Fancy or functional?

1. Identify the niche that Sam has focused on in the market [1]

   • Sam has carved a profitable niche for himself designing new homes and extensions for individual clients.

2. Define the business structure, sole trader [2]

   • A sole trader is a business structure where a single individual owns and operates the business. In Sam’s case, he is the sole decision-maker in his architectural practice.

3. Explain how a lack of continuity can be a problem for sole traders [2]

   • Continuity is an issue for sole traders as the business is entirely dependent on the individual owner. In case of illness, death, or other unforeseen circumstances, there may be disruptions or even the discontinuation of the business.

4. Identify from the case study, three benefits of operating as a sole trader and three benefits of operating as a partnership [6]

   • Sole Trader Benefits:

     1. Autonomy: Sam enjoys the freedom of being the sole decision-maker.
     2. Quick Decision-Making: Sam can make quick and decisive actions without the need for consensus.
     3. Financial Independence: All profits belong exclusively to Sam.

   • Partnership Benefits:

     1. Shared Responsibilities: Partnerships allow for the distribution of tasks and responsibilities.
     2. Diverse Skill Sets: Partnerships bring in diverse skills, potentially filling gaps in expertise.
     3. Collaboration and Innovation: Partnering can lead to fresh perspectives, innovative ideas, and a broader client base.

5. Explain two ways in which a partnership could become larger in size than a sole trader [4]

   • Partnerships can grow larger than sole traders through:
     1. Pooling Resources: Partnerships can combine financial resources, enabling them to take on larger projects.
     2. Division of Labor: Partnerships can divide tasks and responsibilities, increasing efficiency and capacity for more work.

6. Discuss whether or not Sam should remain a sole trader or convert to a partnership [10]

   • Sam should consider the following factors:

     • Autonomy vs. Collaboration: Assess whether Sam values autonomy or is open to collaborative decision-making.
     • Workload and Capacity: Evaluate if the current workload and potential larger projects require the additional resources a partnership could provide.
     • Specialization: Consider if Sam wants to focus on specific aspects of the business while delegating others to potential partners.
     • Growth and Innovation: Explore whether Sam sees the potential benefits of collaboration in terms of growth, innovation, and a broader client base.
     • Risk and Reward: Analyze the risks and rewards associated with remaining a sole trader or transitioning to a partnership.

   • Ultimately, the decision should align with Sam’s personal and professional goals, considering the trade-offs between autonomy and collaboration, and weighing the potential benefits against the challenges.

1. Identify one other goal except from profit at SHCF [1]:

   • One additional goal for SHCF could be building and maintaining a strong brand reputation as the leading confectioner in the UK.

2. Explain two differences between the business structures, private limited (LTD) and public limited company’s (PLC) [4]:

   • Ownership and Shareholders:
     • In a private limited company (LTD), ownership is often restricted to a small group of individuals, usually family members or close friends. In contrast, a public limited company (PLC) can have a large number of shareholders, including the general public, as its shares are traded on the stock exchange.
   • Access to Capital:
     • LTDs raise capital primarily through private sources, such as loans from banks or contributions from a small group of shareholders. PLCs have the option to raise capital by selling shares to the public through an Initial Public Offering (IPO), providing a larger pool of funds for expansion.

3. Discuss whether or not the Denison family should take the business public or remain LTD status [10]:

   • Advantages of Remaining LTD:

     • Autonomy and Control: As an LTD, the Denison family maintains full control over decision-making, preserving the identity and charm of their brand. This swift decision-making process contributes to the success of the business.
     • Exclusive Profits: The family enjoys exclusive rights to profits, fostering personal satisfaction and fueling business growth.

   • Advantages of Going Public (PLC):

     • Capital Infusion: Transitioning to a PLC allows SHCF to raise capital through an IPO, providing funds for ambitious expansion plans, market penetration, technological advancements, and product diversification.
     • Professional Expertise: PLC status enables the recruitment of professionals with diverse skill sets, potentially improving business efficiency and relieving family members of specialized tasks.

   • Challenges of Going Public:

     • Loss of Control: The shift to a PLC entails relinquishing some decision-making control to external shareholders, potentially altering the company’s direction and values.
     • Increased Scrutiny: Going public brings increased scrutiny and reporting requirements, reducing business privacy and exposing the once family-oriented business to external eyes.

   • Considering the Denison Family’s Values:

     • Passion for Purpose: One family member emphasizes the original motive of the business, which was not solely driven by profit but aimed at providing jobs for family members and securing future family generations. Going public might conflict with this initial purpose.

   • Conclusion:

     • The Denison family should weigh the benefits of potential growth and professional expertise against the challenges of loss of control and increased scrutiny. It’s crucial to consider whether the move aligns with their core values and long-term objectives beyond profit.

1. Outline the Goal of TOMS Shoes (2 marks): TOMS’ goal is to implement a sustainable and impactful “One for One” model, providing shoes, eyewear, and clean water to those in need for every corresponding purchase. The company aims to address global issues like poverty and lack of basic necessities, integrating social responsibility into its business model.

2. Explain One Potentially Negative Impact on Other Shoe Manufacturers (2 marks): A potential negative impact is the competition with TOMS’ large-scale donations. Small-scale shoemakers in local economies may struggle to compete, leading to economic challenges and job losses in the traditional shoemaking sector.

3. Comment on Whether TOMS Shoes are Good Value for Customers (3 marks): While some may argue the basic design doesn’t justify the higher price, the intangible value lies in contributing to social causes. For customers prioritizing social responsibility, the value is in knowing their purchase directly supports those in need, turning buying shoes into a philanthropic endeavor.

4. Comment on Whether TOMS is a Sustainable Business Model (3 marks): The sustainability of TOMS’ model is questionable. While initially successful, doubts arise about the long-term viability. The concern centers on whether customers will accept paying a premium for basic shoes indefinitely, and if TOMS can adapt its model to address critiques and maintain relevance.

5. Explain Two Pieces of Evidence that TOMS Follows CSR Practices (4 marks): a. TOMS’ commitment to providing eyewear and clean water demonstrates a broad spectrum of philanthropic initiatives, showcasing a dedication to addressing diverse global issues. b. The company’s emphasis on raising awareness about poverty through marketing and communication efforts contributes to CSR practices, demonstrating a commitment to social impact beyond material donations.

6. Explain Why TOMS is Accused of Cultural Insensitivity Regarding Free Shoes (4 marks): TOMS faces accusations due to potential mismatches between donated shoes and local climates or cultural preferences. The one-size-fits-all approach may not align with diverse needs, and a lack of local community involvement in decision-making exacerbates this insensitivity.

7. Contrast 3 Positives Against 3 Negatives Relating to TOMS as a Business (6 marks): Positives: a. Simplifies charitable giving, making it accessible to consumers. b. Raises awareness about global issues and encourages conscious consumerism. c. Diversifies philanthropic efforts beyond shoes to address different global challenges.

Negatives: a. Oversimplification of complex issues, potentially neglecting root causes. b. Negative impact on local economies and small-scale shoemakers. c. Concerns about environmental impact, transparency, and doubts about revenue allocation to charitable activities.

8. To What Extent TOMS’ Business Model Solves the Problem (8 marks): While TOMS has made a positive impact in conscious consumerism and provided tangible assistance to those in need, doubts and criticisms suggest limitations in fully addressing the root causes of poverty. The one-for-one model may serve as a temporary solution but may require adjustments and more comprehensive strategies for sustainable, long-term impact.

1. Explain why both profit-making and non-profit-making social enterprises must make some profit [4]

   Social enterprises, regardless of their profit orientation, need to generate revenue to sustain their operations and fulfill their social missions. For-profit social enterprises must make a profit to cover operational costs, invest in growth, and ensure sustainability. Non-profit social enterprises, while not distributing profits to shareholders, still require surplus funds to reinvest in their social goals, expand their impact, and address community needs effectively.

2. Explain two financial challenges that social enterprises may face compared to traditional profit-oriented businesses. [4]

   Social enterprises often face challenges in accessing traditional financing options due to their dual focus on both financial and social objectives. One financial challenge is the difficulty in attracting investors who may prioritize profit maximization over social impact. Another challenge involves the potential trade-off between financial returns and social outcomes, as social enterprises navigate the delicate balance of sustaining themselves financially while achieving their social mission.

3. Explain the key characteristics of a social enterprise. (3 marks)

   Social enterprises are characterized by their dual objectives of achieving social or environmental impact alongside financial sustainability. They often operate in a market-driven manner, leveraging business principles to address societal issues. Key characteristics include a clear social mission, reinvestment of profits into the mission, and an entrepreneurial approach to problem-solving.

4. Explain how a social enterprise differs from traditional for-profit businesses. [4]

   Social enterprises differ from traditional for-profit businesses in their primary focus on social or environmental impact rather than solely profit maximization. While for-profit businesses prioritize shareholder wealth, social enterprises balance financial sustainability with a commitment to addressing social or environmental issues. Additionally, social enterprises may employ innovative business models and inclusive hiring practices to align with their social mission.

5. Analyse the potential advantages and disadvantages of adopting a social enterprise structure for a business. [6]

   Advantages of adopting a social enterprise structure include enhanced corporate social responsibility, positive brand image, and a motivated workforce aligned with the social mission. However, disadvantages may include financial challenges, potential conflicts between social and financial goals, and the need for effective communication to stakeholders about the dual objectives. Balancing both aspects requires strategic planning and effective management.

6. Evaluate the potential conflicts that may arise between the social and financial objectives of a social enterprise. [6]

   Conflicts may arise when pursuing social objectives compromises financial sustainability or when profit-driven decisions contradict the social mission. Striking a balance becomes crucial to avoid sacrificing social impact for financial gains or vice versa. Additionally, conflicts may emerge in stakeholder expectations, requiring transparent communication and strategic decision-making to align both social and financial goals effectively.