Practise Edexcel Business questions on costs, revenues, profits and financial performance, using calculations and case evidence to judge management choices.
Extract A Etsy Etsy is an e-commerce business, started in 2005 and based in New York. It is a global online marketplace where people come together to make, sell, buy and collect unique items. Etsy sells a wide variety of handmade products. The range of products includes jewellery, bags, clothing, furniture, toys and art. The handmade products are made by creative people who are trying to turn their hobbies into a business. The products are individual to the person making them and are aimed at niche markets. Etsy does not have a warehouse, just creative people worldwide, selling the products they have made. Etsy connects these creative people directly with customers who are looking for something special. Etsy charges a low fee to those selling their products on the Etsy website. This is lower than the fee charged by eBay and Amazon to sell on their websites. Most customers spend between $15 and $20. Etsy sells a wide range of products but relies on the diversity offered to differentiate itself from the hundreds of available similar sites online. Etsy targets a specific segment of the market by only selling handmade products on its website. Growth of Etsy has led to challenges for sellers who find it difficult to keep up with demand and at the same time maintain a personal touch. Etsy recently changed its terms of business to allow original designs to be made by someone else so that production of items can be increased. However, this has led to the question of whether the items can still be called handmade.
Extract B Third quarter 2020 financial summary for Etsy
Extract B Third quarter 2020 financial summary for Etsy
Using the data in Extract B, calculate the operating profit for Etsy in the third
quarter of 2020. You are advised to show your working.
Discuss whether Etsy is likely to be affected by internal causes of business failure.
Extract B Traditional restaurant with a difference George's Tavern is located in an old house, in the pretty and traditional village of Yeroskipou in Cyprus. The village is only 5 km away from the coastal city of Paphos, which is popular with tourists. The restaurant serves Mediterranean and Greek food. It is unique because there is no menu, instead it serves a set selection of food prepared with locally grown and seasonal ingredients. The small portions of different food only include what is in season, so you might get hand-picked asparagus, wild mushrooms with fresh herbs, aubergines and potatoes in tomato, or tender kleftiko (oven-baked lamb) from local farmers. Even the drinks are home-made, using ingredients from the family's vegetable garden. Evening diners must reserve a table, due to high demand. At lunchtime it is often much quieter. For example, in September George's Tavern could have catered for 1,500 lunchtime customers but only served 1,110. Once seated, diners can then stay for the whole afternoon (noon until three o'clock) or evening (seven until eleven o'clock), as dishes are served until diners can eat no more. The restaurant is open Tuesdays to Saturdays and charges a fixed price of €25 per person for all food served during the sitting. Damien and Benedict are the sons of the founder, George. They now run the restaurant and are eager to make sure George's Tavern continues to follow the original business plan and be successful.
Extract C
Cyprus rate of inflation August 2017 to July 2018
Assess how Damien and Benedict might improve profitability.
Sources for use with Section A
Extract A
What is Zwift?
Millions of people around the world enjoy cycling. However, the weather or road
conditions can sometimes make it difficult or even impossible to take part in this activity.
Zwift created a solution to this by introducing a virtual reality computer program, which
combines cycling with computer gaming. The cyclist rides their bicycle indoors while it is
attached to a fixed frame, so the bicycle does not actually move. This allows the cyclist to
watch their progress on a virtual road on a computer screen. People of all cycling abilities
can improve their fitness at the same time as enjoying social interaction with fellow
cyclists from around the world.
By paying Zwift a $10 fee every month to use the game, the cyclist’s efforts can be
displayed in a virtual world on the computer screen, complete with maps, roads,
landscapes and other riders to interact with.
Jon Mayfield and Eric Min, both keen cyclists, launched Zwift as a private limited
company in 2014, with an initial investment of $3m, followed by venture capital of $27m
in 2016. The statistics are certainly impressive. In October 2017, Zwift had more than
300,000 riders from over 150 countries. Between them they had collectively logged
218,128,291km. There are currently no direct competitors to Zwift and with several
additions to the game being planned its success looks set to continue.
Extract B
Selected financial information for Zwift for year ending 31 December 2017
| $ | |
|---|---|
| Revenue | 36\,000\,000 |
| Cost of sales | (21\,000\,000) |
| Gross profit | 15\,000\,000 |
Extract B
Selected financial information for Zwift for year ending 31 December 2017
| $ | |
|---|---|
| Revenue | 36\,000\,000 |
| Cost of sales | (21\,000\,000) |
| Gross profit | 15\,000\,000 |
Using the data in Extract B, calculate, to two decimal places, the gross profit margin for Zwift in 2017. You are advised to show your working.