CAMBRIDGE INTERNATIONAL AS & A LEVEL BUSINESS: TEACHER’S RESOURCE

Exam-style questions and sample answers have been written by the author. In examinations, the way marks are awarded may
be different.

Workbook answers
Answers to questions that ask for ‘one or two’ points, reasons or impacts may contain more than the
required number of points, indicating that alternative responses exist that could be equally valid. The
suggested answers to questions that are testing the skills of analysis and evaluation, apart from the worked
examples and the ‘improve this answer’ examples, are in a ‘building block’ form. This means they provide
an outline of the key knowledge, application, analysis and evaluation skills required to help learners
construct a complete answer. For further details of the annotation used in some of the completed answers,
refer to the ‘How to use this book’ section.

Chapter 1
Key skills exercises
1 Land; labour; capital; enterprise.
2 A business is more likely to be able to charge a price higher than the cost of bought-in components
when the product has a reputation for quality.
3 The benefit of the next-most desired alternative that is given up.
4 The environment in which businesses operate is constantly changing.
5 Innovative; committed; self-motivated; multi-skilled; self-confident.
6 Lack of market; lack of management skills; shortage of finance.
7 Business risk: identifiable events that could harm the business; the probability of these events occurring
could be measured. Uncertainty: unknown and immeasurable events that could impact on the future
survival of a business.
8 Learners’ answers will vary (e.g. jobs; economic growth; innovation).
9 Marketing strategy; operations strategy (e.g. location); financial forecasts.
10 A business plan is necessary to raise finance; it helps identify which resources will be needed;
it identifies cash-flow needs.
11 Learners’ answers will vary (e.g. finding a market/idea; finding a suitable location); overcoming the
problems of raising finance.
12 An entrepreneur shows creativity and preparedness to take risks in setting up a new business.
An intrapreneur shows creativity and is encouraged to take risks within an existing business.
13 A national business only operates within one country. A multinational business operates in more than
one country.
14 WE. One reason is that Sami wants to be independent by owning his own business. This is shown by
the fact that ‘he feels he is being watched all the time by his manager’, which does not give him any
independence at all.
A second reason is that he was bored in his job. Working in a petrol station lacks variety and working
for himself will involve many different tasks.
15 Capital equipment (i.e. a pottery wheel); land (i.e. a suitable building for his pottery).
16 Gaining the necessary finance for the capital equipment and the lease of the building; building a
customer base as new businesses do not have existing customers.

1 Cambridge International AS & A Level Business – Stimpson © Cambridge University Press 2021
 CAMBRIDGE INTERNATIONAL AS & A LEVEL BUSINESS: TEACHER’S RESOURCE

17 By buying raw materials at a low cost (e.g. clay) and making products with them (e.g. pots and vases)
that he can sell for higher prices.
18 WE. Sami will employ at least one other worker. He will need someone to help him sell pots and carry out
administrative tasks such as looking after the paperwork. This will help reduce unemployment in Sami’s
country. This will lead to more people in jobs earning income and increasing demand for products.
By producing and selling pots, he will increase the total output (GDP) of the country.
19 He might lack the necessary management skills (e.g. ordering inventories of clay on time,
keeping accurate accounting records).
The business might run out of finance due to a lack of cash planning. A lack of cash will mean that he
cannot pay suppliers and they might refuse to supply more clay.
20 Outline: Analyse the factors that can lead to the success of a new business (innovative idea; large
number of potential customers; adequate finance; good leadership) and apply at least one of these
benefits to Sami’s business. Answers should then analyse at least one problem/difficulty that Sami
might face which would reduce the chances of the business being a success (e.g. lack of business
experience). An overall and justified conclusion is needed.
21 Outline: Analyse the entrepreneurial characteristics that can lead to the success of a new business (hard
work; creativity; leadership skills; commitment). Consider whether Sami has some of these skills, then
evaluate which of these skills is/are likely to be most important in the case of Sami’s business. A justified
conclusion is needed, which assesses the most important entreprenuerial characterictics in this case.

Exam-style questions
Short answer questions
1 Learners’ answers will vary: creation of new jobs which reduces unemployment; increased output that
adds to economic growth.
2 Learners’ answers will vary: lack of management skills which leads to making poor decisions; shortage
of adequate finance which leads to the inability to pay suppliers.
Essay questions
1 a Outline: Intrapreneurship encourages existing employees to be creative, innovative and prepared
to take risks. By not penalising failure and by rewarding success, a business encourages
intrapreneurship and benefits from new ideas. These help the business to be flexible and adaptable
to meet changing conditions such as increased competition and technological change.
b Outline: Analyse why hard work is an important condition for a successful entrepreneur but also
why hard work alone might not be sufficient to ensure business success. Analyse the importance
of creativity, initiative, multi-skills, self-confidence, innovation and self-motivation, which are
important characteristics too. An overall conclusion is needed and this could include references to
examples of which entreprenuerial characteristic might be most significant in different contexts.
Data response questions
a i Equipment or machinery used by a business.
ii Selling a product for a higher value than the cost of bought-in materials/components. Value can be
increased by raising the price or using cheaper materials.
b See ‘Improve this answer’.
c Outline: By buying cheaper repair parts for boats and engines, Sadiq will increase value if he charges
the same price. By selling complete engines for high prices, Sadiq should increase added value if he
receives a good discount from the engine supplier.
d Outline: Identify and analyse the importance of Sadiq’s personal qualities/characteristics, then explain
how they have helped make the business a success. Sadiq chose a good location and seemed to identify
a gap in the market. He is hard working, so customers should be offered good service. Perhaps the
business was also helped by a lack of competition or high consumer incomes. An overall judgement
about the importance of Sadiq’s role is needed.

2 Cambridge International AS & A Level Business – Stimpson © Cambridge University Press 2021
 CAMBRIDGE INTERNATIONAL AS & A LEVEL BUSINESS: TEACHER’S RESOURCE

Improve this answer

This is an improved answer for data response Qb. The additional skill has been annotated.
Location is important for any business. If the site is too expensive, it can mean that costs are too high and
no profit is made. Sadiq must have chosen a cheap location on the harbourside so that it is accessible to the
boat owners who will become his customers [Ap].
All new businesses need customers and the quicker customers are gained, the more successful the business
is likely to become. Sadiq’s customers will pay money to the business and this can then be used to pay the
costs of the business and pay back any loans that were needed to set it up. Sadiq is a member of a sailing
club and this helped to build a customer base quickly as he knew many owners of small boats [Ap].

3 Cambridge International AS & A Level Business – Stimpson © Cambridge University Press 2021