11 mark
Which of these businesses provides a service to customers?
Bicycle manufacturer
Dry cleaner
House builder
Pig farmer
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The Purpose & Nature of Businesses (AQA GCSE Business)
Topic Questions
41 mins19 questions
21 mark
Which of the following is an example of a business operation in a primary sector?
Bank
Car manufacturer
Fruit farm
Hairdresser
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31 mark
Which of the following is an explanation of opportunity cost?
Identifying business opportunities and bringing together resources to meet them
Seeing a problem with the way things are done and thinking of a better way of doing it
Seeing a gap in the market and calculating the cost of entering the market
The cost of making one choice concerning the use of limited resources at the expense of an alternative choice
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41 mark
Case Study
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
Number of participants | Fixed costs | Total variable costs |
10 |
|
|
1500John 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.
Using the case study, state one reason why John became an entrepreneur.
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51 mark
Case Study
TradeUp is a high street retailer that buys, sells and exchanges second-hand entertainment products and technology. These products include video games, mobile phones and tablet computers. TradeUp was established in 2002. The number of TradeUp stores since 2015 is shown below.
To keep up with a growing market, TradeUp has used franchising since 2015 to expand rapidly as it had limited funds available to set up stores itself. To open a TradeUp franchise, each franchisee must make an initial investment of £150 000. This money is used to design and fit the shop, purchase opening stock and train managers. Franchisees must pay TradeUp an ongoing royalty fee of 7% of their revenue.
One franchisee is Amelia Appleby. Amelia has had an idea to sell home appliances such as vacuum cleaners and microwaves, but she is unsure which products would be popular. Amelia is keen to present her idea to TradeUp as soon as possible, but she knows that she needs market research to support her proposal. Although Amelia is busy running her store, she has decided to conduct a focus group with her regular customers. To encourage customers to participate, Amelia will pay each of them a small fee. In the past, Amelia has used questionnaires to collect feedback from customers. These were placed on the shop counter for four weeks for customers to complete, but she had a very low response rate.
Identify the business sector that provides services to customers.
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61 mark
Which of the following characteristics of an entrepreneur is the ability to develop new ideas/products?
Determined
Hard working
Innovative
Organised
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71 mark
Enterprise is one of the four factors of production.
Which of the following is a definition of enterprise?
The equipment used to produce the goods and services
The process of changing inputs, such as raw materials, into goods and services
The skills and number of employees employed by the business
The skills of people involved in the business to identify business opportunities
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81 mark
Which of these is an example of a business in the secondary sector?
Accountant
Fisherman
Furniture maker
Website designer
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91 mark
Which of the following is one of the four factors of production?
Competitors
Enterprise
Growth
Quality
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12 marks
Explain, using a business example, the meaning of the tertiary sector.
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22 marks
Businesses produce goods or supply a service.
Explain, using an example, what a service is.
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32 marks
Case Study
HelloFresh is the world’s leading meal-kit delivery company. Each meal-kit contains all the ingredients and a recipe to cook a meal from scratch. HelloFresh delivers the kits to customers. The company was set up by two entrepreneurs in 2011 when they spotted a gap in the market to help busy people cook high quality meals at home. HelloFresh offers meal kits to suit the needs of young families and couples who are prepared to pay a premium for its service.
HelloFresh are proud to be environmentally responsible and advertise that it is the ‘greener way to shop for groceries’. It uses recycled packaging and carefully plans delivery routes to make sure that vehicles travel the shortest possible distance. Meal-kits are becoming very popular in the UK and HelloFresh is operating in an increasingly competitive market. HelloFresh tries to keep its customers interested by developing exciting new recipes each week that are different to the ones that competitors are offering. This process is expensive and time consuming. HelloFresh is now looking for opportunities to reduce costs. It uses customer reviews to find out which foods customers like and dislike, but not all customers give regular feedback. Once HelloFresh has developed a new recipe, the Finance and Production departments must work together to make sure the ingredients are available within the budget.
Describe one characteristic of an entrepreneur.
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42 marks
Case Study
Adventures currently employs eight staff in the UK, who are all keen sporting enthusiasts. Adventures’ employees are expected to sell holidays and take payments but also deal with all customer enquiries such as advice on local facilities.
Sales have fallen recently and staff absenteeism has increased. Other rival businesses have increased their salaries. As John is unable to offer a competitive salary, employees have been asking for extra benefits. Discounts on holidays, commission or profit sharing are being used by different competitors.
John is drawing up a business plan to expand into ski holidays in the Italian resort of Folgaria. The business plan outlines the objectives of the business. Within three years, John aims to double profits and would like to have a 30% market share of ski holidays to Folgaria. To achieve this, the business would need to sell on average 2000 ski holidays each winter. Adventures will increase its number of employees to 10 to sell ski holidays, so the company is moving to a new office with more space. The new employees enjoy skiing; one of them will live in the ski resort for the winter and support customers when on holiday.
Explain, using an example, the difference between a need and a want.
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52 marks
Explain, using a business example, the meaning of the term primary sector.
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62 marks
In a dynamic business environment, products may become obsolete.
Explain, using an example, what is meant by the term obsolescence.
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72 marks
Case Study
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
2020 | 2019 | 2018 | |
Average price that customers pay per item of clothing | £42 | £55 | £65 |
Market share | 14% | 15% | 19% |
Number of direct competitors | 12 | 8 | 6 |
Using the case study, explain what is meant by the term want.
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16 marks
Case Study
TradeUp is a high street retailer that buys, sells and exchanges second-hand entertainment products and technology. These products include video games, mobile phones and tablet computers. TradeUp was established in 2002. One of its franchisees is Amelia Appleby
The demand for some second-hand products, such as mobile phones, changes quickly. Amelia needs to make sure that her prices are competitive with those of other second-hand retailers; otherwise, she will lose customers.
Table 1 Extract of Income Statement for year ending April 2020
(£ 000) | |
Sales revenue | 140 |
Cost of sales | 84 |
Gross profit | 56 |
Amelia has always liked her location in a busy town centre and has never had any direct competition. This location has provided Amelia with loyal customers who like the convenience of being able to visit her store when they are in town shopping. However, another retailer located nearby has announced that it will start to offer a similar service to TradeUp. Amelia has heard that a unit on an out-of-town retail park has become available. She has found out that although the size of the unit at the retail park is bigger than her current location, the rent would be £825 per month, which is lower than her current payment of £1100 per month. There is a bus link every hour to the retail park and lots of free parking; however, not all her current employees can drive.
Analyse one disadvantage of direct competition to TradeUp.
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26 marks
Case Study
HelloFresh is the world’s leading meal-kit delivery company. Each meal-kit contains all the ingredients and a recipe to cook a meal from scratch. HelloFresh delivers the kits to customers. The company was set up by two entrepreneurs in 2011 when they spotted a gap in the market to help busy people cook high quality meals at home. HelloFresh offers meal-kits to suit the needs of young families and couples who are prepared to pay a premium for its service.
HelloFresh is proud to be environmentally responsible and advertise that it is the ‘greener way to shop for groceries’. It uses recycled packaging and carefully plans delivery routes to make sure that vehicles travel the shortest possible distance. Meal-kits are becoming very popular in the UK and HelloFresh is operating in an increasingly competitive market. HelloFresh tries to keep its customers interested by developing exciting new recipes each week that are different from the ones that competitors are offering. This process is expensive and time consuming. HelloFresh is now looking for opportunities to reduce costs.
It uses customer reviews to find out which foods customers like and dislike, but not all customers give regular feedback. Once HelloFresh has developed a new recipe, the Finance and Production departments must work together to make sure the ingredients are available within the budget.
Analyse one advantage to HelloFresh of changing consumer tastes and preferences.
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36 marks
Case Study
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:
Number of pools with swimming classes | 5 |
Price per class per child | £9 |
Number of swimming classes per pool per week 1 | 14 |
Maximum number of children per swimming class | 8 |
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.
Analyse one way Swim to Success is likely to be affected by higher interest rates.
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