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GCSE
BUSINESS
Paper 2 Influences of marketing and finance on business activity

Tuesday 2 June 2020 Afternoon Time allowed: 1 hour 45 minutes

Materials
For Examiner’s Use
For this paper you must have:
• a calculator. Section Mark
A
Instructions
• Use black ink or black ball-point pen. B
• Fill in the boxes at the top of this page. C
• Answer all questions.
TOTAL
• You must answer the questions in the spaces provided. Do not write outside
the box around each page or on blank pages.
• If you need extra space for your answer(s), use the lined pages at the end of
this book. Write the question number against your answer(s).
• Do all rough work in this answer book. Cross through any work you do not
want to be marked.

Advice
• The marks for each question are shown in brackets.
• The maximum mark for this paper is 90.

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Answer all questions in the spaces provided.

For questions with four responses, only one answer per question is allowed.

For each answer, completely fill in the circle alongside the appropriate answer.

CORRECT METHOD WRONG METHODS

If you want to change your answer you must cross out your original answer as shown.

If you wish to return to an answer previously crossed out, ring the answer you now wish to select
as shown.

0 1 . 1 Which element of the marketing mix involves selecting a channel of distribution?

[1 mark]

A Place

B Price

C Product

D Promotion

0 1 . 2 Which source of finance is available to a limited company but not a sole trader?
[1 mark]

A Bank loan

B Mortgage

C Overdraft

D Share issue

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0 1 . 3 Which pricing method involves calculating the costs of production and adding a box
percentage to make a profit?
[1 mark]

A Competitive pricing

B Cost plus pricing

C Loss leader

D Price skimming

0 1 . 4 What is the name for the category of products in the Boston Matrix labelled X below?
[1 mark]

Figure 1 The Boston Matrix

A Cash cow

B Dog

C Question mark/problem child

D Star

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0 1 . 5 Which method of growth involves employing another business to produce products or box

provide services?
[1 mark]

A E-commerce

B Franchising

C Outsourcing

D Merger

0 1 . 6 Which of the following would be on a statement of financial position?

[1 mark]

A Cost of sales

B Non-current assets

C Rent

D Revenue

0 1 . 7 Explain what is meant by the term ‘economies of scale’.

[2 marks]

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0 1 . 8 Identify two ways business activity can have an impact on the environment. box
[2 marks]

Way 1

Way 2

0 1 . 9 Explain one way a business can minimise risk.

[2 marks]

0 1 . 10 Explain one way that promoting a good or service can increase sales.
[2 marks]

Question 1 continues on the next page

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0 1 . 11 Use the break-even chart below to calculate the margin of safety in units if the actual box

number of units sold was 700.

Show all workings.

[2 marks]

Figure 2

Answer

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0 1 . 12 State and explain two extension strategies that can extend the life cycle of a product. box
[4 marks]

Strategy 1

Explanation

Strategy 2

Explanation

20

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Answer all questions in the spaces provided.

0 2 Item A: TradeUp

TradeUp is a high street retailer that buys, sells and exchanges second-hand
entertainment products and technology. These products include video games,
mobile phones and tablet computers. TradeUp was established in 2002. The
number of TradeUp stores since 2015 is shown below.

To keep up with a growing market, TradeUp has used franchising since 2015 to
expand rapidly as it had limited funds available to set up stores itself. To open a
TradeUp franchise, each franchisee must make an initial investment of £150 000.
This money is used to design and fit the shop, purchase opening stock and train
managers. Franchisees must pay TradeUp an ongoing royalty fee of 7% of their
revenue.

One franchisee is Amelia Appleby. Amelia has had an idea to sell home appliances
such as vacuum cleaners and microwaves, but she is unsure which products would
be popular. Amelia is keen to present her idea to TradeUp as soon as possible, but
she knows that she needs market research to support her proposal. Although
Amelia is busy running her store, she has decided to conduct a focus group with
her regular customers. To encourage customers to participate, Amelia will pay
each of them a small fee. In the past, Amelia has used questionnaires to collect
feedback from customers. These were placed on the shop counter for four weeks
for customers to complete, but she had a very low response rate.

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0 2 . 1 Identify the business sector that provides services to customers. box
[1 mark]

0 2 . 2 Calculate the average number of TradeUp stores opened each year from 2017 to
2019.

Show all workings.

[2 marks]

Workings:

Answer

0 2 . 3 Analyse one benefit for TradeUp of expanding through franchising.

[6 marks]

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0 2 . 4 Amelia is considering using a focus group of six customers to gain feedback on her box

idea.

Advise Amelia whether it is a good idea to use a focus group for her research. Give
reasons for your advice.
[9 marks]

Extra space

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Item B: TradeUp box

The demand for some second-hand products, such as mobile phones, changes
quickly. Amelia needs to make sure that her prices are competitive with other
second-hand retailers otherwise she will lose customers.

Table 1 Extract of Income Statement for year ending April 2020

(£ 000)
Sales revenue 140
Cost of sales 84
Gross profit 56

Amelia has always liked her location in a busy town centre and has never had any
direct competition. This location has provided Amelia with loyal customers who like
the convenience of being able to visit her store when they are in town shopping.
However, another retailer located nearby has announced that it will start to offer a
similar service to TradeUp. Amelia has heard that a unit on an out-of-town retail
park has become available. She has found out that although the size of the unit at
the retail park is bigger than her current location, the rent would be £825 per month,
which is lower than her current payment of £1100 per month. There is a bus link
every hour to the retail park and lots of free parking; however not all her current
employees can drive.

0 2 . 5 Explain one factor that influences pricing decisions.

[2 marks]

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0 2 . 6 Amelia is aiming to reduce cost of sales in 2021 so she can improve her gross profit. box
She predicts her sales revenue will stay the same.

Calculate the difference in the gross profit margin between 2020 and 2021 if Amelia
increases gross profit by 25%.

State the formula for gross profit margin and show your workings.
[5 marks]

Formula:

Workings:

Answer %

0 2 . 7 Recommend whether Amelia should relocate her TradeUp store from the town centre
to the retail park.

Give reasons for your answer.

[9 marks]

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DO NOT WRITE ON THIS PAGE

ANSWER IN THE SPACES PROVIDED

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Answer all questions in the spaces provided.

0 3 Item C: Devine Jewellery (DJ) plc

Devine Jewellery (DJ) plc is an international business that sells a range of luxury
jewellery items such as bracelets, necklaces and rings. The business was started
by British jewellery designer Dev Anand who developed a unique selling point
(USP) of jewellery that can be personalised with a message or initials. This USP
has attracted customers from all over the world. All DJ products are crafted from
high quality gold and gemstones. This has enabled DJ to create an exclusive brand
image that has attracted wealthy customers.

As a profitable business, DJ’s shareholders receive dividend payments each year.

Dev understands that his business must be willing to respond to current trends to
maintain sales levels. Silver jewellery is very common as it is much more
affordable than gold. Reputable brands already sell jewellery in a range of precious
metals, including silver.

Dev is keen to produce a new jewellery collection using silver instead of gold. The
new collection would not be personalised or include gemstones. The current selling
price of DJ’s best-selling gold bracelet is £4700. A silver version of this bracelet
would be sold for £1175.

0 3 . 1 Explain one way that shareholders can have an impact on a business.

[2 marks]

0 3 . 2 Using Item C, explain one way that Devine Jewellery is able to compete successfully
internationally.
[2 marks]

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0 3 . 3 Use the information in Item C to calculate the percentage decrease in the selling price box
of a bracelet if it is made from silver instead of gold.

Show all workings.

[2 marks]

Workings:

Answer

0 3 . 4 Analyse one potential impact of the new jewellery collection on Devine Jewellery.
[6 marks]

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Item D: Devine Jewellery (DJ) plc box

DJ imports and exports goods to and from the UK where it is based. One of its
most successful export markets is the USA, where it has 14 stores. It also imports
diamonds to the UK from India as they are much cheaper to buy from here than
other countries. This means DJ can make a larger profit on each item sold. DJ
only has stores in large cities, so customers mainly use the website to find
information on jewellery items.

DJ has always advertised in fashion magazines read by its wealthy target market
but wants to raise its profile further. Other jewellery businesses are promoting their
brands by sponsoring big events such as sports competitions, festivals and awards
ceremonies. DJ would like to sponsor a fashion show in London for a world-famous
British designer with an expensive clothing range. The designer has agreed that if
the sponsorship goes ahead, the models will all wear jewellery from the DJ
collection. As well as attracting reporters and photographers from around the
world, the fashion show will be streamed live on the Internet and shown on
television.

0 3 . 5 Explain one way a business can use digital technology to communicate with
customers.
[2 marks]

0 3 . 6 Explain one way that Devine Jewellery will be affected if the exchange rate of the
pound falls against other currencies.
[4 marks]

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0 3 . 7 Analyse one benefit to Devine Jewellery of using sponsorship of the fashion show to box
promote its jewellery.
[6 marks]

Question 3 continues on the next page

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Item E: Devine Jewellery (DJ) plc box

DJ currently only sells its jewellery through the 60 stores it owns. This has allowed
DJ to maintain its brand image and the high level of service customers expect. Dev
has recently been approached by a luxury hotel chain that has more than 100
properties around the world. The hotel is interested in selling a small
non-personalised range of Devine Jewellery in its hotel shops alongside less
expensive brands. The hotel would want to add 20% to the normal selling price of
each piece of jewellery to cover its costs.

To increase sales, DJ has offered credit to customers spending over £2000 so they
can buy jewellery now and pay later. Many competitors also offer credit. This has
enabled customers to purchase expensive pieces of jewellery and pay for them in
ten equal instalments. Not all customers have been able to afford the monthly
repayments and DJ has spent time and money trying to recover the debt.

0 3 . 8 Dev wants to improve the financial performance of Devine Jewellery. Dev is

considering two options to achieve this. Recommend whether Devine Jewellery
should:

• use the hotel chain as a channel of distribution to sell its jewellery

• remove the current credit scheme so that customers can no longer pay for jewellery
in monthly instalments.

Analyse the effect of each of these two options on Devine Jewellery.

Evaluate which of these two options will have the biggest impact on the future
success of Devine Jewellery.
[12 marks]

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