Unit 4: Operations management · AS Level Business

CC manufactures a range of cola drinks aimed at the mass market. The company is the market leader for cola drinks in country N. CC produces four variants of its cola drink:

• Original cola
• Sugar‑free cola 5
• Caffeine‑free cola
• Cherry cola The company uses market segmentation to plan the marketing of each of the four variants. CC uses cost‑based pricing by adding 80% to the cost when calculating the price of all products. CC sells 50 000 bottles of Sugar‑free cola each month. Table 1.1 shows the cost 10 information for one bottle of Sugar‑free cola.

CC’s sales of Cherry cola have decreased by 12% over the past year. The marketing
manager is planning to carry out market research to investigate the reason for this
decrease. The research will collect qualitative data. The marketing manager will use this
data to make decisions about a marketing campaign to increase sales.
CC has 4 factories in country N and employs 1750 employees. All employees are paid 20
using a time‑based payment method and the work is repetitive. Operations are capital
intensive. The human resource manager is concerned that employees lack motivation,
leading to high labour turnover. Labour turnover has increased by 8% over the past year.
The human resource manager is considering changing the employee payment method from
time‑based to piece rate. 25

DW operates a franchise as a franchisor. Driving instructors can become a franchisee and
sell driving lessons under the DW brand. DW has grown very quickly, gaining a 25% share
of the market in three years.
Driving instructors must prepare a business plan when applying to become a DW
franchisee. To prepare the business plan, the driving instructor must carry out primary 5
market research to assess potential customer demand for driving lessons in their area.
DW sets budgets each year. The budget for advertising was $25 500 in 2025. However, DW
actually spent $31 800 on advertising in 2025.
The prices for DW driving lessons are set by DW’s finance manager, who uses break‑even
analysis to make pricing decisions. 10
In addition to driving lessons, DW sells a ‘learn to drive’ book which customers can buy
from its website with next day delivery. The book is very popular, and the business uses JIC
(Just in Case) inventory management.
DW’s website generates over $28 000 of revenue each year from sales of the ‘learn to
drive’ book. The website is updated by the website manager and an IT assistant. The 15
website manager designs the website and resolves any technical problems. The IT
assistant helps the manager with simple programming and administrative tasks.
The website manager will retire in two months’ time. A new website manager will need
to be recruited. The human resource manager needs to decide whether the new website
manager should be recruited internally or externally. 20

Zorba had always had a passion for flower arranging. When he was made redundant from his job as an engineer last year, he decided to use all of his savings to set up a flower shop called ZF. Although Zorba did not require any additional finance, he decided to write a business plan before setting up ZF. Table 2.1 shows an extract from his business plan, showing the 5 planned expenditure for ZF.

Zorba opened ZF at the start of January 2026. However, Zorba encountered a number of problems with Supply Chain Management during the first three months of ZF’s trading. 15 These included:

• Changeable weather conditions meant that Zorba could not always guarantee which types of flowers would be available.
• ZF was often forced to work over-capacity at times of high demand.
• The inventory is perishable and can be easily damaged when transported. 20 At the end of the first three months of trading, Zorba realised that he had no working capital left. The problem was that he had not been effectively managing his trade payables.

LC is a private limited company based in country J, specialising in the manufacture of
high‑quality, eco‑friendly candles. Founded in 2018, LC has grown quickly by using a highly
effective approach to place (distribution channels).
LC sources raw materials from local and international suppliers. LC’s customers are mainly
specialist retail shops (B2B) and online shoppers (B2C). LC operates in a dynamic market 5
but is committed to supporting communities through job creation and sustainability. LC is
seen by the local community as a valuable contributor to the local economy.
LC has the production capacity to manufacture 500 000 candles per year and has 50
employees. LC has two products: ‘Plain Candles’, at a price of $7 each, and ‘Luxury
Candles’, at a price of $8 each. LC sells twice as many Plain Candles compared to 10
Luxury Candles.
When allocating costs to each product, LC uses a full costing approach. Table 2.1 shows
some key data for LC in 2025.

The owners have decided to convert LC to a public limited company. This will likely increase the value of their shares. However, the directors are concerned about this decision.

Kamal is a successful social media influencer. In 2020, Kamal launched his own social media platform, called Influencer Xperience (IX), operating in the quaternary sector of the economy. Kamal targeted other social media influencers with IX’s promotion. IX allows influencers to manage and publish videos on its platform. The unique selling point of IX is that it provides the influencers with better and more detailed information than any other platform. 5 IX is a free-to-use service for social media influencers. IX charges other businesses to advertise on the platform. The price of advertising space is set each month, using dynamic pricing, based on how many users click on an advertisement (price per click). Table 1.1 shows some data about advertising on IX’s platform.

IX’s operations are labour intensive and Kamal describes his management style as laissez-faire. IX has 30 employees who are all managed by Kamal (see Table 1.2).

Yvette is the managing partner of YV, a veterinary (vet) practice in city P. There are four partners of YV, each of whom is a fully qualified and experienced veterinary surgeon. Each partner specialises in the care of different types of animals. Yvette specialises in the care of small animals, including dogs, cats and rodents. Table 2.1 shows a cash flow forecast that Yvette has created for the next three months. 5

Yvette is proposing a merger between YV and AV, which is YV’s main competitor in city P.
Figure 2.1 shows sales revenue data for the vet services market in city P.
sales revenue ($000s)
JH, 160
YV, 230
SD, 200
AV, 210

NN is a small business owned by Natalia. NN produces and sells a range of natural skincare products. In 2020, Natalia started making her own skincare products at home using natural ingredients. She realised that there was a demand for her products among her friends and family. Natalia then decided to turn her hobby into a business and launched NN in 2021. 5 Natalia operates her business from a rented workshop with limited space, where she makes her products by hand. She buys her ingredients from local suppliers who share her values of environmentally friendly production. NN has been growing steadily and has gained a loyal customer base. NN has received positive reviews from beauty magazines. Natalia’s skincare products are sold through her 10 own website, social media platforms and local retailers who specialise in selling natural products. Natalia is developing a new face cream. Table 2.1 shows price and cost estimates for the new face cream.

The skincare market is very competitive. There are many established brands that offer similar products to NN, but with wider distribution channels. Natalia needs to balance her time between production, managing orders, delivery, marketing 20 and other administrative tasks. She works long hours and is stressed and exhausted. Natalia is considering outsourcing to increase NN’s production capacity.

TRA is a quaternary sector business. It is the market leader in providing social media data to food manufacturers in country F. TRA’s market has grown by 40% over the last year. DF is a multinational business that specialises in non-alcoholic drinks. DF has asked TRA for data about a new bottle of water with pod attachments. The pods give a fruity flavour which is combined with sparkling water. TRA has sampled 8000 potential consumers on 5 social media to identify their favourite fruity flavour (see Fig. 1.1). None, 6% Watermelon, 14% Banana, 18% Lemon, 34% Strawberry, 28%

TRA employs 65 researchers. Since 2020, all of these employees work from home. They are provided with all the necessary IT equipment and a high-speed internet connection. However, motivation is poor, and this has led to high labour turnover. The Human Resource 10 Director has received some feedback from employees. Fig. 1.2 shows some of this feedback.

• I hate being so isolated – I never get to speak to any other employees.
• I have to use my own electricity, and the cost has doubled in the last two years.
• I know some employees are not working very hard, but they get paid the same as 15 me. It’s not fair!

Drake has a law degree and works for a partnership of lawyers during the day. Drake owns a website that gives free legal advice. He works on the website in the evenings and at the weekend. He started the website as a hobby, but the website has grown to over 20 000 users and he now sells advertising on his videos and on the website. 5 Drake uses outsourcing for some areas of his website. He has recently been sent a report showing variances in the budget from the previous month (see Table 2.1).

Drake has now left his job and is focusing full time on the website. He rebranded the website as Law Advice Forum (LAF). Drake’s business plan for LAF included:

• Operating as a sole trader. 15
• Continuing to develop and expand the website to provide legal advice and paid legal services.
• Renting an office in city G where all employees would work.
• Hiring five fully qualified lawyers.
• Hiring three administrators. 20
• Leasing IT equipment. However, Drake is concerned about the limitations LAF will face as a labour intensive operation.

SF is a private limited company that develops and maintains large-scale solar farms in
country X. SF operates as a capital intensive business.
Bob is an entrepreneur and the majority shareholder of SF. He invested into SF’s first solar
farm. SF took out high-interest bank loans to cover initial cash flow problems and provide
working capital. SF used internal (organic) growth over the next 10 years. 5
SF rents fields from farmers. Its main capital expenditure is solar panels, which are installed
on the rented fields. The solar panels generate electricity, which SF sells to energy providers.
Solar panel technology is constantly improving.
SF operates five solar farms in country X. A team of seven engineers maintain all of SF’s
solar farms. 10
Table 1.1 shows SF’s budgeted and actual data for 2024.

Bob has identified that SF can increase its revenue by using batteries to store electricity
generated by the solar panels. This electricity can then be sold at peak times for premium
prices. This will require significant investment into battery technology. 20
Bob wants to retain control of SF but is concerned about the investment required for further
growth. In 2024 the cost of renting new farmland and purchasing solar panels increased
significantly.
ZB is a multinational battery manufacturer that is keen to start a joint venture with SF. If the
joint venture goes ahead, ZB will insist that SF uses ZB batteries in all future solar farms. 25

PD is a mass market fizzy drinks manufacturer in country Z. The fizzy drinks market in
country Z is dominated by a few well-known brands. The total market value is $5.3bn and
the PD brand has a 17% share of this market.
Pablo was recruited to be the Marketing Director of PD in 2022. He launched a new
promotional campaign based on trending music on social media. He decided to use social 5
media influencers to focus on this market.
Online feedback of the campaign was poor. Many of PD’s customers did not want to be
associated with trending music. National news highlighted the negative feedback and PD’s
sales volume decreased by 20% within a week and continued falling. This led to excess
inventory in PD’s warehouses. The bad publicity also caused a drop in PD’s share price and 10
a negative impact on cash flow.
Fig. 2.1 shows feedback from a recent questionnaire where previous PD customers were
asked what they thought about the promotional campaign.
quite positive
very positive
no opinion
very negative 120
quite negative

Pablo has called an emergency meeting of PD’s marketing managers to repair the damage 15 done to the PD brand from this recent promotional campaign.

NS is a private limited company set up by Saira and Chantal as a social enterprise. NS sells natural hair care products and focuses on customer (market) orientation. The main aims of Saira and Chantal include donating to local charities and improving gender equality in the workplace. NS began by selling its products to small, independent businesses in country H. NS 5 expanded its range slowly based on customer feedback, specific requests on its blog, and sales data. NS explored additional finance opportunities required for expansion. NS approached John, who owns manufacturing facilities in country H and has significant marketing experience. He invested into NS in return for ownership of one third of the business. John’s main aim is to 10 increase long-term profits in order to maximise the return on his investment. In the five years since John’s investment, NS has become the market leader in country H for natural hair care products. NS products are now sold in major cosmetic retailers. NS recently analysed its output in 2024 (see Table 1.1).

Saira and Chantal have decided to employ a Marketing Manager for NS. Fig 1.2 shows an extract from the job advertisement. 20 Marketing Manager

• Experience of growing brand awareness and using online channels of distribution.
• Using budgets to monitor the performance of marketing campaigns.
• Developing and maintaining relationships with external stakeholders. 25

PH owns student rental accommodation in all the major cities in country Y. PH used demographic segmentation in its market research. This research identified that university students would pay a premium for high specification rental accommodation. PH has specialist teams focused on sales, maintenance, customer service and finance. There is little opportunity for internal promotion. PH pays low salaries, however, it offers 5 profit sharing to motivate its 150 employees. This has been effective as PH has had low labour turnover. In the last two years, profit levels have fallen by 75%. In 2024, 45 employees left PH. Complaints about maintenance and customer service have increased due to the lack of experienced employees in PH. 10 The Finance Director is reviewing PH’s existing sources of finance, shown in Fig 2.1. Bank loans 8% Owner’s Mortgage investment 42% 28% Overdrafts 22%

Frank, the Operations Director, wants to improve the sustainability of PH’s operations. He plans to:

• stop renting out accommodation in some lower-income cities, and sell these buildings 15
• upgrade accommodation in high-income cities
• reduce the size of the workforce.

TT is a private limited company in country J. TT has contracts to deliver products to secondary, tertiary and quaternary sector businesses. QZ is one of the largest manufacturers in country J and plans to outsource its supply chain management. A contract has been agreed between TT and QZ based on the following cost and revenue data (see Table 1.1). TT’s Sales Manager has forecast that TT will make 5 5 000 deliveries with the new contract.

TT employs 120 drivers. The majority of these drivers are white men aged between 40 and 60. A national newspaper has recently criticised the truck industry in country J for not having diversity and equality in the workplace. Klide, the Marketing Manager, has been set an objective to increase TT’s revenue. He has 15 decided to target small online retailers. TT will pick up individual products from the small online retailers and deliver them to households. This would require a new fleet of smaller trucks but has the potential to increase TT’s revenue. Klide plans to use digital promotion to target these small online retailers.

Kaia left university with a degree in textile design. Using her entrepreneurial qualities, Kaia set up PB as a sole trader. Her current objective is to break even. Kaia uses job production to make blankets which are personalised with a picture. Each customer logs into the PB website and chooses the size of blanket. The customer then uploads a picture that they want printed onto the blanket. 5 Many of Kaia’s customers buy the blankets as gifts for special occasions. Kaia has employed a social media influencer to promote her blankets. The influencer will be paid a salary of $250 a week and a 5% commission on revenue that comes directly from the influencer. Fig 2.1 shows the revenue that came directly from the social media influencer in February. 10 Revenue ($) Week 1 Week 2 Week 3 Week 4

Kaia would like to relocate PB to larger premises. She is applying for external sources of finance, and she has written a five-year business plan to support her applications.

CT is a co-operative that produces and sells a range of wooden toys, such as puzzles, cars and dolls. The co-operative was formed in 2020 by a group of 12 people who share a passion for making toys. They wanted to work together to create quality products that would appeal to children and parents. No one person takes on the role of manager; instead, they share the traditional manager functions between them. 5 CT operates from a large workshop in a rural area of country Z, making toys using labour-intensive techniques. CT uses locally sourced wood that is certified as eco-friendly. CT also uses natural paints and finishes that are safe and non-toxic for children. Table 1.1 shows CT’s output in 2024.

CT sells its products online through its own website and social media platforms, as well as through some independent retailers who specialise in ethical products. The co-operative 15 also attends various trade fairs and exhibitions to showcase its products and network with potential customers and suppliers. CT has never researched customer wants. CT faces some challenges in its current operations. These challenges include:

• high costs of production
• a long lead time 20
• a requirement for skilled workers. CT is considering changing to flow production to overcome these challenges.

Reliable Car Repairs (RCR) is owned by Freya and her brother Kye as a partnership. The business was set up five years ago in city B and repairs a wide range of cars. Freya recently carried out some primary market research. The qualitative data from the market research showed that customers like the speed of RCR’s service as many repairs were completed within 24 hours. 5 RCR’s market share has increased annually over the past five years. The total sales in the market in 2023 were $700 000. Table 2.1 shows RCR’s data for 2024.

The owners are always looking to improve the performance of the business and have an objective of increasing efficiency. Freya and Kye have no experience of repairing cars and so employ two mechanics to carry out this work. The mechanics have both been employed by the business since it was set up. Kye supervises the mechanics using a democratic management style. 15 The business holds a large quantity of inventory as different cars need different components. The business buys components from two suppliers which have both supplied RCR since it was set up. The partners are thinking of introducing Just in Time (JIT).