Pamela is a sole trader. She started her successful photography business 30 years ago. She specialises in taking pictures of people and places for use in posters, calendars and fashion 1 magazines. It is a niche market. Pamela uses cost-plus pricing as part of her marketing mix. Offering a high quality service is important to Pamela and her 2 employees. Define ‘cost-plus pricing’. (a) … … … … [2] Define ‘marketing mix’. (b) … … … … [2] Outline two reasons why offering a high quality service might be important for Pamela’s business. (c) Reason 1: … … … … Reason 2: … … … … [4] Explain two advantages to Pamela of operating as a sole trader. (d) Advantage 1: … … Explanation: … … … … Advantage 2:… … Explanation: … … … … [6] Do you think operating in a niche market will help a small business have a better chance of success than operating in a mass market? Justify your answer. (e) … … … … … … … … … … … … [6]

1(a) Define ‘cost-plus pricing’. Award 2 marks for a full definition. Award 1 mark for a partial definition. The price is based on the cost of making a product and the addition of a fixed percentage for profit [2] OR The cost of manufacturing the product plus a (profit) mark-up [2] OR Formula e.g. [total cost / total number of units] + % mark up [2] Partial definition e.g. profit added to the cost [1] 2 First mark is for explaining what the ‘plus’ is e.g. profit. Second for reference to / description of mark-up. Price is based on / related to cost of product [0] (reordering only). 1(b) Define ‘marketing mix’. Award 2 marks for a full definition. Award 1 mark for a partial definition. All activities that go into the marketing of a product or service. These activities are often summarised as the four P’s – product, promotion, place and price [2] OR Four marketing decisions needed for the effective marketing of a product [2] OR The combination of product, price, promotion and place (distribution) that determines how a firm markets itself to its customers and potential customers [2] Partial definition e.g. (combine) price, product, promotion and place [1] OR Different strategies a business can use to help market / sell its products [1] 2 For 2 marks candidates must understand that it involves four elements AND what it is used for (e.g. help sell products / attract customers / make marketing decisions / market a product). Do not award answers such as 4P’s or 7P’s these do not define the term. 1(c) Outline two reasons why offering a high quality service might be important for Pamela’s business. Award 1 mark for each relevant reason. Award 1 mark for each relevant reference to this business. Points might include: • Increase sales / maintain sales / attract customers [k] of calendars / poster [app] • Helps maintain / increase customer loyalty [k] for this sole trader business [app] • Maintain reputation / improve brand image [k] built up over 30 years [app] • Set/maintain high prices [k] which helps as use cost- plus pricing [app] • Way to add value [k] as operates in a niche market [app] • To reduce complaints [k] for the 2 employees [app] • No need to replace faulty work [k] • Gain competitive advantage [k] which can help her business remain successful [app] Other appropriate responses should also be credited. 4 Note: To use words from the stem as application, the reference must be appropriate (i.e. make sense) in relation to the point being made. The following words are likely to be appropriate for this question: • Sole trader • 30 years • Photography / posters / calendars / (fashion) magazines / pictures / camera • Niche market • Cost-plus pricing • 2 employees • Successful business Other appropriate examples in context can still be credited. Do not award 2 employees as application where answer refers to sharing profit or using profit to pay wages. 1(d) Explain two advantages to Pamela of operating as a sole trader. Award 1 mark for identification of each relevant advantage (max 2). Award 1 mark for each relevant reference to this business (max 2). Award 1 mark for each relevant explanation (max 2). Points might include: • Keeps all the profit [k] from photography business [app] so has an incentive to (continue to) work hard [an] • Has complete control / makes all the decisions / does not need to consult with anyone [k] such as the 2 employees [app] so able to take decisions more quickly [an] • Own boss [k] • Freedom to choose her own holidays / schedule / work time [k] so can choose time off when the business is less busy so does not miss out on sales [an] • Able to keep (financial) information private / do not need to produce annual accounts [k] so competitors cannot use information to take away her customers / market share [an] which can help her stay successful [app] • Has close contact with customers / able to offer a more personal service [k] as it’s a niche market [app] which can help encourage customer loyalty [an] Other appropriate responses should also be credited. 6 Note: To use words from the stem as application, the reference must be appropriate (i.e. make sense) in relation to the point being made. The following words are likely to be appropriate for this question: • 30 years • Photography / posters / calendars / (fashion) magazines / pictures / camera • Niche market • Cost-plus pricing • 2 employees • High-quality (service) • Successful business Other appropriate examples in context can still be credited. Do not award points about start-up as business has been operating for 30 years e.g. quick/easy to set up [0], requires little capital [0], few legal requirements [tv] 1(e) Do you think operating in a niche market will help a small business have a better chance of success than operating in a mass market? Justify your answer. Award up to 2 marks for identification of relevant points. Award up to 2 marks for relevant development of points. Award 2 marks for justified decision as to whether operating in a niche market will help a small business have a better chance of success than operating in a mass market. Points might include: Niche market: • Able to focus more closely on customer’s needs [k] leading to customer loyalty / good customer relations [an] • Less competition [k] less pressure to lower prices / easier to attract customers [an] • May be able to set higher prices (for a high status, exclusive product) [k] so able to have high / increase profit margin [an] • Can become expert in the segment [k] • Small size of market means will not benefit from economies of scale [k] leading to higher average costs [an] • Less potential for growth / low potential demand [k] • Over dependence on single product / less able to spread risk / vulnerable to changes in consumer spending patterns [k] • Likely to attract competition if successful [k] 6 This is a general question so there are no marks for application. To access evaluation marks, candidates must identify points for both types of markets. To gain both evaluation marks, answer must clearly relate to a small business. Do not award definitions of terms as this is NAQ. Advantages of operating in one type of market can be presented as disadvantages of the other option but do not award the same point twice as mirror answers are not accepted. 1(e) Mass market • More (potential) customers/sales [k] leading to higher (potential) revenue [an] • Increased / high level of competition [k] so might have high level of customer loyalty [an] Other appropriate responses should also be credited. Justification might include: In a niche market a business can focus more closely on customer’s needs [k] leading to higher levels of customer loyalty [an]. In a mass market, there are more potential customers [k] which could mean higher revenue [an]. However, I do think a small business has a better chance of success in a niche market because it can continue to charge high prices [eval] as large companies will not see the market as worthwhile because of potentially low sales. [eval] (a) To earn marks, you need to define cost-plus pricing as setting a price based on the cost of making a product and then adding a fixed percentage for profit, or by providing a formula showing this calculation. A partial definition, such as 'profit added to the cost,' earns one mark. (b) To earn marks, you need to define the marketing mix as all activities involved in marketing a product or service, often summarized as the four P's (product, promotion, place, price), or as the four marketing decisions needed for effective marketing. A partial definition, such as listing some of the P's, earns one mark.

PJA make fashion clothing for 16-25 year olds. Many of its competitors are multinational companies. PJA produce new products every 3 weeks. All PJA’s products are made in a local factory because 2 of import quotas. The Managing Director is reviewing PJA’s financial statements using ratio analysis. An extract is shown in Table 2.1. Table 2.1 Extract from PJA’s financial statements for 2020 7400 Revenue ($m) 3330 Gross profit ($m) 1100 Profit ($m) 1.5 Current ratio 8% Return on Capital Employed (ROCE) Define ‘import quota’. (a) … … … [2] Calculate PJA’s gross profit margin. Show your working. (b) … … … [2] Outline one benefit and one limitation to PJA of developing new products. (c) Benefit: … … … … Limitation: … … … … [4] Explain two ways PJA’s managers can use ratio analysis. (d) Way 1: … … Explanation: … … … … Way 2: … … Explanation: … … … … [6] Do you think multinational companies always benefit the countries they operate in? Justify your answer. (e) … … … … … … … … … … … … [6]

2(a) Define ‘import quota’. Award 2 marks for a full definition. Award 1 mark for a partial definition. Limit on the number of goods into a country [2] Partial definition e.g. limit on number of imports [1] 2 2(b) Calculate PJA’s gross profit margin. Show your working. Correct answer 45(%) [2] Correct method but incorrect answer [1] e.g. gross profit / revenue ×100 OR 3330 / 7400 *100 2 0.45 alone = 0 2(c) Outline one benefit and one limitation to PJA of developing new products. Award 1 mark for each relevant benefit/limitation. Award 1 mark for each relevant reference to this business. Points might include: Benefit: • Attract new customers / sales / growth [k] for its clothes [app] • Need to replace products in decline / keep up with changing customer tastes [k] of 16–25-year-olds [app] • Retain customers / to maintain market share [k] • Spread risk / attract new markets / have other products to rely on for sales [k] • Charge a higher price [k] • Improve reputation [k] • Can create a unique selling point [k] Limitations: • No guarantee customers will like the new product [k] as fashion changes [app] • Competitors might introduce rival products / reduce prices [k] as most of competitors are multinational companies [app] • High cost [k] • Production issues, e.g. is there sufficient capacity [k] within factory [app] • Having access to suitable materials [k] as trying to avoid import quotas [app] Other appropriate responses should also be credited. 4 Note: To use words from the stem as application, the reference must be appropriate (i.e. make sense) in relation to the point being made. The following words are likely to be appropriate for this question: • Correct use of data from table 2.1 • Clothes • Fashion • 16–25-year-olds / young customers • Local • Factory • Multinational companies • 3 weeks / 21 days. Other appropriate examples in context can still be credited. 2(d) Explain two ways PJA’s managers can use ratio analysis. Award 1 mark for identification of each relevant way (max 2). Award 1 mark for each relevant reference made to this business (max 2). Award 1 mark for each relevant explanation (max 2). Points might include: • Able to see trends over time [k] for its clothing [app] to see where / whether performance has improved or not [an] • See trends between competitors [k] such as whether revenue is higher than $7400m [app] to assess how / whether they are as competitive as they think [an] • Able to measure financial performance / profitability / success [k] as if last year ROCE was lower than 8% [app] profitability has improved [an] • Help make investment/expansion decisions [k] such as developing new products [app] • Check / manage liquidity OR working capital [k] as if last year the current ratio was higher than 1.5 [app] then they know liquidity has got worse [an] Other appropriate responses should also be credited. 6 Note: To use words from the stem as application, the reference must be appropriate (i.e. make sense) in relation to the point being made. The following words are likely to be appropriate for this question: • Correct use of data from table 2.1 • Clothes • Fashion • 16-25-year-olds / young customers • Local or factory • Multinational companies • Develop new products. Other appropriate examples in context can be credited. 2(e) Do you think multinational companies always benefit the countries they operate in? Justify your answer. Award up to 2 marks for identification of relevant issues. Award up to 2 marks for relevant development of points. Award up to 2 marks for justified decision as to whether multinational companies always benefit the countries, they operate in. Points might include: • Creates jobs / provides income [k] so improving living standards [an] • Technical knowhow increased [k] which could help improve production methods / efficiency / output [an] • Orders for local suppliers [k] increasing local incomes / GDP [an] • Improve international reputation of country [k] • Increased investment / infrastructure development in country [k] • Companies pay taxes [k] which increases government income [an] • Competition for local businesses [k] leading to lower demand / lower prices [an] which could lead to the closure of local businesses [an] • Profits are often repatriated [k] limiting the countries growth [an] • Offer higher wages [k] reducing supply of workers for local business [an] • Use up limited resources [k] so there is less available for other local businesses [an] • Jobs created may be unskilled [k] Other appropriate responses should also be credited. Justification might include: Companies pay taxes [k] which increases government income [an]. However, reduced sales for local businesses [k] may lead to lower revenue [an]. A multinational always benefits a country to some extent, because of the money invested. [eval] The overall impact depends upon the effect on local businesses. [eval] 6 This is a general question so there are no marks for application. Analysis should focus on the impact on the country.

Tom started ALB 5 years ago making trainers (sneakers) out of sustainable materials such as wool. One of ALB’s objectives is to protect the environment. As part of his research, Tom calculated some 2 costs which he could use in his break-even analysis. An extract is shown in Figure 2.1. ALB uses retailers to distribute its products. Tom thinks a successful entrepreneur has to be a good manager. retailers’ costs manufacturers’ profit fixed costs variable costs 0 10 20 30 40 50 60 percent 50% 5% 15% 30% 5% 15% Fig. 2.1 Define ‘variable costs’. (a) … … … … [2] Identify two limitations of break-even analysis. (b) Limitation 1: … … Limitation 2: … … [2] Outline two possible advantages to ALB of using retailers to distribute its products. (c) Advantage 1: … … … … Advantage 2: … … … … [4] Explain one advantage and one disadvantage to ALB of trying to protect the environment. (d) Advantage: … … Explanation: … … … … Disadvantage: … … Explanation: … … … … [6] Do you think a successful entrepreneur has to be a good manager? Justify your answer. (e) … … … … … … … … … … … … [6]

2(a) Define ‘variable costs’. Award 2 marks for a full definition. Award 1 mark for a partial definition. Costs that change with the level of output produced / sales made [2] Costs which vary directly with the number of items sold or produced [2] Costs that change in direct proportion to output [2] Partial definition e.g. costs that change [1] 2 Do not accept examples. 2(b) Identify two limitations of break-even analysis. Award 1 mark per limitation. Two from: • Assumes all costs can remain constant / be represented with straight lines • Not easy to separate some costs into fixed or variable. • Assumes all output is sold / does not allow for inventory being held • Assumes selling price will remain same for all products sold • Assumes only one type of product is sold Other appropriate responses should also be credited. 2 Only award the first two responses given. 2(c) Outline two possible advantages to ALB of using retailers to distribute its products. Award 1 mark for each relevant advantage. Award 1 mark for each relevant reference to this business. Points might include: • Access to many customers / able to attract people passing by / high footfall / wide distribution is possible [k] which can help increase revenue for its trainers [app] • Lower storage costs / does not need large storage space / cost of holding inventories is paid (in part) by retailer [k] so has more space / funds for its wool [app] • Can act as promotion / retailer will pay for advertising and other promotion [k] which could help raise awareness about protecting the environment [app] • Can sell in large quantities to retailers [k] Other appropriate responses should also be credited. 4 Note: To use words from the stem as application, the reference must be appropriate (i.e. make sense) in relation to the point being made. The following words may be appropriate for this question: • Trainers/sneakers • Wool / sustainable materials or related words • Protecting the environment • 50% (retailers costs) Other appropriate examples in context can still be credited. 2(d) Explain one advantage and one disadvantage to ALB of trying to protect the environment. Award 1 mark for identification of each relevant advantage / disadvantage (max 2). Award 1 mark for each relevant reference made to this business (max 2). Award 1 mark for each relevant explanation (max 2). Advantages might include: • Better brand image / reputation [k] leading to higher sales [an] of its trainers/sneakers [app] • Can help attract customers [k] which may be important as does use retailers [app] could lead to an increase in revenue / increase market share [an] • May be able to set higher price [k] • Less likely for pressure group action / no consumer boycott / support from pressure groups [k] maintain sales [an] Disadvantages might include: • Higher / increase in costs [k] leading to lower profit margin / higher prices [an] • High variable costs [k] as suppliers who protect environment may charge higher prices [an] • Can be difficult to find materials [k] such as wool [app] leading to lower output [an] • Higher fixed costs [k] as may need to buy specialist equipment which produces less emissions [an] Other appropriate responses should also be credited. 6 Note: To use words from the stem as application, the reference must be appropriate (i.e. make sense) in relation to the point being made. The following words may be appropriate for this question: • Trainers/sneakers or related words • Wool / sustainable materials or related words • 5% profit margin • Retailers (for distribution) • 30% (variable costs) • 15% (fixed costs) Other appropriate examples in context can still be credited. 2(e) Do you think a successful entrepreneur has to be a good manager? Justify your answer. Award up to 2 marks for identification of relevant points. Award up to 2 marks for relevant development of points. Award 2 marks for justified decision as to whether a successful entrepreneur has to be a good manager. Points might include: Entrepreneur: • Must be creative / innovate / provide new / unique ideas [k] to help gain sales / attract customers [an] • Need to be willing to take risks [k] to benefit from the reward / profit generated from the business [an] • Perseverance / determination [k] as will need to be prepared to keep going when faced with problems / issues that any new business is likely to have [an] • Can hire someone to manage the business (if you don’t possess these skills) [k] but this will cost money [an] Manager: • Need to be able to organise operations [k] so able to get supplies / deliver on time to get repeat orders [an] • Must be able to plan [k] so production runs efficiently [an] • Ability to control employees [k] so they are all on task [an] • Help motivate employees [k] to maintain efficiency / reduce absenteeism / ensure retain employees [an] • Activities must be coordinated [k] so time is not wasted [an] • An ineffective manager can make the wrong decisions [k] which will cost money / damage reputation [an] Other appropriate responses should also be credited. 6 This is a general question so there are no marks for application. 2(e) Justification might include: An entrepreneur is someone willing to take risks [k] to benefit from the profit made by the business. [an] Being a good manager is important as planning is needed [k] so that production runs efficiently [an]. However, I think a successful entrepreneur does not have to be a good manager because they can always recruit someone if they cannot do this role [eval], and without taking the initial risk there is no business to manage. [eval] (a) To earn 2 marks, define variable costs as those that change directly with the level of output produced or sales made. A partial definition, such as 'costs that change,' earns 1 mark. (b) To earn marks, identify two distinct limitations of break-even analysis, such as assuming constant costs, difficulty in separating fixed/variable costs, assuming all output is sold, or assuming a constant selling price.

Economic growth in country X has created many opportunities for new businesses such as TGH. TGH manufacture a range of personalised mobile (cell) phone cases using job production. Quality 4 assurance is important to all 8 employees. TGH operate in a niche market. The Marketing Manager uses e-commerce as TGH’s channel of distribution. She is considering ways to build customer relationships. Define ‘economic growth’. (a) … … … … [2] Define ‘quality assurance’. (b) … … … … [2] Outline two reasons why building customer relationships might be important to TGH. (c) Reason 1: … … … … Reason 2: … … … … [4] Explain one advantage and one disadvantage to TGH of using job production. (d) Advantage: … … Explanation: … … … … Disadvantage: … … Explanation: … … … … [6] Do you think cost-plus is the best pricing method for a new business to use when selling products to a niche market? Justify your answer. (e) … … … … … … … … … … … … [6]

4(a) Define ‘economic growth’. Award 2 marks for a full definition. Award 1 mark for a partial definition. When a country’s GDP increases / more goods and services are produced than in the previous year [2] Partial definition e.g. increases in a country’s spending/income/output [1] OR Increase in GDP [1] 2 For 2 marks the answer must relate to a country not individual business. High GDP [0] 4(b) Define ‘quality assurance’. Award 2 marks for a full definition. Award 1 mark for a partial definition. Checking for quality standards throughout production process / at every stage [2] Partial definition e.g. checking work done [1] 2 Do not credit answers such as check at end or check final product as this defines quality control. Do not credit explanations of why it is done e.g. manufacturer wants product to be perfect. 4(c) Outline two reasons why building customer relationships might be important to TGH. Award 1 mark for each relevant reason. Award 1 mark for each relevant reference to this business. Points might include: • Increase sales [k] of phone cases [app] • Customer loyalty/retention [k] when using e-commerce [app] • Help build reputation / brand image / act as free advertising [k] for this new business [app] • Opportunity for feedback / help identify customer needs [k] as operate in a niche market [app] • Provide a competitive advantage [k] as other businesses may also set up because of economic growth [app] Other appropriate responses should also be credited. 4 Note: To use words from the stem as application, the reference must be appropriate (i.e. make sense) in relation to the point being made. The following words are likely to be appropriate for this question: • Personalised • (Mobile/phone) cases • New business/start-up • Economic growth • Niche market • E-commerce • 8 employees Other appropriate examples in context can still be credited. Do not award phones as application as business does not make them only the covers. 4(d) Explain one advantage and one disadvantage to TGH of using job production. Award 1 mark for identification of each relevant advantage/disadvantage (max 2). Award 1 mark for each relevant reference made to this business (max 2). Award 1 mark for each relevant explanation (max 2). Points might include: Advantages: • Unique / meet exact customer needs [k] for its phone cases [app] can help brand loyalty [an] • Workers likely to make fewer mistakes [k] which helps ensure quality assurance [app] so less need for rework [an] • More varied work (leads to higher motivation) [k] helping retention / lower absenteeism [an] in this new business [app] • Can charge a higher price [k] in a niche market [app] • High quality products [k] which are personalised [app] • Flexible [k] Disadvantages: • Skilled labour can cost more [k] for the 8 employees [app] which increases labour costs [an] • No economies of scale (likely) [k] leading to higher average cost [an] • Production can take a long time [k] causing lower output / efficiency / productivity [an] • Costs are higher as it is labour intensive [k] • Mistakes can be expensive to correct [k] Other appropriate responses should also be credited. 6 Note: To use words from the stem as application, the reference must be appropriate (i.e. make sense) in relation to the point being made. The following words are likely to be appropriate for this question: • Personalised • (Mobile/phone) cases • E-commerce • New business • Niche market • 8 employees • Quality assurance Other appropriate examples in context can still be credited. Do not award phones as application as business does not them only the covers. 4(e) Do you think cost-plus is the best pricing method for a new business to use when selling products to a niche market? Justify your answer. Award up to 2 marks for identification of relevant points. Award up to 2 marks for relevant development of points. Award 2 marks for justified decision as to whether cost-plus pricing is the best pricing method for a new business to use when selling products in a niche market. Points might include: Cost-plus • Know cost can be covered [k] and can make a profit per item [an] • Simple and easy to calculate [k] so saves time when setting prices [an] • Prices may be higher than competitors [k] leading to a fewer sales [an] • Little incentive to control costs [k] Other pricing methods might include: • Penetration pricing [k] as setting a lower price than competitors should attract customers [an] • Competitive pricing [k] but the business will have limited or no control over the price [an] so may not be able to recover its costs [an] • Price skimming [k] customers may expect / be willing to pay more in a niche market [an] • Promotional pricing [k] Other appropriate responses should also be credited. Justification might include: Cost plus pricing is simple and easy to calculate [k] so saves time when setting prices [an]. Although penetration pricing [k] setting a lower price than competitors should attract customers [an]. Cost plus pricing is the best pricing method as covering costs is important for a new business [eval]. Although the price maybe slightly higher this is less important in a niche market where there are likely to be fewer alternatives [eval]. 6 This is a general question so there are no marks for application. To gain both evaluation marks response must clearly relate to a new business operating in a niche market.

Explain one cost and one benefit for PPE of developing a new product. (a) 3 Cost of developing a new product: … … Explanation: … … … … … … Benefit of developing a new product: … … Explanation: … … … … … … [8] Consider the following three pricing methods PPE could use when launching its new product. Which pricing method should it use? Justify your answer. (b) • Cost-plus • Penetration • Skimming Cost-plus: … … … … … … Penetration: … … … … … … Skimming: … … … … … … Recommendation: … … … … … … [12]

3(a) Explain one cost and one benefit for PPE of developing a new product. Award one mark for a cost/benefit (maximum of 2 marks). Award a maximum of 3 additional marks for each explanation of the cost/benefit of developing new products – one of which must be applied to this context. Costs might include: • Costs of carrying out market research - to research the target market - to identify the size of the potential sales • Costs of product development / producing trial products - produce prototype - cost of materials and components for trial products / time- consuming • Risk of failure of the business if the product is unsuccessful – due to lack of sales giving no revenue • May damage image of the business and other brands if product is unsuccessful Benefits might include: • Unique Selling Point [USP] may give business a competitive advantage – consumers may think the business produces up-to-date products – making them more popular than competitors that are seen as old fashioned • The business will have a more diversified range of products – spreads risk – reduces chances of business failure if one product fails • May attract more customers – increase sales • Business may expand into new markets - increases sales • Business may expand in existing markets For example: There may be high costs of carrying out market research (1) to find out what customers want from a new product. (1) This is needed when developing a new piece of playground equipment (app) to ensure it will be attractive to children and therefore be more likely to sell. (1) Application could include: wooden playground equipment; children’s playgrounds; sole trader; job production; individually designed playground equipment; 3 skilled workers; cost-plus pricing; fully tested to meet legal safety standards; parents want to have playground equipment at home; many competitors; no other similar products in the market. 8 3(b) Consider the following three pricing methods PPE could use when launching its new product. Which pricing method should it use? Justify your answer. • Cost-plus • Penetration • Skimming Level Description 3 Sound application of knowledge and understanding of relevant business concepts using appropriate terminology. Detailed discussion of two or more methods. Well-justified recommendation. Candidates discussing all three methods in detail, in context and with a well-justified recommendation including why the alternative methods were rejected should be rewarded with the top marks in the band. 9–12 2 Sound application of knowledge and understanding of relevant business concepts using appropriate terminology. Detailed discussion of at least one method. Judgement with some justification / some evaluation of choices made. Candidates discussing two or more methods in detail and applying it to the case should be rewarded with the top marks in the band. 5–8 1 Limited application of knowledge and understanding of relevant business concepts. Limited ability to discuss the methods with little/no explanation. Simple judgement with limited justification / limited evaluation of choices made. Candidates outlining three methods in context should be rewarded with the top marks in the band. 1–4 0 No creditable response. 0 12 3(b) Relevant points might include: Advantages Disadvantages Cost-plus • Easy to apply to individually produced playground equipment • Can have different mark-up in different markets • Each product makes a profit for the business • The costs of producing the new product may be high and so the price of the final product may be too high to be competitive – loses customers – as there are many competitors • Profit will only be made if sufficient playground toys are sold to break-even • May not give the brand image of the high-quality product • Time is taken to research and calculate cost prices • No incentive to reduce costs Penetration pricing • Low price attracts customers and increases sales of playground equipment • Helps to ensure a successful launch into a new market • Quickly builds market share • Low price will mean low profit per unit • Customer may expect prices to remain low and therefore not purchase the toys when the price is raised at a later date • Consumer may think low price is due to low-quality product 3(b) Advantages Disadvantages Skimming • Customer may think the playground equipment is of high quality • High research and development costs will quickly be recovered • The product is new and unique on the market, then high prices may be paid by customers leading to high profits before competitors produce a similar product • High price may put off potential customers • The high price and possible high profit per item of playground equipment may encourage competitors to quickly enter the market taking away its advantage of being first with the new product Recommendation • Cost-plus pricing as the product is new so there are no other competitors to compare prices and at least this ensures that a profit is made per unit sold. Price skimming may be too high an initial price and therefore there would be low sales and penetration pricing may not result in any profit if too low. • As the product is new then penetration pricing might be the best one to choose to get the playground equipment established in the market. There are other playground products being sold and so it will get this product well known. • Skimming because Kaari wants to create an image of high quality for the new playground toy and this is emphasised in the advertisement in Appendix 1. To earn marks, you must state one cost and one benefit of developing a new product. For each, you need to explain it and apply it to the context of PPE, for example, by mentioning the costs of researching playground equipment or the benefit of a unique selling point for their products.

Cambridge O Level Business Studies · 7115

O-Level Business Studies (7115) Marketing past paper questions

Marketing questions cover the customer, market research, the marketing mix, and marketing strategy — keeping the four Ps and the research methods sharp for the data-response and case-study papers.

38 free questions from 2017–2021, each with its marking scheme. Open the full topical bank to filter by subtopic, paper, and year.