A Level Business Check in Test Objectives and Strategy

Check In test

Objectives and strategy

Questions

1 A mission statement:

(a) contains specific and measurable targets which a business needs to achieve.

(b) distinguishes between long term, medium term and short term goals.

(d) states that the accounts of a business give a true and fair view of its performance. [1]

2 A travel agency which has always sold European holidays to the general public has begun to sell its European holidays to schools and colleges.

Into which of the four quadrants of Ansoff’s Matrix does this growth strategy fall?

(a) Diversification

(b) Market development

(d) Product development [1]

3 The Delphi technique assumes that a forecast is more accurate when:

(a) compiled by a structured group of experts.

(b) cyclical variation is ignored.

(d) the intuition of senior personnel is relied on. [1]

4 A business uses the plan-do-review cycle when implementing strategic decisions.

Which of the following activities is not part of the planning phase?

(a) Agreeing budgets

(b) Monitoring progress

(d) Setting objectives [1]

5 Which of the following performance measures are the local residents of a chemical manufacturing company most likely to be interested in?

(a) Capital budget variance

(b) Environmental impact

(d) Share dividends [1]

6 Which of the following terms best describes the expected peak in ice-cream sales during the summer months?

(a) A boom phase in the business cycle

(b) Cyclical variation

(d) The growth phase of the product lifecycle [1]

7 According to Porter’s Generic Strategies model which of the following strategies is likely to give a business a competitive advantage?

(a) Differentiation

(b) Diversification

(d) Mass marketing [1]

8 A supermarket chain tries to improve its corporate social responsibility profile by operating a scheme which pays for sports and leisure equipment for schools and community youth clubs.

Which of the following is not an expected consequence of running this scheme?

(a) Improved profits

(b) Improved public relations

(d) Increased labour turnover [1]

9 Explain, using an example, what is meant by the term ‘opportunity cost’. [2]

10 State one advantage and one disadvantage to a business of contingency planning. [2]

11 Identify one force from Porter’s Five Forces model. Explain how this force can help a business make strategic choices. [4]

12 Complete the decision tree below by entering the appropriate value into each of the nodes and boxes labelled a - d. [4]

Mark scheme

Question / Answer / Marks / AO / Rationale /
1 1 / (c) / 1 / 1 / (a) Specific and measurable targets are SMART objectives and would not be found in a mission statement.
(b) A mission statement does not incorporate time scales.
(c) Correct answer: A document informing stakeholders of the purpose and function of a business.
(d) Candidate confuses a mission statement with a statement from auditors.
2 2 / (b) / 1 / 1 / (a) Diversification requires there to be a new product as well as a new market.
(b) Correct answer: Same product to a different market.
(c) Market penetration involves selling more of the same product to the same market.
(d) Product development involves changing the product rather than the market.
3 3 / (a) / 1 / 1 / (a) Correct answer The Delphi technique seeks to reach an agreed forecast by using questionnaires to progressively narrow down the opinion of a structured group of experts.
(b): Time series analysis requires cyclical variation to be calculated, but this is not part of the Delphi technique.
(c) The Delphi technique is a qualitative forecasting method. Numerical data is used in quantitative methods.
(d) Intuition is sometimes the most reliable forecaster; however it is not part of the Delphi technique.
4 4 / (b) / 1 / 1 / (a) Agreeing budgets is part of the planning phase.
(b) Correct answer: Monitoring progress is part of the review phase, rather than the planning phase.
(c) Obtaining resources is part of the planning phase.
(d) Setting objectives is part of the planning phase.
5 5 / (b) / 1 / 1 / (a) A departmental manager or director is likely to be interested in budget variance.
(b) Correct answer: Local residents live in the area so are concerned with traffic congestion, air pollution, water pollution, noise, litter etc.
(c) This is a performance measure which of more interest to directors and shareholders.
(d) Share dividends are likely to be of greatest interest to shareholders and prospective investors.
6 6 / (c) / 1 / 1 / (a) Candidate confuses a seasonal peak in the market with the peak of the business cycle.
(b) Cyclical variations are the variations that appear as a result of peaks and troughs in the business cycle. They cover much greater periods of time than cyclical variations. Even in times of boom or bust, ice-cream sales will peak in the summer months.
(c) Correct answer: The peak in ice-cream sales in the middle of the year is an example of season a variation.
(d) Candidate confuses a seasonable peak in the market with the increasing sales experience during the growth phase of the product lifecycle.
7 7 / (a) / 1 / 1 / (a) Correct answer: Peter’s Generic Strategies includes three models for success: Cost leadership, differentiation and niche (focus).
(b) Candidate confuses ‘diversification’ (Ansoff’s Matrix) with ‘differentiation’.
(c) Marginal cost pricing uses the additional cost of producing one more item to price a product. It is not one of Peter’s Generic Strategies.
(d) Peter’s Generic Strategy recommends focusing on niche markets; mass marketing is the antithesis of this
8 8 / (d) / 1 / 1 / (a) Marketing benefits of running such a scheme may well lead to increased profits in the long run.
(b) The general public tend to look favourably on businesses with a good CSR profile.
(c) Running the scheme and providing the equipment will have a financial cost for the supermarket chain.
(d) Correct answer: It is extremely unlikely for an employee to want to leave a firm because of additional CSR activities. Running a CSR scheme is likely to have a positive or no effect on labour turnover. Labour turnover should not be confused with sales turnover.
Question / Answer / Marks / Guidance /
9 / One mark for explanation.
One mark for example. / 2
(AO1 1)
(AO2 1) / Indicative content:
· the loss of the next best alternative which was foregone when a decision was made
· the benefits lost from not taking the next best alternative
Exemplar response:
The benefits lost by choosing one option rather than another (1). For example, a business is considering spending its reserves on adding a new production line or buying out its main supplier. If the business chooses to add the new production line it loses all of the benefits of buying out the new supplier. Benefits such as minimising raw material costs and control of supplies (1).
10 / One mark for the correct identification of an advantage.
One mark for the correct identification of a disadvantage. / 2
(AO1 2) / Indicative content:
· advantages:
o damage limitation
o recover faster
o minimise risk of catastrophic loss
o lower strategic risk
o business more likely to survive
o prepared for eventualities
o worse case scenario can be prepared for
o avoids the need for firefighting.
· disadvantages:
o time
o money
o opportunity cost
o wasted if negative event does not happen.
No context required.
11 / One mark for a correct identification, plus up to three further marks for explanation. / 4
(AO1 4) / Indicative content:
· threat of new entrants
· threat of substitute products
· bargaining power of suppliers
· bargaining power of customers
· existing competitive rivalry.
Exemplar response:
According to Porter, if a business is considering a change in strategic direction it needs consider the threat of substitute products in the market (1). This is because the greater the number of substitutes the more competition the business is likely to experience (1). If the business chooses to go along such a path it needs to bolster its competitive advantage with a strong brand (1) and aggressive marketing (1).
12 / One mark for each correct identification up to a maximum of four identifications.
Award full marks for d: £4.9 million (irrespective of nodes a,b,c or workings).
Otherwise award:
1 mark for a: £14.1 million
1 mark for b: £4.8 million
1 mark for c: £6.9 million / 4
(AO2 4) / OFR applies to ‘d’ based on errors in calculation of a, b and c.