8. Marketing (A Level)
A section of Business Studies, 9609
Listing 10 of 31 questions
Fizzy Drinks (FD) FD is a private sector business that manufactures an international brand of carbonated drinks. Its slogan was ‘A premium drink for premium customers’. The market for FD’s drinks is very competitive, with 7 national and 12 international brands all competing in the same market. Recently FD lost the title of market leader to TR, one of its largest competitors. TR is a multinational public limited company. Two years ago, FD produced primary market research on customer preferences in the carbonated drink market. The report identified that FD still had a great brand name, high brand awareness and customer loyalty. The cost of raw materials has increased in recent years. To keep profit margins stable, FD reduced the quality of ingredients instead of raising the selling price, and reduced its marketing budget. Ted, Finance Director, used the evidence of high customer loyalty to justify the decision. The change in ingredients led to FD’s products tasting similar to their competitors. Customers left feedback highlighting a ‘flavourless drink’, and demand fell rapidly. FD’s good brand name and customer loyalty was lost. Currently FD is operating at 60% of maximum capacity. Table 2.1 FD financial data 2023 Total fixed costs ($m) Average variable cost per unit ($) Average selling price per unit ($) Maximum capacity 100 Employee morale has dropped as a result of the negative feedback. Key employees have left to work for FD’s competitors. The lack of experienced employees has led to a drop in the productivity of the production process. Identify one objective of a private sector business. Explain the term demand. Refer to Table 2.1. Calculate FD’s margin of safety in 2023. Explain one intangible attribute of FD’s products. Analyse two possible impacts on FD of a fall in productivity. Evaluate the usefulness to FD of market research methods to inform future marketing decisions.
9609_s24_qp_21
THEORY
2024
Paper 2, Variant 1
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Perfik Plumbing (PP) PP is a plumbing business owned and managed by Navpreet. She set up PP as a sole trader three years ago when she qualified as a plumber. The majority of Navpreet’s work is repairing and fitting water pipes in customers’ homes. However, there is also a growing market for fitting new appliances, such as washing machines and dishwashers, in customers’ homes. Navpreet is the only female plumber in her town. This is her Unique Selling Point (USP). Her business has been reasonably successful. Navpreet has relied on recommendations from satisfied customers to promote her business. However, if PP is to grow in the future Navpreet will need to use new promotional methods. In the past, Navpreet has used a cost-based pricing strategy, but she believes she may have been setting her prices too low. Navpreet did a survey of her customers to find out how much they would be willing to pay per hour of labour (see Table 2). Table 2: Survey data Price per hour ($) Number of customers Navpreet has expanded PP through internal growth and now there is an opportunity to open a small shop on the main street of her home town. The shop would allow Navpreet to expand her product portfolio by selling electrical goods, such as washing machines. Navpreet is considering taking out a mortgage on her home to provide the finance she needs to expand PP. Define the term ‘Unique Selling Point (USP)’ (line 6). Briefly explain the term ‘internal growth’ (line 18). Refer to Table 2. Calculate the price elasticity of demand if Navpreet changes her price from $24 to $30 per hour. Explain one way in which PP could make use of price elasticity of demand calculations. Analyse one advantage and one disadvantage to Navpreet of taking out a mortgage on her own home to finance PP’s expansion. Evaluate promotional methods that PP could use to grow in the future.
9609_w17_qp_23
THEORY
2017
Paper 2, Variant 3
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Katie’s Cakes (KC) KC is a partnership, owned by Katie and her son James. KC makes birthday cakes. Each cake is made using job production. A customer will tell KC what filling they want and how to decorate the cake. There are three possible fillings for each cake. The proportion of annual revenue made from cakes with each filling is shown in Fig. 1. Fig. 1: Proportion of revenue generated from each cake filling – Annual revenue = $1m Chocolate 53% Cream 37% Jam Katie and James are considering stopping selling cakes with a jam filling. However they are concerned about reducing the product portfolio of the business. Katie is highly skilled and she does all of the cake production and decoration. James manages contact with customers and the business’s finances. Demand has increased steadily in the past few months and KC now needs to recruit a new employee. James has created a job description to help the recruitment process (see Fig. 2). Fig. 2: Job description Job title: Assistant cake decorator The role requires someone who knows how to produce and decorate cakes. The employee should be young and have a driving licence. They should also be creative. The employee will be required to work from 8am to 6pm each day. Full training will be given. The rate of pay will be based on the level of experience of the employee. Define the term ‘demand’ (line 9). Briefly explain the term ‘partnership’ (line 1). Calculate the revenue earned from cakes with a jam filling. Explain one possible impact on KC of reducing the product portfolio of the business. Analyse one advantage and one disadvantage to KC of using job production. Evaluate the job description created by James.
9609_w18_qp_21
THEORY
2018
Paper 2, Variant 1
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Aashna’s Pies (AP) AP produces and sells high quality pies. Aashna set up AP five years ago when she spotted a gap in the market. AP is a private limited company and Aashna is the majority shareholder. All of the pies use the AP branding which is growing in popularity. AP owns a factory where all the pies are produced. Pies are packaged and sold individually. The range of pies produced by AP is shown in Table 1.1. Table 1.1: AP’s product portfolio Name of pie Filling Price per pie Annual change in sales quantity (2018 to 2019) Stage on the product life cycle Meaty Marvel Chicken and lamb $2.80 +3% Maturity Vegetarian Victory Broccoli, cheese and carrot $2.50 –10% Decline Fishy Fortunes Cod, prawns and cheese $3.00 +20% Growth The pastry case of each pie is exactly the same no matter what filling is used. All of AP’s pastry is made using flow production. However each filling is made by specialist workers who use batch production. Aashna is concerned about the sales of Vegetarian Victory pies and she is considering stopping production of this pie. However, the Operations Director has pointed out that AP might lose its economies of scale if the business reduces the total number of pies produced. The Marketing Director would like Aashna to read his report about developing products in the future. He has done some market research (see ). • The price elasticity of demand for AP’s pies is price inelastic • Some consumers are worried about possible health risks of eating too much meat • The average family eats three pies per meal and chooses pies for a meal once every two weeks • The pies have a short ‘best before’ date – they must be eaten within two days of purchase • The average family has one member who does not eat meat. : Market research to aid developing products in the future Define the term ‘shareholder’ (line 3). Explain what is meant by the term ‘flow production’ (line 16). The total quantity of sales for Vegetarian Victory pies in 2018 was 5000 pies. Refer to Table 1.1. Calculate the total revenue gained from Vegetarian Victory pies in 2019. Explain one way in which AP could use product portfolio analysis. Analyse two economies of scale that AP might lose if the business reduces the total number of pies produced. Recommend how AP could develop its products in the future. Justify your recommendation.
9609_w20_qp_23
THEORY
2020
Paper 2, Variant 3
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Snappy Box (SB) SB is owned by Ralph who is a sole trader. The business prints photographs. Ralph has one shop on the main street of city D. Customers bring their saved digital photographs into the shop and these are printed on high-quality paper. SB uses a large printing machine that can print on almost any size of paper to produce different sized photograph prints. The process is very capital-intensive and most customers request a batch of photographs to be printed. SB is the only shop in city D that prints photographs. However, recently a number of online competitors have started to offer low-priced photograph prints to customers. Ralph has noticed that his sales have decreased significantly because of this competition. Ralph estimates the demand for his photograph prints has a price elasticity of demand of –4. SB already has a low profit margin and Ralph is struggling to compete with the online retailers. However, Ralph has an idea to introduce job production into his shop. He could stop printing photographs and instead focus on framing individual photographs for customers. These frames will be made for any sized photograph or picture and can be made from a variety of materials chosen by the customer. Ralph will need specialised equipment to allow him to make the frames. The equipment would cost $10 000. He has identified two possible sources of finance for this equipment. The first possible source of finance is for Ralph to lease the equipment from the company that produces it. The lease would be for five years at a fixed cost of $400 per month. The second possible source of finance is for Ralph to sell the photograph printing machine for at least $10 000, to purchase the equipment to make frames. Define the term ‘fixed cost’ (line 19). Explain the term ‘profit margin’ (line 11). Use Ralph’s estimate of the price elasticity of demand (line 10) to calculate the percentage change in demand for printed photographs if the price is reduced by 10%. Explain one way in which Ralph could use price elasticity of demand when making pricing decisions. Analyse one advantage and one disadvantage to Ralph of introducing job production. Recommend whether Ralph should use leasing or should sell his photograph printing machine as a source of finance for the equipment to make frames. Justify your recommendation.
9609_w21_qp_22
THEORY
2021
Paper 2, Variant 2
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Custom motorcycles (CM) CM is a private limited company. It was set up by Joyce, who identified a gap in the market for specialist motorcycle components. CM’s engineers make the components using job production. The engineers are highly skilled, trained and motivated and very proud of their high-quality products which are sold using price skimming. CM was featured in a popular motorcycle magazine in autumn 2022, which has increased CM’s reputation for quality unique products. This led to an increase in CM’s sales as shown in . Summer 2022 0.5 Autumn 2022 0.6 5.5 Winter 2022 Total market sales (000 units) CM sales (000 units) Spring 2023 1.05 6.25 Summer 2023 1.5 7.5 : CM’s sales data 2022–2023 Lead times for CM’s products have increased from 4 weeks to 10 weeks. This has put additional pressure onto CM’s engineers, who are salaried employees. They often have to work evenings and weekends. Harry, the Sales Manager, thinks demand is going to continue to increase. He wants CM to employ more skilled engineers and continue to use job production. However, Joyce wants CM to invest in new technology and change from using job production to batch production. Identify one non-financial motivator. Explain the term demand. Refer to . Calculate the total market growth between summer 2022 and summer 2023. Explain one benefit to CM of using price skimming. Analyse two impacts on CM of its employees having a poor work-life balance. Evaluate whether CM should change its method of production.
9609_w23_qp_23
THEORY
2023
Paper 2, Variant 3
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Fruit Fusions (FF) FF is a manufacturer of fruit juice drinks with natural ingredients. The drinks are made in an industrial kitchen using batch production. FF buys large quantities of fruit directly from farms in the local area. FF is owned and managed by Trey Curteis. Trey employs 10 production workers and two sales staff. Each salesperson is paid a basic salary of $400 a month and earns a commission of 2% of the value of sales made. Table 3 shows the value of sales made by each salesperson in February 2016. Table 3: Sales for February 2016 Salesperson A ($) Salesperson B ($) Value of sales 24 000 Trey has developed a new drink which combines juice and added vitamins. The drink is called Fusion Plus and Trey believes that it will attract consumers who want healthy food and drink. There are currently no other drinks like Fusion Plus in the local market. Trey plans to sell Fusion Plus through health food shops, fitness centres and cafés. Trey believes that FF needs a Marketing manager to launch Fusion Plus and manage the rest of FF’s product portfolio. He has written the person specification shown in Table 4. Table 4: Person specification Job: Marketing manager • Essential to have a university degree in Business • Desirable to have experience of marketing within the health food/drink market • Essential to be aged 18–35 years old • Essential to be ethical • Desirable to have good human resource management skills • Will be responsible for two sales staff. Define the term ‘batch production’ (line 2). Briefly explain the term ‘product portfolio’ (line 17). Calculate the total payment received by salesperson A for February 2016. Explain one benefit to FF of using commission as a payment method for sales staff. Analyse the person specification shown in Table 4. Discuss appropriate pricing strategies for the launch of Fusion Plus.
9609_m16_qp_22
THEORY
2016
Paper 2, Variant 2
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Questions Discovered
31