Analysing the Financial Performance of a Business (AQA GCSE Business)

Case Study

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)

Case Study

JCC Shoes has a tall organisational structure. At Head Office, different departments employ specialist staff. The company’s human resource (HR) employees have extensive knowledge of employment law. The HR department deals with the recruitment of employees, designs job advertisements, and interviews employees at the level of store manager or above.

JCC Shoes has 200 stores in the UK; each store has a manager. In addition, the business employs 20 area managers who line-manage, on average, 10 stores each. The area managers are loyal staff who have been promoted from within the business.

Extract of area managers’ job description

• Pass on information from the stores to Head Office.

• Hold fortnightly meetings on sales with store managers.

• Recruit and train store sales assistants.

• Attend a monthly meeting at Head Office.

At times, area managers have been so busy travelling that there are delays in passing on messages to Head Office. Store managers do not directly contact Head Office. Recently this has resulted in a store being without a manager for four weeks.

Each store offers measurements of children’s feet, and lots of advice on the correct fitting of shoes. Sales assistants are given one week of intensive training on how to deal with customers, measure and fit shoes. The company believes that children’s shoes should be correctly fitted so that they don’t affect the growth of the child’s feet. The business offers a full money-back guarantee on its fitted shoes. No other shoe shops offer this. Customers value this high level of service and many return each time that their child needs a new pair of shoes.

JCC Shoes’ profit has been falling. However, dividend payments have been high, and the share price has increased by 10% in the last year.

Case Study

The demand for some second-hand products, such as mobile phones, changes quickly. Amelia needs to make sure that her prices are competitive with other second-hand retailers otherwise she will lose customers.

Extract of Income Statement for year ending April 2020

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.

Case Study

Ellie has decided to offer gardening services. There are already a lot of businesses offering home and gardening services in Ellie’s local area. Many of these businesses have loyal customers. Ellie has decided to segment her market and will focus on the family market. She has a lot of friends with children and understands what type of garden families want. To attract families with children, Ellie’s gardening services will include creating play areas for children, vegetable patches and BBQ patio areas.

Ellie would like to use leaflets to advertise her gardening services. Ellie has designed a leaflet herself that has a bright, fun design and includes images of play areas and vegetable patches to show families how their gardens could look. Ellie will offer a special discount to anyone who books using a code on the leaflet. Ellie’s parents think it would be better if she put an advert in the local newspaper which is read by around 8,000 people every day. The newspaper has a ‘Family Fun’ section each week where local businesses targeting families often advertise. It would cost £150 each week for a minimum of four weeks to place a black-and-white advert in the local newspaper.

Case Study

Skate4U Ltd manufactures and sells skateboards. The skateboards are handmade using high-quality materials. The average selling price of a Skate4U Ltd skateboard is £285. This is a high price compared to other brands that sell mass-produced skateboards.

Skate4U Ltd has decided to sponsor a team in the national skateboarding competition. This will cost a minimum of £50 000. According to the contract agreed, if the team reaches the final stages of the competition the cost of sponsorship will increase. Skate4U Ltd is considering whether to pay for the sponsorship using retained profit or an overdraft. Skate4U Ltd aims to pay off the additional cost within six months.

Interest rates on overdrafts have increased to 12% per year. Skate4U Ltd has a maximum overdraft of £65 000 available. It has already used £10 000 of this available overdraft. Skate4U Ltd made £122 000 net profit in 2020, which it planned to retain for new product development.

Table: Selected financial information for Skate4U Ltd

Case Study

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 expects 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)

Case Study

JCC Shoes has a tall organisational structure. At Head Office, different departments employ specialist staff. The company’s human resource (HR) employees have extensive knowledge of employment law. The HR department deals with the recruitment of employees, designs job advertisements, and interviews employees at the level of store manager or above.

JCC Shoes has 200 stores in the UK; each store has a manager. In addition, the business employs 20 area managers who line-manage, on average, 10 stores each. The area managers are loyal staff who have been promoted from within the business.

Extract of area managers’ job description

• Pass on information from the stores to Head Office.

• Hold fortnightly meetings on sales with store managers.

• Recruit and train store sales assistants.

• Attend a monthly meeting at Head Office.

At times, area managers have been so busy travelling that there are delays in passing on messages to Head Office. Store managers do not directly contact Head Office. Recently this has resulted in a store being without a manager for four weeks.

Each store offers measurements of children’s feet, and lots of advice on the correct fitting of shoes. Sales assistants are given one week of intensive training on how to deal with customers, measure and fit shoes. The company believes that children’s shoes should be correctly fitted so that they don’t affect the growth of the child’s feet. The business offers a full money-back guarantee on its fitted shoes. No other shoe shops offer this. Customers value this high level of service and many return each time that their child needs a new pair of shoes.

JCC Shoes’ profit has been falling. However, dividend payments have been high, and the share price has increased by 10% in the last year.

Case Study

DJ currently only sells its jewellery through the 60 stores it owns. This has allowed DJ to maintain its brand image and the high level of service customers expect. Dev has recently been approached by a luxury hotel chain that has more than 100 properties around the world. The hotel is interested in selling a small non-personalised range of Devine Jewellery in its hotel shops alongside less expensive brands. The hotel would want to add 20% to the normal selling price of each piece of jewellery to cover its costs.

To increase sales, DJ has offered credit to customers spending over £2000 so they can buy jewellery now and pay later. Many competitors also offer credit. This has enabled customers to purchase expensive pieces of jewellery and pay for them in ten equal instalments. Not all customers have been able to afford the monthly repayments and DJ has spent time and money trying to recover the debt.