Unit 1 – Business in the real world: 9, 12 markers

Q1.

Sunny Rooms Ltd

Sunny Rooms Ltd is a family-run chain of four small seaside hotels in Cornwall.
The hotels’ customers are mainly families looking for a low-cost holiday by the
sea. Each hotel is managed by one of the four family members who own the
business.
Staff at the hotels are often young and new to this type of work. Wages are low
and there is a high turnover of staff. Recent feedback from some guests on
social media suggests that their holidays were let down by rude hotel staff and
poor-quality service. Sunny Rooms’ owners believe they need to improve the
induction training that new employees receive.
More families are choosing to take their holiday in the UK. This is because
foreign holidays have increased in price and people are becoming worried
about travelling abroad. There has been an increase in the number of wealthier
visitors coming to Cornwall. Sunny Rooms’ owners believe that the market is
changing and want to target wealthier customers. They are unsure if it would be
better for their future profits to buy two higher-quality hotels, or to upgrade the
existing four hotels by improving the facilities that they offer.

More families are choosing to stay in the UK for their holidays. Sunny Rooms’ owners
want to attract some of the wealthier visitors to Cornwall who would have normally gone
abroad. They are considering two options to achieve this:

• buying two more higher-quality hotels to add to their chain, or

• spending money on improving the facilities in their existing four hotels.

Recommend to the owners of Sunny Rooms which option would be better for them.
Use the text above to support your answer.

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(Total 9 marks)

Q2.

Bambino Parties
Sonya has been running Bambino Parties for two years. Last year she made a
profit of £8 000 and now wants to increase the number of parties by 20%.
A friend recently started to work for Sonya on a part time basis. She designs
backgrounds for parties and these have proved very popular. Her friend has
asked if she can become a partner in Bambino Parties. She is willing to invest
£3000 into the business in return for 50% of the profits and will work full time to
help expand the business.
When Sonya takes a booking for a party she asks for a 10% deposit and then
receives the rest of the agreed price after the party. Her suppliers, people who
provide venues, catering, and birthday cakes, expect to be paid in advance.
She is worried about the effect this will have on cash flow.
Sonya has produced a cash flow forecast.

June £ July £ August £ September £

Total Income 5 000 11 100 9 200 11 600

Total Expenses 8 100 7 100 9 800 7 900

Balance brought
(1 300) (4 400) (400) (1 000)
forward

Balance carried
(4 400) (400) (1 000) 2 700
forward

Sonya wants to have a website designed to promote her business, this will cost £4 800.
She is considering the following two options to pay for the website:

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 • A bank loan for £4 800 to be repaid over 2 years
• Take her friend on as a partner.

Recommend which is the better option for Sonya to take. Give reasons for your advice.

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(Total 9 marks)

Q3.

Hey Presto Ltd

Parcel delivery company, Hey Presto Ltd, started in 1987 with just three vans.
Over the years the business has been successful and now has 120 vehicles
which operate in the London area. Most of the journeys the vans make are
through busy city streets. A number of smaller competitors have recently
entered the parcel delivery market. These new businesses charge lower prices
in order to attract the customers from bigger organisations such as Hey Presto.
Often these companies own very old and unreliable vans.
Major shareholder, Christine, would like to expand the business and to provide
a national service. Christine has been in talks with the owners of Birmingham-
based Fast Track Ltd, a similar sized business to Hey Presto. Fast Track’s

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 owners are keen to merge with Hey Presto. Christine is unsure if merging is the
best way for Hey Presto to expand. She believes that continuing to buy new
vans each year from Hey Presto’s profits might be a better idea.
Christine would also like to make the business more environmentally friendly.
She is considering replacing several diesel vehicles with electric vans, which
are more expensive to buy, but are cheaper to run and are less polluting.

Christine is considering two ways in which Hey Presto might expand:

• continuing to buy new vans from the profits the business makes
• merging with its competitor, Fast Track Ltd.

Advise Hey Presto on which of these two methods of expanding the business would be
more suitable for the business. Use the text above to support your answer.

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(Total 9 marks)

Q4.

Tasty Snacks

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 Jenny is studying for her A-levels. At the same time, she enjoys working part
time in a local café in the village where she lives. She has noticed that the
prices charged to customers in the café seem to be much higher than the actual
costs of making the meals and drinks. She is sure that the owners must be
making a good profit. Jenny is now considering whether she should carry on
with her studies or whether she should just leave school and set up her own
café.
Jenny could set up the café in the village where she lives which is in a tourist
area. She is also considering a busier but more expensive location such as the
shopping centre in the town near to where she goes to school.
A recent advert has caught her attention. It is advertising ‘Franchise
opportunities with well known fast food brands’. She would need at least £5000
to take up one of these opportunities. Jenny is unsure whether to set up the
café as a sole trader or as a franchise.

Jenny is unsure where the best place would be to locate her café. She is considering two
locations:

• the village where she lives

• the shopping centre in the town near to where she goes to school.

Advise Jenny which is likely to be the best option. Give reasons for your advice.

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(Total 9 marks)

Q5.

Promotional Products Ltd

Promotional Products Ltd (PP Ltd) sells items such as key rings, pens,
computer mouse mats and memory sticks in large quantities. These items are
sold to other UK companies, who give them away as freebies to promote their
own businesses. All of PP Ltd’s business comes from internet orders.
PP Ltd buys the items in bulk from suppliers based in China. The company uses
Chinese suppliers because they are much cheaper than UK businesses. Once
PP Ltd has an order, it prints the customer’s name, logo or slogan onto the
items to personalise them.
PP Ltd has seen a huge rise in the sales of computer memory sticks. However,
its customers are buying far fewer computer mouse mats. PP Ltd’s managers
believe that mouse mats have entered the decline phase of their product life
cycle.
Overall, the demand for PP Ltd’s products has increased over the past five
years. PP Ltd’s managers believe that the time is right to open a new factory.
The managers would like the business to be based in one location, where the
manufacture of the freebie items, the printing on these items and the office work
would all take place. The Chinese government is very keen to get UK
businesses like PP Ltd to move to China. PP Ltd’s managers have been offered
rent free offices close to the suppliers.

The demand for PP Ltd’s products has increased and the managers want to open a new
factory. It is considering two possible locations in:

• the UK or
• China.

Advise PP Ltd’s managers on which is likely to be the best option. Give reasons for your
advice.

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(Total 9 marks)

Q6.

Apple Inc
In 2004 Apple closed all production facilities in the USA to help save costs.
Production was outsourced to China.
In 2013, a newspaper reported that a factory based in China was paying their
workers £1.12 per hour or a salary of £180 per month. They work an average of
10 hours per day. Chinese people queue up for work and say conditions are
better than other factories in the area.
Apple has a code of conduct for these factories. They carry out regular
inspections on working conditions. In 2014 these inspections increased by 40%.
Apple works closely with these factories, and have paid for 60 000 employees
to go on college courses in China.
China is a growing market for Apple accounting for 25% of their sales in 2015.
This is an 84% increase on 2014.
In 2015 Apple made a net profit of $54 000 million.

Analyse the impact on Apple of moving production facilities to China. In your answer you
should consider:

• Ethical considerations
• Financial implications

You must evaluate which area has seen the biggest impact. Use evidence to support your
answer.

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(Total 12 marks)

Q7.

Thorntons Chocolate
Thorntons’ chocolates are made at its factory in Derbyshire. It employs
experienced and highly skilled chocolate makers to design products and
oversee production. It has approximately 200 stores throughout the UK.
At its store in Derby, Thorntons has successfully introduced job production
where a chocolate maker shows customers how the delicious treats are made.
Unique premium products can be made to order exactly as the customer
requests. The store in Derby was chosen as it has lots of space for the
production equipment. It is located near to the factory and each day a chocolate

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 maker from there is selected to be sent to the store.
Thorntons offer franchising, called ‘Thorntons In Your Store’. The franchise is
offered to existing business owners, such as card shops, who allocate space to
sell Thorntons’ products. The franchise fee is £1000 for five years with the
buyer paying for the fixtures and fittings needed. Predicted sales are between
£80 000 and £250 000. To support the business owners Thorntons offer training
and help with sales and customer service.
People in the UK like chocolate, but they’re eating less. The value of UK
chocolate sales is growing but the amount of chocolate sold is falling.
Customers are now buying chocolate as a treat. A third of British chocolate
buyers splash out on premium products.

Thorntons want to increase sales and are considering two options in the UK to achieve
this.

Recommend if Thorntons should expand by:

• introducing job production in most of its existing stores within the next five years
or
• offering more ‘Thorntons In Your Store’ franchising

Analyse the effect of each of these two options on Thorntons’ sales.

Evaluate which of these two options will have the biggest impact on Thorntons’ sales.

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(Total 12 marks)

Q8.

TradeUp
The demand for some second-hand products, such as mobile phones, changes
quickly. Amelia needs to make sure that her prices are competitive with other
second-hand retailers otherwise she will lose customers.

Extract of Income Statement for year ending April 2020

(£ 000)
Sales revenue 140
Cost of sales 84
Gross profit 56
Amelia has always liked her location in a busy town centre and has never had
any direct competition. This location has provided Amelia with loyal customers
who like the convenience of being able to visit her store when they are in town
shopping. However, another retailer located nearby has announced that it will
start to offer a similar service to TradeUp. Amelia has heard that a unit on an
out-of-town retail park has become available. She has found out that although
the size of the unit at the retail park is bigger than her current location, the rent
would be £825 per month, which is lower than her current payment of £1100 per
month. There is a bus link every hour to the retail park and lots of free parking;
however not all her current employees can drive.

Recommend whether Amelia should relocate her TradeUp store from the town centre to
the retail park.

Give reasons for your answer.

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(Total 9 marks)

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Mark schemes

Q1.
Areas of possible analysis:
• cost involved in buying two new hotels compared with upgrading the existing
properties
• the short / long term benefits of either / both choices
• whether wealthier guests would accept an upgraded former low-cost hotel
• no longer have one owner to manage each hotel if there are now 6
• staffing implications of extra hotels
• need to improve standard of service in upmarket hotels
• unsure if reluctance to travel abroad will go on for a long time.

Level Descriptor Marks Assessment

Objective

3 Analyses issues relating to increasing 4-3 AO3

the number of wealthier guests in
context.

2 Describes issues relating to increasing 2 AO2

the number of wealthier guests in
context.

1 States relevant points. 1

AO1
0 No valid response. 0

Notes:

NB Assume that the response is contextual unless the candidate is writing exclusively
about another business.
AO3 also assesses students’ quality of written communication. When deciding on the AO3
level to be awarded, consider the degree to which the student orders and communicates
his / her ideas.
In addition, and separately, award marks for evaluation using the grid below.
Students are evaluating which business expansion method would be better for Sunny
Rooms Ltd’s owners. The chosen method must be clearly supported to access E2 and not
simply be a reiteration of previously made arguments. An alternative method may be
offered or a combination of the two stated methods, but again this must be justified in
clear terms to be awarded E2 marks.

Level Descriptor Marks Assessment

Objective

E2 Offers judgement with clear justification 5-3 AO3 and Quality

for chosen way to attract wealthier of Written
guests. Alternatively, the clear Communication
justification might consist of supporting
why the method rejected is unsuitable.
Ideas are communicated using a
logical structure, with some appropriate
use of technical terms. There are

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 occasional errors in accepted
conventions of written communication.

E1 Offers judgement plus limited 2-1

justification.
Ideas are communicated with some
structure evident with occasional use of
technical terms. There are noticeable
errors in accepted conventions of
written communication.
[9]

Q2.
[AO2 = 3 AO3 = 6]

Level Description Marks

3 Detailed evaluation of topics based on the context. 7–9

• Sustained line of reasoning, which is coherent, relevant, AO3
substantiated with a focused conclusion that is fully
justified.
• Business areas are fully analysed. AO3
• Detailed application of interpretation of financial data AO2
including calculation of relevant figures.
2 Sound evaluation of topics based on the context. 4–6
• A line of reasoning, with a conclusion that has some AO3
justification.
• Business areas are partially analysed. AO3
• Sound application of interpretation of financial data AO2
including calculation of relevant figures.
1 Basic evaluation of topics based on the context. 1–3
• Basic line of reasoning with a conclusion. AO3
• Basic analysis of business areas. AO3
• Basic application of interpretation of financial data AO2
including calculation of relevant figures.

0 Nothing worthy of credit.

Indicative content:

Application Analysis/evaluation

Over 24 months these are not going

Bank loan to significantly affect her cash flow.
The bank loan will spread the This will mean that she can expand
payments out over 24 months. As the business and ensure that cash
it’s repaid through regular payments is available to pay suppliers to keep
and is for a fixed period of time. It the business going. Overall there is
may also have a low interest rate. less chance of the business going
into the red and having possible
extra charges or liquidity issues.
Partnership The full amount can’t be covered by

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 the partner’s £3000 investment, how
will they pay for the £1800 left?
They may still need a loan or a large
overdraft so until this is arranged
The £3000 will come into the they won’t be able to go ahead with
business immediately but will expect the website.
a share of the profits
The investment is low compared
50% of last year’s profit would mean with the return she will get at the
Sonya would have to giveher end of the first year. This will cost
partner £4 000. Sonya more than the loan and she
will lose complete control of her
business. However her friend may
leave if she does not make her a
partner.
[9]

Q3.
Possible areas for discussion include:

Organic growth
• simplifies decision making – does not have to take FT’s views into account
• avoids reliance on FT, unknown quantity
• have used this method successfully to date.

Merger
• fast way to grow, especially with new competition
• allows expansion to a new city with established contacts
• cost saving, probably be able to get rid of duplicated support staff.

Possible areas for evaluation:

• the risks involved to HP of one or both methods
• whether HP has sufficient funds to expand organically
• how important is the loss of control if merger takes place?

Level Descriptor Marks Assessment

Objective

3 Analyse expansion issue(s) in context. 4–3 AO3

2 Explains expansion issue(s). 2 AO2

1 Identifies expansion issue. 1

AO1
0 No valid response. 0

In addition and separately award marks for evaluation using the grid below

Notes:
AO3 also assesses candidates’ quality of written communication. When deciding on the
AO3 level to be awarded, consider the degree to which the candidate orders and
communicates his/her ideas.

A clear judgement is one that follows logically from the arguments raised elsewhere in the
response. The judgment made is unambiguous and realistic with the candidate having

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 articulated the reason(s) for this particular choice, rather than leaving it to the examiner to
infer the reason(s).

Judgement is being made on which methods of expanding the business would be more
suitable for Hey Presto.

Level Descriptor Marks Assessment

Objective

E2 Gives judgement with supported 5–3

justification.
Ideas are communicated using a
logical structure, with some appropriate
use of technical terms. There are
occasional errors in accepted
conventions of written communication. AO3 and Quality
of Written
E1 Offers judgement with limited 2–1 Communication
justification.
Ideas are communicated with some
structure evident with occasional use of
technical terms. There are noticeable
errors in accepted conventions of
written communication.
[9]

Q4.
Possible areas for discussion include:

Village location:
• likely to cost less to buy / rent and run
• convenient for Jenny
• tourist area so will get customers
• likely to have less competition.

Town centre location:

• would be more expensive to buy / rent and run
• all year round potential
• likely to have more customers
• likely to be more competition
• Jenny will need to travel to work.

Level Descriptor Marks Assessment

Objective

3 Analyses benefit(s) of option(s). 4–3 AO3

2 Describes benefit(s) of option(s). 2 AO2

1 States relevant point(s). 1

AO1
0 No valid response. 0

Note:

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 AO3 also assesses candidates’ quality of written communication. When deciding on the
AO3 level to be awarded, consider the degree to which the candidate orders and
communicates his / her ideas.

Level Descriptor Marks Assessment

Objective

E2 Offers judgement plus clear 5–3

justification.
Ideas are communicated using a
logical structure, with some appropriate
use of technical terms. There are
occasional errors in accepted
conventions of written communication. AO3 and Quality
of written
E1 Offers judgement plus clear 2–1 communication
justification.
Ideas are communicated with some
structure evident with occasional use of
technical terms. There are noticeable
errors in accepted conventions of
written communication.
[9]

Q5.
Areas for discussion might include the following:

Expanding in UK
• familiar with business / consumer laws
• transport is easier / cheaper to UK / EU customers
• less ‘fear of the unknown’
• no language problems
• removes the worry of fluctuating exchange rates.

Expanding to China
• cheaper costs
• abundant labour force
• less likely to have poor labour relations
• get a foothold in an emerging economy.

Many other suitable options can be included / discussed and / or combined.

Discussion should be in the context of the business.

Level Descriptor Marks Assessment

Objective

3 Uses the item to analyse location 4–3

AO3
issue(s).

2 Uses the item to explain location 2

AO2
issue(s).

1 Identifies location issue. 1 AO1

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 0 No valid response. 0

Note:
AO3 also assesses students’ quality of written communication. When deciding on the AO3
level to be awarded, consider the degree to which the student orders and communicates
his / her ideas.

In addition and separately award marks for evaluation using the grid below.

Judgement is made on where to locate the new factory.

Level Descriptor Marks Assessment

Objective

2 Offers judgement with supported 5–3

justification.
Ideas are communicated using a
logical structure, with some appropriate
use of technical terms. There are
occasional errors in accepted
conventions of written communication.
AO3
1 Offers judgement plus limited 2–1
justification.
Ideas are communicated with some
structure evident with occasional use of
technical terms. There are noticeable
errors in accepted conventions of
written communication.
[9]

Q6.
[AO1 = 3 AO2 = 3 AO3 = 6]

Level Description Marks

4 Developed integrated analysis and evaluation of topics 10 – 12

with sustained judgement based on context.
• An integrated line of reasoning, which is coherent, AO3
relevant, with a conclusion where the area which has
been impacted on the most has been fully justified.
• Interdependent nature of business areas are fully AO3
analysed.
• Applies knowledge and understanding to the context and AO2
successfully draws together several functional areas of
business.
3 Detailed analysis and evaluation of topics based on the 7–9
context.
• A line of reasoning, which is coherent, relevant, with a AO3
conclusion that is justified.
• Different business areas are analysed independently or AO3
the interdependent nature of business areas is partially
analysed.

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 • Applies knowledge and understanding to the context and AO2
starts to draw together several functional areas of
business.
2 Sound analysis and evaluation of topics in isolation of 4–6
their interdependence based on the context.
• A line of reasoning, with a conclusion that has some AO3
justification.
• One business area is analysed independently. AO3
• Applies some knowledge and understanding to the AO2
context.
1 Basic generic discussion of topics. 1–3
• A basic understanding of business concepts in isolation. AO1
• A basic understanding of one or more business AO1
concepts. AO1
• Partial relevance to the question.

0 Nothing worthy of credit.

Integrated approach – ethics and links with other areas:

• Finance can improve as costs are reduced. Can business reduce labour and
production costs without moving abroad? Living standards are lower in these
developing countries and why should businesses not take advantage of them?
• Are ethics more important than profit for their shareholders? If they pay higher
wages or give them shorter working hours this will cost more and reduce profit
• Will consumers be affected when buying their products? If they do not pay attention
to newspaper reports then sales will remain the same
• Marketing and PR will be directly impacted by unethical decisions. It may increase
costs in this area as their website has been developed and the extra checks may be
needed.

Indicative content:

Understanding Application Analysis/evaluation

Ethics – is location in Working hours 10 per day Apple is seen to be trying

China morally right? are high. to change and are working
with suppliers and trying to
monitor through checks
which are seeking
continued improvement.
As Apple is a large
company the media may
pay more attention to them
than others and therefore
ethics become more
important.

Finance – production costs Employees paid £1.12 per However Apple brings jobs
wages lower, need to hour or £180 month much to the area and provides
maintain profits. Other lower than other parts of better working conditions
costs higher. the world. than other companies,
60 000 employees been therefore if they withdraw
sent on training courses conditions will get worse
for free. Checks for these workers.
increasing.

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 Marketing – negative PR The newspaper article has
been written with some
negative statements about
Apple and the marketing
department will need to
respond to this
This may reduce sales as
fewer buyers demand
Apple products. However
their code of conduct
suggests that they take
this seriously and are
funding checks and
initiatives to improve the
situation. Their profit and
sales would not suggest
that this is having an
impact on sales.

Factors affecting location – China is a growing market If products are being

proximity to market. for Apple and as sales are produced in China there
25% of their total sales will be lower transport
they rely heavily on this costs and no import taxes.
market. This will make Apple more
competitive in the growing
market. They can invest
money in marketing and
R&D and also the training
courses they are offering
to improve living
standards.
[12]

Q7.
[AO1 = 3 AO2 = 3 AO3 = 6]

Level Description Marks

4 Developed integrated analysis and evaluation of topics 10 – 12

with sustained judgement based on context.
• An integrated line of reasoning, which is coherent,
relevant, with a conclusion with the area which has been
impacted on the most has been fully justified.
• Interdependent nature of business areas are fully
analysed.
• Applies knowledge and understanding to the context and
successfully draws together several functional areas of
business.

3 Detailed analysis and evaluation of topics based on the 7–9

context.
• A line of reasoning, which is coherent, relevant, with a
conclusion that is justified.
• Different business areas are analysed independently or
the interdependent nature of business areas is partially
analysed.
• Applies knowledge and understanding to the context and
starts to draw together several functional areas of
business.

2 Sound analysis and evaluation of topics in isolation of 4–6

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 their interdependence based on the context.
• A line of reasoning, with a conclusion that has some
justification.
• One business area is analysed independently.
• Applies some knowledge and understanding to the
context.

1 Basic generic discussion of topics. 1–3

• A basic understanding of business concepts in isolation.
• A basic understanding of one or more business
concepts.
• Partial relevance to the question.

0 Nothing worthy of credit.

Indicative content:

Understanding Application Analysis/evaluation

Franchising is a Franchise fee is This would be the cheaper option

method of low at £1000 for Thorntons as its costs would be
organic growth which should significantly lower as they do not
which can help encourage a employ the shop workers and have
increase sales. number of shop no overheads to pay. Although
owners to training would be needed this option
consider offering could be quicker than job production
the franchise. as business owners are already
operating. However sales will be
The buyer pays lower than if it operated the shop
for fixtures and itself. Overall it depends on how
fittings. popular its products are and with
People in the UK 200 stores what other possible
like chocolate, locations would be suitable.
but they're eating However how many business
less. owners would have the space to sell
the products and the footfall to
Suitable generate £250 000 of sales.
businesses such Possibly only larger shops and
as card shops those on popular high streets would
and need space. see a significant rise in sales for
Thorntons.

Job production Unique products This would allow it to create unique

will meet the can be made to gifts and aim to sell to the third of
exact needs of order exactly as the UK buyers who want premium
the customers. the customer products. It would allow Thornton’s
requests. to charge a premium price. This
should cover any initial costs that it
A third of British would have for equipment and
chocolate buyers employing a chocolate maker.
splash out on However it will depend on if it can
premium train chocolate makers. Only stores
products. near their factory will be able to use
Store need their highly skilled chocolate makers
space for the and others will need to be recruited
equipment. or store staff trained. Therefore
there will be a high initial cost.

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 Needs a trained Some stores may not have the
chocolate maker space for the equipment and with
to operate. less skilled chocolate makers the
products may not be to the quality
that customers request or produced
in the time expected. In the long run
this would increase sales but as it is
likely to take at least 5 years may be
too slow for them to achieve their
objective.

Integrated approach – links with other areas

• Will the chocolate market be affected by changing consumer spending?
• Depends if the objective is more products or the value of sales as the amount of
sales in the market is falling.
• This will depend on market research and what customers’ needs are.
• Given the changes in the UK market then the job production is likely to meet these
needs more.
• Depends if it is prepared to reduce profit in the short term to introduce the job
production and have the cash.
[12]

Q8.
[AO2 = 3 AO3 = 6]

Level Description Marks

3 Detailed analysis and evaluation of topics based on the 7–9

context
• Sustained line of reasoning, which is coherent, relevant,
substantiated with a focused conclusion that is fully
justified.
• Business areas are fully analysed.
• Applies knowledge and understanding to the context
sufficiently.
2 Sound analysis and evaluation of topics based on the 4–6
context
• A line of reasoning, with a conclusion that has some
justification.
• Business areas are partially analysed.
• Applies some knowledge and understanding to the
context.
1 Basic analysis and evaluation of topics based on the 1–3
context
• Basic line of reasoning with a conclusion.
• Basic analysis of business areas.
• Basic knowledge and understanding are applied to the
context.
0 Nothing written worthy of credit. 0

Indicative content:

Application Analysis/evaluation

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Amelia is currently located in a busy Proximity to market is an important
town centre
No direct competition, but another
retailer soon to offer a similar
buy/exchange service
Retail park is an out-oftown location Customers currently like the
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factor of location for Amelia, as a
store like TradeUp should be near
to potential customers and passing
trade. Her current location has
provided Amelia with lots of regular
customers who like the convenient
location of TradeUp. If someone has
a DVD to sell to TradeUp, they are
unlikely to want to travel to an out-
of-town location because it would
probably not be worth it for the
money they will make. People now
have lots of options for buying and
selling goods and if her store is not
in a convenient location then
customers are more likely to use
eBay or Marketplace to trade their
goods.
As Amelia has never had any direct
competition this means that anyone
in the local area wanting to buy, sell
or exchange their goods with a high
street retailer would have used
TradeUp. This has given Amelia lots
of regular customers who return to
TradeUp. Although another retailer
is due to offer a similar service,
Amelia is experienced in this market
and if she continues to offer the
same service, they should stay loyal
to her. The new competition may
also have an impact on the buying
and selling prices at Amelia’s
TradeUp store. She might have to
pay more for goods being traded in
and lower her selling prices in order
to remain competitive.
convenience of Amelia’s store being
in the town centre. It allows them to
pop in when they are already in
town visiting other shops. Moving to
an out-of-town location would mean
that people would have to make
more of an effort to visit TradeUp,
so they are likely to go less often,
especially if the retail park does not
have any other stores they want to
visit. Customers may choose to use
an alternative online trade in service
if they do not want to travel to the
retail park.
 There is a bus link that goes to the
retail park every hour but waiting for
an hour for a bus would
inconvenience customers used to
walking into town to visit TradeUp.
There is also the additional cost of
taking the bus as well as the time
this would take.

Retail unit is much bigger than
current store with lower rent
Amelia could use the extra space to
redesign her store and make it more
attractive to customers. Having to
pay £275 less rent a month (£3300
per year) would reduce Amelia’s
costs, however it is likely that she
would have to spend any spare
money on marketing to attract
customers to her out-of-town
location as she would have less
passing trade. As rent is a fixed cost
Amelia must pay this no matter how
much revenue she makes, therefore
lower is an important factor to
consider.

Evaluation/Conclusion
• Amelia must consider whether the reduction in rent at the retail park is big enough to
justify losing the convenience of her current location and her regular customers.
• Moving to the bigger store at the retail park would incur other costs for Amelia, such
as buying extra fixtures and fittings and recruitment costs – will she make enough
revenue to cover this?
• Does Amelia need the additional space that the retail store offers? Although the rent
is lower, she will have to spend more on fixtures, fittings and stock to fill the store.
[9]

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