Scenario
You are working as an assistant in a small business advisory service. Shiro, who wants to start their own business, has asked for advice on two possible options for the future. Shiro has provided you with some information about their business, the market and the two different options that they are considering.
The business
Shiro studied business and history in college, and they speak several languages. Their home city is a popular destination for city breaks. It has many cultural sights that attract visitors of all ages from all over the world.
Shiro wants to set up a business providing eco-friendly city tours.
The aims and objectives of the new business are:
- to promote environmental sustainability
- to be profitable at the end of year one.
Market trends
The city council recognises the need to have a range of transport options for visitors to choose from, but it is worried about the effects of pollution, especially from the tour buses operating in the city. To address this, the council is only issuing operating licences to new businesses who use eco-friendly vehicles. Shiro has researched two popular methods of eco-friendly transport that they could use for the city tours:
- auto rickshaws
- electric bicycles.
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Chat NowAuto rickshaws (or tuk-tuks) were popular in Asia and Central and South American cities for many years and commonplace in India and many African states. In the last 15 years these have been replaced by e-rickshaws (or e-tuks), three-wheel covered pods with small but powerful energy efficient electric motors that do not create noise or pollution. They are ideal for city tours and short-distance travel and popular with visitors as they can carry a guide/driver and two passengers with seat belts comfortably at a speed of 10-15 km/h (6-9 mph) and cover a 55 km (34 mile) journey. This has led to an increase in use across Europe and Indonesia, and in India in 2020 there were thought to be more than 1.5 million e-rickshaws on the streets.
Most electric bicycles or e-bikes have a pedal-assisted electric drive powered by Li-ion batteries that can be recharged hundreds of times. This allows people to ride with ease at up to 25 km/h (15 mph). In 2023 e-bike sales are estimated to reach 40 million units worldwide, and the total number of e-bikes in circulation globally to reach 300 million.
In a recent survey the most common reason given for choosing an e-bike as a form of transport was to help the environment. The next reason was the health benefits as, although e-bikes do some of the work, it still counts as exercise, with riders burning up to 400 calories in an hour.
Renting an e-bike to take a city tour has become increasingly popular with people of all ages who want an active and environmentally friendly way to see the city. These tours resemble the walking tours that are popular in cities but using an e-bike to explore the
sights rather than walk. Although e-bikes can be difficult to ride as a beginner, they are considered safe if the rider considers speed and other rules of the road. Damage to e-bikes mainly occurs through vandalism when parked rather than from accidents.
Option 1 – Providing guided city tours using e-rickshaws
Shiro has seen an established business for sale with an existing customer base. It offers a range of guided city tours using e-rickshaws. Shiro has enough money for the purchase price of the business which includes three e-rickshaws but would need to rent a storage yard with electric charging points for these vehicles.
Customers will pre-book their chosen city tour on the website and the driver will pick them up from their hotel and guide them around the city’s most impressive sights using an e-rickshaw. Shiro will supply illustrated city guides explaining the route and supply refreshments to all customers.
Shiro will continue to employ the three drivers who have previously worked at the business.
Yearly costs
| Rent of storage yard | $48 000 |
| Staff wages | $21 000 |
| Insurances | $9 000 |
| Utility and other bills | $1 100 |
| E-rickshaw maintenance and repairs | $1 750 |
| Cost of goods sold | 5% of sales revenue |
Other financial information
| Predicted sales revenue for the year | $89 000 |
| Price per vehicle for a three-hour city tour | $75 |
| Variable costs of a three-hour city tour | $12 |
| Daily fixed costs | $200 |
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Hire NowCurrent assets and liabilities
| Trade payables | $1 500 |
| Inventory (refreshments) | $900 |
| Cash in bank | $2 200 |
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Option 2 – Offering self-guided city tours using e-bikes
Alternatively, Shiro has seen a gap in the market renting out e-bikes to visitors who want to take their own eco-friendly tours of the city. Shiro has enough money to purchase six e-bikes but would need to rent a store in the city centre with electric charging points to store and recharge these e-bikes.
Customers would book rentals online or in-store and collect their e-bike from the store. Shiro would supply detailed maps of the city with suggested cycling routes and safety advice leaflets to each customer. Shiro would employ part-time staff at the store to help maintain and repair the e-bikes.
Yearly costs
| Rent of store | $75 000 |
| Wages | $6 500 |
| Insurances | $10 500 |
| Utility and other bills | $1 500 |
| E-bikes maintenance and repairs | $4 800 |
| Cost of goods sold | 6% of sales revenue |
Other financial information
| Predicted revenue for the year | $108 500 |
| Price of a half day e-bike rental | $35 |
| Variable costs of a half day e-bike rental | $5 |
| Daily fixed costs | $185 |
Current assets and liabilities
| Trade payables | $995 |
| Inventory (refreshments) | $615 |
| Cash in bank | $1 100 |
Set Assignment
ACTIVITY 1 – An electronic business report and presentation with speaker notes
Using the information provided, produce a formal report for Shiro that recommends which business option to choose. This report must have a logical structure and use appropriate business terminology throughout. Your report must be supported by a set of presentation slides with speaker notes. This presentation must be concise, accurate and well laid out.
The report
Your detailed report must examine the two options Shiro is considering for the business. It must be set within the context of the aims and objectives of the business and make reference to the scenario throughout.
Your report must include a rationale that shows:
- the different factors in the internal and external business environments that influence each option, and the relative importance of these factors
- possible risks for each option and reasonable alternative approaches that could be taken
- the implications of human, physical and financial resources on the operation of each option
- the influence of legislation and regulation on each option
- the use of financial forecasts and ratio analysis to predict the performance of each option and the relative importance of this data
- a supported conclusion that recommends which option Shiro should choose.
The presentation
Your slides and speaker notes should present your business analysis and recommendation to Shiro, giving clear, supported reasons for choosing one business option rather than the other.
This activity covers learning aims A, B, C and D.
A.P1, A.P2, A.M1, A.D1
B.P3, B.P4, B.M2, B.D2
C.P5, C.P6, C.M3, CD.D3
D.P7, D.P8, D.M4
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Assessment criteria
| Pass | Merit | Distinction |
|---|---|---|
| Learning aim A: Examine the business principles and practices that determine business decisions | ||
| A.P1 Explain factors that influence the development of a business idea or objective.
A.P2 Explain factors that influence the formulation of a business idea or objective in a specific context. |
A.M1 Analyse the factors that will need to be taken into account when formulating a business decision in a given context. | A.D1 Evaluate the relative importance of different factors that may influence the outcome of a business decision. |
| Learning aim B: Review and interpret business data and information | ||
| B.P3 Extract appropriate data from a given data set to aid decision making.
B.P4 Explain the current context of a business organisation using given data. |
B.M2 Analyse the current context of a business organisation using given data. | B.D2 Evaluate the current context of a business organisation using given data. |
| Learning aim C: Formulate decisions and solutions to business problems | ||
| C.P5 Explain the main influences on business performance from a given set of data.
C.P6 Explain reasoning for formulating the outcome of a business decision. |
C.M3 Assess the relative importance of business data and information extracted from a given data set when formulating a business decision with a supported rationale. | CD.D3 Justify a logically consistent case for the preferred outcome, and its implications, of a business organisation’s strategy with a detailed, supported rationale, using a comprehensive report and concise presentation slides prepared to a professional standard. |
| Learning aim D: Prepare business documents to present business decisions | ||
| D.P7 Produce a report with recommendations to aid business decision making.
D.P8 Prepare presentation slides with speaker notes, using appropriate software, to summarise key outcomes of a business decision. |
D.M4 Prepare a detailed business report, with concise presentation slides, in an acceptable business format that provides a reasoned rationale for a business decision set against other alternatives relating to the future direction of a business organisation. | |
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