A LEVEL EDEXCEL BUSINESS PAPER 1 QUESTIONS AND ANSWERS

mass market - a market that targets a large segment - products are standardised

niche market - a market that targets a small segment - customers have specific needs that
aren't catered by the mass market

brand name - a name, sign, symbol or other feature that allows consumers to identify the
goods of a business and differentiate it from rivals

e-commerce - conducting business transactions online

online retailing/ e-tailing - buying goods online

market - a arrangement where the buyer and seller can trade and communicate

marketing - process that involves identifying, analysing and anticipating customer

requirements profitably

market share - the total sales a business has in a particular market that involves one and
more other businesses

primary/field research - data collected first-hand for a specific purpose (involves

questionnaires)

secondary/desk research - data that already exists for a different purpose (can be internal -
stock movements/sales figures and external - international publications/rival websites)

quantitative research - data can be measured (financial element to it)

qualitative research - research based on opinions, beliefs and intentions.

consumer panel - group of consumers are asked for feedback of a product after a period of
time

database - a system that stores data electronically - has features such as find and sorting.

focus groups - consumers are invited for a discussion about a product that is going to be
launched in the market

market orientation - a business that places the needs of the customers at the centre of
decision making

product orientation - a business that puts emphasis on the product itself - meaning contact
with customer comes last

market research - collection, presentation and analysis of data relating to the marketing and
consumption of goods and services

market segmentation - a group that has similar characteristics in a whole market

(behavioural, psychographic, demographic and geographic)

added value - the extra features that may be offered when selling a product which helps to
exceed customer satisfaction

competitive advantage - an advantage that helps a business to perform better than its rivals

market/perceptual map - a two-dimension diagram that places a brand with other rivals
against two characteristics or attributes (based on opinion)
market positioning - the view a customer has of a product compared to other rivals (in terms
of quality, value and image)

product differentiation - at attempt by a business to set the product apart from its rivals

reposition - the process by which a business attempts to change the position consumers
have of their product

USP - the aspect or feature of a product that clearly distinguishes it from its rivals

demand - amount of a product consumers are willing and able to buy at any given price

Factors affecting demand - price of substitutes, complementary goods, advertising and

branding, fashion and tastes, seasonality, demographics and external shocks (government,
competition and economic climate)

complementary goods - goods that are purchased together because they are consumed
together (milk and cereal)

inferior goods - income rising = demand falls (Tesco value crisps)

substitute good - goods that can be bought as an alternative to other but perform the same
function

normal good - income rising = demand rises (kettle chips for example)

supply - amount of a product which suppliers will offer at a given price

factors affecting supply - cost of production, introduction of new technology, indirect taxes,
government subsidy and external shocks (weather and government)
subsidy - a grant given to producers using to encourage production

equilibrium price/ market clearing price - the price which demand and supply are equal

excess demand - point at which supply is unable to meet demand (shortage of goods)

excess supply - point at which supply is greater than demand (unsold supply)

total revenue - money generated from sales of good (price x quantity)

price elasticity of demand - measures the responsiveness to a change in quantity demanded

to a change in price

price/income elastic - change in price/income results in a greater change in demand

price/income inelastic - change in price/income results in a small change in demand

income elasticity of demand - measures the responsiveness to a change in quantity

demanded to a change in income

factors affecting PED - time, competition and branding

factors affecting YED - necessity or luxury

design mix - range of features that are important when designing a product (aesthetics,
functionality and cost)
ethical sourcing - using materials and components from suppliers that respect the
environment, workers and trade with integrity.

recycling - making use of resources that have been discarded as waste

resource depletion - using up of natural resources

waste minimisation - reducing the amount of resources that are discarded in the production
process

above-the-line promotion - promotion that involves the use of media (newspapers, TV,
cinema, radio, internet and social media)

below-the-line promotion - promotion that doesn't involve the use of the media

sales promotion - methods used to boost sales: BOGOF offers, coupons, loyalty cards and
competitions

public relations - communicating with stakeholders to improve image: press release and
press conference

merchandising - point of sale: product layout and display

direct mailing - sending out letters and leaflets by post informing customers about specific
products

brands - manufactorer brands (Heinz Beans), own-label (Tesco value beans) and generic
(carrots)

choosing promotion - cost, market type, product type, stage in product lifecycle, legal factors
and competitors promotion
emotional branding - building a brand through consumers emotions

viral marketing - encouraging the passing on a message electronically

cost-plus pricing - adding a mark-up to the cost of making the product to get the price

penetration pricing - setting a low price to get established in the market

predatory pricing - setting a low pricing to force rivals out of the market

competitive pricing - setting a price accordingly to rivals

psychological pricing - setting a price slightly below a round figure (£9.99)

price skimming - setting a high price initially and then lowering it later

distribution channel - the route a product takes to get from the manufacturer to the
consumer

agent/broker - an intermediary that brings together buyer and seller (travel and estate)

breaking-bulk - buying products in large quantities and selling them in smaller chunks

direct selling - manufacturer sells its products directly to seller (without the use of
intermediaries)

intermediary - brings together producer and buyer (wholesaler, agents/brokers, retailers)

retailer - a business that buys products from producer or wholesaler and sells them in
smaller chunks to consumers

wholesaler - a business that buys goods from manufacturer and sells them in small
quantities to retailer

marketing strategy - a set of plan that helps the business achieve its marketing objective

product line - products a business produces that are quite similar

product portfolio - range of products a business is currently marketing

extension strategy - strategy used to prolong the life of a product (used when the product
has hit saturation - product ajustment and promotion)

Boston matrix - 2x2 model that analyses a product portfolio of a business according to its
market growth and market share (cash cow, star, question mark and dog)

marketing mix (4Ps) - product, place, price and promotion

B2B - business to business (wholesaling) - COSCO wholesale

B2C - business to consumer (retailer) - TESCO

soft HRM - staff as an asset: caring about the workers - flexible hours, financial and non-
financial incentives andchances for promotion

hard HRM - staff as an cost: treating staff as an cost - means minimising costs - low
motivation, use of zero-hour contracts and inflexibility
collective bargaining - a method used to determine conditions of work and terms of
employment through a worker's representative (trade union) and employer

flexible workforce - where workers can respond to a change in demand

home workers - people who undertake their regular work from home (suitable for parents
and carers)

industrial action - disruptive measures taken by employees to put pressure on employer to

solve a disagreement (strikes)

multi-skilling - process of improving the skills of the workplace

zero-hour contract - contract that doesn't guarantee the hours of work

CV (curriculum vitale) - a document that lists personal details, qualifications, education,

experience and other specific details required by jobseeker

job description - a document that gives details about the duties and responsibility of the job
role

person specification - a person profile that enlists the type of person (character) wanted for
the job

on-the-job training - training taken at the workplace

induction training - training given to employee on the first day (tour, rules, etc)

off-the-job training - training provided externally (can be a short course)

responsibility - the duty to carry out a task

centralisation - decision-making takes place in the core of the workplace (top-down)

de-centralisation - decision-making is pushed down the chain of command away from the
core (subordinates - bottom-up)

hierarchy - the order of levels of responsibility of a organisation

chain of command - the way authority and power is organised in the workplace

delayering - removing layers of the workplace (usually involves senior management)

tall structure - long chain of command - narrow span of control (usually large corporations -
more chance for promotion but more controlling)

flat structure - short chain or command but wide span of control (fewer chances for
promotion and more independence)

matrix structure - individuals work in groups/teams as well as their own department and
function (Team working, efficiency and emphasis on skills)

span of control - total number of people someone is directly responsible for

Taylor's scientific management theory - workers should be given repetitive work and piece
rate (financial incentives)

mayo's human relations - Hawthorne effect (recognition of a group)

Maslow's hierarchy of needs - physiological needs, safety, love and belong, esteem and self-
actualisation (bottom to up)

herzberg's two factor theory - hygiene - what needs to be met (working conditions and pay)
and motivators - what increases productivity (recognition and promotion)

bonus - a payment in addition to wage

piece rates - a payment based on per unit produced

performance-related pay - additional payment on top of wage based on performance targets

being met

commission - percentage payment on a sale made

profit sharing - workers are given a certain amount of profit made

empowerment - giving authority and right to decision making

job enlargement - horizontally extending - more work to do

job enrichment - vertically extending - more responsibility

job rotation - allowing workers to try new tasks and roles (reducing repetition)

delegation - passing authority further down the hierarchy

leadership - way in which one person influences the actions and behaviour of others
management - art of getting things done through people

laissez-faire - employees are encouraged to make all decisions with certain limits

paternalistic - leader makes all the decision with interests of workers in mind

autocratic leadership - leader makes all decision (army - needs to follow orders)

democratic leadership - leadership that involves others but leader makes final decision
(consultative or persuasive

entrepreneur - individuals who set up a business themselves and are involved in the risk in
this

intrapreneur - employees who find and develop initiatives using entrepreneurial skills for
their employer without risking their own money

profit maximisation - an attempt to make enough profit as possible

profit satisficing - an attempt to make profit to satisfy needs of owner

aim - what a business tries to achieve in the long term

objectives - the goals that help the business to achieve its long term purpose

sales maximisation - an attempt to either sell as much as possible (in terms of volume) or
generate as much revenue as possible (value)

articles of association - a document that provides information on the internal running of the
business
certificate of incorporation - a document that declares that a business is allowed to operate
as a limited company

deed of partnership - a binding legal document that declares the right of partners

limited liability - when owner(s) have a separate legal identity to the business

unlimited liability - both the owner and the business have the same entity - liable for all
debts

sole trader - a business that has a single owner

partnership - a business that has more than one owner (usually up to 20 owners)

primary sector - agriculture - natural resources

secondary sector - manufactoring - factory

tertiary sector - service - hairdressing, banking

sleeping partner - a partner that contributes capital and gets dividends but has no say in the
decision making or control

social enterprise - a business that trades to improve social and environmental wellbeing

memorandum of association - a document that sets out the constitution and external details
of a limited company
limited partnership - contribute capital and enjoy dividends but aren't involves in the
running of the business

lifestyle business - makes enough money to satisfy needs of owner and has flexibility (profit
satisficing)

franchise - a business model that allows others to operate under its name

private equity company - business owned by private individuals backed by financial

institutions

public limited company - a company that is owned by shareholders and the business' shares
can be bought in the stock market

stock market - where company shares can be bought by individuals, groups or organisations

stock market fluctuation and initial public offering - when a company goes public - makes
shares available to public

opportunity cost - when choosing between two options, opportunity cost is the benefit lost
from choosing the next best alternative

trade-off - a business facing a compromise between two choices

choices - when a business has to choose between alternatives or resources

ethnocentric (domestic) - a business makes little or no attempt to change the product when
introducing it in a global market (APPLE)

polycentric (international approach) - the business changes its product and brand name to
meet the demand of its customers (WALMART - ASDA)
geocentric (think global act local) - keeps the brand name but changes products (McDonalds)

MINT - Mexico, Indonesia, Nigeria and Turkey

BRIC - Brazil, Russia ,India and China

emerging economy - a market that has high potential growth but involves a lot of risk

EU - European Union (28 - 27 if UK pulls out)

NAFTA - North America free trade agreement (Canada, USA and Mexico)

tariff - tax placed on the imports to make it more expensive

quota - a physical limit on the number of imports

embargo - a complete ban on international trade

trade barriers - measures used to restrict trade

administrative barriers - rules and regulations that make it difficult for importers to
penetrate an overseas market

foreign direct investment (FDI) - investing by setting up operations or buying assets in

another country

economic growth - an increase in a country's productive capacity

HDI - a collection of statistics (life expectancy, GNI and mean years of schooling) that indicate
a country's human development

literacy rate - the percentage of adults (over the age of 15) that can read and write

PPP - price of buying the same amount of goods in other countries

comparative advantage - country should produce products and services that it can produce
more effectively than other countries

competitive advantage (4) - idea that a business should specialise in any area that it can
perform better than other rivals

division of labour - different workers specialising in a different area of production

exports - goods a business produces in the home country but sells abroad

imports - goods and services that bought into a country from another

specialisation - a business focuses on a limited scope of production - efficiency as allows

production to be based upon low unit costs

globalisation - growing integration of the world's economies

MNC/transnational - companies that own production or service facilities in another country

other than their home country

world trade organisation - a international organisation that encourages free trade by

promoting reduces tariffs and other trade barriers
dumping - where an overseas business sells products below cost in domestic firm

infant industries - new industries that still need to establish themselves

protectionism - an approach by government to protect domestic producers

common market/ single market - market where goods and services can more freely among
member countries.

customs union - a market where trade barriers are reduced and all member countries adapt
the same rules/barriers against non-member counties

preferential trade area - low tariffs on certain products

economic and monetary union - trade barriers are removed - goods can move freely and
common currency

free trade area - remove trade barriers among member states but keep different barriers
with other countries

economic union - custom union and common market

regional trade agreement - trade agreement between a specific geographic location which
involves reducing trade barriers to encourage trade

rules of origin - products made must be certified in the country made (regional trade
agreement)

ASEAN - association of southern east Asia nations - 10 countries including Singapore and
Vietnam
economies of scale - increasing the scale of production leads to efficiency and lower costs

labour productivity - amount of goods produces by one hour of labour

offshoring - shifting jobs to another country (BT: call centres to India)

outsourcing - shifting jobs to other organisations

product life cycle - the stages a product goes through: development, introduction, growth,
maturity and decline

pull factors - economies of scale and risk spreading

push factors - competition and saturated market

saturation - limited opportunity for the product to grow

disposable income - amount of money a person has left over after paying taxation and other
necessities

exchange rate - price of one currency to another

infrastructure - basic system, facilities and services required for a country's economy
(schools, hospitals, transportation links)

reshoring - bringing production back home after using it abroad

assesment of a country as a production location - ease of doing business, infrastructure,
political stability, skills and availability of a labour force, natural resources, likely return on
investment and location in trading bloc

assessment of a country as a market - ease of doing business, infrastructure, disposable

income, political stability and exchange rate

franchising - where a business allows another to operate under its name

licensing - produce another businesses products and use its intellectual property in exchange
of a fee

intellectual property - intangible property that is a result of creativity (copyright)

barriers to entry - factors that make it difficult for new entrants from entering the market

differentiation - setting the product apart from its rivals - through USP or a established brand

skill shortages - where potential employees don't have the skills that employer is looking for

economic risk - future cash flows will change due to unexpected fluctuation in exchange rate

global marketing strategy - process of adjusting a company in order to meet a certain

country's requirements (language or promotion)

global niche market - customers that have specific needs in more than one country which is
not met by global mass markets

cultural/social factors - unintended meanings, language, inappropriate/inaccurate

translations, differing tastes and inappropriate/inaccurate promotion
ethnocentrism - tendency of people to view their own culture, ethics and norms as superior

cultural audit - study or examination of a country's culture to determine whether they

support or hinder the business's mission statement and vision

high-context culture - emphasise interpersonal relationships (build trust for example)

low-context culture - emphasis on direct language

reverse engineering - a method of analysing a product's design by taking it apart

transfer pricing - used to avoid high tax rates through the prices which one subsidiary
charges another for components and finished goods

ethics - moral right or wrong which guides behaviour

institutional framework - formal laws, procedures and regulations that shape behaviour and
activity

code of conduct - a set of rules outlining the practices of an organisation

direct action - the use of demonstrations, protests and strikes to achieve a political or social
group

pressure group - voluntary organisations that aim to change political or commercial decision
making

tax avoidance - using legal methods to reduce the amount of tax

competition policy - government policy that exists to promote competition and prevent high
marketing power of businesses

tax evaison - using illegal means to avoid paying tax