Nura is comparing four organisations because she wants a job that combines trading with a clear benefit for people in her town. One organisation is a gym ow...
Question 1 Report
Nura is comparing four organisations because she wants a job that combines trading with a clear benefit for people in her town. One organisation is a gym owned by an investor, which distributes profit to the investor. Another is a council-run library funded by local taxes. A third collects unwanted furniture, repairs it with paid trainees who have been unemployed, and sells the restored items at affordable prices. Its directors reinvest most surplus into training places. The fourth organisation is a manufacturer that sells premium furniture and pays dividends to its shareholders. Nura has also read that the furniture-repair organisation may need to increase prices because its workshop rent has risen.
(a) Which one of the following organisations is most likely to be a social enterprise? Give one reason for your choice. [2]
A The investor-owned gym
B The council-run library
C The furniture-repair organisation
D The shareholder-owned furniture manufacturer
(b) Identify two business objectives that the furniture-repair organisation could use to measure its social performance. [4]
(c) Explain how reinvesting surplus can help this organisation achieve both its social and financial aims. [6]
(d) What is meant by a stakeholder, using one stakeholder of the furniture-repair organisation as an example? [6]
(e) Explain whether increasing the price of restored furniture is likely to be the best decision for the organisation. [8]
Answer Details
(a) The furniture-repair organisation is the social enterprise. It trades by selling restored furniture, while reinvesting most surplus into paid training for unemployed people. This combines commercial activity with a social benefit. [2]
(b) Social objectives should be specific and measurable. Suitable objectives include:
- Provide 30 paid training places for unemployed people in the next year. [2]
- Achieve an 80% trainee completion rate for a skills course. [2]
Repairing and selling 500 affordable items, reducing landfill by 20 tonnes, or supporting a stated number of low-income households would also be valid measurable objectives. [4]
(c) Reinvesting surplus can pay for additional training places, tools and trainer wages, directly giving unemployed people skills and work experience. Better equipment and better-trained workers can improve the quality and quantity of restored furniture. This can increase sales revenue, which helps pay rent and other costs. The organisation can therefore continue its social purpose without relying only on donations. [6]
(d) A stakeholder is an individual or group that is affected by a business or can affect it. Trainees are stakeholders because the organisation provides their employment and skills development. For example, a decision to reduce training places would reduce their opportunities; a price decision that affects sales could also affect the number of placements available. Directors should therefore consider trainees' interests. [6]
(e) A higher price could increase revenue per item and help the organisation meet its increased workshop rent. Better cash flow may allow it to keep staff and continue funding training places. However, customers may have limited incomes. If restored furniture becomes less affordable, demand and sales could fall, reducing revenue and conflicting with the social aim of accessible furniture. A balanced decision could be a small, researched price increase alongside cost control, negotiating rent, increasing furniture donations, or retaining lower-priced basic items. Overall, a limited increase is likely to be best only if market research shows customers will still buy and affordability is protected. [8]
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