A Level Business: Marketing and People — Practice Questions

These are original questions written for Marlbridge, in the style and at the standard of the examination. They are not reproduced past-paper questions — examination boards hold copyright in their own papers. Use these alongside the official past papers available free from your board.

Related: Marketing and People revision notes

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Case study

Verdo Ltd manufactures premium reusable water bottles, sold through independent retailers at £28 each. Revenue last year was £4.2m in a market worth £60m, which grew 8% over the year. Staff turnover is 31%, against an industry average of 14%. A rival has just launched a similar bottle at £19.

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Questions

1. Calculate Verdo’s market share. [2]

2. Explain one benefit to Verdo of primary rather than secondary market research. [3]

3. Analyse two possible reasons for Verdo’s high staff turnover. [6]

4. Verdo is considering cutting its price to £19 to match the rival. Assess whether it should. [9]

5. Evaluate whether a pay rise is the best way for Verdo to reduce staff turnover. [12]

6. Verdo currently has a tall organisational structure with six management levels. The board is considering delayering to become flatter.

(a) Explain one advantage and one disadvantage of delayering for Verdo. [4]

(b) Calculate Verdo’s labour turnover rate if 45 staff left last year out of an average workforce of 145. [2]

(c) Explain how Verdo’s leadership style might need to change if it delayers. [3]

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Answers

1. (4.2 ÷ 60) × 100 [1] = 7% [1].

2. Primary research is collected first-hand for Verdo’s own purpose [1], so it is directly relevant to its own premium customers [1]. Secondary data on the whole bottle market would include budget buyers and could mislead Verdo about its own segment [1].

3. Any two, each developed as a chain: Uncompetitive pay [1] — if Verdo pays below the local rate, staff can move easily [1], since manufacturing skills transfer readily between employers, making leaving low-risk [1]. Lack of motivators [1] — repetitive production work offers little achievement, recognition or responsibility [1], so even adequately paid staff have no positive reason to stay [1]. (Also creditable: poor management, no progression, better local employers.)

4. Indicative content:

For cutting price [up to 4]: prevents losing customers to the £19 rival; if demand proves price-elastic, revenue could rise; protects market share in a market growing at 8%.

Against [up to 4]: Verdo is positioned as premium, and a price cut undermines that positioning — customers may infer lower quality; it invites a price war the smaller firm is likely to lose; margin falls sharply, and at £19 Verdo may not cover unit costs; premium buyers are typically price-inelastic, so volume may not rise enough to compensate.

Judgement [1]: Verdo should not match. Its competitive advantage is differentiation, not cost — competing on price abandons the only ground on which a smaller firm can beat a larger rival. This depends on Verdo’s cost structure and on how loyal its existing customers prove to be.

5. Indicative content:

For a pay rise [up to 4]: turnover is more than double the industry average, which suggests pay may be uncompetitive; pay is the most immediate and visible lever; it addresses the reason most commonly cited in exit interviews.

Against [up to 4]: Herzberg classifies pay as a hygiene factor — it removes dissatisfaction but does not motivate, so the improvement is likely to be short-lived; it raises fixed costs permanently, squeezing margins already threatened by the £19 rival; it does not address the cause if the real problem is repetitive work or weak management.

Alternatives [up to 2]: job enrichment or rotation to add variety and responsibility; training and progression routes; improved line management.

Judgement [2]: a pay rise alone is unlikely to solve it — Herzberg’s distinction predicts a temporary improvement before turnover returns to previous levels. Verdo should first establish why staff are leaving, through exit interviews, and address the actual cause. That said, if pay is genuinely below market rate it is a necessary first step, even though it is not a sufficient one.

6. (a) Advantage: delayering cuts management costs and speeds up decision-making, since information travels through fewer levels between the shop floor and senior management [2]. Disadvantage: it increases the workload on remaining managers, who must now supervise a wider span of control, and can damage morale among staff who lose a clear route for promotion [2].

(b) Labour turnover = leavers ÷ average number employed × 100 = 45 ÷ 145 × 100 [1] = 31% [1] — consistent with the turnover rate already stated in the case study.

(c) A flatter structure gives each remaining manager a wider span of control, making close supervision of every individual impractical [1], so Verdo would likely need to shift toward a more democratic or delegative style, empowering experienced production staff to make routine decisions themselves [1]; this would reduce the burden on the smaller management team while giving staff more autonomy and responsibility [1].

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How the marks are awarded

• Knowledge — correct terms and theory.
• Application — uses Verdo’s actual figures and situation. Generic answers about “a business” cap at the lower bands.
• Analysis — a chain: because X, therefore Y, which means Z for Verdo.
• Evaluation — weighs both sides, judges, and states what the judgement depends on.

Where marks are usually lost

• Answering generically without using the case-study figures.
• Listing points instead of developing a chain of reasoning.
• Concluding “there are advantages and disadvantages” without judging.
• Saying pay always motivates, ignoring Herzberg.
• Ignoring Verdo’s premium positioning in the pricing question.
• Describing delayering as only cost-cutting, without also weighing the effect on remaining managers’ workload.
• Forgetting to state which leadership style suits a wider span of control.