Practise Edexcel Business questions on stakeholder, environmental and economic influences, applying competing pressures to strategic decisions and outcomes.
Sources for use with Extract A Dunelm: The Home of Homes We are the UK’s number one retailer of products for the home. We offer our customers great products to improve every room in their home. We have a number of distribution methods including 170 superstores, two high street stores and our website, Dunelm.com. We focus on style, quality and value and are always working hard to help our customers to create a home they love. • Over 30,000 products in store • Over 55,000 products available online • Over four and a half million customers visit our stores and website each week • Made to Measure curtains and blinds service including home fitting • Our own Home Delivery fleet of vans • Reserve and Collect service in store Extract B UK Home products market size (£bn) 2017–2021
Extract B: UK home products market size (£bn), 2017–2021
Extract C
Selected financial data for Dunelm ending June 2019 (£m)
| £m | |
|---|---|
| Revenue | 1\,100.4 |
| Operating profit | 126.9 |
| Non-current liabilities | 81.5 |
| Total equity | 185.8 |
Assess the extent to which Dunelm's corporate culture contributes to its success.
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.
Explain one likely difficulty for Burberry when changing its established culture and brand identity.
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 E outlines Burberry's strategic decisions to stop destroying unsold luxury goods and no longer using real fur in any of its products. Assess the possible trade-offs between profit and ethics from Burberry's strategic decisions.
Extract A British Airways: a cash cow British Airways (B A) is the second largest airline in the UK and is part of a larger group of airlines. BA merged with Iberia in 2011 to create International Consolidated Airlines Group (IAG), which has since taken over Aer Lingus, as well as Vueling and Level, two low-cost airlines.
Financially, IAG outperforms Europe's other big airlines. BA is the main reason for this. Its return on capital has grown and it provides the largest share of IAG's operating profits.
Extract B Selected data for an Airbus A350-1000 aircraft
Extract C IAG buys Air Europa for €1bn IAG is spending €1bn to buy Air Europa, another Spanish airline. Air Europa serves 69 destinations. Air Europa is the third largest Spanish airline after Iberia and Vueling - both of which are already owned by IAG.
In 2018, Air Europa made an operating profit of €100m. It had a revenue of €2.1bn from 11.8 million passengers. It serves many niche destinations in South America including Paraguay, Colombia and Iguazú on the border of Argentina and Brazil.
Extract D Angry passengers as tens of thousands affected by systems failure In August 2019, BA had many angry passengers as more than 500 flights were cancelled or delayed as a result of an IT systems failure. It affected the travel plans of tens of thousands of people with holiday and business plans travelling from London's Heathrow, Gatwick and City airports. This was not the first time BA has had IT failures.
In 2017, 75,000 passengers were stranded around the world when BA was forced to cancel more than 700 flights over three days due to IT systems failures. A data breach in 2018 affected 400,000 customers and led to a fine of £183m. BA claimed it regularly carries out detailed risk assessments of its IT systems and IT infrastructure. It is dependent on IT systems for many of its key business processes.
Extract E BA to offset domestic flight emissions from 2020 BA will offset all domestic flight emissions from 2020, after its owner IAG became the first airline group to commit to net zero-carbon flying by 2050. IAG is responsible for about 3\% of global aviation's emissions. Offsetting allows businesses to invest in environmental projects to balance out their own carbon footprints.
Chief executive of IAG, Willie Walsh, said that the company would reach the net zero-carbon target through offsetting but it already has a strong environmental policy that significantly reduces its environmental footprint by recycling and cutting waste from aircrafts.
Walsh said B A is replacing older, less fuel-efficient aircraft. He said the new Airbus A350-1000, which has just entered service on the transatlantic route to Toronto, would typically use 43 instead of 70 tonnes of jet fuel to carry a similar number of passengers.
Extract A British Airways: a cash cow British Airways (B A) is the second largest airline in the UK and is part of a larger group of airlines. BA merged with Iberia in 2011 to create International Consolidated Airlines Group (IAG), which has since taken over Aer Lingus, as well as Vueling and Level, two low-cost airlines.
Financially, IAG outperforms Europe's other big airlines. BA is the main reason for this. Its return on capital has grown and it provides the largest share of IAG's operating profits.
Explain one way a shareholder of IAG might be affected by the data shown in
Extract A.
Assess the likely strategic benefits for B A of reducing its environmental impact.