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Using the data in Extract G and SWOT analysis, evaluate each option and recommend to Holly and Andy which one might be better for them to increase profits - Edexcel - A-Level Business - Question 2 - 2022 - Paper 3
Question 2
Using the data in Extract G and SWOT analysis, evaluate each option and recommend to Holly and Andy which one might be better for them to increase profits. The Wonk... show full transcript
Worked Solution & Example Answer:Using the data in Extract G and SWOT analysis, evaluate each option and recommend to Holly and Andy which one might be better for them to increase profits - Edexcel - A-Level Business - Question 2 - 2022 - Paper 3
Step 1
Evaluate the option: Upstairs renovation
Answer
The upstairs renovation offers several strengths and opportunities. By doubling the number of covers to 48, The Wonky Table can significantly increase its customer base. This increase not only elevates sales potential but also provides the chance for private party bookings, which can lead to higher revenue. Furthermore, the proposed lighting upgrade to economical LED fixtures could reduce long-term operational costs, mitigating some of the renovation expenses.
However, there are challenges. The estimated renovation cost of £14,000 is substantial, and Holly and Andy must also consider potential delays in furniture delivery, especially during the busy months following the renovation. This could hinder revenue generation during peak dining periods if not managed effectively.
Step 2
Evaluate the option: External catering
Answer
External catering presents unique advantages and potential risks. This option involves a lower immediate physical alteration to the current premises, thus requiring less upfront investment compared to the upstairs renovation. The possibility of providing catering services to local businesses opens new revenue streams, especially in the form of buffets and corporate events.
However, there are significant considerations, such as needing to close the restaurant for two weeks for installation, which could lead to lost sales during a typically busy season. Additionally, the staff must adapt to providing catering services, which may introduce additional training costs and potential operational difficulties.
Step 3
Recommendation
Answer
Evaluating both options through a SWOT analysis, it appears that the upstairs renovation may lead to more sustainable long-term growth by permanently increasing capacity and potentially increasing the number of customers during peak hours. However, if Holly and Andy are looking for a less disruptive and quicker means to generate revenue, external catering may be the more immediate choice. Ultimately, if they possess the financial capability and are willing to risk the renovation costs, pursuing the upstairs renovation could provide a more solid foundation for increasing profits in the long run.