O Level Business Studies (7115)
Marketing Banker
30 questions · about 20% of the marks we indexed · examined in 9 of 9 sessions.
Practice questions
Original questions written by HomiLabs in the style of the exam, with answers and mark schemes. They are not
Cambridge past paper questions and have not been reviewed by Cambridge. Try each one before opening the answer.
Q1Marketing mix · Core · Paper 1 style · 4 marksCrunchy Bites Ltd launched a new range of baked lentil snacks two years ago. Sales are now rising quickly.
- (a) Define 'product life cycle'. [2]
- (b) Identify the stage of the product life cycle the lentil snacks are most likely to be in, and state one feature of this stage. [2]
Show answer
- (a) The stages a product goes through from its introduction to the market until it is withdrawn (introduction, growth, maturity, decline).
1 mark: stages a product passes through over time; 1 mark: from launch/introduction to decline/withdrawal (or naming the stages).
- (b) Growth stage; e.g. sales rising quickly / profits starting to rise / competitors begin to enter.
1 mark: growth. 1 mark: a valid feature of growth (rapidly rising sales, profit begins, more distribution outlets, competitors appear).
Mango Fresh sells fruit juice in cartons through shops and school canteens in Punjab.
- (a) Outline two functions of packaging for Mango Fresh. [4]
Show answer
- (a) 1. Protects the juice from damage and keeps it fresh during transport to canteens. 2. Attracts customers with bright colours and the brand name, helping it stand out on shop shelves. (Also: gives information, e.g. ingredients and expiry date; easy to carry/drink from with a straw; helps brand image.)
For each of two functions: 1 mark identify + 1 mark outline applied to fruit juice/Mango Fresh.
Hamza makes handmade leather wallets in Lahore. Each wallet costs Rs 240 to make. He uses cost-plus pricing with a mark-up of 25%.
- (a) Calculate the selling price of one wallet. [2]
- (b) State two other pricing methods Hamza could use. [2]
Show answer
- (a) Rs 300
Mark-up = 25% × 240 = Rs 60 (M1). Price = 240 + 60 = Rs 300 (A1).
- (b) Any two: competitive pricing, penetration pricing, price skimming, promotional pricing, dynamic pricing.
1 mark each.
FarmFresh Eggs has a poultry farm near Rawalpindi. It sells eggs to wholesalers, to supermarkets and directly to households.
- (a) Identify two channels of distribution. [2]
- (b) Outline two reasons why FarmFresh Eggs might sell directly to households. [4]
Show answer
- (a) Any two: manufacturer → consumer (direct); manufacturer → retailer → consumer; manufacturer → wholesaler → retailer → consumer; manufacturer → agent → wholesaler/retailer → consumer.
1 mark each for a correctly described channel.
- (b) 1. No middlemen take a share of the price, so it earns a higher profit per tray of eggs. 2. Eggs reach customers fresher and the farm gets direct feedback; it can build loyalty with regular home deliveries.
For each of two reasons: 1 mark identify + 1 mark outline applied to eggs/FarmFresh.
Spice Route is a new restaurant opening in Faisalabad. The owner wants to attract customers in the first month.
- (a) State two aims of promotion. [2]
- (b) Outline two methods of sales promotion Spice Route could use. [4]
Show answer
- (a) Any two: inform customers about a new product; persuade customers to buy; create/improve brand image; increase sales or market share; remind customers about the product.
1 mark each.
- (b) 1. Opening discount, e.g. 20% off all meals in the first week, to encourage people to try it. 2. Loyalty card: a free meal after five visits, encouraging repeat visits. (Also: free starters/dessert, buy-one-get-one-free, competitions, free samples at a mall stall.)
For each of two methods: 1 mark identify + 1 mark outline applied to the restaurant. Do not accept advertising methods such as TV or newspaper adverts.
Sialkot Sports Ltd makes cricket bats and sells them under its own brand name in Pakistan, the UK and Australia.
- (a) Define 'brand'. [2]
- (b) Explain two benefits to Sialkot Sports Ltd of having a strong brand. [6]
Show answer
- (a) A unique name, symbol or design that a business uses to make its product different from those of competitors.
1 mark: name/symbol/logo/design; 1 mark: distinguishes the product from competitors' products.
- (b) 1. Customer loyalty: players who trust the brand buy again and recommend it, so sales are more stable. 2. Higher prices: a respected brand used by famous cricketers allows a premium price, raising profit per bat. (Also: easier to launch new products such as pads under the same brand; easier to enter new countries; retailers more willing to stock it.)
For each benefit: 1 mark identify, 1 mark application to cricket bats/Sialkot Sports, 1 mark development of the effect on sales/profit.
Tea Time biscuits have been sold in Pakistan for 25 years. Sales have stopped growing and several rival brands sell similar biscuits.
- (a) Explain two extension strategies Tea Time could use. [6]
Show answer
- (a) 1. New flavours or varieties (e.g. cardamom or chocolate-filled): attracts new customers and gives existing customers a reason to buy more, so sales rise again. 2. New market, e.g. exporting to the Gulf where many Pakistani workers live, or selling smaller cheap packs in rural shops: reaches customers who have not bought before. (Also: new packaging, new advertising campaign, price reduction, new uses.)
For each strategy: 1 mark identify, 1 mark application to Tea Time, 1 mark explanation of how it extends the maturity stage / increases sales.
ZetPhone is launching a new high-quality smartphone in Pakistan with features that no rival phone has yet.
- (a) Define 'penetration pricing'. [2]
- (b) Do you think price skimming is the best pricing method for ZetPhone's new smartphone? Justify your answer. [6]
Show answer
- (a) Setting a low price when a new product is launched to attract customers and gain market share quickly; the price may be raised later.
1 mark: low price; 1 mark: at launch / to gain market share quickly.
- (b) Skimming suits a new, unique, high-quality product: early adopters who want the latest technology will pay a high price, which helps recover development costs and gives a premium image. But rivals may soon copy the features, many Pakistani consumers are price-sensitive, and a high price may limit sales. Judgement: skimming is probably best at first because the features are unique, then lower the price as competitors arrive.
Up to 2 marks knowledge, up to 2 marks analysis (developed consequences), up to 2 marks evaluation (justified judgement that weighs both sides for this business).
GlowSkin is a new range of sunscreen made in Malaysia. Its marketing manager has a promotion budget of $40,000 for the launch. Appendix: promotion options.Option | Cost ($) | Estimated people reachedTV advertising | 36,000 | 900,000Social media influencers | 12,000 | 400,000Leaflets | 8,000 | 50,000Market research shows that 70% of GlowSkin's target customers are aged 16–30.
- (a) Using the appendix, recommend which promotion option(s) GlowSkin should use for its launch. Justify your answer using suitable calculations. [12]
Show answer
- (a) Calculations: TV $0.04; social media $0.03; leaflets $0.16. Social media influencers: cheapest per person ($0.03), and most target customers are 16–30, who use social media most; influencers can show the product being used. TV reaches the most people but uses 90% of the budget and many viewers are outside the target group. Leaflets are expensive per person. Recommendation: influencers, possibly with the leaflets as well (total $20,000), keeping money for later; TV alone leaves little budget.
Calculations: Cost ÷ people reached: 36,000 ÷ 900,000 = $0.04; 12,000 ÷ 400,000 = $0.03; 8,000 ÷ 50,000 = $0.16. Content: cost per person reached TV $0.04, influencers $0.03, leaflets $0.16; 70% of target customers aged 16–30 (heavy social media users); TV uses 90% of the $40,000 budget and reaches many outside the target group; leaflets costly per person but local; combinations within budget (e.g. influencers + leaflets = $20,000). Mark bands (12; knowledge 2, application 2, analysis 4, evaluation 4): Level 3 (9–12): developed analysis of both sides / all options applied to GlowSkin, using the data, and a justified decision that explains why the rejected option(s) are weaker. Level 2 (5–8): advantages and disadvantages analysed and applied to GlowSkin, with a decision that is only partly justified or one-sided. Level 1 (1–4): relevant knowledge with little application or analysis; a decision with no reasoning earns no evaluation marks. Correct calculations count towards application and analysis; follow through an earlier calculation error.
Gul Crafts is a small business in Peshawar that makes hand-carved wooden boxes and sells them at a local market stall.
- (a) Define 'e-commerce'. [2]
- (b) Explain one opportunity and one threat that e-commerce creates for Gul Crafts. [6]
Show answer
- (a) Buying and selling goods or services using the internet (e.g. through a website, app or online marketplace).
1 mark: buying and selling; 1 mark: over the internet / online.
- (b) Opportunity: it can sell its boxes online to customers across Pakistan and abroad (e.g. tourists or overseas Pakistanis), not just market visitors, so sales and revenue can rise. Threat: customers can easily compare prices with other woodcarvers and factory-made boxes online, so Gul Crafts may have to cut prices; also delivery costs and breakages, and it needs IT skills.
Opportunity: 1 identify + 1 application + 1 development. Threat: 1 identify + 1 application + 1 development.
Kool Kola is a soft drink made by Riverside Drinks plc. Appendix: annual sales (thousand bottles).Year | 1 | 2 | 3 | 4 | 5 | 6Sales | 5 | 18 | 45 | 70 | 74 | 72
- (a) Calculate the percentage increase in sales from Year 3 to Year 4. Give your answer to 1 decimal place. [2]
- (b) Identify the stage of the product life cycle Kool Kola has reached in Year 6. Use the data to support your answer. [2]
- (c) Explain how Riverside Drinks' promotion and pricing of Kool Kola are likely to have been different in Year 1 compared with Year 5. [4]
Show answer
- (a) 55.6%
(70 − 45) ÷ 45 × 100 (M1) = 55.6% (A1).
- (b) Maturity (possibly saturation / start of decline): sales have levelled off at about 72–74 thousand and fell slightly from Year 5 to Year 6.
1 mark: maturity/saturation. 1 mark: evidence from the data (sales growth stopped; 74 → 72).
- (c) Year 1 (introduction): heavy informative promotion (e.g. launch adverts, free samples) to make people aware of the new drink; price either low (penetration) to win customers or high (skimming) if the drink was unique. Year 5 (maturity): promotion mainly reminds customers and defends the brand against rivals (e.g. loyalty offers, sponsorship); price set competitively, close to rival soft drinks, possibly with promotional discounts.
Promotion: 1 mark for Year 1 (informative/awareness, high spending) + 1 mark for Year 5 (reminder/persuasive, defend market share). Price: 1 mark for Year 1 (penetration or skimming, with reason) + 1 mark for Year 5 (competitive/promotional pricing).
CleanHome Ltd makes three brands of washing powder. The directors want to stop making one brand to free factory space for a new liquid detergent. Appendix (Rs thousand per year):Brand | Revenue | Total costs | Product life cycle stageSparkle | 1,800 | 1,260 | declineBreeze | 2,400 | 1,560 | maturityBloom | 900 | 720 | growth
- (a) Using the appendix, recommend which brand CleanHome Ltd should stop making. Justify your answer using suitable calculations. [12]
Show answer
- (a) Calculations: Sparkle Rs 540 thousand; Breeze Rs 840 thousand; Bloom Rs 180 thousand. Sparkle is the likely choice: it is in decline, so its profit of Rs 540 thousand will probably keep falling. Bloom makes the least profit now (Rs 180 thousand) but is in growth, so profits should rise as sales grow and launch costs fall. Breeze is the most profitable and mature, so keeping it gives a steady income. Dropping Sparkle loses some profit in the short term, but its customers might switch to Breeze or the new liquid detergent.
Calculations: Revenue − total costs: Sparkle 1,800 − 1,260 = 540; Breeze 2,400 − 1,560 = 840; Bloom 900 − 720 = 180 (Rs thousand). Content: profit Sparkle Rs 540 thousand, Breeze Rs 840 thousand, Bloom Rs 180 thousand; profit margins (Sparkle 30%, Breeze 35%, Bloom 20%); product life cycle stages — decline means falling future profit, growth means rising profit as launch costs fall; customers may switch to other brands or the new liquid detergent. Mark bands (12; knowledge 2, application 2, analysis 4, evaluation 4): Level 3 (9–12): developed analysis of both sides / all options applied to CleanHome Ltd, using the data, and a justified decision that explains why the rejected option(s) are weaker. Level 2 (5–8): advantages and disadvantages analysed and applied to CleanHome Ltd, with a decision that is only partly justified or one-sided. Level 1 (1–4): relevant knowledge with little application or analysis; a decision with no reasoning earns no evaluation marks. Correct calculations count towards application and analysis; follow through an earlier calculation error.
SkyLite is a new low-cost airline that will fly between Karachi, Lahore, Islamabad and Dubai. It competes with larger, well-known airlines.
- (a) Define 'marketing mix'. [2]
- (b) Explain two elements of the marketing mix that are important for SkyLite. Which element is likely to be the most important? Justify your answer. [6]
Show answer
- (a) The four main elements a business uses to market a product: product, price, place and promotion (the 4Ps).
1 mark: elements/decisions used to market a product; 1 mark: names product, price, place, promotion.
- (b) Price: as a low-cost airline its main appeal is cheaper fares than the well-known airlines, attracting students and families who would otherwise travel by road. Promotion: as a new brand nobody knows it, so it must advertise its fares (e.g. on social media) to win customers. Judgement: price is most important, because low fares are its unique selling point; promotion only works if the fares really are lower, and a basic product is acceptable to price-sensitive passengers.
Up to 2 marks knowledge of two elements; up to 2 marks analysis applied to SkyLite; up to 2 marks evaluation choosing the most important with a reason why it beats the other.
Two businesses in Islamabad are each thinking of raising prices by 10%. Fuel Point is the only petrol station on a busy motorway for 60 km. Bean There is one of eight cafés on the same street.
- (a) Define 'price elastic demand'. [2]
- (b) Explain why the 10% price rise is likely to have a different effect on the revenue of Fuel Point and Bean There. [6]
Show answer
- (a) When a change in price causes a proportionally larger change in quantity demanded.
1 mark: quantity demanded changes; 1 mark: by a larger percentage than the price change.
- (b) Demand for Fuel Point's petrol is likely to be price inelastic: drivers need fuel and there is no nearby alternative, so quantity falls by less than 10% and total revenue rises. Demand for Bean There's coffee is likely to be price elastic: there are seven close substitutes, so many customers switch and quantity falls by more than 10%; total revenue falls. So Fuel Point may raise its price; Bean There probably should not.
Fuel Point: 1 mark inelastic, 1 mark reason (necessity / no substitutes nearby), 1 mark revenue rises. Bean There: 1 mark elastic, 1 mark reason (many substitutes), 1 mark revenue falls.
Natura is a new business in Lahore making organic face cream. It must choose one channel of distribution for its first year. Appendix:Option A – sell online direct to consumers: price Rs 1,200, delivery cost Rs 150 per jar, website and online advertising Rs 1,500,000 a year, expected sales 8,000 jars.Option B – sell to pharmacies and beauty shops (retailers): they pay Rs 800 per jar, expected sales 20,000 jars.Option C – sell to a wholesaler: it pays Rs 650 per jar, expected sales 35,000 jars.Each jar costs Rs 500 to make.
- (a) Using the appendix, recommend which channel of distribution Natura should choose for its first year. Justify your answer using suitable calculations. [12]
Show answer
- (a) Calculations: A: Rs 2,900,000; B: Rs 6,000,000; C: Rs 5,250,000. Option B: highest expected profit (Rs 6.0 m), and pharmacies give a trusted image for a skincare product; customers can see and test it. Option C gives high volume but the lowest profit per jar (Rs 150) and Natura loses control over where it is sold and how it is displayed. Option A has the best margin and direct customer contact but the lowest profit because of website costs and uncertain online demand for a new brand. B is best for year one, perhaps adding online sales later when the brand is known.
Calculations: A: (1,200 − 500 − 150) × 8,000 − 1,500,000 = Rs 2,900,000. B: (800 − 500) × 20,000 = Rs 6,000,000. C: (650 − 500) × 35,000 = Rs 5,250,000. Content: expected profit A Rs 2.9 m, B Rs 6.0 m, C Rs 5.25 m; profit per jar (A Rs 550 before website costs, B Rs 300, C Rs 150); control over display and image, trusted pharmacy image for skincare, direct customer contact online, risk and reliability of sales forecasts for a new brand. Mark bands (12; knowledge 2, application 2, analysis 4, evaluation 4): Level 3 (9–12): developed analysis of both sides / all options applied to Natura, using the data, and a justified decision that explains why the rejected option(s) are weaker. Level 2 (5–8): advantages and disadvantages analysed and applied to Natura, with a decision that is only partly justified or one-sided. Level 1 (1–4): relevant knowledge with little application or analysis; a decision with no reasoning earns no evaluation marks. Correct calculations count towards application and analysis; follow through an earlier calculation error.
RideNow is a ride-hailing app in Karachi. It uses dynamic pricing: fares rise automatically when many people request rides at the same time, for example during rain or rush hour.
- (a) Explain one advantage to RideNow of using dynamic pricing. [2]
- (b) Do you think dynamic pricing will help RideNow increase its profits in the long term? Justify your answer. [6]
Show answer
- (a) Higher fares at busy times encourage more drivers to work then, so more ride requests are met and RideNow earns more revenue when demand is highest.
1 mark: identifies advantage (higher revenue/profit at peak times or matches supply of drivers to demand). 1 mark: explanation linked to RideNow.
- (b) Yes, it raises revenue at peak times and keeps drivers available, improving service. But customers may feel cheated by very high fares during rain or emergencies, damaging the brand; with rival apps they may switch, and bad publicity or government action could follow. Judgement: it helps profits if price rises are limited and explained clearly in the app; very large rises could cost loyal customers.
Up to 2 marks knowledge, up to 2 marks analysis (developed consequences), up to 2 marks evaluation (justified judgement that weighs both sides for this business).
Fit Zone plans to open a gym for women in Quetta.
- (a) Define 'primary research'. [2]
- (b) State two sources of secondary research Fit Zone could use. [2]
Show answer
- (a) Collecting new (first-hand) information for a specific purpose, e.g. by questionnaires, interviews, observation or focus groups.
1 mark: new/original/first-hand data; 1 mark: collected by or for the business for its own purpose (or method example).
- (b) Any two: government statistics (e.g. population census), internet/websites, newspapers and magazines, market research agency reports, competitors' websites or price lists, trade association reports.
1 mark each.
A bakery chain in Colombo, Sri Lanka, wants to know whether customers would buy a new range of sugar-free cakes.
- (a) Outline two methods of primary research the bakery could use. [4]
Show answer
- (a) 1. Questionnaire: customers in the shops answer set questions about whether they would buy sugar-free cakes and at what price. 2. Product testing / free samples (or focus group): customers taste the cakes and give their opinions before full launch. (Also: interviews, observation, online survey.)
For each of two methods: 1 mark identify + 1 mark outline applied to the bakery.
Pixel Print is a small business in Kampala, Uganda, that prints T-shirts. It wants to find out what designs young customers prefer.
- (a) State two advantages of using an online questionnaire for this research. [2]
- (b) State two disadvantages of using an online questionnaire for this research. [2]
Show answer
- (a) Any two: cheap; quick to reach many people; young people use social media so it reaches the target market; results are easy to analyse automatically; can include pictures of designs.
1 mark each.
- (b) Any two: low response rate; people who answer may not be representative; cannot ask follow-up questions; people may give careless answers; some people may answer more than once.
1 mark each.
FrostyCream asked 400 people outside one shopping mall in Lahore which new ice-cream flavour they would buy. 92 chose mango, 140 chose pistachio, 108 chose chocolate fudge and 60 chose none of these.
- (a) Calculate the percentage of people asked who chose mango. [2]
- (b) FrostyCream estimates that 25,000 people in its target market will buy a new flavour. Using the results for pistachio, estimate how many of them would choose pistachio. [2]
- (c) Explain two reasons why the results of this survey may not be reliable. [4]
Show answer
- (a) 23%
92 ÷ 400 × 100 (M1) = 23% (A1).
- (b) 8,750 people
140 ÷ 400 = 35% (M1); 35% × 25,000 = 8,750 (A1).
- (c) 1. Sample from one mall only: shoppers there may be wealthier or younger than the whole target market, so results are biased. 2. People may say they would buy a flavour but not actually buy it, or answer quickly to get away. (Also: sample size small relative to market; leading questions; time of day/season.)
For each reason: 1 mark identify + 1 mark explain linked to FrostyCream.
Bolan Travels runs coaches between Quetta and Karachi. It plans to start a premium service with reclining seats and Wi-Fi. The marketing manager must choose between an online survey sent to 2,000 past customers by email and a focus group of 10 regular passengers.
- (a) Explain two problems Bolan Travels might have in making sure its market research is accurate. [8]
- (b) Recommend which research method Bolan Travels should use. Justify your answer. [12]
Show answer
- (a) 1. The sample may not represent the target market: past customers who gave an email address may be younger or richer than other passengers, so the results could overstate demand for the premium service. 2. Questions may be badly written or leading, or people may not answer honestly about how much extra they would pay, so the firm could set the wrong fare. (Also: low response rates; out-of-date data; researcher bias.)
For each problem (max 4 each): 1 mark identify; 1 mark apply to Bolan Travels' premium coach service; 2 marks explain the consequence for its decision.
- (b) Online survey: cheap, quick and gives numerical data from many people, so the firm can estimate how many would pay more; but response rates may be low and answers are short. Focus group: gives detailed opinions on seats and Wi-Fi and why people value them, but only 10 people, so may not represent all passengers. Recommendation: the online survey, because the key question is how many customers would pay the higher fare; a focus group could follow to refine features.
Content: online survey of 2,000 — cheap, quick, numerical data on how many would pay more, but low response rate and short answers; focus group of 10 — detailed opinions on seats and Wi-Fi and why, but small and may not represent all passengers; the key question is how many would pay the higher fare; a focus group could follow. Mark bands (12; knowledge 2, application 2, analysis 4, evaluation 4): Level 3 (9–12): developed analysis of both sides / all options applied to Bolan Travels, using the data, and a justified decision that explains why the rejected option(s) are weaker. Level 2 (5–8): advantages and disadvantages analysed and applied to Bolan Travels, with a decision that is only partly justified or one-sided. Level 1 (1–4): relevant knowledge with little application or analysis; a decision with no reasoning earns no evaluation marks.
Leila wants to open a bookshop and café in Muscat, Oman. She has limited money for research and plans to rely only on secondary research.
- (a) Identify two pieces of information secondary research could give Leila. [2]
- (b) Do you think secondary research alone is enough for Leila? Justify your answer. [6]
Show answer
- (a) e.g. population/age structure of the area; average incomes; number and locations of competing bookshops/cafés; trends in reading or café spending; rents in the area.
1 mark each for any two relevant pieces of information.
- (b) Secondary research is cheap and quick and shows market size, incomes and competitors. But it was collected for other purposes, may be out of date and will not tell her what local customers want from a bookshop-café (e.g. Arabic or English books, prices, opening hours). As a new business with limited money, a mistake would be costly, so a small amount of cheap primary research (e.g. a short questionnaire to people in the area or a social-media poll) is worthwhile. Judgement: not enough on its own.
Up to 2 marks knowledge, up to 2 marks analysis (developed consequences), up to 2 marks evaluation (justified judgement that weighs both sides for this business).
HealthyBite plans to sell a new protein bar. An online survey of 1,200 gym members found that 60% would buy the bar at Rs 150 and 25% would buy it at Rs 200. Each bar costs Rs 90 to make.
- (a) Should HealthyBite rely on these survey results to choose the price of its protein bar? Justify your answer using suitable calculations (for example, the expected profit per 1,000 gym members at each price). [12]
Show answer
- (a) Calculations: Rs 150: Rs 36,000; Rs 200: Rs 27,500. The results suggest Rs 150 gives more profit (Rs 36,000 v Rs 27,500 per 1,000 members) and more customers. But only gym members who use the internet were asked, so the sample excludes other possible buyers; people often say they will buy but do not; answers for one bar per person ignore how often people buy; competitors' prices are not considered. Judgement: use the results as a guide (Rs 150 looks better) but test-market in a few gyms before deciding.
Calculations: Rs 150: 600 buyers × (150 − 90) = Rs 36,000. Rs 200: 250 buyers × (200 − 90) = Rs 27,500. Content: per 1,000 gym members, Rs 150 → 600 buyers × Rs 60 = Rs 36,000; Rs 200 → 250 buyers × Rs 110 = Rs 27,500; limitations — only online gym members sampled, stated v actual behaviour, frequency of purchase ignored, competitors' prices not considered; test marketing. Mark bands (12; knowledge 2, application 2, analysis 4, evaluation 4): Level 3 (9–12): developed analysis of both sides / all options applied to HealthyBite, using the data, and a justified decision that explains why the rejected option(s) are weaker. Level 2 (5–8): advantages and disadvantages analysed and applied to HealthyBite, with a decision that is only partly justified or one-sided. Level 1 (1–4): relevant knowledge with little application or analysis; a decision with no reasoning earns no evaluation marks. Correct calculations count towards application and analysis; follow through an earlier calculation error.
Cool Breeze sells air coolers in Pakistan. Last year its sales were Rs 360 million and total market sales of air coolers were Rs 2,400 million.
- (a) Calculate Cool Breeze's market share. [2]
- (b) Define 'market segment'. [2]
Show answer
- (a) 15%
Market share = firm's sales ÷ total market sales × 100 (M1) = 360 ÷ 2,400 × 100 = 15% (A1).
- (b) An identifiable sub-group of a whole market in which consumers have similar characteristics or needs.
1 mark: part/sub-group of a market; 1 mark: customers with similar characteristics (e.g. age, income, location).
Velocity Sportswear sells trainers and sports clothing in Pakistan and the UAE.
- (a) Define 'niche market'. [2]
- (b) Explain two ways Velocity Sportswear could segment its market. [6]
Show answer
- (a) A small, specialised segment of a larger market with particular needs.
1 mark: small part/segment of the market; 1 mark: specialised/particular needs (e.g. running shoes for marathon runners).
- (b) 1. By age: different ranges for children and adults, so designs and prices can match each group and advertising can be aimed at them. 2. By use/lifestyle (activity): football boots, running shoes, gym wear; customers needing specialist products will pay more. (Also: income, gender, location/region, e.g. lighter fabrics for the UAE climate.)
For each way: 1 mark identify, 1 mark application to sportswear, 1 mark explanation of the benefit (better targeting, higher sales).
Desi Chips Ltd sells potato crisps. The managing director is pleased that sales have increased. Appendix (Rs million):Year | Desi Chips sales | Total market salesYear 1 | 4.2 | 30Year 2 | 4.6 | 40Two new foreign crisp brands entered the market in Year 2.
- (a) Calculate Desi Chips' market share in each year. Give your answers to 1 decimal place. [2]
- (b) Explain why the managing director should be concerned, and explain one way Desi Chips could respond to the new competition. [6]
Show answer
- (a) Year 1: 14.0%; Year 2: 11.5%
4.2 ÷ 30 × 100 = 14.0% (1); 4.6 ÷ 40 × 100 = 11.5% (1).
- (b) Sales rose by about 9.5% but the market grew by a third, so market share fell from 14.0% to 11.5%; rivals, including the new foreign brands, are growing faster and Desi Chips may lose bargaining power with shops. Response: e.g. launch new local flavours (e.g. chatpata masala) that foreign brands do not offer, and promote them, to attract customers and win back share; or improve distribution to small shops in rural areas.
Up to 3 marks: concern explained using data (sales up but share down, market growing faster, new entrants). Up to 3 marks: one response identified, applied and developed.
Laptop Lane is a computer shop in Rawalpindi. Customers now compare prices online, and two large electronics stores have opened nearby.
- (a) Explain two ways Laptop Lane could keep its customers despite the stronger competition. Which way is likely to be the most important? Justify your answer. [6]
- (b) State two reasons why customer spending patterns may change. [2]
Show answer
- (a) 1. Better customer service: expert advice, installing software and fast repairs that big stores and online sellers do not offer; customers who value help will stay loyal. 2. Loyalty scheme / after-sales care, e.g. discounts on repairs for returning customers. Judgement: customer service is most important, because a small shop cannot match large stores on price, but personal service gives a reason to pay slightly more and creates loyalty and recommendations.
Up to 2 marks knowledge (two ways, e.g. service, loyalty scheme, price matching, after-sales service, online presence). Up to 2 marks analysis applied to Laptop Lane. Up to 2 marks evaluation choosing one with a reason why it beats the other.
- (b) Any two: changes in income; changes in tastes/fashion; new technology (e.g. online shopping); population/age changes; changes in prices of substitutes; advertising.
1 mark each.
Rang Fashions sells shalwar kameez in Pakistan and wants to start selling in the UK.
- (a) Identify two problems Rang Fashions may face when entering a foreign market. [2]
- (b) Define 'licensing' as a way of entering a foreign market. [2]
Show answer
- (a) Any two: lack of knowledge of the market/customers; different tastes or culture; strong local competitors; different laws and regulations; exchange-rate changes; transport costs; language barriers; import taxes.
1 mark each.
- (b) Allowing a business in another country to make or sell a product using the firm's brand or design in return for a fee or royalty.
1 mark: permission given to a foreign business to make/sell using the brand/design; 1 mark: in return for a payment/royalty.
Masala Munch Ltd makes spicy snacks in Karachi. It wants to sell in Malaysia and is considering a joint venture with a Malaysian food company.
- (a) Explain one advantage and one disadvantage to Masala Munch Ltd of a joint venture with the Malaysian company. [6]
Show answer
- (a) Advantage: the Malaysian partner knows local tastes, laws and has distribution links to shops, so the snacks can reach customers faster with less risk; costs and risks are shared. Disadvantage: profits must be shared and the partners may disagree, e.g. about recipes, prices or how halal certification is promoted, which could slow decisions or damage the brand.
Advantage: 1 identify, 1 application, 1 development. Disadvantage: 1 identify, 1 application, 1 development.
Sukoon Herbal Teas makes herbal tea in Pakistan. Its advertisements say the tea "cures headaches and stress". It wants to sell in the European Union, where advertising and labelling laws are strict. Option 1: open its own shops in Germany. Option 2: license a German tea company to pack and sell the tea under the Sukoon name.
- (a) Explain two ways laws may control Sukoon Herbal Teas' marketing in the European Union. [8]
- (b) Recommend which option Sukoon Herbal Teas should choose to enter the German market. Justify your answer. [12]
Show answer
- (a) 1. Laws against misleading advertising: Sukoon cannot claim the tea 'cures' headaches unless this is proved, so its adverts must change, which may weaken its main selling point. 2. Labelling and food-safety laws: packs must show ingredients, weight and allergy information correctly, which may need new packaging and testing and raises costs. (Also: rules on product safety, weights and measures, consumer rights to refunds.)
For each way (max 4 each): 1 mark identify the legal control; 1 mark apply to Sukoon's tea or its 'cures' claim; 2 marks explain the effect on Sukoon's marketing or costs.
- (b) Licensing: low cost and risk; the German company already knows EU labelling laws and has distribution to shops, and Sukoon receives royalties. But it loses control of quality and receives only a share of the profit. Own shops: full control and all the profit, but very expensive, slow, and Sukoon lacks local knowledge. Recommendation: licensing at first, with strict quality terms in the contract, because it reduces legal and financial risk in an unfamiliar market.
Content: licensing — low cost and risk, German partner knows EU labelling laws and has distribution, royalties, but less control of quality and only a share of profit; own shops — full control and all the profit, but very expensive, slow and lacks local knowledge; strict quality terms in a licence contract. Mark bands (12; knowledge 2, application 2, analysis 4, evaluation 4): Level 3 (9–12): developed analysis of both sides / all options applied to Sukoon Herbal Teas, using the data, and a justified decision that explains why the rejected option(s) are weaker. Level 2 (5–8): advantages and disadvantages analysed and applied to Sukoon Herbal Teas, with a decision that is only partly justified or one-sided. Level 1 (1–4): relevant knowledge with little application or analysis; a decision with no reasoning earns no evaluation marks.
