A-level Business (7132) · Paper 3: Business 3
RA10 predicted paper · June 2027 · Set A · Mark scheme · Time allowed: 2 hours · Maximum mark: 100
Written by RA10 from a question-by-question analysis of the AQA 7132 papers 2020-2025 and the v2.0 specification. This is not an official AQA paper and does not contain real exam questions.
Northlight Cinemas plc
Question 01 [12 marks]
Using Porter's five forces, analyse why Northlight Cinemas plc has found it difficult to increase its operating profit.
Indicative content
- Threat of substitutes is high: streaming households with 2+ subscriptions rose from 6.1m to 13.4m; films arrive on streaming quickly - limits price rises and attendance (admissions fell 32.0m to 30.1m).
- Buyer power is high: customers compare prices on phones and book the cheapest chain - price competition.
- Rivalry: three large chains plus independents competing for a smaller audience (UK admissions 176m to 121m).
- Supplier power: film distributors control blockbusters and take a large share of ticket revenue; fewer blockbusters strengthens their position; energy suppliers raised costs.
- Result: revenue rose only slightly because ticket prices rose while admissions fell; costs rose faster - operating margin fell from 7.1% to 4.0%.
- Level 3 answers develop chains linking at least one force to Northlight's prices/costs using the data.
Levels of response (AO1 3 / AO2 3 / AO3 6)
| Level | Marks | Descriptor |
|---|
| 3 | 9-12 | Well-developed, relevant analysis applied throughout to the case. One fully developed line of argument can reach this level. |
| 2 | 5-8 | Reasonably developed analysis with some application to the case. |
| 1 | 1-4 | Limited knowledge and generic or undeveloped points. |
Why we predicted this: Spec 3.7.7: never set as an extended question in Paper 3 (2020-2025); most recently elsewhere in 2021.
Question 02 [12 marks]
Analyse the human resource implications for Northlight Cinemas plc of introducing self-service kiosks and app-based ordering.
Indicative content
- Workforce planning: 30% fewer front-of-house hours - redeployment to 'experience host' roles, or fewer shifts/redundancy for some staff.
- Training needed for new roles (customer experience, technology support) - cost but develops skills (talent development).
- Motivation: fewer shifts for students (60% of workforce) may cause dissatisfaction and higher labour turnover (Herzberg hygiene: pay/security); enriched host roles could motivate some (responsibility, recognition).
- Lower employee costs as a % of turnover - improves profit margin.
- Recruitment changes - need fewer but more customer-focused staff; job design changes; risk to customer service if staff are stretched.
- Communication/consultation needed to manage resistance (Kotter & Schlesinger).
Levels of response (AO1 3 / AO2 3 / AO3 6)
| Level | Marks | Descriptor |
|---|
| 3 | 9-12 | Well-developed, relevant analysis applied throughout to the case. One fully developed line of argument can reach this level. |
| 2 | 5-8 | Reasonably developed analysis with some application to the case. |
| 1 | 1-4 | Limited knowledge and generic or undeveloped points. |
Why we predicted this: Spec 3.6.3 / 3.9.4: last tested as an extended question in Paper 3 in 2025. HR has been the focus of only one Paper 3 question since 2020 (2025 Q4).
Question 03 [16 marks]
Should Northlight Cinemas plc go ahead with the premium screens proposal?
Use calculations and other information to justify your answer.
Indicative content
- Payback: cumulative £6m, £15m, £25m, £35m after Year 4; £1m of Year 5's £9m needed = 1/9 x 12 = 1.3 months - payback 4 years and about 1 month - just outside the 4-year criterion.
- ARR: total net cash flow £44m - £36m = £8m over 5 years = £1.6m a year; / £36m = 4.4% - well below the 10% criterion.
- Against: fails both criteria; forecasts may be optimistic; equipment life only 5 years; capital is scarce (current ratio below 1).
- For: premium experiences differentiate cinemas from streaming - the one thing home viewing cannot copy; customers will pay more (inelastic demand); may raise attendance at standard screens and food sales (not included in figures?).
- For: qualitative benefits for brand and share price; competitors may already offer premium screens - not investing may lose share.
- Judgement must use the calculations; good answers consider whether the criteria are appropriate, trial in fewer cinemas, or financing.
Levels of response (AO1 2 / AO2 3 / AO3 4 / AO4 7)
| Level | Marks | Descriptor |
|---|
| 4 | 13-16 | Well-developed, balanced analysis applied to the context, with a well-supported judgement that weighs the arguments and considers what the answer depends on. |
| 3 | 9-12 | Reasonably developed analysis, some balance, and a judgement with some support. |
| 2 | 5-8 | Some analysis, possibly one-sided; judgement is asserted rather than supported. |
| 1 | 1-4 | Limited knowledge and analysis; little or no judgement. |
Why we predicted this: Spec 3.7.8: last tested as an extended question in Paper 3 in 2024.
Question 04 [16 marks]
To what extent does Appendix A suggest that Northlight Cinemas plc is in a weak financial position?
Indicative content
- ROCE = £18m / (£240m + £310m) = 3.3% - very low; operating margin fell from 7.1% to 4.0%.
- Current ratio = 62 / 88 = 0.70 : 1 - below 1, potential liquidity problems; BUT cinemas receive cash at the point of sale and hold little inventory, so a low ratio is normal in leisure/retail.
- Gearing = 310 / 550 = 56.4% - highly geared; rising interest rates increase finance costs and risk; non-current liabilities may include property leases.
- Revenue still rising (410 to 445) and Northlight is still profitable; admissions held up better than the market in 2023.
- Limitations: one year of balance-sheet data; no cash flow figure; share price fall 40% supports weakness.
- Judgement: weak on profitability and gearing, liquidity less serious given the industry; trend is the main concern.
Levels of response (AO1 2 / AO2 3 / AO3 4 / AO4 7)
| Level | Marks | Descriptor |
|---|
| 4 | 13-16 | Well-developed, balanced analysis applied to the context, with a well-supported judgement that weighs the arguments and considers what the answer depends on. |
| 3 | 9-12 | Reasonably developed analysis, some balance, and a judgement with some support. |
| 2 | 5-8 | Some analysis, possibly one-sided; judgement is asserted rather than supported. |
| 1 | 1-4 | Limited knowledge and analysis; little or no judgement. |
Why we predicted this: Spec 3.7.2: never set as an extended question in Paper 3 (2020-2025); most recently elsewhere in 2025.
Question 05 [20 marks]
Should Northlight Cinemas plc choose Option 1 (NorthLive) or Option 2 (Northlight Unlimited)?
Use quantitative and qualitative information to justify your view.
Indicative content
- Option 1 is diversification (new products/experiences, partly new markets) - Ansoff: highest risk; Option 2 is market penetration - lower risk.
- Option 1: £45m for £7.5m a year from Year 3 = 16.7% annual return once established; but no experience of live events; 80% occupancy at rivals' events suggests demand; uses spare capacity on quiet weekdays; differentiates from streaming.
- Option 2: only £4m; £3m-£9m a year = 75%-225% return on investment; increases visits and food/drink spending; builds loyalty and data; BUT cannibalisation - frequent visitors pay less per visit; relies on film supply.
- Finance: high gearing and current ratio below 1 favour the cheaper Option 2; Option 1 may need more borrowing.
- Strategic fit: Option 2 builds on core competence; Option 1 addresses the long-term threat from streaming.
- Answers analysing only one option are limited to Level 3. Good answers weigh risk, return, finance and fit, and may suggest Option 2 first then trial NorthLive at a few sites.
Levels of response (AO1 4 / AO2 3 / AO3 5 / AO4 8)
| Level | Marks | Descriptor |
|---|
| 5 | 17-20 | Both options analysed in depth using quantitative and qualitative evidence; a clear, well-supported recommendation that weighs risks and returns. |
| 4 | 13-16 | Both options analysed with good use of evidence; judgement supported but may not fully weigh the options. |
| 3 | 9-12 | Reasonable analysis, possibly focused mainly on one option (answers analysing only one option are capped here). |
| 2 | 5-8 | Some relevant points; limited use of data; weak judgement. |
| 1 | 1-4 | Limited, generic points. |
Why we predicted this: Spec 3.8.1: never set as an extended question in Paper 3 (2020-2025); most recently elsewhere in 2022. Ansoff (3.8.1) has never been the basis of a Paper 3 decision question.
Question 06 [24 marks]
To what extent is technological change the biggest threat facing all businesses?
Indicative content
- For: disrupts business models - streaming v cinemas, e-commerce v high street, AI and automation in services; reduces barriers to entry for new competitors.
- For: speed of change makes strategic drift likely for slow businesses (Kodak, Blockbuster).
- Against: technology is also an opportunity - lowers costs (kiosks), creates new products (premium screens), new channels and data.
- Against: other threats may be bigger for some businesses: economic change (interest rates for house builders), legislation (environmental rules), competition, social change, supply chain disruption, labour shortages.
- Context matters: tech-heavy industries v businesses with stable technology (funeral services, haircuts, construction materials).
- Contrasting contexts and a judgement about which businesses and timescales are most affected are needed for Levels 4-5.
Levels of response (AO1 5 / AO2 4 / AO3 6 / AO4 9)
| Level | Marks | Descriptor |
|---|
| 5 | 21-24 | Precise knowledge; contrasting business contexts used effectively; well-developed balanced analysis; judgement flows from the arguments and identifies key factors. |
| 4 | 16-20 | Good analysis with some contrasting contexts; supported judgement. |
| 3 | 11-15 | Reasonable analysis; context mainly the case business; judgement partly supported. |
| 2 | 6-10 | Some analysis, largely one-sided or generic. |
| 1 | 1-5 | Limited knowledge; little analysis. |
Why we predicted this: Spec 3.7.6: last tested as an extended question in Paper 3 in 2020; most recently elsewhere in 2023.