Size of business · AS Level Business

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.

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

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.

Frank grows fruit, including oranges, on his farm in country J. He sells his fruit at a market in a local city one day a week. Frank is a sole trader and operates in the primary and tertiary sectors. He set up FF using all of his redundancy money from a previous job with a large company. Frank’s business objective is to increase profit by 10% by the end of 2026. He also has a 5 target profitability of 25% by the same date. He uses the data from break-even analysis to make business decisions. Table 1.1 shows forecast data for the sale of oranges in July 2025.

Frank has two main competitors:

• a national supermarket with stores locally 15
• a shop in the local city selling fruit. Frank’s business is very successful as the fruit he sells is fresher than products sold by his competitors. This is Frank’s USP. His fruit is sold only a few hours after it is picked. However, the fruit sold by Frank’s competitors is grown hundreds of kilometres away. Customers also enjoy the range of fruit sold by Frank as it varies throughout the year. 20 Frank currently uses competitive pricing but is thinking of introducing price skimming in the future.