Growing the Business (Edexcel GCSE Business)

Exam Questions

2 hours27 questions
11 mark

Which one of the following is an example of an internal source of finance?

Select one answer.

  • Loan capital

  • Selling assets

  • Share capital

  • Stock market flotation

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21 mark

Which one of the following is a barrier to international trade?

Select one answer.

  • Aesthetics

  • Ethics

  • Tariffs

  • Trade-offs

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31 mark

Case Study

Mind Candy Ltd produces games and apps for computers and mobile devices. Its most successful game was Moshi Monsters. The game was aimed at young teenagers and was a global hit, with 80 million users in 2012.

In 2013, Mind Candy made large losses as sales revenue fell due to the falling popularity of its games. This was blamed on the short product life cycle of Moshi Monsters and increased competition in its market. As a result of these losses, Mind Candy reduced its workforce of software developers. Mind Candy now needed to raise £1.2 million of extra finance. It required this finance to pay existing costs and fund the development of new apps such as Petlandia.

Mind Candy believes Petlandia will allow it to return to organic growth. The app is free to download and allows players to design a virtual version of their own pet. This virtual pet can go on an adventure within the app. The adventure is then turned into a personalised storybook which can be purchased for £19.99.

State one drawback to Mind Candy of organic growth.

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42 marks

Which two of the following are methods of external growth for a business?

Select two answers.

  •  Improve promotion

  • Innovation

  • Merger

  • Research and development

  • Takeover

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51 mark

Case Study

Iceland is a supermarket that sells frozen food. Although the grocery industry is very competitive, Iceland enjoyed a successful 2017. Sales revenue increased by 2.0% allowing profits to increase by £9.5 million to £160 million.

Iceland believes this success has been due to improved marketing. It has introduced new products using the Slimming World and Millie’s Cookies brand names. It also launched a new advertising campaign called ‘The Power of Frozen’. In addition it has developed a new store format called ‘The Food Warehouse’. These stores are much larger than a normal Iceland store which allows them to stock more luxury products. Iceland hopes that The Food Warehouse will help it to appeal to high-income customers and it plans to open more stores.

In 2018, Iceland received positive publicity from its decision to ban all plastic packaging on its own-brand products by 2023. It intends to replace plastic with recycled paper, as shown in Figure 3. A survey of 5,000 of its customers showed that 80% of them agreed with the change. Pressure groups, such as Friends of the Earth, have welcomed Iceland’s decision. Plastic waste has caused pollution of the world’s oceans and has killed marine life. Pressure groups hope that Iceland’s decision will be repeated by other supermarkets in the UK.

Define the term pressure group.

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61 mark

Case Study

Tesla is a public limited company based in California, USA. Its founder and main shareholder, Elon Musk, wanted to produce an electric car that is affordable to a large number of potential customers. This car is called the Tesla Model 3 .

Introduced in 2017, the basic version of the Model 3 was originally priced at $50 000 and the company wanted to reduce this price to $35 000 by 2019. However, this was difficult to achieve because Tesla’s California factory suffered from low levels of productivity. These problems resulted in Tesla making a $976 million loss in 2018.

Following the introduction of tariffs on US imports by the Chinese government in 2018, Tesla decided to invest $5 billion in the construction of a new car factory in Shanghai, China. This factory will use flow production. However, with only $2.4 billion of available capital, Tesla needs to raise external finance to fund it.

In 2019, Tesla decided to close most of its showrooms to reduce costs. The company believes customers will be happy to purchase electric cars using e-commerce.

State one impact on Tesla of continuing to make a loss.

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72 marks

Case Study

ASOS plc is an online fashion retailer which targets customers in their 20s. The company started in 2000 and since then it has grown significantly. One of the main reasons for its growth is what Chief Executive Nick Beighton calls, the ‘ASOS Experience’.

The company focuses on high quality logistics to distribute its products and increased use of warehouse technology. This has resulted in a warehouse and distribution system which is almost fully automated . This allows ASOS to deliver customer orders the next day, so long as the order is placed online before midnight. Automation has also given ASOS the ability to increase the range of clothes it can sell on its website.

However, the market for clothes in the UK is becoming increasingly competitive. Despite a significant growth in sales, ASOS’s profits have fallen. This has caused the company’s share price to fall. ASOS has responded by focusing on viral advertising. Its latest campaign is to get customers to use the hashtag #AsSeenOnMe when they are showing off their latest ASOS outfit on social media. In return, ASOS gives customers the opportunity to be featured on the ASOS Instagram feed which has 7.1 million followers.

Outline one advantage to ASOS of increasing the range of products offered for sale on its website.

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82 marks

Outline one way a business could implement a retrenchment strategy.

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91 mark

Which one of the following is an example of ethical business practice?

  • Responsible sourcing of raw materials

  • Employing workers from overseas

  • Operating unsustainably

  • Treating workers and suppliers unfairly

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101 mark

Fairstone Ltd changes the features and designs of its products in order to adapt to customer tastes, cultures and legal requirements in other countries.

Which term describes this strategy?

  • Diversification

  • Globalisation

  • Branding

  • Branding

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111 mark

Which one of the following is an example of horizontal integration?

Select one answer.

  • A business merges with a larger competitor

  • A business takes over a key supplier

  • A business merges with one of its major customers

  • A business takes over a business in a different industry

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122 marks

Case Study

Tesla is a public limited company based in California, USA. Its founder and main shareholder, Elon Musk, wanted to produce an electric car that is affordable to a large number of potential customers. This car is called the Tesla Model 3 .

Introduced in 2017, the basic version of the Model 3 was originally priced at $50 000 and the company wanted to reduce this price to $35 000 by 2019. However, this was difficult to achieve because Tesla’s California factory suffered from low levels of productivity. These problems resulted in Tesla making a $976 million loss in 2018.

Following the introduction of tariffs on US imports by the Chinese government in 2018, Tesla decided to invest $5 billion in the construction of a new car factory in Shanghai, China. This factory will use flow production. However, with only $2.4 billion of available capital, Tesla needs to raise external finance to fund it.

In 2019, Tesla decided to close most of its showrooms to reduce costs. The company believes customers will be happy to purchase electric cars using e-commerce

Outline one drawback to Tesla of a government introducing tariffs on imports from the US.

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13 marks

Explain one advantage to a business of improving its environmental sustainability.

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23 marks

Explain one impact on a business from increased globalisation.

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33 marks

Explain one impact that a pressure group can have on a business.

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46 marks

Case Study

Mind Candy Ltd produces games and apps for computers and mobile devices. Its most successful game was Moshi Monsters. The game was aimed at young teenagers and was a global hit, with 80 million users in 2012.

In 2013, Mind Candy made large losses as sales revenue fell due to the falling popularity of its games. This was blamed on the short product life cycle of Moshi Monsters and increased competition in its market. As a result of these losses, Mind Candy reduced its workforce of software developers.

Mind Candy now needed to raise £1.2 million of extra finance. It required this finance to pay existing costs and fund the development of new apps such as Petlandia. Mind Candy believes Petlandia will allow it to return to organic growth. The app is free to download and allows players to design a virtual version of their own pet. This virtual pet can go on an adventure within the app. The adventure is then turned into a personalised storybook which can be purchased for £19.99.

Analyse the impact on Mind Candy of reducing the size of its workforce.

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56 marks

Discuss the impact on a business of becoming a public limited company (plc).

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63 marks

Explain one benefit to a business of merging with a supplier.

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73 marks

Explain one disadvantage to a business of financing growth through the issue of shares.

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86 marks

Case Study

Kentucky Fried Chicken (KFC) is a fast food chain that sells fried chicken. Amongst its most popular products are Popcorn Chicken, Boneless Chicken boxes and Zinger Tower burgers. These are freshly cooked in batches in each of its 900 restaurants across the UK.

In 2017, KFC changed the company it used to transport its supplies of chicken. It replaced Bidvest with DHL. Bidvest had three distribution centres across the UK, but DHL only had one. In February 2018, DHL started to have logistical problems causing many KFC restaurants to run out of chicken. This led to a temporary closure of many KFC branches due to poor supplier reliability.

As a result of these closures, KFC started losing market share to rival fast food restaurants such as Burger King. KFC used social media and a viral advertising campaign to apologise to customers. It also considered lowering the prices of its most popular food items to win back lost customers and recapture market share.

Analyse the impact of supply chain issues on KFC's marketing mix

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93 marks

Explain one reason why governments establish barriers to trade.

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103 marks

Explain one benefit of international trade to a UK business.

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116 marks

Discuss the impact on a business of operating ethically.

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123 marks

Explain one way a business may change its products in order to successfully enter international markets.

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19 marks

Case Study

Mind Candy Ltd produces games and apps for computers and mobile devices. Its most successful game was Moshi Monsters. The game was aimed at young teenagers and was a global hit, with 80 million users in 2012.

In 2013, Mind Candy made large losses as sales revenue fell due to the falling popularity of its games. This was blamed on the short product life cycle of Moshi Monsters and increased competition in its market. As a result of these losses, Mind Candy reduced its workforce of software developers.

Mind Candy now needed to raise £1.2 million of extra finance. It required this finance to pay existing costs and fund the development of new apps such as Petlandia. Mind Candy believes Petlandia will allow it to return to organic growth. The app is free to download and allows players to design a virtual version of their own pet. This virtual pet can go on an adventure within the app. The adventure is then turned into a personalised storybook which can be purchased for £19.99.

In order to raise the £1.2 million of extra finance needed, Mind Candy considered two options:

Option 1: retained profit

Option 2: share capital.

Justify which one of these two options Mind Candy should choose.

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212 marks

Case Study

In August 2017, UK supermarket group Sainsbury’s decided to cut its costs by £500 million to remain competitive.

One of the changes Sainsbury’s made was to end its membership of Fairtrade. The Fairtrade scheme gives farmers in countries such as Kenya a higher price for their crops, such as tea. In return, Sainsbury’s can use the Fairtrade logo on its products. This makes its groceries, such as bananas, more attractive to ethically-minded customers.

Sainsbury’s has decided to replace Fairtrade with its own scheme called ‘Fairly Traded’. Critics of the change believe that it confuses customers. Protests about this change have already been held in London.

Sainsbury’s also decided to reduce its head office workforce by 1,000. This allowed the company to increase wages for its shop floor employees, including checkout operators and shelf stackers, by 4.4% to £8 per hour. This reduced the wage difference with Aldi, which pays £8.53 per hour. Sainsbury’s wants to retrain shop floor employees to improve the customer service in its stores.

Evaluate the likely impact on Sainsbury’s of replacing Fairtrade with its own Fairly Traded scheme. You should use the information provided as well as your knowledge of business.

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39 marks

Case Study

Tesla is a public limited company based in California, USA. Its founder and main shareholder, Elon Musk, wanted to produce an electric car that is affordable to a large number of potential customers. This car is called the Tesla Model 3 .

Introduced in 2017, the basic version of the Model 3 was originally priced at $50 000 and the company wanted to reduce this price to $35 000 by 2019. However, this was difficult to achieve because Tesla’s California factory suffered from low levels of productivity. These problems resulted in Tesla making a $976 million loss in 2018.

Following the introduction of tariffs on US imports by the Chinese government in 2018, Tesla decided to invest $5 billion in the construction of a new car factory in Shanghai, China. This factory will use flow production. However, with only $2.4 billion of available capital, Tesla needs to raise external finance to fund it.

In 2019, Tesla decided to close most of its showrooms to reduce costs. The company believes customers will be happy to purchase electric cars using e-commerce.

In order to raise the finance for its new Chinese factory, Tesla is considering two options:

Option 1: share capital

Option 2: loan capital.

Justify which one of these two options Tesla should choose.

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