team building day, we had great fun and it was better than being at work for the day. However I am not sure how useful it was to my job in the admin department?” Sue, Admin department.

The production manager will retire soon. Like him, many of the production staff have worked at PDL for many years. They enjoy their work and most stay until they retire. Consequently, there are several possible candidates to take over as production manager, but none have management experience.

Customer reviews say that the furniture is made to a very high standard, however, they also suggest that the administration staff do not always deliver a good service. Complaints show that order processing is not always accurate. Recently, some customers have asked about the negative reviews when enquiring about possible purchases.

HelloFresh has experienced rapid growth and now has more than 1.45 million customers worldwide. In 2017 it became a public limited company and is now aiming to break even.

In the UK, the selling price for one HelloFresh meal is around £5 per person with a minimum order value of £34.99. In a 2017 survey 59% of people said they had never subscribed to a meal-kit delivery service because it was too expensive, however the target market for HelloFresh expect a high-quality product and this requires a certain level of cost. For example, HelloFresh work with local suppliers to source seasonal, fresh food and its meal-kits are packaged mainly using recycled materials instead of cheaper solutions which have a more negative impact on the environment.

HelloFresh focuses its marketing activity online, including social media, to advertise meal-kits to its target market. HelloFresh sometimes combines advertising with a sales promotion, such as 50% off your first box, to attract new customers to its subscription service. Marketing is very important to HelloFresh as it operates in an increasingly competitive environment. In 2018 one major competitor launched a TV advertising campaign costing £2 million. HelloFresh incurred marketing expenses of £140 million in 2016 which increased to £215 million in 2017.

Table 1: Adapted from HelloFresh Extract of Income Statement (Euros have been converted to pounds)

Eve is a sole trader. She owns and runs Style the Chic (STC). STC is a fast fashion website aimed at females aged 16–24. Eve started the business five years ago. She invested her £5000 life savings. The business made a profit of £450 000 last year.

Fast fashion means producing cheap clothes as quickly and as frequently as possible. STC works with reality TV celebrities that have a large social media following. The celebrities help design and promote a collection (range of clothing items).

STC has 30 employees. However, Eve makes all the major decisions in the business. She decides which products to order from suppliers and the selling prices. The buying team works with suppliers. Recently staff turnover in the buying team has increased.

Table 1 – Information on STC

Fone Ltd. produces ultra-thin mobile phone cases and accessories. The managing director Anita Wang started the business with her three brothers 15 years ago. Each of them provided £50 000 capital. Each member of the family has an equal number of shares. The brothers take no part in the running of the business. Fone Ltd. plans to spend £2 million introducing one new product and expanding the product range of the business. This expansion will be funded by a loan.

Two possible options to expand the product range are:

1. introduce car phone holders

2. introduce headphones.

The business will recruit a team leader for the new production department. Anita is keen to attract an experienced manager. The salary and benefits for the job are above average for the local area. She wants someone who can lead the new department effectively to ensure the success of the expansion.

Table 1: Extract of person specification for team leader’s job

Swim to Success (STS) is a programme that teaches young children how to swim through weekly lessons. It was developed by Jade Jackson, an ex-Olympic swimmer. Jade employs swimming instructors who deliver the programme using the pool facilities at gyms across the North East of England.

Information:

Jade set STS up as a sole trader because she wanted to make the key business decisions herself. Initially Jade used a bank loan as her main source of finance and secured the loan against her home which she owns. Jade would like to expand STS. However, she is struggling to raise the finance herself as her costs are still high. To help her manage financially Jade has arranged an overdraft on her business bank account. She relies on this to pay employees if the business does not have enough cash at the end of the month. Jade has recently received a letter from the bank explaining that interest rates on bank loans and overdrafts are going to increase.

John is a sole trader who owns a business called Adventures. The business was set up seven years ago to sell activity holidays in the UK. John has been a keen water-sports enthusiast for many years. He had been unhappy when working for a large insurance company. He therefore decided to set up Adventures. Adventures offers a range of activities, such as windsurfing, canoeing and surfing.

One holiday that Adventures sells is a weekend course where people can learn to windsurf. The business employs an instructor and books the hotel. This is then sold as a package holiday to customers.

Table 1: Cost information for a windsurfing weekend

John strongly believes that a successful business should be a sustainable business. Adventures will only book hotels that take responsibility for their impact on the environment by recycling and using renewable energy. This means Adventures often pay a premium price for accommodation.

Many of John’s customers go skiing during the winter months and he would like to expand and sell ski holidays in Italy. John has never skied himself so he has asked his friend Lucas for some advice. Lucas has never run his own business before but has lived and worked in an Italian ski resort called Folgaria for several years. He is familiar with the local hotels there and knows several ski instructors. Lucas does not believe that the business should pay a premium price for hotels but is keen to invest in the business. Lucas would like to form a partnership in which decisions are shared equally with John.

Nadia Aslam is a wealthy entrepreneur. Two years ago, she bought a struggling airline and changed the name to Skyline plc. The airline offers low-price flights from the UK to popular European destinations. There are high levels of competition in this market.

Nadia has found out that Sibiu, a city in Romania, is becoming popular for city breaks, but no UK airlines currently fly there. Nadia is planning to buy an additional plane and start flying there. Fees and taxes at Sibiu International Airport are much higher than at other destinations.

Nadia will need to consider how to cover these additional costs. Nadia has rebranded the planes with the new Skyline plc logo and colours. To raise the finance needed she used a share issue which reduced her ownership of the business from 90% to 70%. Although her shareholders do not have a say in the day-to-day running of the business, they are able to vote on major decisions such as whether to expand. Nadia has worked hard for the past two years to make Skyline plc a profitable business. She would like to reinvest all the profits back into the business but whatever she does she must also keep her shareholders happy