A-level Business (7132) · Paper 2: Business 2

01.1 [2 marks]

Using Appendix A, calculate Atlas Bricks plc's capacity utilisation in 2024.

315 / 420 x 100 = 75%.

• 1 mark: method.
• 1 mark: 75%.

01.2 [3 marks]

Using Appendix A, calculate the change in Atlas Bricks plc's operating profit margin between 2023 and 2024, in percentage points.

2023: 22.3 / 186.0 = 12.0%; 2024: 13.7 / 171.0 = 8.0%; fall of 4.0 percentage points.

• 1 mark: 2023 margin 12.0%.
• 1 mark: 2024 margin 8.0%.
• 1 mark: fall of 4.0 percentage points.

01.3 [4 marks]

Using Appendix B, explain how changes in interest rates have affected the demand for Atlas Bricks plc's products.

• Base rate rose from 3.5% to 5.25% - higher mortgage costs reduce demand for new homes; house builders started fewer homes (190k to 149k, -22%).
• Bricks are a derived demand - fewer homes started means fewer bricks ordered (output fell from 378m to 315m).
• Higher rates also raise house builders' borrowing costs, delaying projects.
• Marks: 1 knowledge, 1 application with data, 2 development.

01.4 [9 marks]

Analyse the possible benefits to Atlas Bricks plc of mothballing its Lancashire works.

• Capacity utilisation is only 75% - closing the oldest works raises utilisation of the remaining works, spreading fixed costs over more output and lowering unit costs.
• The oldest works is probably least energy-efficient - large energy saving.
• Cuts fixed costs (staff, maintenance) helping to restore the operating margin (down to 8.0%).
• Mothballing rather than closing keeps the option to restart when interest rates fall and house building recovers.
• BUT restarting kilns is costly and slow; transport costs rise for customers in the North West; redundancy costs and loss of skilled staff.

01.5 [16 marks]

Using the data, to what extent should Atlas Bricks plc buy Hartley Bricks Ltd?

• For: Hartley's handmade/restoration niche is less dependent on new-house building - diversifies risk; higher value products.
• For: modern, energy-efficient works (35% less energy) - lower costs; 92% utilisation shows demand.
• Against: £48m for £4.1m operating profit = 8.5% return - similar to Atlas's own weak performance; payback over 11 years on profit.
• Against: Atlas already has spare capacity (75% utilisation) - buying more capacity in a downturn adds risk; finance may require borrowing at high interest rates.
• Integration risks: culture of a small craft business v large plc; key craftsmen may leave.
• Judgement: depends on finance source, expected recovery of house building, synergies and whether Atlas can keep Hartley's niche expertise.

02.1 [9 marks]

Analyse how Kindred Care's talent development programme may have helped it to achieve its objectives.

• Paid qualifications and a career path meet esteem and self-actualisation needs/motivators - labour turnover fell from 34% to 22%.
• Lower turnover cut agency staff costs from £940k to £510k - more surplus to reinvest in homes (social enterprise objective).
• Qualified staff (41% to 68%) provide better care - supports the mission of 'care with dignity' and reputation with families and the council.
• Continuity of staff improves relationships with residents.
• BUT costs of training; qualified staff may leave for better-paid NHS roles; other factors (pay, sector-wide changes) may explain improvements.

02.2 [9 marks]

Analyse how stakeholder mapping could help Kindred Care's board manage the proposed closure of Elm House.

• Map stakeholders by power and interest: local council (high power - funds places; high interest) - manage closely; families and residents (high interest) - keep informed/consult; staff (high interest); local newspaper (power over reputation).
• Identifies who must be consulted early and who could block or damage the decision (council contracts, bad publicity).
• Helps prioritise communication resources and choose methods (meetings with families, consultation with staff representatives).
• Reduces conflict and protects reputation, supporting future funding.
• BUT positions change over time (newspaper campaign could raise families' power); mapping is subjective.

02.3 [16 marks]

To what extent do all businesses benefit from having a mission that goes beyond making a profit?

• For: purpose attracts and motivates employees (values alignment), customers and investors who care about ethics - Kindred Care's mission supports recruitment and trust.
• For: guides decisions and long-term strategy; avoids short-termism; CSR reputation (Carroll's ethical/philanthropic levels).
• Against: may conflict with shareholders' demands for returns; higher costs; risk of 'purpose washing' if not genuine.
• Against: in highly price-competitive markets customers may not reward the mission; survival may require focus on profit first (Carroll's base).
• Depends on ownership (social enterprise v plc), industry, customers' values and how the mission is put into practice.
• Judgement: most businesses benefit if the mission is credible and compatible with financial sustainability - but 'all' needs qualification.

03.1 [2 marks]

What is meant by viral marketing?

• Marketing messages (often videos or posts) that are designed to be shared rapidly by consumers themselves through social media, spreading awareness at low cost.

03.2 [3 marks]

Using Table 1, calculate the value of returned items as a percentage of Thread & Co's revenue.

£7.7m / £28m x 100 = 27.5%.

• 1 mark: figures selected.
• 1 mark: method.
• 1 mark: 27.5%.

03.3 [2 marks]

Using Table 1, calculate Thread & Co's market share of the 18-30 segment.

£28m / £1,650m x 100 = 1.7%.

• 1 mark: method.
• 1 mark: 1.7%.

03.4 [9 marks]

Analyse how dynamic pricing might affect Thread & Co's profit.

• Prices rise when demand is high (viral video weeks) - captures more revenue per item and higher margins.
• Prices fall automatically on slow-moving lines - clears inventory before it goes out of fashion, reducing markdown losses and storage costs.
• Responds instantly to rivals' prices - protects sales volume in a price-sensitive market (young customers, elastic demand).
• Software and data costs; risk of customer resentment if prices change between visits - may damage loyalty and increase returns/abandoned baskets.
• Net effect on profit depends on PED, accuracy of the algorithm and how customers perceive fairness.

03.5 [16 marks]

To what extent is choosing the right position on a market map the key to success for all retailers?

• For: market mapping shows gaps and where competitors are crowded - a clear position (e.g. affordable trend fashion for 18-30s) targets the right customers and supports pricing.
• For: positioning drives the whole marketing mix and brand identity.
• Against: execution matters more - supply chain speed, returns costs, customer service and digital marketing decide success (Thread & Co's returns are 27.5% of revenue).
• Against: gaps may exist because they are unprofitable; positions are easy to copy; markets change quickly (fashion).
• Against: financial management, location (for physical stores), and operational efficiency.
• Judgement: positioning is necessary but not sufficient; its importance is greater in crowded markets and for new entrants.