SAMPLE - Amazon S3 · 2016-11-08 · Resources for Courses Uncle Wongs Big Decision 8 Capacity...

Resources for Courses

Teaching theNew Edexcel

A LevelBusiness

SAM

PLE

Resources for CoursesUncle Wongs Big Decision

Teacher InstructionsThe purpose of this exercise is to get students to consider the quantitative and qualitative factors a business has to consider when choosing a location. This can beused as a synoptic A2 exercise or at the end of AS Theme 2 (omitting the net cashflow cards, as investment appraisal is an A2 topic)

1 Split the students into groups of 4

2 Give each group a copy of the scenario and a set of cards for both Birminghamand Sunderland

3 Encourage students to make calculations in order to provide numerical evidenceto support their decision:

4 Birmingham factory has a payback of 2 years and 2.4 months compared to 1 year and 11.25 months for Sunderland

5 Average rate of return for Birmingham is : Total return 11-7 = 4m, Annual return =4/3= 1.33m, ARR = 1.33/7 X 100 = 19%Average rate of return for Sunderland is: 8.7 – 6 = 2.7m, annual return = 2.7/3 =0.9m, ARR = 0.9/6 x 100 = 15%

6 Profit for Birmingham at full capacity is 6m x 1.25 – 2m = £5.5Profit for Sunderland at full capacity is 4m x 1.35 – 1.75m = £3.65

7 Break even for Birmingham is 2m/1.25 = 1.6m units, Break even for Sunderland =1.75m/1.35 = 1.29m units

SAM

PLE

Resources for CoursesUncle Wongs Big Decision

8 Capacity utilisation Birmingham SunderlandYr 1 50% 50%Yr 2 66.6% 75%Yr 3 83.3% 87.5%

9 Labour productivity Birmingham SunderlandYr 1 6,000 units per worker 5000Yr2 8000 7500Yr 3 10000 8750

10 Encourage students to consider both quantitative and qualitative factors beforemaking a decision.

Extension activityAsk the students to choose the 3 most important factors and get them to justify their choices.

Pose some ‘What if’ questions to get the students to debate whether it would affecttheir location decision e.g.:The effect of a change in the £/euro exchange rate.A large ‘rush’ order from the French supermarket.A competitor opening a factory in either Birmingham or Sunderland.

SAM

PLE

ScenarioUncle Wong Foods is a manufacturer of chilled readymeals. They deliver to all the major supermarkets. Due to the perishable nature of the product, delivery timefrom the factory to the supermarket must be less than 8 hours. Uncle Wong Foods have expansion plans and have contracts to supply to a chain of French supermarkets. This will require them to increase their capacity and open a brand new factory. 2 potential sites have been chosen: Birmingham or Sunderland.

Your taskConsider the information cards for both Birmingham andSunderland. Using this information decide which locationUncle Wong Foods should choose. You are advised touse calculations to support your decision.

SAM

PLE

4 hours 10%

£1m 50 miles

Initial cost £7mFixed costs per year £2mVariable cost/unit £0.75Selling price/unit £2

6 million units

2

£300 6 hours

Birmingham Birmingham





Year 1 £2mYear 2 £4mYear 3 £5m

SAM

PLE

Year 1 £3mYear 2 £4mYear 3 £5m

1 million units

Year 1 10%Year 2 8%Year 3 5%

500

6 hours15%

£2m 30 miles

Initial cost £6mFixed costs per year £1.75mVariable cost/unit £0.65Selling price/unit £2

4 million units



Sunderland Sunderland



SAM

PLE

3

£200 7 hours

Year 1 £2mYear 2 £3mYear 3 £3.5m

0.5 million units

400Year 1 5%Year 2 3%Year 3 2%

Year 1 £3mYear 2 £3.2mYear 3 £2.5m





SAM

PLE


A LevelBusiness


SAM

PLE


OverviewEntrepreneur cards is a kinaesthetic group activity designed specifically to developstudents skills of analysis and evaluation in relation the characteristics of an entrepreneur.

The entrepreneur cards can also be used to introduce the concept of the skills and characteristics of an entrepreneur or can be used as a main activity once this areahas been previously been discussed.

Resources need• One set of entrepreneur cards per group (one master set has been provided

which can be copied/ laminated)

• Roll of paper per group (the longer the better)

• Marker pen

• Blu-tack

Teaching and Learning Strategy1 Split the class into groups of around 4 – 6 students

2 Give each student a set of the entrepreneur cards, a roll of paper and a marker pen

3 On the board, draw the following which each group should replicate on their roll of paper

4 Students then need to discuss the cards and place them along the spectrum. This encourages students to make judgements as to the relative importance of the characteristics of an entrepreneur

5 When all the cards have been placed on the spectrum, the teacher should selectstudents from the groups (a group at a time) to come to the board and place theircards on the spectrum

The students then need to justify why they have placed them there and a further discussion can take place in relation to where other groups may have placed them .

Entrepreneur Cards

Least important

characteristic

Most important

characteristicSAM

PLE

Self-belief

Entrepreneur Cards

Initiative

Entrepreneur Cards

Risk-taker

Entrepreneur Cards

Determination

Entrepreneur Cards

Resilience

Entrepreneur Cards

Persistence

Entrepreneur Cards

Creativity

Entrepreneur Cards

Vision

Entrepreneur Cards

Passion

Entrepreneur Cards

Confident

Entrepreneur Cards

SAM

PLE

Hard-working

Entrepreneur Cards

Ability to spot gaps in the

market

Entrepreneur Cards

Problem solving

Entrepreneur Cards

Planning/ organisation

Entrepreneur Cards

Risk management

Entrepreneur Cards

People skills

Entrepreneur Cards

Communication

Entrepreneur Cards

Selling

Entrepreneur Cards

Negotiation

Entrepreneur Cards

Networking

Entrepreneur Cards

SAM

PLE

Customer Service

Entrepreneur Cards

Financialawareness

Entrepreneur Cards

Leadership

Entrepreneur Cards

Ability to multi-task

Entrepreneur Cards

Coping withchange

Entrepreneur Cards

PersuasiveEntrepreneur Cards

Entrepreneur Cards Entrepreneur Cards

Entrepreneur Cards Entrepreneur Cards

SAM

PLE

Ability to delegate

Management and Leadership Skills Management and Leadership Skills





Good communication

Confidence Team player

Ability to motivate Organised

Fair Dedicated

Giving feedback Decisive

SAM

PLE

Not afraid tomake tough decisions






Innovative

Inspire

Co-ordinate

Develop people

Plan

Inspire Set objectives

Create a vision Risk taker

SAM

PLE

FriendlyManagement and Leadership Skills Management and Leadership Skills





Monitoring

Supportive

Passion

Take control

Charisma

DynamicSAM

PLE



A LevelBusiness

SAM

PLE

Resources for CoursesPrice Elasticity of Demand

Teacher InstructionsThis resource is intended for use after students have been introduced to the concept of elasticity of demand.

Once they have been introduced to theconcept, determinants and formula forPrice Elasticity of Demand, they can practice using it for calculations and to interpret the results using tasks 1, 2 and 3for each of the On the Case businessesin this resource.

The Elasticity Extension exercises are intended to be used later in the course, as a Cross Theme challenge, when students have learnt about Pricing Strategies (1.3.3 in the Specification) andProfitability Ratios (2.3.1). The spreadsheeton the resource disk gives expected answers to the calculations.

SAM

PLE



A LevelBusiness

SAM

PLE

Resources for CoursesPrice Hike?

Teacher InstructionsThis activity encourages students to make use of the quantitative data given to them.Often ignored in exam settings, this activity forces them to use the data by givingthem no case study.

Resources Needed Students will need at least one set of data and instructions per group and a calculator.Other resources required depends on the format you wish them to present their information e.g. sugar paper for posters, computers for a powerpoint etc.

Teaching and Learning Strategy Put students in small groups – pairs to fours. Mixed ability groups may work well.Ask them to use the data to assess whether this business should increase their pricesto increase profitability. This should encourage students to make links between thetwo themes they have studied. There are a few ways of doing this task e.g.:

• Assign students roles e.g. one student in the group is to look for evidence supporting a price rise, another is to look for evidence against the price riseand another student could look for alternative strategies for increasing profitability.They could then share ideas and create a poster to explain their conclusions

• Students could create a powerpoint presentation and feedback to the rest of the class

• Students could even do an essay individually or in small groups. The question title could be: “Evaluate the likely impact of an increase in price on this business’s profitability.” (20)

As an extension activity, ask students to consider what other information would have been useful in helping them make their conclusions and why.SA

MPL

E

Your Task

SAM

PLE

data information

Fig 1 An overview of key competitors from this year. Your client is company H

Fig 2 Market Research Commissioned in 2012

Fig 3 Finance and operations data for the last two years

Other; 80

H; 31

G; 40

F; 33

E; 35

D; 50

C; 85 B; 100

A; 260

Sales (£m)

Price elasticity of demand

Income elasticity of demand

-0.9

+0.5

This year

Revenue £36m

Cost of goods sold £8.6m £8.2m

Operating expenses £21.5m £21m

Number of units sold 77m 80m

Capacity utilisation 72% 75%

Last yearSAM

PLE

data information

Fig 4 Data on employees

Fig 5 Data on scrap rate (percentage of products made which were not put up forsale as quality control officers found faults)

Labour productivity index

This year 97

Last year 99

2 years ago 100

Span of control

This year 20

Last year 10

2 years ago 10

This year This year

9

8

7

6

5

4

3

2

1

02 years ago 3 years ago 4 years ago

Scrap Rate

Scrap Rate

SAM

PLE

Possible answers

What has happened to profitability?• Profit has fallen from (36 – 29.2) £6.8m to (31- 30.1) £0.9m this year• Gross profit margin is now 72.26% whereas it was 77.22% last year• Operating profit margin is now 2.9% whereas last year it was 18.89%

Alternative strategies to raise profitability:• The scrap rate has increased greatly in the last year. At the same time the span of control for employees rose.

Perhaps employees are just getting used to the transition of having less close supervision or perhaps some ofthese managers should be brought back. This could also help with labour productivity. If fewer products arewasted then hopefully profit margins will rise. Alternatively, they could consider a move to quality assurancefrom quality control to reduce the scrap rate.

• They could reduce operating expenses e.g. by moving to a smaller premises as operating expenses are risingbut capacity utilisation is low. The operating profit margin has decreased at a faster rate than the gross profitmargin so tackling more fixed costs should perhaps be a bigger priority

• The costs of goods sold figure has risen despite selling fewer units. The higher scrap rate may account forsome of this change but the firm may also want to look into changing supplier of any raw materials they use,to increase gross profit margin

• Product development or another extension strategy to boost sales could be looked into• Increasing the strength of the brand might be an option e.g. by having more unique selling points or sponsorship

(if appropriate for the business type)• Products are being sold for quite a low price which might indicate they are low skilled goods. The business

could consider relocating and producing abroad where costs e.g. wage costs may be lower.

It would be useful to know...• The industry e.g. is the whole industry facing problems or just this firm?• Is this a long term trend of declining profitability or has it just occurred this year?• What are the industry average scrap rates, gross and operating profit margins?• Do they have retained profit which could be used for rebranding or product development?• Up-to-date price elasticity of demand estimates

Arguments for raising the price Arguments against raising the price

PED is -0.9 which indicates price inelastic demandtherefore revenue should increase as a result.

PED is difficult to estimate and this market researchis out of date so it could have changed since then. Itis also a risky strategy as it is close to being elastic so slight flaws in the market research could easilymean this strategy makes the situation worse.

It would help cover rising costs of goods sold. They are in a competitive market and they are a relatively small player in that market. Increasingprices may mean customers switch to one of themany substitute goods available.

It would be usual to increase prices by a smallamount in most industries just to cover inflation.

They already have low capacity utilisation. Raisingprices will reduce demand and mean that they haveeven more spare capacity.

They seem to have already tried cutting prices andrevenue fell by £5m! By looking at revenue and numberof units sold it can be seen that prices fell from 45p to40.26p. Perhaps the opposite strategy should be tried.

Sales fell despite a cut in price so a rise in price couldbe a disaster.

SAM

PLE

SAMPLE - Amazon S3 · 2016-11-08 · Resources for Courses Uncle Wongs Big Decision 8 Capacity...

Documents

Transcript of SAMPLE - Amazon S3 · 2016-11-08 · Resources for Courses Uncle Wongs Big Decision 8 Capacity...