The Economic Climate (AQA GCSE Business)

Swim to Success (STS) is a programme that teaches young children how to swim through weekly lessons, 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.

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 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.

Cakehead has been making and selling upmarket brownies and bakes since 2004. It specialises in making cake postal boxes that are easy to order and delivered on time. Customers can choose their cakes and brownies from a selection on the website and pay online. The cakes and brownies are then automatically selected and packaged by advanced robotics according to the customer's individual orders. The boxes are then automatically labelled and dispatched to customers.

Cakehead sells its postal boxes to both corporate customers and private individuals. In recent months the firm has noticed the level of private individual sales has fallen as customer income levels have fallen. This is because interest rates have been rising.

Cakehead's objective is to expand the business over the next 5 years by using a bank loan to buy new machinery, and it is considering two options. It could expand its corporate customer base and retain the high profit margin on each order. Alternatively, Cakehead could reduce the price of each cake box to increase the number of individual orders it receives.

Krispy Kreme opened its first UK store in 2003 in London. The business sells doughnuts containing responsibly sourced ingredients in their stores, coffee shops, kiosks and cabinets in Tesco. Doughnuts can also be ordered online.

The business supports the communities in which it operates. A policy of recruiting the long-term unemployed has worked really well.

Krispy Kreme sell their coffee at £1.90 per cup. Research shows that some coffee shop customers are willing to pay more for ethically produced coffee and that most of these customers expect to pay around 10% more for this type of coffee.