'Will It Make A Profit?'

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Business Studies        Will It Make A Profit        Shehryar Raja 11.4

Business Studies Coursework 3

‘Will It Make A Profit?’


For my business studies coursework, I have decided to investigate the cost of setting up and running a business which will sell mobile phones. However, the phones will not be manufactured at the site or by the business, therefore meaning that I will have to purchase them in bulk from another manufacturer who produces the mobiles in order to be able sell them at the most reasonable prices. Although I will be selling a number of different mobile phones, I have chosen to use only one particular phone for my business; the ‘Nokia 8910i’. The name I have chosen for the business is ‘Mobile Mania’. The reason I have chosen to do this type of business is because of the fact that I have a keen interest in mobile phones, mainly fun and modern style phones such as Nokias, and using it for my business and doing detailed financial and marketing research in this field will be very interesting for me, whilst I will also be learning skills used for business management.

My aim in this coursework is to investigate the feasibility of making a profit for my chosen product. I will have to do this by applying break-even analysis, which will further involve working out the costs, setting prices, and also producing spreadsheets and charts. I will then use all of that information to word process a report in order to examine the likelihood of setting up the business, running the business, and hopefully, making a profit.

Will It Make a Profit?

Task 2

Costs – These are amounts, payments or things for setting up a business and running it.

Fixed Costs – Costs which remain the same whatever the level of output of the business. E.g. salaries, rent / mortgage is always the same no matter how much profit you make.

Variable Costs – Costs which vary directly with the output of the business. E.g. cost of materials, bills, stock, and wages.

Tasks 3a + 3b:

3a) The following are the different types of pricing strategies that can be used by a business:

  • Skimming – this involves charging a relatively high price for a short period of time usually used when a fresh, innovative or a much enhanced product is launched into the market. Eventually, the price is lowered when demand falls due to the high price and the decrease of those customers willing to buy the new product earlier, at a high price.
  • Penetration Pricing – this involves setting a lower price for the product when it is launched rather than a high price, with the aim of achieving a large, if not dominant market share.
  • Cost plus pricing – this is when a price is fixed by adding a percentage profit margin to the cost of production of the product.
  • Competition based pricing – this involves fixing a price based on the prices charged by competitors for similar products. This may not be much profitable at times, but is likely to be very effective to
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3b) I have decided to choose the following two pricing strategies for my product:

  • Cost plus pricing – because I will have to cover the cost of my product plus make a percentage of profit. (Selling Price = £310)

  • Competition based pricing – this is because I will need to take into consideration the prices that the competitors are offering for the similar product as charging high prices may mean losing customers to competitors. However, this method of pricing could lead to a low profit margin.

(Selling Price = £350)

Break Even ...

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