NN is Natalia’s small business. It makes and sells a variety of natural skincare products. In 2020, Natalia began preparing her own skincare products at home with natural ingredients. She noticed that there was demand from friends and family for what she made. Natalia then chose to turn her hobby into a business and set up NN in 2021. She runs the business from a rented workshop with restricted space, where the products are made by hand. Her ingredients come from local suppliers who share her commitment to environmentally friendly production. NN has expanded steadily and has built up a loyal customer base. Beauty magazines have given NN favourable reviews. Natalia sells her skincare products through her own website, social media platforms and local retailers that specialise in natural products. Natalia is creating a new face cream. Table 2.1 gives the price and cost estimates for the new face cream. The skincare market is extremely competitive. Many established brands sell similar products to NN, but they have wider distribution channels. Natalia has to divide her time between production, order handling, delivery, marketing and other administrative work. She works long hours and feels stressed and exhausted. Natalia is thinking about outsourcing in order to raise NN’s production capacity.
(a(i))[1]
Identify one internal stakeholder of a business.
(a(ii))[3]
Explain the term distribution channels.
(b(i))[3]
Using Table 2.1, calculate the break-even level of output for the new face cream.
(b(ii))[3]
Explain one limitation to NN of break-even analysis.
(c)[8]
Analyse one advantage and one disadvantage to NN of being a small business.
(d)[12]
Evaluate whether outsourcing is the most suitable way to increase NN’s production capacity.
Worked solution & mark scheme
This 30-mark question has a full step-by-step worked solution and mark scheme. One marking point: “staff members” …