HookBoohoo's £3.50-an-hour weekend
In July 2020, an undercover Sunday Times reporter took a job in a Leicester garment factory packing orders for Boohoo's Nasty Gal brand — and was told to expect around £3.50 an hour, against a legal minimum wage of £8.72. Within days, well over £1bn had been wiped off Boohoo's market value as the shares fell more than 40%; Next, ASOS and Zalando pulled Boohoo brands from their sites. An independent review by Alison Levitt QC that September found the allegations ‘substantially true’ — and, more damningly, that the company had known of serious problems in its Leicester supply chain and moved too slowly, prioritising growth.
That one story runs through every leaf of B3.4. A corporate influence: a growth-at-all-costs timescale that made supply-chain risk somebody-else's-problem. A culture: test-and-repeat, speed-first, questions later. A stakeholder collision: shareholders enjoying a soaring share price built partly on costs pushed onto workers with the least power in the chain. And ethics with a price tag you can read off a share chart. The exam frames these as abstractions; every one of them is a line in Boohoo's 2020 accounts.
ModelCorporate influences — timescales and evidence
Two dials shape how companies decide. The first is timescale. Short-termism means managing for the next results announcement: cutting training, R&D and maintenance because their costs land now and their benefits land on a successor's watch. It is fed by quarterly reporting, share-price-linked bonuses and investors who can exit in seconds. Long-termism accepts lower profits today for capability tomorrow — the family-owned German engineering firm is the cliché, but UK examples exist: Unilever scrapped quarterly profit guidance back in 2009 precisely to escape the ninety-day treadmill.
The second dial is how decisions get made. Evidence-based decision-making uses data — Tesco's Clubcard turned decades of purchase records into range and pricing decisions. Subjective decision-making runs on experience, instinct and hunch — James Dyson famously built 5,127 prototypes on the conviction that a bagless vacuum would sell, long before any data agreed. Neither dial has a ‘correct’ setting: data is backward-looking and can miss what has never happened before, while hunches scale badly and excuse bias. Boohoo shows the twist worth writing about: a business can be intensely data-driven in operations (its test-and-repeat buying model) and simultaneously blind on strategy, because nobody was collecting evidence on the thing that blew up.
ModelCorporate culture — ‘the way we do things around here’
Culture is the set of unwritten rules that decide what actually happens when nobody senior is watching. Charles Handy's classification gives you four types to name: power culture (decisions radiate from a dominant centre — common in founder-led firms like early Boohoo); role culture (rules, hierarchies and job descriptions — banks, councils); task culture (flexible teams formed around problems — agencies, tech firms); and person culture (the organisation exists to serve skilled individuals — barristers' chambers, GP partnerships). Culture forms from founders' values, recruitment (hiring people ‘like us’), rituals and war stories — and it hardens over time, which is why changing it is among the slowest jobs in management.
The UK's defining culture case is the Post Office. Between 1999 and 2015, more than 900 sub-postmasters were prosecuted over shortfalls that were actually caused by the Horizon IT system. A defensive, deny-and-litigate culture — protect the institution, doubt the individual — kept the fiction alive for two decades, and it took the 2024 ITV drama Mr Bates vs The Post Office to force a national reckoning; compensation schemes are now budgeted well beyond £1bn. Note what the case proves: a STRONG culture is not the same as a healthy one. Strong toxic cultures do more damage than weak ones, because everyone rows, hard, in the wrong direction.
ModelShareholders versus stakeholders — whose business is it?
A shareholder approach — crystallised in Milton Friedman's 1970 essay — says managers are employed to maximise returns to the owners, within the law. A stakeholder approach says the firm must balance everyone with a stake: employees, customers, suppliers, the local community, lenders, government, environment. The conflicts are concrete and the exam wants them named in pairs: dividends versus wages; lowest-cost sourcing versus supplier welfare; speed versus safety; a factory's jobs versus its emissions.
But the sharpest analysis — and the one Boohoo hands you — is that the two approaches converge over a long enough timescale. Squeezing Leicester suppliers cut costs and flattered short-run profits, which pure shareholder logic applauds. Then the scandal broke, wiped out years of gains in days, and forced an expensive ‘Agenda for Change’ programme of supplier audits and factory consolidation. Ignoring stakeholders turned out to be terrible FOR shareholders. Write that as the evaluation: shareholder-versus-stakeholder is really a disagreement about timescales — in the short run they trade off; in the long run mistreated stakeholders send the bill to the owners.
Put numbers on the trade-off. Suppose sourcing from the cheapest, least-audited suppliers saves a retailer £20m a year, but carries a 25% annual chance of a scandal costing £150m in lost market value, remediation and boycotts. Expected annual cost of the risk = 0.25 × £150m = £37.5m — nearly double the £20m saving. The ‘hard-nosed’ choice fails on purely financial logic before ethics even enters the room. (And the decision-tree logic from B3.3 carries the caveat: this is an average — the firm might dodge the scandal for years, which is exactly why short-termist managers keep making the bet.)
MechanismBusiness ethics — principle meets pay-off
Ethics in strategy is about the decisions where profit and principle genuinely pull apart. The spec flags three arenas. First, strategic trade-offs: fast fashion's model is inherently high-waste and high-return-rate; airlines profit by flying, whatever the carbon accounting says. Second, pay and rewards: the median FTSE 100 chief executive earns roughly £4m a year — over a hundred times a median UK worker — and shareholder ‘say on pay’ revolts have become an annual fixture at AGM season. Third, corporate social responsibility: everything from genuine commitments (Richer Sounds transferring majority ownership to an employee trust in 2019) to greenwashing — sustainability language without operational substance, now actively pursued by the Competition and Markets Authority under its Green Claims Code.
The analytical frame that scores: ethics functions as both a cost and an asset. Genuine ethical practice raises costs today — audited suppliers charge more than £3.50-an-hour ones — but it builds brand trust, attracts staff and investors, and works as insurance against exactly the cliff-edge Boohoo fell off. The evaluation is about which effect dominates for THIS firm: a business selling on price to customers who don't ask questions faces a weaker commercial case for ethics than one selling on trust. Say so, with the firm named.
VocabularyKey terms the mark scheme pays for
TrapsMisconceptions that cost marks
ExamWhat examiners want
B3.4 questions are essay-shaped — 12-mark ‘assess’ and 20-mark ‘evaluate’ — and the levels are earned through context, not vocabulary. ‘Boohoo had a power culture’ is knowledge; showing HOW founder-led speed-first values produced an unaudited supply chain is analysis. Build stakeholder answers around a named conflict pair (dividends versus supplier welfare, in this case) and trace one causal chain fully rather than listing five stakeholders shallowly.
The reliable evaluation move in this section is timescale: almost every shareholder-versus-stakeholder or ethics question turns on short run versus long run, so make the judgement conditional on it — ‘cheap sourcing raises returns this year, but the expected cost of reputational failure exceeds the saving over any horizon longer than one’. Where the extract gives numbers (a share-price fall, a compensation provision, a pay ratio), quantify the ethics: examiners consistently reward candidates who treat reputation as a balance-sheet item rather than a sermon. And keep counter-balance honest — a Level 4 answer concedes that plenty of firms profit from ethical corner-cutting for years before, or without ever, being caught.