1 (a) Explain four barriers to communication for a business.

Barrier 1: Very long messages → messages not clear

Barrier 2: Use of jargon → unclear language and messages
Barrier 3: Difference in language between sender and receiver →
unable to understand the message
Barrier 4: bad internet connection so the receiver cannot receive
message
[8]

1 (b) Consider the following two ways VP can purchase its

inventory. Which way should it use? Justify your answer.
• Head Office purchases the inventory for all the restaurants.
• Restaurant Managers purchase their own inventory from
local suppliers.

Head Office:
All restaurants' inventory is bought by Head Office, which takes
advantage of bulk purchasing to obtain discounts and economies
of scale.These large purchases result in cheaper food ingredient
costs, which in turn cut production costs and allow for competitive
pricing, which raises demand and sales and, eventually, increases
revenue. But the need to supply culinary ingredients to 500
fast-food outlets means higher transportation expenses, which
can reduce profit margins and make it difficult to stay profitable.

Restaurant Managers:
In order to speed up the transportation of food ingredients,
restaurant managers purchase their own inventory from nearby
suppliers, putting each restaurant in less distance to its
source.Fresher ingredients are the end product, which raises
consumer happiness and increases customer loyalty. But
because restaurant managers already have a lot on their plates,
they might find it difficult to take on more work. This could result in
ordering errors and situations where certain ingredients aren't
available, which could leave menu items empty and lower
customer satisfaction, sales, and ultimately revenue.

Recommendation:
I recommend restaurant managers to use local suppliers because
this enables them to adjust their spending based on customer
demand and preferences. This customization guarantees that
each establishment can serve food that corresponds with
customer tastes, which raises customer satisfaction and
eventually improves each restaurant's reputation.
[12]

2 (a) Explain two advantages and two disadvantages of VP’s

Restaurant Managers delegating tasks to their Assistant
Managers.

Advantage 1: restaurant managers won't be too busy → more

concentrated at work → can reduce mistakes → able to give
service the fastest possible
Advantage 2: assistant manager will feel as if they are trusted →
increased motivation → increase efficiency of cooking and serving
meals
Disadvantage 1: Assistant managers and the 50 employees can
be overloaded → unable to focus → unable to work properly →
less motivated
Disadvantage 2: assistant manager may not have enough
knowledge and skill → more mistakes → less quality food → less
customer satisfaction → worse reputation restaurant
[8]

2 (b) Using Appendix 2 and other information, consider the

two countries VP could choose to locate its new restaurants.
Which country should VP choose? Justify your answer.

Country A: price is 20$ and country B is $10 → if demand is

around the same, then higher total revenue. higher wage costs →
lower profit gained.

Country B: Variable costs is $2 and country A is $6 → lower cost

of production so can lower price → higher demand and sales →
higher revenue. However gross profit is $8 and country A is $14
so lower so might be lower money to invest more into the fast
food restaurant

Recommendation: In my opinion, Country B is better since it has

less competition, which may increase consumer demand for its
fast-food restaurant and lead to higher sales and revenue.
Country A is worse because of its greater unemployment rate,
which makes it harder to find workers and reduces output. This
prevents the country from taking advantage of economies of
scale, and lower output results in fewer sold goods and lower
revenue.
[12]
3 (a) Explain two possible reasons why VP wants to expand.

Reason 1: Get higher profit

Explanation: The Vice President can sell more in more markets

as a result of expansion, which boosts output and raises sales
and revenue. Because of the increased profitability, stockholders
will receive more dividends.

Reason 2: Economies of scale

Explanation: Expansion allows businesses to benefit from bulk

buying on their food ingredients, leading to economies of scale
and lower average production costs.
[8]

3 (b) Consider the benefits and limitations of the following

two ways VP can enter a new market in another country.
Which way should VP choose? Justify your answer.

Joint venture:
Advantage:
Through joint ventures, businesses can access new markets
where local partners are familiar with consumer tastes while
sharing or lowering risk and expenses. This knowledge makes it
simple for joint ventures to adjust to local tastes and concentrate
on creating food that appeals to the target market, which
eventually boosts sales and revenue. Joint ventures save costs
and free up resources to invest in expansion initiatives by utilizing
local experience to replace the requirement for thorough market
research, which raises output, sales, and income

Disadvantage:
Joint ventures may encounter difficulties in locating acceptable
partners, which could cause them to lose time and postpone
openings or expansions, which would prevent them from making
any money. Furthermore, joint ventures split profits, which means
that not all profit gains are realized. This can result in
lower-than-expected profits or even losses, which infuriates
shareholders by reducing payouts.

Franchising:
Advantage:
One benefit of franchising is that it allows one to collect franchise
fees passively and with little work, meaning that the initial
investment is minimal and potential returns are substantial.
Because the franchisor handles the operational labor while the
franchisee handles the cash,franchising eliminates the need for
loans for growth.

Disadvantage:
It can be dangerous to franchise if the franchisee doesn't continue
to provide the same level of food and service as the parent
business (VP)

Franchising → VP has little control over the franchisee → can’t

really manage them → service and food might be poor → lower
brand image and reputation → lower sales → lower revenue
Recommendation:
Joint ventures may be the ideal option because the partner will be
able to assist the VP and provide a wealth of expertise about the
new country, helping them to satisfy local client demand and
expand in high-traffic areas and optimal locations. As a result, VP
will make more money from its vegetarian menu. It's possible that
a franchisee would serve bad food and service, which will
damage the reputation of the brand, thus franchising may not be a
wise idea.

[12]

4 (a) Explain, using an example, one reason why VP might

need:
• short-term finance
• long-term finance.

Short-term finance: To prevent cash-flow problems and

overcome cash shortages or increase liquidity, businesses can
consider obtaining a bank loan, which provides short-term
financing. This can help provide the necessary funds to address
immediate financial needs and stabilize cash flow. Additionally, to
ensure sufficient working capital for day-to-day operations and
expenses,potentially reducing interest payments by only using the
facility when necessary

Long-term finance: Due to their longer payback terms, which

allow for lower monthly cash withdrawals, firms may use
long-term bank loans to purchase non-current assets, which
sometimes require large investment.
[8]

4 (b) Using Appendix 3 and other information, consider how

the following three changes in country Z may affect VP.
Which change is likely to have the greatest effect on VP's
profits? Justify your answer.
• Increase in interest rates.
• Depreciation of country Z’s exchange rate.
• New legal controls which require all restaurants to list the
ingredients in their meals.

Increase in interest rates: Customer buy less meal -> because

interest increase from 3% to 5% -> making borrowing money
more expensive -> less money spent by customer -> reduced
revenue

Increased interest received on reserves held by VP -> increase

income into the business -> increase in profit

Depreciation of country Z’s exchange rate: Imported food

ingredients cost more -> higher costs -> lower profit margin/higher
price

When VP expands to another country and establishes new

restaurants, the profits repatriated to country Z will yield a higher
amount due to favorable exchange rates. However, the capital
required for the expansion will be subject to lower exchange
rates, leading to a greater investment needed to fund the venture
effectively.

New legal controls which require all restaurants to list the

ingredients in their meals: Increased cost to rewrite menu ->
need to rewrite everytime new food -> increases costs in the
short-run and the long run -> reducing profit

All restaurants will have the same costs -> competitiveness may
not change

Conclusion:
The largest impact will come from the depreciation of country Z's
exchange rate, as imported food items will cost higher due to the
decreased value of the country's currency in comparison to other
nations, resulting in significant variable expenses for VP. VP's
profit is lowered as a result, which makes it harder to make new
investments and expand.
[12]