Practise Unit 2 Business questions on planning, finance, operations, resource management and external influences through calculations and case-based analysis.
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
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.
Define the term 'business plan'. (Extract B, line 19)
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.
Using the data in Extract B, calculate the capacity utilisation for George's Tavern at lunchtime in September. You are advised to show your working.
Analyse two benefits for a business, such as George's Tavern, of using cash-flow forecasts.
Assess how Damien and Benedict might improve profitability.
Source for use with Section B
Extract C
About Skechers
Skechers is a global footwear company that designs and develops shoes for men, women and children. It sells its products online and in more than 2,700 shops in 170 countries through its established distribution channels. The annual sales revenue of the business increased from $3.52bn in 2016 to $4.16bn in 2017.
Skechers' marketing department uses both primary and secondary market research. Focus groups and interviews are used during the design stage to collect opinions on new shoes before they are launched onto the market. Focus groups are also used to gain feedback on the performance and comfort of existing styles of shoes. Since 1992 when it launched its first shoe, the company has diversified into several new lines, targeting different market segments and different activities.
The range is updated regularly and includes shoes for walking, work and casual wear. The portfolio includes 3,000 different styles of footwear for all ages that offer quality and comfort. Its best-selling shoe is the Go-Walk brand, sold globally. More recently the company has designed and sold shoes for athletes and is now competing with companies such as Nike and Adidas.
Organisation of Skechers
Although Skechers has offices and shops globally it has maintained a centralised organisational structure. At the corporate headquarters in California, USA, Skechers research, design, and develop the shoes as well as controlling global marketing campaigns and operations. Offices based in South America, Europe and Asia oversee the regional operations.
David Weinberg is the Chief Operating Officer (COO) based in the USA head office. He is responsible for the day-to-day operations. These include planning Skechers policies and objectives and developing financial and distribution strategies to expand the business.
Extract C
About Skechers
Skechers is a global footwear company that designs and develops shoes for men, women and children. It sells its products online and in more than 2,700 shops in 170 countries through its established distribution channels. The annual sales revenue of the business increased from $3.52bn in 2016 to $4.16bn in 2017.
Skechers' marketing department uses both primary and secondary market research. Focus groups and interviews are used during the design stage to collect opinions on new shoes before they are launched onto the market. Focus groups are also used to gain feedback on the performance and comfort of existing styles of shoes. Since 1992 when it launched its first shoe, the company has diversified into several new lines, targeting different market segments and different activities.
The range is updated regularly and includes shoes for walking, work and casual wear. The portfolio includes 3,000 different styles of footwear for all ages that offer quality and comfort. Its best-selling shoe is the Go-Walk brand, sold globally. More recently the company has designed and sold shoes for athletes and is now competing with companies such as Nike and Adidas.
Organisation of Skechers
Although Skechers has offices and shops globally it has maintained a centralised organisational structure. At the corporate headquarters in California, USA, Skechers research, design, and develop the shoes as well as controlling global marketing campaigns and operations. Offices based in South America, Europe and Asia oversee the regional operations.
David Weinberg is the Chief Operating Officer (COO) based in the USA head office. He is responsible for the day-to-day operations. These include planning Skechers policies and objectives and developing financial and distribution strategies to expand the business.
Using Extract C, calculate to 2 decimal places, the percentage change in sales revenue for Skechers between 2016 and 2017. You are advised to show your working.
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.
Assess the benefits to Etsy of being an online business.
Source for use with Extract C Belmont Estate Belmont Estate is a plantation established on the Caribbean island of Grenada in the 17th century. Since 2017, its main activity has been chocolate manufacturing. The ‘tree-to-bar’ range of organic chocolate is produced from cocoa grown on the 1.6 km2 plantation. Natural flavours such as mango, banana and ginger are absorbed into the cocoa from crops growing close by, so that Belmont Estate can produce chocolate with unique flavours. Batch production of the chocolate is used and is labour-intensive, from picking the cocoa to wrapping the chocolate bars. Despite the size of the plantation, the production process is well-organised, making it efficient. Belmont Estate prides itself on its reputation and the quality of chocolate produced, allowing it to sell at a price of $7.50 for a 55 g chocolate bar. The owners of Belmont Estate offer a happy and positive place to work. The business aims to support the local community by providing employment and preserving the environment. These aims are well-received by visitors who enjoy tours of the plantation, as well as the increasing number of importers of Belmont Estate’s chocolate bars, most of whom are in the US. Tours of Belmont Estate are run whenever there is a demand, whether from an individual visitor or a bus full of tourists. The price of a tour is $6.00. It is possible to book a tour through Belmont Estate’s own website or through Viatour, a tour business. However, if a tour is booked through Viatour, it charges 17% of the tour price as a fee for taking the booking.
Extract C Belmont Estate Belmont Estate is a plantation established on the Caribbean island of Grenada in the 17th century. Since 2017, its main activity has been chocolate manufacturing. The ‘tree-to-bar’ range of organic chocolate is produced from cocoa grown on the 1.6 km2 plantation. Natural flavours such as mango, banana and ginger are absorbed into the cocoa from crops growing close by, so that Belmont Estate can produce chocolate with unique flavours. Batch production of the chocolate is used and is labour-intensive, from picking the cocoa to wrapping the chocolate bars. Despite the size of the plantation, the production process is well-organised, making it efficient. Belmont Estate prides itself on its reputation and the quality of chocolate produced, allowing it to sell at a price of $7.50 for a 55 g chocolate bar. The owners of Belmont Estate offer a happy and positive place to work. The business aims to support the local community by providing employment and preserving the environment. These aims are well-received by visitors who enjoy tours of the plantation, as well as the increasing number of importers of Belmont Estate’s chocolate bars, most of whom are in the US. Tours of Belmont Estate are run whenever there is a demand, whether from an individual visitor or a bus full of tourists. The price of a tour is $6.00. It is possible to book a tour through Belmont Estate’s own website or through Viatour, a tour business. However, if a tour is booked through Viatour, it charges 17% of the tour price as a fee for taking the booking.
Define the term 'batch production'. (Extract C, line 8)
Extract C Belmont Estate Belmont Estate is a plantation established on the Caribbean island of Grenada in the 17th century. Since 2017, its main activity has been chocolate manufacturing. The ‘tree-to-bar’ range of organic chocolate is produced from cocoa grown on the 1.6 km2 plantation. Natural flavours such as mango, banana and ginger are absorbed into the cocoa from crops growing close by, so that Belmont Estate can produce chocolate with unique flavours. Batch production of the chocolate is used and is labour-intensive, from picking the cocoa to wrapping the chocolate bars. Despite the size of the plantation, the production process is well-organised, making it efficient. Belmont Estate prides itself on its reputation and the quality of chocolate produced, allowing it to sell at a price of $7.50 for a 55 g chocolate bar. The owners of Belmont Estate offer a happy and positive place to work. The business aims to support the local community by providing employment and preserving the environment. These aims are well-received by visitors who enjoy tours of the plantation, as well as the increasing number of importers of Belmont Estate’s chocolate bars, most of whom are in the US. Tours of Belmont Estate are run whenever there is a demand, whether from an individual visitor or a bus full of tourists. The price of a tour is $6.00. It is possible to book a tour through Belmont Estate’s own website or through Viatour, a tour business. However, if a tour is booked through Viatour, it charges 17% of the tour price as a fee for taking the booking.
Analyse two reasons why productivity may have improved at the Belmont Estate.
Assess the likely advantages of using labour-intensive production methods, rather than capital-intensive methods, for a business such as Belmont Estate.