Business Studies Exam Skills

PBLI 1 + Balance: [P] Social media marketing can increase brand awareness at a low cost compared to traditional advertising methods [B] because a recent survey found that 68% of coffee drinkers in nearby towns have never heard of Green Bean, which shows there is a large untapped market that could be reached through platforms like Instagram. [L] This leads to potential new customers discovering the brand without Green Bean needing to spend heavily on print or radio adverts, [I] which is important for Sarah since she needs to keep costs low while building awareness ahead of any expansion plans.

However, [P] social media requires consistent content creation and engagement to be effective. [B] Sarah already works 60+ hours per week managing every aspect of the business herself. [L] This means she may not have the time to regularly post quality content, respond to comments, and manage campaigns, leading to an inactive account that could actually harm the brand image rather than help it.

PBLI 2 + Balance: [P] Visual platforms like Instagram are particularly effective for food and drink businesses because customers share photos of their experiences [B] because Green Bean roasts its own beans on-site, which is a unique and visual process that would make compelling social media content and help differentiate them from chain coffee shops. [L] This leads to organic sharing where customers post their own photos, giving Green Bean free word-of-mouth promotion, [I] which builds the authentic, community feel that customer reviews already praise and could attract customers from the nearby towns before opening a second location there.

However, [P] social media reach does not always convert into actual footfall. [B] Green Bean is located in one Manchester location that already feels "cramped during peak hours" according to reviews. [L] This means attracting more customers through social media could worsen the crowding problem, leading to longer queues and lower service quality that damages the friendly atmosphere customers currently love.

✓ 8/8 marks (Level 4)

PBLI 1 + Balance: [P] Opening a company-owned second location gives full control over operations and all profits stay with the owner [B] because Sarah would keep 100% of the 15% profit margin rather than sharing revenue with franchisees. [L] This leads to higher potential earnings per location, as all £2,700 monthly profit goes to Sarah, [I] which could significantly increase her income and build a more valuable business if she ever decides to sell.

However, [P] expansion requires significant capital investment and management time. [B] The £80,000 needed represents nearly 2.5 years of current annual profits (£32,400 per year), and Sarah already works 60+ hours per week. [L] This creates major financial risk as Sarah would need to borrow or use all her savings, and a second location would demand even more of her time when she is already stretched thin, potentially leading to burnout.

PBLI 2 + Balance: [P] Franchising offers expansion with reduced personal risk because the franchisee provides their own capital [B] because franchisees would fund and manage their own Green Bean locations, meaning Sarah avoids the £80,000 investment and the daily management burden. [L] This leads to the potential for multiple locations generating royalty income without Sarah working additional hours, [I] directly helping with her 60+ hour weeks that are clearly not sustainable long-term.

However, [P] franchisees may not maintain the same quality standards as the original owner. [B] Green Bean's loyal customer base was built over 5 years through Sarah's personal attention to coffee quality, including the on-site bean roasting that customers value. [L] If a franchisee cuts corners to boost their own margins, poor reviews could spread online and damage the entire Green Bean brand, hurting Sarah's original shop too.

Conclusion (MOPS: Objectives): Overall, I recommend Sarah pursues franchising. Given that her main objective is to build "a sustainable business that provides good work-life balance", franchising directly addresses this goal while opening a second location would likely increase her already excessive workload. Her personal objective outweighs the potential for higher profits from direct ownership. In the short term, she will earn less per location, but in the long term she could have multiple franchises generating income while enjoying better quality of life. It depends on developing strong franchise agreements that require franchisees to maintain quality, including the on-site roasting process.

✓ 12/12 marks (Level 4)

PBLI 1 + Balance: [P] Maintaining product quality is important during expansion because it protects the brand reputation that drives customer loyalty, and in a service business this also means investing in staff training so that quality is consistent across every location. [B] Green Bean's customer reviews consistently praise the quality of coffee and the on-site bean roasting is seen as a key part of the experience. Sarah currently oversees quality herself with her 8 part-time baristas and 1 assistant manager, but she cannot be in two places at once. [L] This leads to a major challenge when expanding because new locations would need baristas trained to the same standard without Sarah's direct supervision, and any drop in quality could undo 5 years of reputation-building, [I] meaning that inconsistent coffee or poor service at a new location would not just lose customers there but could damage the Green Bean brand overall, driving loyal Manchester customers to competitors too.

However, [P] quality alone does not guarantee business growth if the target market does not know the brand exists, and over-investing in training before expansion generates revenue could strain the business financially. [B] The local survey found that 68% of coffee drinkers in nearby towns have never heard of Green Bean despite 5 years of trading, and monthly profit is only £2,700. [L] This means that even though current customers love the quality, this has not been enough to build awareness beyond Manchester, and spending heavily on training systems on top of expansion costs could stretch Sarah's limited finances too thin, especially if a new location takes months to become profitable.

PBLI 2 + Balance: [P] The method of expansion chosen will directly affect how easy it is to maintain quality, and the financial risk involved creates a trade-off between control and sustainability. [B] If Sarah franchises, she relies on franchisees to replicate her on-site roasting process and the "friendly atmosphere" that reviews praise, while a company-owned second location would stay under her direct control but requires £80,000 of capital, which is nearly 2.5 years of current annual profits. [L] This leads to a difficult choice where franchising is less risky financially but harder to quality-control from a distance, while direct ownership keeps quality high but adds to Sarah's already unsustainable 60+ hour working week and puts her personal finances at serious risk, [I] meaning the expansion method and the quality question are closely linked and cannot be considered separately.

However, [P] strong franchise agreements with clear quality standards can reduce the quality control risk, as proven by successful franchise models in the coffee industry. [B] Chains like Costa require franchisees to follow strict operational procedures covering bean sourcing, preparation methods, and customer service standards. [L] This means Sarah could build similar requirements into her contracts, including mandatory use of her roasted beans and regular quality inspections, which would protect quality without requiring her personal presence at every location and without the £80,000 financial risk.

Conclusion (MOPS: Product + Objectives): Overall, maintaining quality is the most important factor because it is so closely connected to what makes Green Bean different. Green Bean's product is not just coffee but the whole experience of on-site roasting and a friendly atmosphere, and Sarah's objective is to build a "sustainable business" with good work-life balance. If quality drops during expansion, the brand that took 5 years to build could be damaged in months, making all other planning pointless. In the short term, Sarah should develop training systems and quality standards before expanding. In the long term, franchising with strong quality controls offers the best balance between growth and quality. It depends on whether she can create franchise agreements that truly protect the on-site roasting experience.

✓ 20/20 marks (Level 4)

PBLI 1 + Balance: [P] Developing a fitness app could create a new revenue stream and help retain members who want flexible workout options [B] because exit surveys show that 30% of members who left SportsFit did so because they now prefer working out at home with apps charging just £10/month. [L] This leads to the potential to win back some of those lost members by offering a hybrid membership combining gym access with app-based home workouts, [I] giving SportsFit more than one source of income and protecting them if the trend towards home fitness continues to grow.

However, [P] app development requires specialist technical skills that a gym operator is unlikely to have in-house. [B] SportsFit's 180 staff are personal trainers, receptionists, and cleaners, not software developers, so they would need to hire externally or outsource the build. [L] This means facing established apps with bigger budgets, more content already built, and years of user data, making it very difficult for a first-time app from a gym chain to compete.

PBLI 2 + Balance: [P] An app could strengthen customer loyalty by keeping members connected to SportsFit even when they are not in the gym [B] because SportsFit's CEO believes their strength is the personal, community-focused experience with qualified trainers, and an app could extend this by offering personalised workout plans from those trainers. [L] This leads to members feeling they get more value from their £35/month membership, making them less likely to switch to a £15 budget gym that offers no personal support, [I] which could help slow the 12% membership decline that is currently costing SportsFit around 1,800 members per year.

However, [P] investing in an app diverts money away from the physical gyms where most revenue is generated. [B] SportsFit's equipment is already 4 years old and the 25% of leavers who cited outdated equipment suggest the gyms themselves need investment. [L] This means spending reserves on app development could leave SportsFit unable to upgrade equipment, losing even more members to competitors with newer facilities.

✓ 8/8 marks (Level 4)

PBLI 1 + Balance: [P] Lowering prices could help retain price-sensitive members who might otherwise switch to budget competitors [B] because exit surveys show that 45% of the 1,800 members who left cited price as the main reason, suggesting that around 800 members were lost primarily due to the £20 gap between SportsFit's £35 and the budget gyms' £15. [L] This leads to maintaining membership numbers and spreading fixed costs like rent and equipment maintenance across more members, [I] which could stop the cycle of falling membership causing further cost pressures on the remaining 15,000 members.

However, [P] large price cuts destroy profit margins and can trigger a price war that mid-range businesses cannot win. [B] Matching the £15 budget price would mean losing £20 per member per month, totalling around £300,000 less monthly revenue across 15,000 members, while SportsFit has higher costs for qualified trainers and quality facilities than stripped-back budget gyms. [L] This would likely make their 12 locations unprofitable because they simply cannot operate at the same low cost as budget competitors without cutting the staff and facilities that make them different.

PBLI 2 + Balance: [P] Premium pricing, supported by investment in better facilities, can justify a higher price point by offering value that budget gyms cannot match [B] because SportsFit could upgrade their 4-year-old equipment and add services like personal training packages, group classes, and spa facilities that stripped-down £15 gyms simply cannot offer. [L] This leads to a clear reason for customers to pay more, as they receive an experience and level of service that goes far beyond what a basic gym provides, [I] potentially not only keeping current members but attracting new ones who want more than a room full of machines.

However, [P] premium investment carries financial risk, especially when membership is already declining. [B] Full equipment replacement across 12 locations would cost £1.2 million, but SportsFit only has £400,000 in reserves. [L] This means they would need to borrow £800,000, and if the premium strategy does not attract enough new members to cover repayments, SportsFit could face serious cash flow problems.

Conclusion (MOPS: Product): Overall, I recommend SportsFit uses premium pricing supported by targeted facility upgrades. Given that their core product is "the personal, community-focused gym experience" with qualified trainers, this is something that budget gyms and apps simply cannot copy. Investing in what makes SportsFit different is smarter than trying to compete on price where they will always lose. In the short term, investment costs will reduce profits, but in the long term a clear premium position creates a reason for customers to choose SportsFit over cheaper alternatives. It depends on upgrading the most visible equipment first using the £400,000 reserves, rather than trying to replace everything at once.

✓ 12/12 marks (Level 4)

PBLI 1 + Balance: [P] Understanding why customers are leaving is essential before choosing a strategy, and differentiation through premium facilities can create a competitive advantage that budget competitors cannot copy. [B] SportsFit's exit surveys reveal three distinct groups: 45% left because of price, 30% prefer home app workouts, and 25% wanted newer equipment. SportsFit could use its £400,000 reserves to begin upgrading the 4-year-old equipment at the 8 locations facing direct budget gym competition, adding features like personal training suites and group fitness studios. [L] This leads to a clear value difference that justifies the £35 price, since budget gyms operating on £15 cannot afford qualified trainers or specialist equipment, and it directly addresses the 25% who left for newer gyms while also giving the 45% who cited price a stronger reason to see the membership as worth the extra cost, [I] which could not only keep the remaining 15,000 members but attract new ones who want more than a basic, no-frills gym experience.

However, [P] differentiation only works if enough customers in the market are willing and able to pay a premium, and focusing on just one customer group risks permanently losing the others. [B] The fact that 45% of leavers cited price suggests a significant portion of SportsFit's Northern England market is price-sensitive. Full equipment replacement across 12 locations would cost £1.2 million but reserves are only £400,000, and SportsFit has already lost 1,800 members. [L] This means if the pool of customers willing to pay £35+ is too small to fill 12 gyms, the investment will not pay off, and the ongoing 12% annual membership decline could push revenue losses beyond what the business can absorb.

PBLI 2 + Balance: [P] The impact on staff morale and capability must be considered alongside the financial constraints, because employees deliver the customer experience that sets SportsFit apart and any strategy that cuts staff undermines the core product. [B] SportsFit employs 180 staff including qualified personal trainers, and the CEO believes their community-focused experience with trained staff is their core strength. At the same time, with 1,800 fewer members each paying £35, the business has already lost £63,000 per month in revenue. [L] This leads to a difficult position where any strategy involving cost-cutting (like matching budget prices) would likely mean reducing staff or replacing qualified trainers with cheaper alternatives, [I] which would destroy the very thing the CEO says makes SportsFit different, leaving them as a more expensive version of a budget gym with no real reason for customers to choose them.

However, [P] retaining all 180 staff across 12 locations may not be sustainable if the membership decline continues, and some restructuring may be necessary regardless of which strategy is chosen. [B] If the 12% annual decline continues, SportsFit could lose over 3,000 members in total, and the revenue drop could make fixed costs like rent on 12 locations unaffordable. [L] This means SportsFit may need to consider closing the weakest-performing locations and concentrating its best staff and investment into the gyms with the most loyal membership bases, rather than trying to save every location.

Conclusion (MOPS: Situation + Product): Overall, the most important factor is SportsFit's current financial situation, which limits what strategies are actually possible. With only £400,000 in reserves and revenue falling by £63,000 per month, SportsFit cannot afford to do everything. Since 45% of leavers cited price and 25% cited equipment, a combined approach of targeted equipment upgrades at the most threatened locations plus a lower "off-peak" membership tier would address 70% of the reasons members are leaving. Their product strength, the personal community experience, should be at the centre of whatever they do. In the short term, SportsFit should prioritise upgrading the 8 locations facing direct competition using its reserves. In the long term, the goal should be establishing a clear premium reputation so customers see the £35 as good value. It depends on acting quickly before the membership decline becomes too severe to reverse.

✓ 20/20 marks (Level 4)