1 The Shop (TS) Thomas worked for 30 years as a manager of a factory. Although he was very good at his job he was recently made redundant. Thomas always wanted to open a shop. He thinks he has the qualities an entrepreneur is likely to need for success. He has undertaken some primary market research to identify possible opportunities in city X where he lives (see Fig. 1.1). [Figure 1.1] This figure shows the following percentages for each shop type: sandwich shop 25%, electronics shop 10%, butcher shop 10%, bakery shop 20%, grocery shop 15%, clothes shop 5%, coffee shop 15%. Question: What type of shop do you think would be most successful on Main Street? Percentage of respondents for each type of shop, based on a sample of 160 shoppers on Main Street in city X between 12:00 and 14:00 on Friday 20 December 2019. Thomas now needs to make a decision about which type of shop to open. He has used the data in Fig. 1.1 and some secondary market research to identify two options. Option 1: Coffee shop The coffee shop would provide hot drinks that customers could take away and drink elsewhere. It would also sell some bakery items, such as biscuits and doughnuts. There are four other shops selling takeaway hot drinks and bakery items in the city, as well as five cafés. Thomas thinks that the profit margin would be 6% to 8%. Option 2: Sandwich shop The sandwich shop would make sandwiches using job production. Customers can choose from a range of sandwich fillings, as well as cold drinks and snacks. There is only one competitor in the city. It is a well-known international franchise that spends a lot of money on promotion. Thomas thinks that the profit margin would be 10% to 15%.

Mark scheme

Marking points from the official mark scheme (May/June 2020). The mark or mark type is shown in brackets.

1. [2] A correct definition
2. [1] A partial, vague or unfocused definition
3. [0] No creditable content
4. Redundancy is where an employee is made to leave an organisation because their job role is no longer required.
5. [1] Example or some other way of showing good understanding
6. [1] An understanding of primary
7. [1] An understanding of market research
8. Market research is when a business investigates the needs of consumers to assess who may be interested in purchasing its product/service.
9. Primary involves the business conducting the research themselves, first-hand.
10. Examples include questionnaires, surveys etc.
11. Can be more specific than secondary, more expensive than secondary etc.
12. [2] Correct answer with or without correct working
13. [1] Correct identification of figures
14. [0] No creditable content
15. Answer = 24
16. Correct figures: 160 shoppers in total, Coffee shop = 15%
17. Formula: 160 X 15 / 100 = 24 respondents
18. [4] Explanation of two limitations of the sampling methods used by Thomas
19. [3] Explanation of one limitation of the sampling methods used by Thomas
20. [2] Identification of two limitations of sampling
21. [1] Identification of one limitation of sampling
22. [0] No creditable content
23. Random - is everyone likely to be in the target population for his shop?
24. Only 160 shoppers – is this enough on which to base such an important decision for Thomas?
25. At lunchtime – is this likely to have weighted the answers towards shops that sell food?
26. Friday 20 December – is one day likely to be representative of the whole year?
27. Friday 20 December – just before Christmas/holiday – is this a peak time for shoppers and would this give a representative sample?
28. [4] Shows understanding of two (or more) qualities needed to be a successful entrepreneur in context
29. [4] Good analysis of two (or more) qualities needed to be a successful entrepreneur in context
30. [3] Shows understanding of one quality needed to be a successful entrepreneur in context
31. [3] Good analysis of one quality needed to be a successful entrepreneur in context
32. [2] Shows knowledge of qualities needed to be a successful entrepreneur
33. [2] Limited analysis of two (or more) qualities needed to be a successful entrepreneur
34. [1] Shows knowledge of entrepreneurship
35. [1] Limited analysis of one quality needed to be a successful entrepreneur
36. [0] No creditable content
37. Risk-taking - Thomas will be taking risks in setting up his own business.
38. Confidence - Thomas needs to have confidence that he will make good decisions when setting up his new shop.
39. Ability to make decisions – about the opening of his business, i.e. the options.
40. Self-starter - Thomas will not have a boss in his new business so needs to motivate himself.
41. Creative - to gain a USP in his new business.
42. Determined – Thomas is likely to have to overcome setbacks in his new shop venture.
43. [7] Justified recommendation based on arguments in context
44. [6] Developed recommendation based on arguments in context
45. [5] An evaluative statement/recommendation based on arguments in context
46. [3-4] Shows understanding of the two options for Thomas's new shop
47. [3-4] Arguments based on the two options for Thomas's new shop
48. [1-2] Shows knowledge of business decision making
49. [1-2] Limited analysis of business decision making
50. [0] No creditable content
51. Option 1: A coffee shop
52. Hits two of the segments form the research, so could potentially sell to 35% of the market.
53. Synergy between coffee shop and bakery – similar customers etc.
54. Other shops in local area suggest that there are potential customers.
55. Lower profit margin than Option 2.
56. Higher competition than Option 2 – four takeaway shops and five cafes – will Thomas have a USP?
57. Option 2: A sandwich shop
58. Job production – will it be able to keep up with demand – however may give shop a USP over the international franchise.
59. Low competition compared to Option 1 – however competitor spends heavily on promotion, so may be a barrier to entry.
60. Higher profit margin compared to Option 1.
61. Hits less of a market than Option 1 (25%) but it is the biggest single segment of the market.