GCSE BUSINESS STUDIES Spice Case study guide A revision workbook for the OCR Spice case study MPayne 4/1/2014
What is meant by cash flow? Why is cash flow important to a business? How will the recession have affected business in Bowton? Why might a restaurant be particularly affected by the recession Why has unemployment risen in Bowton? How will this rise in unemployment affect business? What is VAT? If a meal is priced at 20 before VAT what will be the price with VAT included?
How will a rise in VAT affect business? Explain how a rise in world food prices might affect a restaurant like Chloes What is the EU? Why are workers from Eastern Europe allowed to work in the UK? How might a shrinking population affect business in Bowton? Explain how some of the bullet pointed factors would have affected the cashflow at Chole s Restaurant Chloe s new business is the Bowton Spice Bazaar. What word best describes the type of market in which her new business is operating (Monopoly or Competitive). How will this affect her business?
Extract 1.) Key Terminology Recession - EU - Single Market Free Movement of Labour Recession - Unemployment Multiplier Effect Competition Competitive Market - Indirect Tax VAT Cash flow -
Explain the advantages of leasing the factory Explain the advantages of taking out a mortgage to buy the factory Why were market prices for the property likely to have been low at this time
What are the advantages to Chloe and Ade of using specialist machinery? Are there any disadvantages to investing in specialist machinery? How might they finance the purchase of the specialist machinery to make the spices Will the new factory benefit the town of Bowton?
Extract 2.) Key Terminology Sources of Finance Leasing Mortgage Loan Specialisation Technology -
What were BSB objectives likely to be for the first year How might these have changed over time How did the celebrity endorsement help the business Explain the advantages to BSB of receiving large orders Are there any disadvantages to BSB of large orders like the Christmas special order? Explain the advantages to BSB of having many different customers Explain the advantages to BSB of buying pouches and bottles in bulk
Explain how BSB adds value by branding its products Explain how the celebrity endorsement has helped BSB add value Extract 3.) Part 1. Key Terminology Objectives Brand Diversification Economies of Scale Purchasing Economies of Scale Technical Economies of Scale - Riskbearing Economies of Scale Adding Value -
What has happened to BSB s revenue between 2012 and 2013 Which spice is BSBs biggest seller in both 2012 and 2013 Calculate the value of sales for each Spice in 2012 Calculate the value of sales for each Spice in 2013 What has happened to sales of Punjabi Masala between 2012 and 2013 What is likely to have happened to profit between 2012 and 2013? Why can t we be certain?
Extract 3.) Part 2. Key Terminology Revenue Costs Profit
What are the advantages of BSB using JIT when it only requires a small quantity of spice Why doesn t it use JIT all the time? Explain the main types of internal economies of scale Which type of economies of scale is BSB benefiting from in this case? Explain the advantages of economies of scale to BSB What are the advantages and disadvantages to BSB of employing skilled workers in the roasting and blending room
What are the advantages and disadvantages to BSB of employing so many unskilled workers BSB is considering replacing the unskilled workers on the packing line with a machine. What would be the advantages and disadvantages of doing this Explain the difference between Job, Batch and Flow methods of production What production method is being used in this case? What are the advantages and disadvantages of this method of production to BSB
What is R&D? What might the benefits of R&D be for the business? The business specialises in producing spices and employs a large number of specialised staff. What are the advantages and disadvantages of specialisation to the business Explain how BSB adds value throughout the production process Why is adding value important to BSB?
Extract 4.) Key Terminology Just in Time Production - Job Production - Batch Production - Flow Production - Economies of Scale - Average Cost - Purchasing Economies - Research & Development - Specialisation - Division of Labour Added Value -
In what ways is BSB a globalised business Explain how the price of spices will vary with demand and supply What is the exchange rate BSB sells spices via the internet around the world. What would happen to BRB spice exports if the pound were to strengthen? BSB imports raw materials (spices such as cardamom from India. How would a rise in the value of the against the rupee affect BSB BSB has ordered a large quanitity of Cardomom from India. It has agreed to pay 112,000 rupees in 3 months time. The has since rise from 1=70 rupees to 1 = 80 rupees. How has the appreciation in the value of the affected BSB
Extract 5) Key Terminology Exchange Rate - Import - Export - Appreciation - Depreciation SPICED -
Give some examples of Fixed Costs that BSB might have Give some examples of Variable Costs of producing the Moroccan Special Spice Blend Calculate the Total Variable Costs of making 10,000 Pouches Calculate the Total Costs of making 10,000 pouches Calculate the Total Revenue if BSB sells 10,000 pouches How much profit will BSB make on the order? How many pouches would BSB need to sell to break even?
What is the margin of safety of it sells 10,000? What are the advantages to BSB of using break even analysis in this case What are the limitations of break even analysis to BSB Extract 6) Key Terminology Breakeven Fixed Cost Variable Cost Total Costs Revenue Profit Margin Of Safety
What kind of costs are advertising and distribution costs Explain what the text means when it says these were spread over an increased output What kinds of economies of scale is BSB benefiting from in this case What economies of scale might BSB benefit from if it moves to new bigger premises What are the advantages to BSB of moving to new premises What are the disadvantages to BSB of moving to new premises What else would you like to know before making a decision
List some Social Benefits of the new factory List some Social Costs of the new factory Extract 7) Key Terminology Social Costs Social Benefits Sustainability Ethics Marketing Economies of Scale
Exam Style Questions Does BSB use Job, Batch or Flow production? explain your answer. BSB uses Batch Production. Explain the advantages and disadvantages of this production method to BSB Explain how BSB adds value to the products it sells Analyse the importance to BSB of adding value The price of spices in India has risen which has increased BSBs costs. Explain two ways by which it can respond to these rising external costs. State two fixed and two variable costs associated with spice making Calculate the breakeven level of sales of the Moroccan Special Spice Blend Calculate the profit BSB will make if it accepts the Morrocan Spice order Evaluate the usefulness of breakeven to BSB One motive behind BSB moving to a bigger factory is that it will benefit further from economies of scale. Explain two ways by which BSB will benefit
Exam Style Questions When starting the business Chloe and Ade decided to take out a mortgage rather than leasing the factory. Was this the right decision? You should refer to the advantages and disadvantages of both options in your answer. Recommend an appropriate source of finance for the specialist machinery BSB intends to get a government grant to help fund the new factory. Explain how a grant will help BSB BSB is looking to build a new factory on the outskirts of Bowton. How should they finance this expansion? You should refer to the advantages and disadvantages of different sources of finance in your answer. BSB is keen to accept the 10000 pouch supermarket order but it is short of cash to purchase the ingredients it needs. Recommend an appropriate source of finance.
Exam Style Questions BSB operates in a competitive market. Explain one advantage and two disadvantages to BSB of operating in a competitive market BSB operates in a competitive market to what extent is this good for the consumer Explain two ways by which BSB has tried to change its competitive environment Explain the social costs and benefits of building a new factory BSB wants to open a new factory on the outskirts of Bowton but some local residents are opposed to the idea. Do you think the council should let the new factory be built? You should refer to the social costs and benefits of the factory to Bowton in your answer
Exam Style Questions Discuss how the recession may have affected business in Bowton Explain how the rise in unemployment may have affected business in Bowton Explain how the rise in VAT may have affected business in Bowton Discuss how BSB may be affected by a rise in interest rates Discuss the likely impact of a rise in the value of the against the rupee on BSB Explain two benefits to BSB of the UK being part of the EU Explain two disadvantages to BSB of the UK being part of the EU To what extent is BSB a global business
For any question that asks you to recommend you must remember the Thinking Hats
Chloe and Ade are undecided as to whether BSB should grow by moving to a new larger premises on the outskirts of Bowton. Do you think they should go ahead with the proposed expansion? You should refer to the advantages and disadvantages when making your recommendation. (10 marks) Arguments for Expansion Arguments against Expansion Conclusion