AS
BUSINESS
Paper 2 Business 2
Insert
Source 1: Hoods Ltd
7131/2
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, 2
Hoods Ltd
Hoods Ltd designs, manufactures and sells hoodies and other sportswear to retailers in the UK 1
and Europe. Hoods Ltd was set up in 2002 by an entrepreneur, Habib. The business is
successful and has grown quickly. It has four factories in the UK.
The product portfolio for Hoods Ltd has grown in the last three years. It now includes tracksuits,
t-shirts and swimwear, as well as the original hoodie design. The clothes are made from 5
high-quality materials. Hoods Ltd sources these from suppliers that use ethically sourced raw
materials.
Habib started Hoods Ltd with the aim of wanting the business to be different from regular
sportswear businesses. Hoods Ltd competes against global brands. These brands spend
heavily on promotion. Habib decided to only use suppliers that sign up to Fair Trade and other 10
similar agreements. Habib created a mission statement that he feels has set Hoods Ltd apart
from other brands.
Hoods Ltd mission statement: ‘Hoods Ltd only uses ethically sourced raw materials. This
ensures excellent quality for our clothes and shows our commitment to being part of a more
sustainable world.’ 15
Using Fair Trade suppliers means that Hoods Ltd pays premium prices for materials. In the last
year, the cost of materials has increased drastically. Habib has reassured the shareholders that
these cost increases can be passed on to customers. He believes the Hoods Ltd brand and the
quality of the clothes are strong enough to justify any price increase.
The marketing manager, Clara, is concerned that Hoods Ltd relies too heavily on repeat 20
customers and is not promoting the company sufficiently. Following a recent dip in sales, Clara
wants to increase the spending on promotion to reach more customers. Hoods Ltd has a
website and Instagram account but these are not regularly updated. Habib does not agree with
Clara and sees the dip as a temporary issue. He feels that the brand is well established in the
market and that the clothes will ‘sell themselves’. Habib estimates that the price elasticity of 25
demand for Hoods Ltd’s products is –0.1
Hoods Ltd employs 70 production staff who work in one of the four factories across the UK.
Each factory has a site manager. The site managers regularly complain that they are not
trusted to make decisions for their sites. Last week one of them left the business to work for a
competitor. Habib is the majority shareholder and manages the company. His role includes 30
setting and analysing all of the operational budgets for the company. Recently, Habib has
struggled to manage this workload and decision-making has been slow. He is considering
delegating the control of the budgets to the site managers which means they will allocate and
decide how the money is spent.
The company has always generated healthy profits and had positive cash flow. However, in the 35
last two years, there have been some major cash flow issues. One of the large retail customers
for Hoods Ltd closed down without paying for its recent orders. The finance manager, Parvin,
believes that many of Hoods Ltd’s retail customers value the 60 days they have to pay for their
orders. Parvin, therefore, suggests that Hoods Ltd should take out an overdraft, despite
knowing that interest rates are currently high and may increase. Some of the shareholders are 40
worried that this financial situation may continue and have asked Habib to urgently look at the
cash flow position.
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IB/G/Jun25/7131/2/INS
BUSINESS
Paper 2 Business 2
Insert
Source 1: Hoods Ltd
7131/2
lock in and max out: tyrionpapers.com for more: tyrionpapers.com
IB/G/Jun25/G4002/E4
, 2
Hoods Ltd
Hoods Ltd designs, manufactures and sells hoodies and other sportswear to retailers in the UK 1
and Europe. Hoods Ltd was set up in 2002 by an entrepreneur, Habib. The business is
successful and has grown quickly. It has four factories in the UK.
The product portfolio for Hoods Ltd has grown in the last three years. It now includes tracksuits,
t-shirts and swimwear, as well as the original hoodie design. The clothes are made from 5
high-quality materials. Hoods Ltd sources these from suppliers that use ethically sourced raw
materials.
Habib started Hoods Ltd with the aim of wanting the business to be different from regular
sportswear businesses. Hoods Ltd competes against global brands. These brands spend
heavily on promotion. Habib decided to only use suppliers that sign up to Fair Trade and other 10
similar agreements. Habib created a mission statement that he feels has set Hoods Ltd apart
from other brands.
Hoods Ltd mission statement: ‘Hoods Ltd only uses ethically sourced raw materials. This
ensures excellent quality for our clothes and shows our commitment to being part of a more
sustainable world.’ 15
Using Fair Trade suppliers means that Hoods Ltd pays premium prices for materials. In the last
year, the cost of materials has increased drastically. Habib has reassured the shareholders that
these cost increases can be passed on to customers. He believes the Hoods Ltd brand and the
quality of the clothes are strong enough to justify any price increase.
The marketing manager, Clara, is concerned that Hoods Ltd relies too heavily on repeat 20
customers and is not promoting the company sufficiently. Following a recent dip in sales, Clara
wants to increase the spending on promotion to reach more customers. Hoods Ltd has a
website and Instagram account but these are not regularly updated. Habib does not agree with
Clara and sees the dip as a temporary issue. He feels that the brand is well established in the
market and that the clothes will ‘sell themselves’. Habib estimates that the price elasticity of 25
demand for Hoods Ltd’s products is –0.1
Hoods Ltd employs 70 production staff who work in one of the four factories across the UK.
Each factory has a site manager. The site managers regularly complain that they are not
trusted to make decisions for their sites. Last week one of them left the business to work for a
competitor. Habib is the majority shareholder and manages the company. His role includes 30
setting and analysing all of the operational budgets for the company. Recently, Habib has
struggled to manage this workload and decision-making has been slow. He is considering
delegating the control of the budgets to the site managers which means they will allocate and
decide how the money is spent.
The company has always generated healthy profits and had positive cash flow. However, in the 35
last two years, there have been some major cash flow issues. One of the large retail customers
for Hoods Ltd closed down without paying for its recent orders. The finance manager, Parvin,
believes that many of Hoods Ltd’s retail customers value the 60 days they have to pay for their
orders. Parvin, therefore, suggests that Hoods Ltd should take out an overdraft, despite
knowing that interest rates are currently high and may increase. Some of the shareholders are 40
worried that this financial situation may continue and have asked Habib to urgently look at the
cash flow position.
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IB/G/Jun25/7131/2/INS
