Business Studies

Topics: Elasticity, Mussel Pages: 8 (1470 words) Published: October 10, 2013
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General Certificate of Education Advanced Subsidiary Examination June 2012


Business Studies
Unit 2 Managing a Business 9.00 am to 10.30 am Monday 21 May 2012


For this paper you must have:  a calculator.

Time allowed  1 hour 30 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. Do not write outside the box around each page or on blank pages.  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 80.  Questions 1(c), 1(d), 2(c) and 2(d) 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.





2 1 Read the case study below and then answer the questions that follow. High aspirations Tree Tops Ltd (TT Ltd) is an outdoor pursuits company operating 28 high wire adventure sites in the UK. The company aims to give ‘a unique experience’. Its sites offer rope ladders, swings and trapezes, although some customers have asked for additional facilities such as zip lines. TT Ltd was established by Carmella de Lucia in 2000 and has grown steadily. Carmella’s main objective is to maximise short-term profits. Despite rising costs, the company’s net profit margin has risen steadily to 21.7% in 2011. TT Ltd faces intense competition from rivals such as Go Ape Ltd which has announced expansion plans. For the first time, TT Ltd ’s customer numbers fell in 2011 by 1.5%. The company has always placed a high emphasis on health and safety in what could be a dangerous environment for its customers, and its employees are relatively well paid. Over 65% of its training budget is used for health and safety training and this budget is unchanged for 2012 at 4% of company revenue. The company has received a rising level of complaints about long queues at its sites, especially the sites opened recently. Site managers at these locations argue that there are insufficient facilities for the customer numbers, and that prices, at £33 per adult, are too high, especially given these shortcomings. One manager noted that a 2007 survey showed price elasticity of demand for this type of leisure product was –2.0. There is increasing dissatisfaction from employees about their workloads and lack of job rotation. Since 2009, annual labour turnover has doubled to 24%. In early May 2012, Carmella and the other directors made a number of key decisions to:  

Do not write outside the box

continue with the policy of setting prices 10% above those of rivals switch £1.5 million from market research to advertising and sales promotions targeted at increasing customer numbers at less profitable sites delegate control of budgets to site managers at each of its 28 sites with immediate effect; they would then have more freedom in setting budgets.

Carmella believes that the company should adopt a policy of linking employees’ pay to achieving targets for customer numbers at all of its sites. She forecasts that adopting this policy would increase average wages by 4% and increase customer numbers by 5%. A decision on this is to be made next month.



3 Answer all questions in the spaces provided.

Do not write outside the box

1 (a)

Analyse two possible solutions to TT Ltd ’s poor level of customer service. ...............................................................................................................................................
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