2.1 Growing the Business Practice Questions

Read the following extract before answering the question.

Fenwold Foods Ltd

Fenwold Foods Ltd makes chilled soups and ready meals at a factory in Leicestershire. It was founded in 2005 and now employs 310 people. Its soups are sold in supermarkets in the UK, the Republic of Ireland and France.

In 2023 the business made a net profit of £2.4 million and kept £1.8 million of this as retained profit. It also owns a small factory in Derby that has been empty since 2022. A local estate agent has valued the Derby site at £1.5 million.

The directors want to grow the business. They are considering taking over Hemsby Chilled Ltd, a smaller business that makes chilled sauces and already supplies two of the supermarkets Fenwold Foods sells to. Hemsby's owners want £3 million for the business.

Table 1 – Fenwold Foods sales revenue

Market	2022 (£m)	2023 (£m)
UK	18.0	21.0
Republic of Ireland	4.0	5.0
France	3.0	4.0
Total	25.0	30.0

Lumo Audio plc designs wireless speakers and headphones. It was founded in Manchester in 2009 and now sells in 26 countries. Its speakers are made in a factory in Poland and its headphones are made in a factory in Vietnam.

In 2024 Lumo began selling directly to overseas customers through its own website, rather than only through electrical retailers. One of its largest export markets has introduced an 8% tariff on imported speakers. The finance director says this will make Lumo's £180 speaker more expensive for customers in that market.

Table 1 – Lumo Audio plc sales revenue by region

Region	Sales revenue 2022 (£m)	Sales revenue 2024 (£m)
United Kingdom	40	46
Europe (excluding the UK)	15	19
North America	7	9
Asia	2	2

Read the following extract before answering the question.

Corvane Audio plc

Corvane Audio plc designs wireless headphones and portable speakers. It was founded in Bristol in 2009 by Marta Okoye and became a public limited company in 2021. It employs 340 people and sells through its own website and through electrical retailers in the UK, Germany and Spain. Its best-selling product, the Z7 headphone, sells for £129.

Sales revenue grew from £62 million to £68 million last year. All Corvane Audio products are assembled by a contract manufacturer in Malaysia, so the business owns very few factories or machines.

The directors have set a new objective: to double sales revenue within five years. They have identified two ways of doing this. The first is to launch a range of lower-priced headphones for younger children, designed by Corvane Audio's own research and development team. The second is to begin selling the Z7 in the United States, where the business has no customers at present.

Both plans are expensive. Developing the children's range would cost about £4 million and launching in the United States about £5 million. Corvane Audio has £6 million of retained profit and no long-term bank loans. The directors do not want to borrow money.

Read the following extract before answering the question.

Brackenfield Dairy plc

Brackenfield Dairy plc makes mature cheddar cheese and natural yoghurt at a creamery in North Yorkshire. It was founded in 1978 and floated on the stock market in 2016. It buys milk from 140 British dairy farms and employs 620 people.

Brackenfield now sells to 22 countries. Its cheddar has sold particularly well in Germany and Poland, where demand for British cheese has grown. Everything the business sells is produced in North Yorkshire and taken abroad by refrigerated lorry, which is expensive and limits how fresh the yoghurt is when it arrives.

The directors are considering opening a second creamery in Poland. The land and machinery would cost £18 million. Labour costs in Poland are lower than in the UK and the creamery would be close to Brackenfield's European customers. However, Polish milk would have to be used, and the directors are unsure whether customers who buy the cheese because it is British would accept this.

Table 2 – Brackenfield Dairy plc sales revenue, 2024

Market	Sales revenue (£m)
UK	84
Republic of Ireland	15
Rest of Europe	12
Asia	9

Read the following extract before answering the question.

Kinetic Fitness Ltd

Kinetic Fitness Ltd operates 42 gyms in towns and cities across the UK. It was founded in 2011 by Dara Finch, who owns 70% of the shares; the remaining shares are owned by three members of her family. Membership costs £29 per month and the business has 186 000 members and 900 employees.

Kinetic Fitness wants to open 30 more gyms over the next four years at a total cost of £45 million. Last year it made a net profit of £9 million and it has £12 million of retained profit.

Dara Finch has been advised to turn Kinetic Fitness into a public limited company by floating it on the stock market. Her bank has also offered a £45 million loan repayable over ten years. Two competitors have recently opened budget gyms charging £16 per month in towns where Kinetic Fitness already operates.

Harbour Greens Ltd runs 34 healthy-eating cafés across the UK. Lena Okafor opened the first café in Bristol in 2015, selling salad bowls at £7.50 and soups at £4.20. The business now employs 410 people and made a profit of £1.9 million last year, most of which was kept as retained profit.

Harbour Greens has grown by opening its own new cafés in city centres, choosing sites close to office blocks and universities. Every café is fitted out by the same design team and all dishes are made from recipes written by Lena.

Lena has turned down two offers to buy smaller café chains. She says that opening its own sites keeps the brand consistent, although it has meant growth of only four or five cafés a year.

The board now wants to open 20 more cafés over the next three years, including the first five in Scotland. The expansion will be paid for using retained profit and a £3 million bank loan. City-centre rents have risen and two national sandwich chains have recently opened outlets close to Harbour Greens sites.

Mazaro Foods Ltd manufactures cooking sauces at a factory in Leicester. It began by selling only to UK supermarkets and now exports to Germany, Japan and the United Arab Emirates (UAE). Exports account for 38% of its £22 million sales revenue.

Mazaro changes its products for each market. The chilli content of its sauces is reduced for Japanese customers, and the jars sold in Japan are smaller because many shoppers there have less storage space at home. All products sold in the UAE are halal certified. Labels are translated into German, Japanese and Arabic.

Prices also differ between markets. A 400g jar sells for £2.80 in the UK, while the smaller jar sold in Japan sells for the equivalent of £4.10, where there is less competition in the premium sauce market. In Germany, Mazaro sells through a wholesaler and promotes its sauces using social media, while in the UK most promotion takes place in supermarkets.

The founder, Dev Raval, says exporting has transformed the business. However, the production manager points out that 14 different recipes are now made at the Leicester factory.

Read the following extract before answering the question.

Hartwell Pet Foods plc

Hartwell Pet Foods plc makes dry dog food at two factories in Staffordshire. It sells its own Hartwell brand and also makes own-label dog food for supermarkets in the UK, France and the Netherlands. Last year sales revenue was £146 million and net profit was £11 million. The business has £18 million of retained profit and owns a warehouse in Derby that it stopped using in 2023.

The pet food market is growing, especially for premium grain-free food. Hartwell makes no cat food at all, and one in four of the supermarkets it supplies has asked it to.

Hartwell is considering two options.

Option 1: internal growth. Hartwell's research and development team would create its own premium cat food range. This would take two years and need a new production line costing £12 million.

Option 2: external growth. Hartwell would take over Pawsley Ltd, a family-owned business that already makes premium cat food, holds 6% of the UK cat food market and has one factory in Shropshire. Pawsley's owners would sell for £20 million. Pawsley made a loss last year because its factory runs at only 55% of capacity.

Read the following extract before answering the question.

Mirado plc

Mirado plc designs and sells running shoes and sportswear in 30 countries. It makes 60% of its running shoes at a factory in Leicester, which employs 400 people; the rest are made by a supplier in Portugal.

Wages at the Leicester factory average £13 per hour. A contract manufacturer in Vietnam has offered to make all of Mirado's running shoes at a labour cost of £2.40 per hour. Mirado's directors have accepted the offer. The Leicester factory will close in 18 months and 400 jobs will be lost.

Shoes made in Vietnam will take six weeks to arrive by ship, compared with three days from Leicester. Mirado will also pay an import tariff of 8% on each pair of shoes brought into the UK. A pair of Mirado running shoes sells for £95.

Mirado's advertising has always used the phrase 'designed and made in Britain'. A pressure group, Fair Factory Watch, has written to newspapers claiming that workers at the Vietnamese factory work 60-hour weeks. Mirado says it will inspect the factory twice a year.

Read the following extract before answering the question.

Harbour Rooms plc

Harbour Rooms plc operates 18 hotels in coastal towns in England and Wales. It became a public limited company in 2019. Rooms start at £75 per night and the business employs 1 100 people.

The UK seaside hotel market has stopped growing and Harbour Rooms' revenue has been flat for three years. The directors now want to enter the Spanish market by buying a chain of five hotels in Alicante for £26 million. The Spanish hotels take bookings all year round, while Harbour Rooms' UK hotels are busy only between April and September.

Harbour Rooms has £4 million of retained profit, which is not enough. The directors are considering two options to raise the remaining £22 million.

Option 1: sell the conference centre the business owns in Cardiff. It was closed in 2022 and a developer has valued it at £23 million.

Option 2: issue new shares on the stock market. This would reduce the founding family's shareholding from 38% to 22%.

Table 3 – Harbour Rooms average hotel occupancy rates, 2024

Location	Occupancy rate (%)
South West England	71
South East England	66
North West England	58
Wales	63

Rowan & Reed Ltd makes natural haircare products. Megan Shah started the business in 2016, making shampoo bars in a rented unit in Derby. The business now makes 40 different products, which are sold through UK supermarkets and its own website. Last year sales revenue was £14 million, 15% higher than the year before.

When Megan started the business her main objective was survival. Her objective now is to double the size of the business within five years and to begin selling in Europe.

Rowan & Reed holds £2.1 million of retained profit and has been offered a £3 million bank loan by its bank.

Rowan & Reed is considering two options:

• Option 1: take over Coastal Curls, a smaller haircare brand based in Ireland, which sells £4 million of products a year to European customers
• Option 2: use retained profit to launch a new range of men's haircare products, made at its own factory in Derby.

Trellis Toys plc designs and manufactures wooden toys. It was founded in Sheffield in 1998 and became a public limited company in 2019, raising £24 million by selling shares on the stock market.

Until now all toys have been made at its Sheffield factory, which employs 220 people. Trellis exports to 22 countries, and one of its export markets has introduced a 12% tariff on imported toys.

In 2025 the board decided to open a new factory in Vietnam, where average labour costs are £2.10 per hour compared with £12.60 per hour in Sheffield. Around 160 Sheffield jobs will go, although design and marketing will remain in the UK. Shareholders have been told that the move should reduce the cost of making each toy by about 20%.

Trellis advertises its toys as 'British made from sustainably grown wood'. A pressure group campaigning for UK manufacturing jobs has written to the national press about the decision.

Table 2 – Trellis Toys plc sales revenue by region, 2025

Region	Sales revenue (£m)
United Kingdom	18.4
European Union	9.2
North America	6.5
Rest of the world	1.9

Verda Drinks plc makes fruit smoothies and sells 1.2 million bottles a week to supermarkets across Europe. It became a public limited company in 2021 and its shareholders expect a dividend every year. Last year Verda made a net profit of £6.8 million.

Every smoothie is sold in a plastic bottle that costs Verda 4p. A pressure group, Plastic Tide Action, has organised protests outside Verda's head office in Reading, claiming that fewer than half of the bottles are recycled. Two national newspapers reported the protest.

Verda's largest supermarket customer has told all of its suppliers that it wants plastic packaging reduced within three years.

Verda is considering two options:

• Option 1: replace the plastic bottles with bottles made from recycled glass, costing 11p each
• Option 2: pay for a national bottle return scheme, giving customers 10p back for every empty Verda bottle returned to a supermarket.