Marketing and Love Wood

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Centre Number Surname Other Names Candidate Signature

Candidate Number

For Examiner’s Use

Examiner’s Initials

Question

Mark

General Certificate of Education Advanced Subsidiary Examination January 2010

1 2 TOTAL

Business Studies
Unit 1 Planning and Financing a Business 9.00 am to 10.15 am Tuesday 12 January 2010 For this paper you must have:  a calculator.

BUSS1

Time allowed  1 hour 15 minutes Instructions Use black ink or black ball-point pen.  Fill in the boxes at the top of this page.  Answer all questions.  You must answer the questions in the spaces provided. Answers written in margins or on blank pages will not be marked.  Do all rough work in this book. Cross through any work you do not want to be marked. 

Information The marks for questions are shown in brackets.  The maximum mark for this paper is 60.  Questions 2(b) and 2(c) should be answered in continuous prose. In these questions you will be marked on your ability to: – use good English – organise information clearly – use specialist vocabulary where appropriate. 

Advice  You are advised to spend about 20 minutes answering Question 1.

(JAN10BUSS101)

G/K46670

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BUSS1

2 Read the case study and then answer the questions that follow. Love Wood At school, Padma developed and patented a technique for joining different woods together to create a patterned effect. This patented process improved efficiency allowing Padma to produce more cheaply than competitors. A large company offered to buy the patent, but Padma decided to keep it and run a small, sole trader business, making and selling individually designed wooden toys. During this time, she built up an expertise in selling through the internet. Padma’s friend, Emily, was a brilliant toy designer and so Padma asked Emily to create a new business with her. Padma changed her sole trader business to a private limited company called Love Wood Ltd with Emily receiving 40% of the shares. Before starting the new business, Emily designed some new toys which Padma made. Emily carried out some market research which included showing these toys to potential customers. She discovered that most of the interest in Love Wood Ltd’s products would come from grandparents who wished to buy presents for their grandchildren especially at Christmas. She then conducted some qualitative market research through a small focus group of grandparents and found that they were most likely to buy old-fashioned, traditional wooden toys. They particularly liked the fact that Padma used long-lasting tropical hardwood in different colours. The combination of Emily’s designs and Padma’s patented technique would provide the business with a unique feature. Emily carried out some quantitative market research on individually designed wooden toys, using both primary and secondary market research. This is summarised in Figure 1. She also calculated the variable costs shown in Figure 2. Figure 1: Results of market research into the UK market for individually designed wooden toys. Average selling price for an individually designed wooden toy Annual sales forecast for Love Wood Ltd ’s first year, 2010 Annual growth forecast for Love Wood Ltd 2010 –2012 Annual growth forecast for UK market for individually designed wooden toys Data on largest competitor in the market: Sales value Market share £83 4000 toys 25% per annum 10% per annum £2.4 million 25.6% 10

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15

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Areas outside the box will not be scanned for marking

Figure 2: Variable costs for Love Wood Ltd Item Raw materials Labour costs Transport to customer Variable cost per toy (£) 15 5 4

Projected sales were high but unpredictable, so Padma suggested that Love Wood Ltd should recruit a mix of permanent and temporary employees. Padma and Emily used their market research to help them to decide on the objectives for their business...
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