A-level Business (7132) · Paper 1: Business 1

Question 16 [4 marks]

(a) 48,000 / 40 = 1,200 units per worker per year. (b) Total labour cost = 40 x £27,600 = £1,104,000; £1,104,000 / 48,000 = £23.00 per unit.

• 1 mark: correct method for labour productivity.
• 1 mark: 1,200 units per worker.
• 1 mark: total labour cost £1,104,000 (or wage / productivity).
• 1 mark: £23.00 per unit (unit required).

Own figure rule applies to follow-through errors.

Question 17 [4 marks]

Cumulative: Y1 -£330,000; Y2 -£170,000; needs £170,000 of Year 3's £200,000. £170,000 / £200,000 x 12 = 10.2 months. Payback = 2 years 10 months.

• 1 mark: cumulative cash flow (or amount outstanding after Year 2 = £170,000).
• 1 mark: £170,000 / £200,000 (= 0.85 of Year 3).
• 1 mark: 0.85 x 12 = 10.2 months.
• 1 mark: 2 years 10 months (accept 2 years 11 months if rounded up).

Own figure rule applies to follow-through errors.

Question 18 [9 marks]

• Lower inflation can mean real incomes recover (wages rising faster than prices) - furniture is a discretionary, income elastic purchase, so sales volume may rise.
• The Bank of England may cut interest rates when inflation falls - cheaper credit makes 'buy now pay later' and finance deals more attractive, boosting demand for big-ticket items.
• Supplier and import price rises slow, making costs easier to forecast and protecting gross profit margin if retail prices are held.
• Wage pressure eases, so employee costs as a % of turnover may stabilise.
• BUT lower inflation reduces the ability to raise prices - if the business relied on price rises to grow revenue, revenue growth may slow.
• Inventory bought earlier at higher prices may need discounting if rivals cut prices - margins could be squeezed in the short term.
• Impact depends on exchange rates: imported costs depend more on the value of the pound than on UK inflation.

A 9-mark "Analyse" question needs no conclusion; a judgement earns no extra marks.

Question 19 [9 marks]

• Matrix structures bring specialists from different functions (design, engineering, marketing, finance) into one project team - fewer hand-offs between departments speeds development.
• Problems are solved inside the team rather than sent up separate functional hierarchies, cutting decision time.
• Marketing input early in design reduces costly late redesigns, so launch dates are less likely to slip.
• Teams can work on several products in parallel rather than queuing for each department.
• BUT employees report to two managers (functional and project) - conflicting priorities can slow decisions.
• More meetings and coordination; managers may compete for staff, delaying projects.
• Speed gains depend on project managers having real authority and on staff training in team working.

A 9-mark "Analyse" question needs no conclusion; a judgement earns no extra marks.

Question 20 [9 marks]

• Loyalty card and online data reveal buying patterns - data mining finds links (e.g. products bought together) used for targeted offers that win spending from rivals.
• Personalised promotions raise visit frequency and basket size, building brand loyalty (a marketing objective).
• Better demand forecasting reduces stock-outs - customers who find products available are less likely to switch.
• Dynamic pricing can match rivals' prices on key lines, reducing reasons to shop elsewhere.
• Store-level data helps decide which stores to open, refit or close, and which ranges suit each catchment.
• BUT rivals use the same tools, so any advantage may be short-lived; cost of systems and data scientists is high; data protection rules (GDPR) and customer privacy concerns limit use.

A 9-mark "Analyse" question needs no conclusion; a judgement earns no extra marks.

Question 21 [25 marks]

'Herzberg's two-factor theory shows that pay will never motivate employees.' Do you agree? Justify your view.

• Herzberg classed salary as a hygiene factor - poor pay causes dissatisfaction, but raising it removes dissatisfaction rather than creating lasting motivation.
• Pay rises quickly become expected; motivators such as achievement, recognition and responsibility create intrinsic motivation that lasts.
• Evidence of well-paid but disengaged staff (e.g. high turnover in some banks) supports the view.

• Herzberg's research was on accountants and engineers - for low-paid workers pay meets physiological needs (Maslow) and can motivate effort.
• Performance-related pay, commission and piece rate link pay to achievement and recognition - pay can act as recognition (a motivator).
• Taylor's view: in repetitive work with measurable output, piece rate raises productivity.
• 'Never' is too strong - context (job type, labour market, cost of living) matters.

Best answers distinguish between pay preventing dissatisfaction and pay used as recognition of achievement; judge that pay alone rarely sustains motivation but can motivate when linked to performance or when pay is low - it depends on the job and the employee.

Question 22 [25 marks]

To what extent is the Tannenbaum Schmidt continuum useful in helping managers choose the most effective leadership style?

• It shows leadership as a range from manager-centred (tells/sells) to subordinate-centred (consults/joins) rather than a fixed type, encouraging managers to adapt.
• Forces in the manager, the subordinates and the situation (time, skills, nature of the problem) give a practical checklist for choosing a style.
• Helps explain why autocratic styles suit emergencies or unskilled teams while democratic styles suit skilled, motivated staff (e.g. software developers).

• It describes styles but does not tell managers which is 'best' - judgement is still needed.
• Assumes managers can switch style easily; personality and organisational culture (e.g. power culture) constrain this.
• Ignores other influences such as the leader's relationship with the team, national culture and employee motivation theories.
• Effectiveness depends on implementation, not on knowing the model.

A strong conclusion weighs its value as a framework for thinking about the situation against its limits as a decision tool - most useful for managers who are aware of their own default style and the team's capability.

Question 23 [25 marks]

To what extent is Porter's five forces the most useful tool for a business deciding whether to enter a new market?

• Shows the likely profitability of the market - high barriers to entry, low buyer/supplier power, few substitutes and low rivalry indicate attractive returns.
• Identifies which forces to manage (e.g. securing suppliers, differentiating to reduce buyer power).
• Explains why some growing markets are still unprofitable (e.g. food delivery: intense rivalry, powerful customers).

• It is a static snapshot - forces change quickly (technology lowered entry barriers for challenger banks).
• Ignores the business's own strengths - SWOT/core competences matter: can WE compete?
• Financial tools (investment appraisal, break-even) and market research on demand are also needed.
• PESTLE factors (legislation, exchange rates) outside the five forces can dominate, e.g. tariffs.

Five forces is valuable for judging market attractiveness, but whether to enter depends on combining it with internal analysis and financial forecasts; 'most useful' depends on the market (fast-changing tech v stable industries).

Question 24 [25 marks]

Will selling through several channels (multi-channel distribution) always make a business more competitive than selling through a single channel? Justify your view.

• Reaches more customers and segments (online, stores, marketplaces, wholesalers) - higher sales volume and economies of scale.
• Convenience (click and collect, returns in store) improves customer experience and loyalty.
• Spreads risk - if one channel weakens (high street decline) others continue.

• Higher costs: logistics, IT, staff and inventory across channels - can reduce margins and competitiveness on price.
• Channel conflict - retailers may object if a manufacturer sells direct; inconsistent pricing damages brand.
• Some businesses compete best by focusing on one channel (online-only lower costs; luxury brands control experience through own stores).
• Requires integration (inventory visibility, systems) - poorly run multi-channel can be worse than a well-run single channel.

'Always' is unlikely: multi-channel improves competitiveness when the business can integrate channels profitably and customers value choice; for niche or low-cost positioning a single channel may be superior.