Business Economics - Case Study - BPP University Business School

Case Study :  You work for a firm of accountants called First Accountancy Associates based in Ealing,West London. You are a business adviser and help the clients to maximise the potential from their business. One of your clients has 8 highly successful Romanian restaurants across London called Bucharest Bistro. Bucharest Bistro operates in the highly competitive London restaurant market. No restaurants chain has more than 5% of the market with many thousands of individual restaurants and small chains. Bucharest Bistro was founded by Adrian Hagi in 1990 shortly after he emigrated from Romania. His family have for generations been in the restaurant business in this former communist country. The business uses a significant amount of energy for lighting, heating and cooking. The restaurants are also impacted by international food prices. Food and energy prices form a large part of the businesses variable costs. You have been asked to advise Bucharest Bistro on economic matters. Adrian has various questions for you. Please respond to Adrian, formally answering all his questions in under 1500 words. Ensure you include a brief introduction. Your report must be referenced using Harvard referencing.   Q1. a) Explain the concept of opportunity cost through an example related to this business. b) Describe two advantages and disadvantages of a restaurant business like Bucharest Bistro operating in the Private Sector rather than the Public Sector. c) Bucharest Bistro pays corporation tax and VAT. Explain what these taxes tax are, and whether they are a direct or an indirect tax. d) The restaurant is often full with customers waiting for a seat. The number of customers getting served is currently limited by the number of staff members working. Adrian wants to expand the business and feels that by having extra members of staff, they will be able to serve more customers and increase revenues and profits. Using economic theory explain why production will initially increase but will then reduce as you add ever more workers. Q2 a) Adrian is concerned that more rival restaurants will be entering the London restaurant market. Using a supply and demand diagram show and explain how this change will affect Bucharest Bistro. Fully label your diagram. b) Eating out is becoming increasingly fashionable in London with a many people eating out at least twice a week. Using a supply and demand diagram show and explain how this change will change the London restaurant market and affect Bucharest Bistro. Fully label your diagram. c) Adrian believes Bucharest Bistro has an inelastic price elasticity of demand. Explain what this means and give two reasons why this may be the case. d) What market structure does Bucharest Bistro operate in? Describe two characteristics of this market structure. Q3. a) Describe two market failures that would occur in the food market without government intervention, and how does the government intervenes to correct these failures. Remember to use the economic terms for your descriptions. b) The UK has a significant budget deficit and thus the government is pursuing a contractionary fiscal policy. Explain what policies this will involve. How will this affect the economy, Bucharest Bistro and consumers? What other macroeconomic policy could be used to limit the negative effects of a contractionary fiscal policy? = Q4. a) Bucharest Bistro imports about 40% of its food from the EU. How will the recent depreciation of the pound impact the business? b) Bucharest Bistro has used bank loans to finance the expansion of its business. What factors do banks consider when giving a business a specific credit rating? How will the credit rating of the business affect the terms of any borrowing? c) Bucharest Bistro gets 60% of its food from British farmers. The UK is planning to reduce its protectionist measures and operate freer trade with the rest of the world. How might the government reduce protectionists measures in the agricultural industry? Explain the impact upon Farmers and UK Restaurants. d) Adrian has a dream of opening further restaurants in his native Romania and other European cities. Evaluate the positives and negatives of this approach. Should he proceed? Q5. a) Members of the EU operate in a free trade area. Explain how this is beneficial to businesses in the EU. (5 marks) b) Looking at one key current global market over the last few years explain how this may affect Bucharest Bistro now and in the future. These could include: Pound / Euro Exchange Rate or the Oil market. The coursework will also be marked on its presentation. This will include a brief introduction, accurate spelling, grammar and appropriate language used.