Joe's Smoothies (JS) Joe graduated with a Business degree. He then spent a year travelling around Asia. He discovered a local drink. This was a fruit smoothie, with added nuts and seeds for protein, that many people drank instead of a meal. When he returned home to country Y he found no suppliers of this type of product. Joe is considering setting up a small café producing smoothies to supply this potential new market segment. It would be called 'Joe's Smoothies'. This would be possible with a low level of start up capital. This is important as he has no savings. He created a business plan with estimated costs (Table 2.1) and estimated demand and average selling price (Table 2.2). This data was based on a sole trader business in one location. Looking at the data, Joe thought that the business would be low risk and had the potential for national expansion. Table 2.1: Estimated cost information ($) | | Spring | Summer | Autumn | Winter | | :-------------------- | :------- | :------- | :------- | :------- | | Capital Investment | 2000 | | | | | Fixed costs | 10000 | 10000 | 10000 | 10000 | | Average variable cost | 2.50 | 2.00 | 2.50 | 3.00 | Table 2.2: Estimated demand and average selling price (with no market research) | | Spring | Summer | Autumn | Winter | | :--------------------- | :------- | :------- | :------- | :------- | | Demand (units sold) | 1000 | 3500 | 1500 | 500 | | Average selling price | $3.50 | $6.00 | $3.50 | $2.50 | Before opening Joe's Smoothies, Joe approached a business adviser who asked him about his market research. Joe had not done any. The business adviser suggested it would be a good idea to do some primary market research to collect information about his target market and potential demand.

1. (a)(i)Define the term 'market segment' (lines 5–6).[2]
2. (a)(ii)Explain the term 'start up capital' (lines 6–7).[3]
3. (b)(i)Refer to Table 2.1 and Table 2.2. Calculate the break-even level of sales for JS in the summer.[2]
4. (b)(ii)Explain two factors which may influence the demand for Joe's product.[4]
5. (c)Analyse two methods of primary market research that Joe could use.[8]
6. (d)Discuss sources of finance Joe could use to start up his business.[11]