Edexcel International A Level Business: Global business (YBS11) – Practice Questions

These are original questions written for Marlbridge, for revision and practice on this content. They are not reproduced past-paper questions, and they do not replicate the exam’s exact structure, question count or mark tariffs – examination boards hold copyright in their own papers. Use these alongside the official past papers from your board or school.

These questions cover Unit 4 Global business (sections 4.3.1 to 4.3.4) of the Pearson Edexcel International Advanced Subsidiary/Advanced Level in Business specification (YBS11), Issue 1, September 2017. Command words follow the specification’s list: define, calculate, explain, analyse, discuss and assess. Money is in dollars unless stated, the zeld is an invented currency, and all businesses are invented. Calculators may be used.

Links: study guide, revision notes, Edexcel A Level Business hub, printable checklist, free diagnostics.

Questions

1. Define the term “foreign direct investment”. [2]

2. Kaldmoor has a GDP of 56bn dollars and a population of 8 million. A year later its GDP is 61.6bn and its population is 8.2 million. Calculate the percentage change in GDP per capita. [4]

3. Explain one way in which a trading bloc may affect a business that is based outside it. [4]

4. Fairnholt Footwear imports leather at 80 dollars a hide. The government adds a 12% tariff. A local supplier sells similar leather at 92 dollars. Calculate the price of the imported leather after the tariff and how it compares with the local price. [4]

5. Torvik Cycles, based in the USA, exports a bike for 400 dollars and buys components priced at 90,000 zelds a month. The rate moves from 3 to 4 zelds per dollar. Calculate (a) the zeld price of one bike before and after, with the percentage change, and (b) the monthly dollar cost of the components before and after. [4]

6. Solvane Beverages makes a drink at a total cost of 31 dollars a unit at home. Producing abroad would cost 24 dollars a unit, all costs included. It sells 200,000 units a year and relocation would cost 2.1m. Calculate the payback period in months. [4]

7. Solvane is choosing between two countries for its new plant. Country X has wages 40% below Country Y but frequent changes of government. Country Y is inside a trade bloc that is Solvane’s main market. Analyse two factors Solvane should consider. [6]

8. Explain how Porter’s five forces could help Solvane assess Kaldmoor as a market for its drinks. [4]

9. Fairnholt Footwear uses the same brand name, advertising and white trainers in every country. In a new market, sales are low. Research shows that white is linked to mourning, the brand name sounds like a rude word, and local buyers prefer cheaper, hard-wearing shoes. Analyse how glocalisation might help. [6]

10. Solvane can enter Kaldmoor by a joint venture with a local drinks firm or by building its own factory. Discuss which route it should choose. [8]

11. Marenko Garments is an MNC with factories in Kaldmoor. It employs 2,000 people at an average of 4,800 dollars a year, while the local average is 4,000. Its Kaldmoor factories supply 30% of its output. A news report shows that a subcontractor of Marenko uses child labour. Assess whether the Kaldmoor government or consumers will be more effective in controlling Marenko’s behaviour. [12]

Answers

1. FDI is investment by a firm in business operations in another country [1], such as building a factory or buying a foreign business [1]. [2] Examiner insight: a definition gains from saying where the investment goes (abroad) and giving an example; “investing money” alone is too general.

2. GDP per capita before = 56bn ÷ 8m = 7,000 [1]. After = 61.6bn ÷ 8.2m = 7,512 (to the nearest dollar) [1]. Percentage change = (7,512 − 7,000) ÷ 7,000 × 100 [1] = 7.3% [1]. [4] Examiner insight: the change is in GDP per capita, not GDP; calculating 10% growth in GDP alone would not answer the question set. Show the two per capita figures.

3. Outside firms face the bloc’s common barriers, such as tariffs or standards [1], so their goods cost more in bloc markets [1] and compete less well with firms inside the bloc [1]. The firm may therefore lose sales or may need to invest inside the bloc to avoid the barriers [1]. [4] Examiner insight: explain means a cause and an effect; stating that blocs are “bad for outsiders” without the mechanism earns little.

4. Tariff = 80 × 12% = 9.60 [1]. Price after tariff = 89.60 [1]. Local price 92 [1]. The imported leather is 2.40 dollars cheaper than the local leather even after the tariff [1]. [4] Examiner insight: complete the comparison the question asks for; stopping at 89.60 leaves the second part unanswered.

5. (a) Before: 400 × 3 = 1,200 zelds; after: 400 × 4 = 1,600 zelds [1]. Change = 400 ÷ 1,200 × 100 = 33.3% rise [1]. (b) Before: 90,000 ÷ 3 = 30,000 dollars [1]; after: 90,000 ÷ 4 = 22,500 dollars, a fall of 7,500 [1]. [4] Examiner insight: the direction matters; a stronger dollar makes exports dearer abroad and imports cheaper, so label each result clearly.

6. Saving per unit = 31 − 24 = 7 [1]. Annual saving = 7 × 200,000 = 1.4m [1]. Payback = 2.1m ÷ 1.4m = 1.5 years [1] = 18 months [1]. [4] Examiner insight: the question asks for months, so convert from years and state the unit.

7. Costs of production: Country X has much lower wages, which would cut unit costs and raise profit margins [1], giving Solvane a price advantage over rivals [1]. Political stability: frequent changes of government could change taxes, rules or contracts [1], which makes the investment risky and could lose the money spent on the plant [1]. Location in a trade bloc: Country Y avoids tariffs on sales into Solvane’s main market [1], so the higher wage cost may be outweighed by lower selling costs [1]. (Credit other applied factors, such as skills.) [6] Examiner insight: analyse needs a short chain for each factor linked to the data; naming the factors without the effect on Solvane stays at description.

8. Rivalry: if many drinks firms already compete in Kaldmoor, prices and profit will be squeezed [1]. Threat of new entrants: if setting up is easy, Solvane’s profit could be copied away [1]. Buyer power: strong supermarkets could demand low prices [1]. Substitutes and supplier power should be checked as well; a market with weak forces is more attractive and shows Solvane whether entry is worth the cost [1]. [4] Examiner insight: apply the forces to drinks in Kaldmoor rather than listing all five generally; two or three well applied forces are enough.

9. Glocalisation keeps the global brand while adapting to local culture [1]. Changing the colour from white and renaming or re-spelling the brand would avoid the mourning link and the rude meaning [1], which protects the brand image and removes a reason for buyers to reject it [1]. Adapting the product to a hard-wearing, lower-priced range matches local tastes and income [1], which should raise sales and market share [1]. Some global identity (logo, quality promise) is kept, so the firm keeps economies of scale in design and advertising [1]. [6] Examiner insight: tie each adaptation to a fact in the data and say what it changes (sales, image or cost); describing glocalisation in general terms is not analysis.

10. A joint venture gives local knowledge, an existing distribution network and shared costs and risks [1]. It enters faster and a local partner may help with government or legal requirements [1]. However, profit is shared [1] and cultures or aims may clash, and Solvane could lose control of its brand and quality [1]. A new factory gives full control and all the profit [1] but needs large investment, takes longer and carries all the risk, including an unfamiliar market and political risk [1]. Judgement: the choice depends on how well Solvane knows Kaldmoor and the funds it has; if knowledge and funds are limited, a joint venture is safer, but if the drink is its main brand and profit matters, the factory may suit better in the long run [2]. [8] Examiner insight: discuss needs an awareness of competing arguments, so give both routes and finish with a short judgement based on the firm’s circumstances.

11. Wages: Marenko pays (4,800 − 4,000) ÷ 4,000 = 20% above the local average [1], a payroll of 2,000 × 4,800 = 9.6m [1]. This gives it influence: the government may fear job losses if it threatens to leave [1], limiting legal control. Government: it can pass laws and inspect, with fines for breaking them [1], and this affects all firms equally [1], but it may be reluctant if the MNC is a large employer and political influence is strong [1]. Subcontractor abuses abroad can be hard to monitor under national law. Consumers: a news report lets social media and pressure groups spread the story fast [1]. Buyers can stop buying, harming sales and reputation, and this applies to the whole supply chain without needing a law [1]. But consumers need alternatives and may care more about price [1]. Judgement: for a firm that depends on its brand and sells in rich export markets, consumer pressure is probably faster and more effective [1], though law gives lasting change; the most effective control combines both [1] and the answer depends on how important Kaldmoor is to Marenko, since its factories there make only 30% of output and it could shift work elsewhere [1]. [12] Examiner insight: a high-level answer uses the data (wage premium, 30% of output) in the argument and reaches a supported judgement; stating that “both are important” without a reason is a weak ending.

Where marks are usually lost

• Defining a term in one vague phrase rather than two precise points.
• Forgetting to compare figures after a calculation when the question asks for a comparison.
• Mixing up the direction of an exchange rate change.
• Mixing up off-shoring and outsourcing, or a tariff and a quota.
• Writing lists of factors for analyse questions without any chain of reasoning.
• Giving general descriptions of globalisation instead of using the firm in the data.
• Missing the final judgement on discuss and assess questions.
• Giving only the benefits or only the costs of MNCs to a host country.

Next steps

• Revise with the revision notes and the study guide.
• Course hub: Edexcel A Level Business and the printable checklist.
• Take the free 10-minute diagnostics.
• Book a free trial class.

Frequently asked questions

What do these Global business practice questions cover? They cover Unit 4 Global business of Pearson Edexcel International A Level Business (YBS11), sections 4.3.1 to 4.3.4: globalisation, global markets and expansion, global marketing, and global industries and companies.

What are common mistakes on global business questions? Mixing up the direction of an exchange rate change, confusing off-shoring with outsourcing or a tariff with a quota, and giving only the benefits or only the costs of multinationals to a host country.

How do you answer an analyse question in Unit 4? Build a chain of reasoning that links a cause to its consequences for the firm in the data, rather than listing factors. General descriptions of globalisation without the firm in the case earn little.

What should follow a calculation in a global business question? If the question asks for a comparison, compare the figures after calculating them and say what the difference means for the business’s decision.

Official syllabus

Pearson Edexcel International Advanced Subsidiary/Advanced Level in Business, Specification, Issue 1, September 2017, Unit 4: Global business (first assessment June 2020).