Question

tutoru Section c ANSWER ALL QUESTIONS IN THIS SECTION with modern coffee shops well established in the UK it was only a matter of time before the humble cup of tea underwent a similar change. The demand for tea and tea rooms has grown significantly over the past few years, partly down to the increase in demand for afternoon tea which has been put down to the success of the Great British Bake Off. According to a report by market research firm Mintel, demand is rising fastest amongst young people aged between 25 and 34. Entrepreneur Jenny Taylor has made the most of this trend. She started her artisan tea business, "Honest TEA, as a sole trader. Jenny sources high quality whole leaf tea from Sri Lanka, creating individually designed and quirky packaging and selling it across the world. Jenny is keen to expand the business and is planning to launch her first 'HonesTEA to room in Northumberland, targeting a young, urban, affluent crowd and serving only the finest Sri Lankantea. Jerny is risk verse and believes in obtaining as much data as possible before making decisions. After spending several months gathering Information she has found two potential locations which she believes may be suitable (see figure 1 below). Figure 1: Location Information based on market research carried out by Jenny Shopping Centre High Street Monthly fixed costs £3,100 $4,300 Forecasted monthly customers 570 490 Forecasted customer spend per visit £10 £14 Variable cost per customer E3 Her market research has also revealed that there are plans to invest £900,000 in the shopping centre which will include increasing the number of shops, extending the opening hours and attaching a two level multi-storey car park. The high street location is in a more affluent area of Northumberland and the premises were previously used as a café. In order to fund her expansion, Jenny wil need a significant amount of finance. Although interest rates are at an al-time low, she has decided that the expansion should be financed by forming a private limited company, inviting people to purchase shares in her business tutor2u AQA A Level Business Unit Assessment Page 5

Answer 1

Monthly fixed Cose Variable cost Shopping Centre Street 3, 100 4,300. S70x3 o 49003 =1710 21470 570 x 10 490 x 14 = 5700. - 6860. Customer shenets per visit Cle Опле) - 4300 Total cost Fixed coste Variable cost 3100 + 1710 4810 +1470 5770 profit = Total Revenue 5700 -4810 68 60 -5770 1090 Total Cost sgo profit selo 1090 Cumently profit is higher in High Street o location compared to "Shopping Centre".

BENEFITS OF DATA BASED DECISION MAKING.
1) Any company be it small or large are today taking decision based on data, data analytics leads to a higher performance levels in the organisations who use the data effectively. When business decisions are made without properly understanding and utilizing data then it can limit the business from reaching to its full potential.
2) One of the major benefits on data based decisions are that your decisions are based on facts and numbers, data understanding and collecting definately takes time initially but in the later stages of the business, the decisions are taken rather very fast based on the data you have.
3) Data helps identify trends in the market, you can even predict the trend, if you have the relevant data, and you can before hand make your business ready for the coming trend.
4) Data does not discriminate, it is neutral, it will always tell the facts, in the above example jerry has the data that there is going to be investment in the shopping center so jerry can predict the upcoming trend at the shopping center, may be currently profits are higher at high street but after the investment is done, profits could get higher at shopping center so this all can be only predicted when you have accurate data, it will help you to predict, where you can open the tea shop, even before the investment is made.
5) Data will help to clearly define the problems, A decision is to be made only when there is a certain problematic situation, in the above case the situation is where to open the tea shop, so i hypothesis needs to be developed, data is collected and then using data we can come to a conclusion. This process is one of the most effecient to take decisions that have higher probability of being correct.

DO YOU AGREE WITH JERRYS DECISION OF TURNING FORM A SOLE TRADER INTO PRIVATE LIMITED COMPANY? (Subjective answer)
(I will put up advantages and disadvangages of both and then you select what you feel is right)
What is a sole trader ?
It basically means a self employed person, who is solo owner of the business, it is one of the most simplest buisness structures. The business man and the business are one entity in this case and are not seperate.
What is a limited company ?
It is a type of a business structure that has its own legal identity, the business is seperate from the owners of the business (shareholders and managers).

Sole trader vs Limited company ?

Sole trader advantages
1) Easy to set up and very less legalities to follow.

​​​​​​Sole trader disadvantages
1) As the owner and business are treated as one entity then if there are losses, debts are not being paid then the owner is personally liable to pay those debts even if he has to sell off his personal stuff to pay the debt. So personal life can come in danger in case if the company is not being able to generate profits.
2) Getting loans from banks is bit difficult when you are sole trader, banks give clear preference to limited companies.
3) Tax rates on sole traders are higher than that on limited companies, When you as a sole trader are able to get very high levels of income then staying as a sole trader becomes ineffecient.

Limited company advantages

1) The owner and the business are treated as seperate entities, so when business are in loss then the owners personal assets are safe.
2) when the business is generating very high income, then tax paying as a limited company is more effecient than paying as a sole trader, as corporation taxes are lesser than higher brackets of income taxes.

Limited company disadvantages

1) Legal responsibilites, which are time consuming must be performed by the owner for the company. Filling annual returns, handeling paperwork.
2) Less privacy - all the details of the company earnings are shown publicly.