Give me
3 motives for
starting a new
Business
Motives of an Entrepreneur
To exploit a gap in the
market
To be their own boss
and make their own
decisions
Turn a hobby or passion
into a business venture
Boys v Girls
3 Sources of
Business Ideas
3 Protecting
Business Ideas
Observation
Patent
Ideas from
hobbies/ interests
Trademark
Market Trends
Copyright
Connectives
Use the two
connective words
to develop your
answer and show
good analysis
Examiners Tip
To write a level 2 to 5 answer, you need to
demonstrate the skill of analysis and
application. You aim is to work towards
showing good application and good
analysis.
Throughout the day we will provide you
with some tips and advice of how to show
this in the exam.
Tip 1: Write a chunky paragraph, that
uses connectives to build a chain of
argument (analysis) that is firmly routed
in the case study. (application)
= write answers that make the
connections
+ write chunky
paragraphs
By building a logical argument
using connectives
which in turn…
therefore…
this might
mean…
A consequence of
this might be …
this is because
on the other
hand…
Here’s an example of how to start building a
chain of argument using connectives
Effects
In addition to this,
focusing on a niche
market makes it easier
for a business to target
their marketing
Explain
therefore
because
makes it easier for the
business to develop
marketing campaigns
that appeal directly to
that target market ,
increasing the chances
of
the
campaign
reaching the target
audience.
the business is only
focusing on a small
group of customers
within a much larger
segment. This
Analyse the benefits of Rob protecting Trunki’s
products and brand name (Developing application and
analysis)
Effects and Relate
Explain and Relate
A
benefit
of
Rob
protecting his products
and brand name is that it
prevents
other
manufacturers
from
producing
the
same
design.
This means that no other
business
can produce a
.
similar product (as was
seen with the Chinese
manufacturer) perhaps for
cheaper than the Trunki.
This will mean that
Rob can market his
product as unique and
perhaps charge a
premium price for the
product because it is
the only one of its
kind in the market
place.
Explain one reason why
turning potatoes into vodka
might be an effective way of
adding value?
(4 marks)
Once reason why turning
potatoes into vodka is an
effective way to add value
is because it takes a very
low cost resource and
transforms it into a much
more valuable and unique
product that can sell for up
to £32
Examiners Tip
To achieve GOOD
application, you
need to use the
evidence in the
case study to
SUPPORT your
arguments
Exam-style question
To what extent do you think that
Louis’ Business Planning will
help contribute to the success of
Chokolit?
15 marks
Examiners Tip
To keep your answer
structured and
focused, aim to use
the key words in the
question at the start
of each paragraph
We will be looking at
this technique next!
Definition of
Business Plan
A business plan is a
document that enables
a business to plan for
the future. It usually
contains the
businesses objectives
and potential problems
and opportunities
One reason why business planning will
help contribute to the success of Chokolit
is
that it encouraged Louis to carry out
extensive primary and secondary
research allowing him to discover that
there was a gap in the market therefore
by targeting this gap in the market his
business is more likely to be successful
Another reason why business planning
will help contribute to the success of
Chokolit is
that it enabled Louis to secure finance
from his local authority as it would
have shown the viability of the
business. This finance will be necessary
to help his business become successful.
However, one reason why One reason is that the success of his business will
why business planning may not also depend on the skills of Louis. For
contribute to the success of Chokolit
example, the business plan only shows
the viability of the idea. The success of
the business will be largely down to
how Louis runs it.
Another reason why business planning
may not contribute to the success of
Chokolit is
the market that Louis operates in is
fiercely competitive and Louis cannot
predict with 100% certainty of his
competitors reactions
Overall, I feel
that business
planning
will to a large extent contribute
to the success of the business
because, without planning,
Louis wouldn’t have identified
the gap in the market which he
has targeted very successfully,
giving him a competitive
advantage
enabling
his
business to be successful.
However, it cant guarantee the
success of the business as this
will also depend on Louis’ skills
as an entrepreneur
A business has fixed costs of £50,000 a year,
variable costs of £5 and
a selling price of £12. How
£7,143
many units need to be sold to break-even?
A business sells its products for £3.50. The cost
of making the product
is £1.25. What is the %
180%
added value?
A business needs to sell 5,000 products to
£7,500 per unit is £1.50
break-even. The contribution
How much are the fixed costs?
State 3 problems in setting budgets
Often based on forecasts meaning they can often be inaccurate
1
Budgets that are too stringent can work against the business
2
Small businesses often lack the experience necessary to set research
and set budgets
3
What’s the connection?
Price
Break-Even
If a business increases the price of its products then this will increase
contribution. Increasing contribution means that fewer products need to
be sold in order to break-even with therefore reduces the break-even
point
Examiners Tip
Always show your working
out when completing
calculations.
It maybe that you only got
part of the calculation
wrong. Therefore some
marks can still be awarded
State 3 ways in which Marc can
reduce the break-even point of
the Poole location and explain
which is the best method and
why?
State 3 ways of reducing the breakeven
point
Increase the selling price of each Flyboard experience therefore
increasing contribution per experience
1
Reduce the variable costs of each Flyboard experience therefore
increasing contribution per experience
2
Reduce Flyboards fixed costs therefore meaning few experiences need
to be sold in order to cover them
3
Overall the best way to break-even is...
I think that the best way for Marc to reduce his break-even point is to
increase the price of each Flyboard experience. This is because the
experience is very unique so people may be willing to pay extra. In
addition, they were one of the first businesses to introduce Flyboarding
into the UK so they may be seen as the leader in the Flyboard
experience market, again, allowing them to increase price.
Examiners Tip
In questions like this,
try to pick out what
you believe is the
most significant
reason and then
justify why you think
this is the most
significant
Due to rising costs, Marc
believes that next year his
variable cost may increase by 4
%. Calculate the change in
break-even if this rise occurs
6 marks
Fixed Costs are £60,000 per year
Selling price is £445
Variable costs are £125
With a 4% increase VC would be:
£130
Break-even would therefore
increase to:
£60,000 = 191
(445-130)
To what extent do you agree that Lee’s cash
flow forecast will contribute to the overall
success of BMX Box?
(1) Lee was able to see that in his
first year he would have a huge
deficit, the therefore opted to
rent rather than buy thus giving
him a better cash flow
(2) Would show Lee where there
would be short falls in cash given
the seasonal nature of the
business allowing better planning
(3)Will help show the viability of
the business should Lee require
any extra funding
Boys – arguments
for
(1) The rel
(1) The reliability of the sales data
could be questioned as Lee only
used a very small sample size. In
addition, the sample could also
be biased as they were his sons
friends
(2) The reliability of his costs
could also be questioned as they
were gathered from a secondary
source, the website, bikebiz.com
(3) Lee used to be a welder and
therefore probably has no
experience of cash flow
forecasting
Girls
arguments against
Lots of practice of
answering Buss 1
questions will be
key to your success.
Have a go at these
questions as part of
your revision
State 4 ways in which a market can be
segmented
Gender
1
Age
2
Hobbies and Interests
3
Religion
4
Analyse the benefits of the
Mammoth Supply
Company targeting a
specific market segment
(10 marks)
Have a go at planning your answer to this
question using the template on pg 16
One benefit of the Mammoth Supply Company targeting a specific market segment
is
the market research that they carried out showed them that men stopped eating
diet food after the age of 30 and that there was a gap in this market.
This is a benefit to them because
by targeting this gap they can therefore benefit from first-mover advantage
and develop brand loyalty for the products that they are offering.
Another benefit of the Mammoth Supply Company targeting a specific market
segment is
that by targeting a specific group of people, they can design food that
specifically meets their target market. For example, their rum and cola ice
cream was created specifically for their target market.
This is a benefit to them because
by developing food that meets the needs of their target group it is more likely to
sell as they would prove more popular with their customer base.
Examiners Tip
Again, we can see
from the previous
example that using
the key words in the
question can lead to
a much more
focused and
structured answer
Marketing Maths
Calculate
The UK
lunchtime
market value
for 2010
Solution
In 2011 the market was worth £15
billion. An increase of 3.3% from
2010
3.3/ 100 = 0.033
0.033 x £15bn = £0.495 bn
£15bn - £0.495 bn
£14.505 billion
Marketing Maths
Calculate
In 2011 the UK
lunchtime market
(value) was worth £15
billion. In 2012 this is
forecast to increase to
£15.6 billion. Calculate
the % increase in
market value
Solution
(New Value – Original Value) /
Original Value x 100
(£15.6 bn - £15 bn) / £15bn x
100
4%
Explain one limitation of
the market research
that Vincent carried out
before setting up Tossed
(4 marks)
Explain one limitation of the market research that
Vincent carried out before setting up Tossed
One limitation of the market research carried out was that the majority
of it was carried out in America. The American market may have
completely different needs and wants when compared to the UK
market meaning that the research that Vincent carried out could be
flawed
1
Exam-style question
Evaluate the main factors that
might influence the demand for
Tossed (15 marks)
Definition of
Demand
Demand is the ability
and willingness to buy
a product or service at
a certain price
One factor that might
influence the demand for
Tossed is
the quality of the food. Research has indicated
that few people were willing to sacrifice the
taste of their food for the sake of health eating
therefore the quality will influence demand
Another factor that might
influence the demand for
Tossed is
the speed and quality of the service. Research
also suggested that customers wanted a quick
eating out option. This is crucial given that
Tossed gets most of its business from the
lunchtime trade
A third factor that might
influence the demand for
Tossed is
the level of competition within the market.
Tossed operate in a highly competitive market
with 100’s of other outlets competing for
business
Overall, I feel that the key
factor influencing demand is
is the quality of the food. Research shows that
although people want food that is quick, cheap
and easy to eat, people weren’t prepared to
compromise on the quality.
Examiners Tip
Make sure you only answer the
question you are asked
In the previous example, it is
tempting to explain the
downsides of using venture
capital even though the
question doesn’t ask that!!
Only answer what you are
asked!!
Exam-style question
Sarah decided to purchase a
Sharkey’s Hair Cut for Kids franchise
rather that set up her own sole
trader business. To what extent do
you agree with her decision? (15
marks)
Definition of a
Franchise
A franchise is where an
already existing
business sells the right
for another individual
to sell their products
and services using their
brand name
Examiners Tip
In a question where two
key terms are presented
you only need to define
one
You will receive no more
knowledge marks for
defining two and it will just
waste valuable time in the
exam
One reason why I think Sarah
made the right decision to
purchase the franchise is
Another reason why I think
Sarah made the right decision
to purchase the franchise is
However, a reason why I think
Sarah should have set up as a
sole trader
Another reason why I think
Sarah should have set up a
sole trader business is
there is less risk of the business failing. This is
because the business has an existing brand
name which has high customer awareness and
Sarah will not be trying to build a brand from
scratch.
that she will receive training and support from
Sharkeys in the form of store set-up, a grand
opening and an on-going marketing campaign.
This again will increase her chances of success.
as she will have more control of the key
decisions as a sole trader. As a franchisee she
needs to follow the rules and regulations that
have been set by the franchisor
as a sole trader she gets to keep 100% of the
profit whereas working as a franchisee she will
need to give Sharkeys a royalty payment. As
her need for support reduces in the future she
may resent this.
Overall, I feel
that Sarah made
the
correct
decision because
Sarah stated that she wanted
to benefit from the existing
support
network
of
franchisees as well as
benefitting from the existing
brand
and
marketing
activities. Although setting up
as a sole trader may have
offered
her
more
responsibility, it seems as
though the most significant
factor to Sarah was having
advice,
guidance
and
support.
Examiners Tip
You can apply this
structure to other
15 mark questions
– “Practice makes
perfect”
Q.1 How long is the
Buss 1 exam?
a) 75 mins
b) 90 mins
C) 60 mins
Q.2 What is the total
mark allocation for Buss
?
a) 80 marks
b) 60 marks
C) 90 marks
Q3 What is the weighting of
Buss 1 as part of the AS
qualification?
a) 40% of AS
b) 50% of AS
What is the Question?
Question: Explain one reason why Lee
from the BMX BOX carried out primary
research
Answer : One reason was that
he was inexperienced and
therefore it would have been
necessary for him to have found
out about what customers’
needs were so that he could
supply the products they
wanted
Remember this question and
answer in Session 2?
Rewrite this answer to turn it from reasonable to
good
One limitation of the research
that Lee carried out is that he
carried out some secondary
research.
The
secondary
research he carried out was
obtaining cost information
from a bike website. This may
have been limited as the
information would not be
specific to Lee’s shop as his
shop only sells BMX’s. Also,
the bike website wouldn’t
know the specific costs of
setting up a business in
Sunderland where the shop is
based.
What’s the connection?
An overdraft may be
At Christmas when
demand for BMX’s
is likely to
increase.
• Different students provided
with
different
‘what’s the
A large
amount
of
Lee’sconnections’
money will be
needed to enable
Lee to buy new
stock especially
tied up in stock
meaning that
• Different
students
Analyse
two benefits
toprovided
the BMX Box of arranging a £10,000
with connections thatoverdraft
are
closer or further apart
Lee(clustering)
needs to
Customers expect to
carry high levels
of stock in order
• satisfy
Weaker
students provided
to
demand
because
with a ‘middle’ connection
to help bridge the gap
be able to go into
BMX Box and buy
what they need on
the same day
therefore
This means that
Vincent would need
to sell less food and
drink to cover his
fixed costs.
What’s the connection?
Reducing
his
variable
costs
• Different
students provided
would increase the
with different ‘what’s the
contribution of his
food connections’
and drinks.
• Different
Analyse
twostudents
ways inprovided
which Vincent from Tossed could
with connections
reducethat
his are
breakeven pointPurchasing cheaper
ingredients
would
closer or further apart
therefore reduce his
One way Vincent
(clustering)
variable costs.
could reduce his
break even point is
by • Weaker
purchasing
students
cheaper ingredients.
provided
with a ‘middle’ connection
to help bridge the gap
Evaluation
Look
at the
To students
achieve top
marks,
you need
response,
is it
to
demonstrate
reasonable
or
good GOOD
evaluation
evaluation.
Evaluate when?
Re- read the question and add an E sentence at the
end of each paragraph.
Show judgement and weigh up the factors – most
important, significant relevant and say because.. and
relate to case