Practise Edexcel Business questions on objectives and strategy, applying strategic choices to a firm’s resources, stakeholders and competitive position.
Extract A
The Peloton Business Model
Peloton, founded in 2012, manufactures and sells two products for customers to use at home when exercising. The first is the Peloton Bike, an indoor cycle with a touchscreen monitor and a starting price of $2 245. The second is the Peloton Treadmill; this has a touchscreen monitor and a starting price of $4295.
Peloton customers pay a monthly subscription of $39. This gives them access to exclusive virtual sport content streamed directly to their monitors where they can compete against other subscribers. If they do not want to compete against others, they can follow a class from the Peloton large fitness and sport library.
The Peloton headquarters is in New York. It has become the largest interactive fitness business in the world and in 2019 became a public limited company. It has customers in the US, Canada, UK and Germany and has recently expanded into Australia.
There has been a huge growth in virtual fitness classes as fewer people attend traditional gyms. This has led to an increase of 153% in Peloton's revenue since March 2020.
Extract B
Selected financial data for Peloton 2020 and 2021
Extract C
Peloton's mission statement
Peloton uses technology and design to connect the world through fitness, empowering people to be the best version of themselves anywhere, anytime.
Extract D
Peloton completes takeover of Precor for $420m cash in April 2021
Precor is one of the largest global commercial fitness equipment manufacturers with a large number of sales in the US. Its fitness equipment can be found in hotels, universities and businesses in 90 countries.
With this takeover, Peloton expands its US manufacturing capacity and is able to increase its research and development capabilities with Precor's highly-skilled employees. This is expected to speed up Peloton's penetration of the global commercial market.
Extract E
Peloton recalling all treadmills
In May 2021, Peloton announced recalls of 126,000 treadmills over safety concerns. The announcement marked a major reversal of Peloton's initial reaction. It comes after weeks of discussions with the US Consumer Product Safety Commission (CPSC) over reports of faults with the Peloton Treadmill.
In a statement, Peloton apologised for not acting more quickly after reports of one death and dozens of injuries. "I want to be clear; Peloton made a mistake in our initial response to the CPSC's request that we recall the Peloton Treadmill," CEO John Foley said. "We should have listened to them from the outset. For that, I apologise."
Peloton shares closed nearly 15% down. This wiped $4.1bn from Peloton's market value.
Peloton share price February-August 2021
Extract C
Peloton's mission statement
Peloton uses technology and design to connect the world through fitness, empowering people to be the best version of themselves anywhere, anytime.
Using Extract C, discuss the possible benefits for Peloton of having a mission
statement.
Extract A The Five Guys' family, freshness and customisation Jerry and Janie Mitchell lived in Arlington, Virginia. In 1986 they gave their five sons a choice: start a business or go to college. The business route won and the family opened the first Five Guys - named after the five brothers.
To this day, the formula remains simple: 'Burgers and fries cooked to perfection' in keeping with Jerry's philosophy of 'To perfect and to serve.' The family is still very much involved in the business, meeting every Tuesday.
Five Guys is organised differently from other fast-food burger outlets. You will not find a freezer in any Five Guys restaurant because everything is cooked from fresh ingredients. Food is prepared every day for maximum freshness including hand cutting the potatoes. Employees do the cooking without timers and are trained to judge the food's readiness by sight, aroma and texture. In other fast-food outlets machines are used to cook the food and timers are relied on to indicate when the food is ready to serve.
The burgers, hotdogs and sandwiches come with up to 15 free toppings, giving 250,000 combinations to choose from. If you had one a day, it would take you 684 years to try them all and the milkshake machines give over 1,000 possible combinations.
Extract B Selected financial data for Five Guys (UK and Europe) 31 December 2020 and 2021
Extract C Data for purchasing a new £10000 milkshake machine for a Five Guys restaurant
Extract D How to Incentivise Your Crew The fast-food industry is well known for its over 100% labour turnover levels. Many businesses are relying on employee incentive programmes to retain their workers.
One popular way is using mystery shoppers. A mystery shopper is a person employed to visit a shop or restaurant anonymously to assess the quality of the goods and services.
Five Guys uses mystery shoppers to assess the quality of its food and the customer services given by employees. The information gathered from mystery shoppers is used to create weekly, monthly and quarterly rewards programmes for its employees.
Five Guys rewards the top 200 restaurants every week. The weekly reward is anywhere from $900 to $1 300 per restaurant. The money is shared between the employees working in the restaurant when they were mystery shopped.
Molly Catalano, Director of Communications and Marketing at Five Guys, said, "We think that our success can be seen in the increasing mystery shopper scores over time, in the satisfaction of our employees and in our growth as a company. We have seen success in all three areas."
Five Guys is still expanding and has 1,600 locations in 19 countries across the world.
Extract E Five Guys launches merchandise collection Five Guys, known for its burgers, hot dogs and milkshakes, has launched the first of its clothing lines branded with the Five Guys logo in the UK.
The main item from the collection is the black and white embroidered unisex college jacket that pays tribute to Arlington, Virginia, where the brand was founded in 1986. This follows the current trend for American-styled clothing, which has seen college jackets feature in high street and designer collections during summer 2022.
Alongside the college jackets are the official Five Guys t-shirts, featured in red, black and white, branded sweatshirts and hoodies, baseball caps and red-and-white checked sports socks. There is even a lightweight rain jacket with the Five Guys logo.
Prices start from £10 for the socks to £75 for the college jacket. T-shirts cost £20 each, while sweatshirts are priced at £35 and hoodies at £45. All can be purchased at the Five Guys online store.
Using Ansoff's Matrix, assess the possible benefits to Five Guys from launching its
new clothing merchandise.
Extract A Kellogg's Corporate Strategy Founded in 1906 by W.K. Kellogg, Kellogg's started to produce breakfast cereals such as Kellogg's Corn Flakes but has since ventured into other food products. Its product portfolio today includes convenience foods such as snacks, biscuits, waffles, pastries, cookies and crackers. Kellogg's vision is simply to 'Enrich and delight the world through foods and brands that matter'. Its strategy ranges from being the best provider of breakfast products and global provider of snacks to doubling sales in emerging markets. Kellogg's spends more than 8\% of its revenue building its brand that is helping the business to become a powerful name in some of the developing markets in the world. Kellogg's uses a mix of demographic, geographic and psychographic segmentation to market its 1,600 food products that are produced in 21 countries and sold in more than 180 countries. It reinvests profits to produce more innovative food products and to improve its product mix.
Extract B Kellogg's in 2017
Sales Revenue (\$m) per region
Main Products by sector (\%)
Extract C Kellogg's to run summer hours scheme for Manchester-based staff Kellogg's is running a summer hours scheme for its Manchester-based staff. The scheme, now in its 15th year, lets all 420 employees based at its headquarters in the UK finish work at 12.00 on a Friday provided they have done a full week's work. The summer hours scheme is designed to boost productivity and give employees greater flexibility so they enjoy long weekends, pursue hobbies and spend extra time with friends and family. The UK HR Director at Kellogg's, said: "Flexible working is something we take very seriously at Kellogg's. Research shows people who feel they have a good work-life balance work 21\% harder than those who do not."
Extract D Kellogg's cuts sugar levels in Coco Pops by 40\% - and says they taste better Kellogg's says it has improved Coco Pops by reducing the amount of sugar in the cereal by 40\% and adding more chocolate powder. The changed recipe, which also has 10\% less salt, now has 17g of sugar per 100g rather than 30g.
Bridget Briggs, of Kellogg's, said: "We have listened to people who buy Coco Pops. We have reduced the total sugar content of the cereal without affecting its great chocolatey taste." UK health campaigners urged other companies to follow Kellogg's as nearly two-thirds of adults and a third of children are overweight. Professor Graham MacGregor, Chair of Action on Sugar, said: "We hope Kellogg's will change all of its cereals and set an example for all other food manufacturers. We need compulsory sugar-reduction targets with strict penalties for those who do not comply."
Extract E Kellogg's statement of comprehensive income for the year ending 31st December 2017
Explain one aim of portfolio analysis for Kellogg's.
The UK Government has a policy to cut sugar in breakfast cereals by 20% before 2020.
Assess the likely implications of this policy for Kellogg's corporate strategy.
Assess the likely implications of this policy for Kellogg's corporate strategy.
Extract A Kellogg's Corporate Strategy Founded in 1906 by W.K. Kellogg, Kellogg's started to produce breakfast cereals such as Kellogg's Corn Flakes but has since ventured into other food products. Its product portfolio today includes convenience foods such as snacks, biscuits, waffles, pastries, cookies and crackers. Kellogg's vision is simply to 'Enrich and delight the world through foods and brands that matter'. Its strategy ranges from being the best provider of breakfast products and global provider of snacks to doubling sales in emerging markets. Kellogg's spends more than 8\% of its revenue building its brand that is helping the business to become a powerful name in some of the developing markets in the world. Kellogg's uses a mix of demographic, geographic and psychographic segmentation to market its 1,600 food products that are produced in 21 countries and sold in more than 180 countries. It reinvests profits to produce more innovative food products and to improve its product mix.
Extract B Kellogg's in 2017
Sales Revenue (\$m) per region
Main Products by sector (\%)
Extract C Kellogg's to run summer hours scheme for Manchester-based staff Kellogg's is running a summer hours scheme for its Manchester-based staff. The scheme, now in its 15th year, lets all 420 employees based at its headquarters in the UK finish work at 12.00 on a Friday provided they have done a full week's work. The summer hours scheme is designed to boost productivity and give employees greater flexibility so they enjoy long weekends, pursue hobbies and spend extra time with friends and family. The UK HR Director at Kellogg's, said: "Flexible working is something we take very seriously at Kellogg's. Research shows people who feel they have a good work-life balance work 21\% harder than those who do not."
Extract D Kellogg's cuts sugar levels in Coco Pops by 40\% - and says they taste better Kellogg's says it has improved Coco Pops by reducing the amount of sugar in the cereal by 40\% and adding more chocolate powder. The changed recipe, which also has 10\% less salt, now has 17g of sugar per 100g rather than 30g.
Bridget Briggs, of Kellogg's, said: "We have listened to people who buy Coco Pops. We have reduced the total sugar content of the cereal without affecting its great chocolatey taste." UK health campaigners urged other companies to follow Kellogg's as nearly two-thirds of adults and a third of children are overweight. Professor Graham MacGregor, Chair of Action on Sugar, said: "We hope Kellogg's will change all of its cereals and set an example for all other food manufacturers. We need compulsory sugar-reduction targets with strict penalties for those who do not comply."
Extract E Kellogg's statement of comprehensive income for the year ending 31st December 2017
Explain one aim of portfolio analysis for Kellogg's.
Extract A
Lush promises to invest in UK stores after return to profit
Ethical UK high street retailer Lush, best known for its highly scented bath soaps and handmade cosmetics, returned to profitability in the financial year 2021-22.
The latest statement of comprehensive income for Lush showed a pre-tax profit of £29m during 2021-22 compared to a loss of £45m in the previous year. However, turnover was lower at £408.7m, down from £437.8m in the previous year.
Lush operates retail outlets in 48 countries and has manufacturing facilities in six countries. It plans to attract more customers by investing in larger outlets with services such as health spas and hairdressers.
The business made no dividend payments to its shareholders in 2022. "We have to invest money now. We need to refit our shops." said Mark Constantine, one of the co-founders of Lush.
The group continues its policy of charitable donations, with Lush raising funds of £6.3m for several charities.
Extract B
Selected cost and sales data for Lush's bath soap department
Extract C
Lush boss Mark Constantine happy to lose £10m after leaving social media
Ethical beauty brand Lush is expected to lose £10m in sales after leaving four major social media platforms. Lush's co-founder, Mark Constantine, shut its Facebook, Instagram, Snapchat and TikTok accounts. Its Facebook and Instagram accounts had 10.6 million followers.
Constantine said he had no choice and that it is a price he is willing to pay. He was concerned over research showing the negative impact of social media platforms on many teenage girls, key consumers for Lush. "We've tightened up during the global health crisis, it won't destroy us. We will find new ways to connect with our customers as well as using the older tried and tested routes," he added.
Extract D
Lush has been 10% employee owned since 2017
The employees of Lush and its ethics are at the heart of the business. In 2017, Lush shareholders gifted 10% of the company shares into the Lush Employee Benefit Trust (EBT). There are five Trustees who look after the trust on behalf of the employees.
The purpose of having an employee ownership scheme is to:
- protect our ethics
- ensure the independent ownership of the business
- maintain the bonus culture
- promote two-way inclusive communication
- give every Lush employee a voice.
Extract E
We Believe - Lush's guiding statement for 25 years
We believe in:
- making effective products from fresh, organic fruit and vegetables, the finest essential oils and safe synthetics
- making products by hand using little or no preservative or packaging, using only vegetarian ingredients, and telling you when they were made
- buying ingredients only from companies that do not test on animals
- happy people making happy soap, putting our faces on our products and making our mums proud
- our products being good value, that we should make a profit and that the customer is always right.
Using Extract C, discuss the effects on Lush's financial resources of its strategic
decision not to use social media.
Extract A
What we do at Bosch
Bosch is a German engineering and technology business that has over 420,000 employees worldwide. Its aim is to develop products that are 'Invented for life' to improve the quality of living for its customers.
Bosch has a wide product portfolio. Its consumer goods division manufactures household goods such as refrigerators, dishwashers, coffee makers, vacuum cleaners and garden tools.
Bosch's mobility division supplies parts and services to the automotive market. This earns Bosch the majority of its revenue. It is a market leader in the supply of car parts and software systems and has numerous manufacturing and engineering factories located around the world. Bosch is increasing its investment in the design of parts and software systems for electric cars and electric bikes, which are growing markets.
Bosch has announced that €950m will be invested in an engineering and manufacturing factory in Suzhou, China. The factory will create new jobs to make parts for electric cars.
Extract B
Bosch has exceeded its sales forecasts despite many challenges over the last few years such as the global health crisis, supply chain problems and increasing costs of raw materials.
Selected financial data for Bosch 2021 and 2022
Extract C
Investment in innovation
Bosch states that 'one of its biggest strengths is its employees with their expertise, ideas, creativity and commitment.' The basis of the future growth of the business is its innovation. In 2022 it employed 76,000 employees worldwide in research and development (R&D) and spent €6bn developing new products.
Extract D
Ownership of Bosch
Unlike many large businesses, Bosch has remained a private limited company rather than converting to a public limited company. It has a unique form of ownership. Ownership is shared between the Bosch family and a charitable foundation that does not have voting rights in the business. Most of the profits are either invested back into the business to build for future growth or donated to charitable causes.
Assess the likely benefits for Bosch of using a SWOT analysis when developing its business strategy.
Sources for use with Section A
Extract A
Selected figures from Burberry's Statement of Comprehensive Income, 31 March 2018
| Item | Value |
|---|---|
| Revenue | £2,732.8m |
| Cost of sales | £835.4m |
| Gross profit | £1,897.4m |
| Net operating expenses | £1,487.1m |
| Operating profit | £410.3m |
Extract B All change at Burberry Group plc
Burberry is a 162-year-old British luxury fashion house with its headquarters in London and has a market capitalisation of £8.3bn. It sells trench coats, outerwear, fashion accessories, fragrances, sunglasses and cosmetics.
Growth slowed after Christopher Bailey became its Chief Executive Officer (CEO) in 2014. Profits dropped and the shareholders lost confidence in him. In July 2017 Marco Gobbetti replaced Bailey as CEO. Christopher Bailey then became the Chief Creative Officer until his resignation in November 2017. This was followed in March 2018 by the appointment of a new Chief Creative Officer, Ricardo Tisci.
As expected, Tisci has shaken things up at one of Britain's best-loved brands. He has already changed the brand's iconic logo. The red, black and beige pattern that has been the brand's most recognisable trademark for over 20 years has now been altered into a more contemporary stripe. The rebranding indicated a major change for the British luxury brand.
Extract C: Burberry share price, September 2017 to September 2018
Extract C
Can Ricardo Tisci reinvent Burberry?
The figure below shows Burberry's share price from September 2017 to September 2018. It identifies Christopher Bailey's departure announcement following Marco Gobbetti's appointment as CEO, Bailey's last Burberry collection at London Fashion Week, and Ricardo Tisci's appointment as Chief Creative Officer.
Extract D
Burberry's digital presence
As one of the first businesses to use technology, we have an outstanding digital reach with over 51 million followers globally, across 13 platforms and 11 languages. Our Burberry app, now available in 33 countries, is our customers' gateway to the world of Burberry. Customers can explore and buy from the new collections while managing all their orders in one place.
In China, over 80% of online shopping is done on a smartphone or tablet. Burberry customers can now book in-store or online appointments with a salesperson via WeChat, China's number one multipurpose social media mobile application.
Extract E
Burberry to stop burning unsold inventory
Burberry came under severe criticism in July 2018 when it admitted to destroying £28.6m of unsold luxury goods in a year to prevent them being sold at below market prices and devaluing the brand. Burberry, whose coats sell for more than £2,500 and handbags sell for £1,500, said it would stop this practice and expand efforts to reuse, repair, donate or recycle its unwanted products and work to develop new sustainable materials.
Burberry also said it would follow the likes of Gucci and the leader for ethical fashion, Stella McCartney, in removing real fur from its ranges.
“Modern luxury means being socially and environmentally responsible. This belief is core to us at Burberry and key to our long-term success,” said CEO Marco Gobbetti.
This has come at a time when customer attention to sustainability has increased, with 66% of global consumers willing to pay more for sustainable goods.
Extract D
Burberry's digital presence
As one of the first businesses to use technology, we have an outstanding digital reach with over 51 million followers globally, across 13 platforms and 11 languages. Our Burberry app, now available in 33 countries, is our customers' gateway to the world of Burberry. Customers can explore and buy from the new collections while managing all their orders in one place.
In China, over 80% of online shopping is done on a smartphone or tablet. Burberry customers can now book in-store or online appointments with a salesperson via WeChat, China's number one multipurpose social media mobile application.
Assess the extent to which the external technological environment will help with Burberry's growth in China. (Extract D)
Extract A Bramwell Brown: weather clocks Bramwell Brown's weather clocks have been putting wonder and fascination on walls all over the world. These hand-assembled weather clocks are unique. They tell the time and they forecast the weather from a barometric sensor inside the clock. The little mechanical clouds in the clock face move to show one of five forecasts, clouding over when it is going to rain and a sun appearing when the weather is improving. Brother and sister Rob and Sarah Bramwell started Bramwell Brown. They trace their love of curious mechanical objects back to childhood. On Sunday afternoons their father would wind the grandfather clock and check the barometer to see what the weather would be that day. "We looked everywhere for a mechanical barometer in an appealing design - but could not find one anywhere. So, we decided to design one at our kitchen table, building what was a very basic initial model," said Rob. More technical versions followed and after several years of development, the first weather clock was launched in 2015. The clocks are available in two sizes with the option of four different coloured frames. Limited edition weather clocks are available but the number is restricted to just 250 clocks per design.
Extract B Data for purchasing new production machinery for the limited edition weather clocks Cost of initial investment: £150 000
Extract C Selected financial data for Bramwell Brown April 2020
Extract D The Bramwell Brown Workshop A Bramwell Brown weather clock has 150 parts that come from all over the world. These include the quartz clock mechanism from Germany and the frames from Yorkshire, UK. Every clock is produced using job production after a customer order is received. The clock is individually assembled with care and pride by extremely skilled employees in a workshop in Hampshire, UK. They personally sign and stamp a certificate that goes into its box. The weather clocks are so popular that there is a waiting list.
Extract E Bramwell Brown's design and intellectual property (IP) Ever since the initial design and product development we have protected our designs and intellectual property. We use a range of IP protection including patents, design rights, copyright and trademarks. We have actively pursued registrations of our IP across many countries worldwide and will continue to do so in all future research and development work. Bramwell Brown, along with its investors, take very seriously the protection of the company's designs and inventions. We will work hard to ensure that any violations are effectively dealt with.
Assess the usefulness to Bramwell Brown of Porter's five forces model when
analysing the market for weather clocks.