Fabian Flowers (FF)

Fabian is starting a business selling flowers in country Z. He will call his shop Fabian Flowers (FF). He
was made redundant from a factory which produced paint. Fabian thinks he has the skills needed to
manage his own business.
Fabian does not know much about flowers but he has found out that demand for them is increasing. He
wants to have a business partner. There are three people who want to become his partner and he has
to choose between them. See Appendix 1 for details about them.
To make progress with his business idea he needs to:
• set objectives for the business with his partner
• decide whether to focus on Option A customers or Option B customers (see below)
• decide on the prices of the flowers in his shop.
Option A: Business customers
These would be mainly hotels and restaurants demanding fresh flower
arrangements two times a week. The orders would be all year round. These
customers would expect trade credit and a reduced price for regular orders.
Projected financial data for the first year is:
• sales revenue $200 000, cost of flowers $40 000 and expenses
$120 000.
Option B: Retail customers
These would buy flowers regularly. There would also be higher sales for special
occasions such as weddings, Valentine’s Day and birthdays. High prices could
be charged and customers would pay with cash. Projected financial data for the
first year is:
• sales revenue $120 000, cost of flowers $30 000 and expenses
$60 000.
Appendix 1
Details of three people who wish to become Fabian’s business partner:

Gowri Miranda Pamela

Has already managed her own Has no experience of Has no experience of
Business managing a business but managing a business but wants
worked in a shop for two years to learn how to do this

Has no flower arranging Has qualifications in flower Likes flower arranging at home
Experience Arranging but no work experience

Age 35 with three small Age 25, no children Age 50 with two children at
Children University

Has $10 000 to invest Has $5 000 to invest Has $20 000 to invest

Identify and explain two advantages and two disadvantages to Fabian of working for himself
rather than being an employee of another business.
Advantage 1: .............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
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Advantage 2: .............................................................................................................................
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Explanation: ..............................................................................................................................
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Disadvantage 1: ........................................................................................................................
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Explanation: ..............................................................................................................................
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Disadvantage 2: ........................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
.............................................................................................................................................. [8]

Refer to Appendix 1. Consider the advantages and disadvantages of each person who wants
to form a partnership with Fabian. Recommend which one Fabian should choose. Justify your
choice.
Gowri: .......................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
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Miranda: ....................................................................................................................................
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Pamela: .....................................................................................................................................
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Recommendation: .....................................................................................................................
...................................................................................................................................................
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............................................................................................................................................ [12]

Identify and explain two possible business objectives Fabian and his new partner could set
for their business.
Objective 1: ...............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
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Objective 2: ...............................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
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.............................................................................................................................................. [8]
After losing his job, Juan decides to become an entrepreneur. He wants to set up a shoe-repair
business with his redundancy payment. He would be a sole trader. Juan believes a business plan would help him. Juan
has been told to build good customer relationships. The Government is offering either grants or free training to all new
business start-ups.

(a) Identify two characteristics of a successful entrepreneur.

Characteristic 1: : ...................................................................................................................................
................................................................................................................................................................
Characteristic 2: : ...................................................................................................................................
................................................................................................................................................................[2]

(b) Identify two possible advantages to Juan of being a sole trader.

Advantage 1: : ...................................................................................................................................
............................................................................................................................................................

Advantage 2: : ...................................................................................................................................
............................................................................................................................................................. [2]

(c) Identify and explain two ways in which a business plan might help Juan’s business.
Way 1: ...................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
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Way 1: ...................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
.................................................................................................................................................. [4]

(d) Identify and explain two methods Juan could use to help build good customer relationships.
Method 1: ...................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
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Method 2: ...................................................................................................................................
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Explanation: ..............................................................................................................................
................................................................................................................................................... [6]

(e) Recommend to Juan whether he should choose a grant or free training from the
Government. Justify your choice. [6]
...................................................................................................................................................
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The Government of country B plans to build a new airport. A Government spokesperson said:
‘There will be external costs, but I think there will be more benefits for the local community. We
have to support businesses such as airlines in the private sector’. RU Air is one of the world’s most
profitable airlines. RU has announced plans on its website that it will operate flights to and from
country B in the future. RU is a public limited company.
(a) What is meant by the ‘private sector’?
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...............................................................................................................................................[2]

Identify two ways the Government might support RU Air and other private sector business
activity (other than by building a new airport).
Way 1: .......................................................................................................................................
...................................................................................................................................................
Way 2: .......................................................................................................................................
...................................................................................................................................................

Identify and explain two benefits to RU Air of high profits.

Benefit 1: ...................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
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Benefit 2: ...................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
...............................................................................................................................................[4]

Kyle is an entrepreneur. He plans to buy a Frydays franchise. Frydays is a leading fast

food (take-away) business. Each franchise costs $100 000. Frydays would provide some
promotion. ‘I only need to find the right location, hire some people and raise the finance’ said
Kyle. ‘I am certain to make a profit.’
(a) What is meant by an ‘entrepreneur’?
..........................................................................................................................................
..........................................................................................................................................
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...................................................................................................................................... [2]

Identify and explain two factors that Kyle should consider when choosing a suitable
location for his business.
Factor 1: ...........................................................................................................................
..........................................................................................................................................
Explanation: .....................................................................................................................
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Factor 2: ...........................................................................................................................
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Explanation: .....................................................................................................................
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...................................................................................................................................... [6]

Do you think that owning a franchise would mean Kyle is ‘certain to make a profit’?
Justify your answer.
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..........................................................................................................................................(6)

Manuel’s Fruit and Vegetable Shop

Manuel owns a shop selling fruit and vegetables. It is located on a main road in the capital city of
country X. He is a sole trader and has been in business for 10 years. He has 5 employees who all work
part-time in the shop.
Manuel buys his fruit and vegetables from a wholesale supplier and he pays cash. The wholesaler
charges Manuel a delivery fee of $20 for each delivery. Manuel usually has 4 deliveries a week. He has
thought of buying his own truck (lorry) but that would cost $4 000 for an old truck or 3 times as much for
a new truck.
Manuel wants to encourage more customers to buy fruit and vegetables from his shop each week. He
is planning to offer a low cost delivery service to customers who order the same quantity of fruit and
vegetables each week. This would discourage customers from buying fruit and vegetables from other
shops. He is not sure how to promote this new service.
Manuel gives his existing loyal customers one month’s credit. Half of Manuel’s sales are to these
customers. Most of Manuel’s stock is sold with 100% mark up.

Identify and explain two disadvantages to Manuel of operating as a sole trader.

Disadvantage 1: ........................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
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Disadvantage 2: ........................................................................................................................
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Explanation: ..............................................................................................................................
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...............................................................................................................................................[8]

Identify and explain four reasons why customers may prefer to buy fruit and vegetables from
Manuel’s shop rather than from large supermarkets.
Reason 1: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
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Reason 2: .................................................................................................................................
...................................................................................................................................................
Explanation: ..............................................................................................................................
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Reason 3: .................................................................................................................................
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Explanation: ..............................................................................................................................
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Reason 4: .................................................................................................................................
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Explanation: ..............................................................................................................................
...............................................................................................................................................[8]

Manuel has been operating his successful fruit and vegetable shop for 10 years. He wants
to expand by either opening more shops or becoming a franchisor and selling franchises
to other people. Consider these two methods of expansion. Recommend which method he
should choose. Justify your answer.
Opening more shops of his own: ..............................................................................................
...................................................................................................................................................
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Becoming a franchisor and sell franchises to other people: .....................................................
...................................................................................................................................................
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Recommendation: .....................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
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.............................................................................................................................................[12]

Answers to some of the questions can be found at the given link.

http://www.cie.org.uk/programmes-and-qualifications/cambridge-igcse-business-studies-0450/past-papers/