Business (AS & A Level) · May / June 2025 · Paper 21 · Question 2

Premium Homes (PH) PH owns student rental accommodation in all the major cities in country Y. PH used demographic segmentation in its market research. This research identified that university students would pay a premium for high specification rental accommodation. PH has specialist teams focused on sales, maintenance, customer service and finance. There is little opportunity for internal promotion. PH pays low salaries, however, it offers profit sharing to motivate its 150 employees. This has been effective as PH has had low labour turnover. In the last two years, profit levels have fallen by 75%. In 2024, 45 employees left PH. Complaints about maintenance and customer service have increased due to the lack of experienced employees in PH. The Finance Director is reviewing PH’s existing sources of finance, shown in Fig 2.1. Mortgage 42% Owner’s investment 28% Overdrafts 22% Bank loans 8% Fig 2.1 PH’s sources of finance Frank, the Operations Director, wants to improve the sustainability of PH’s operations. He plans to: • stop renting out accommodation in some lower-income cities, and sell these buildings • upgrade accommodation in high-income cities • reduce the size of the workforce. 5 10 15

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