OCR A Level Business: Ansoff's matrix and Conflicts in business decision making (H431) – 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 Ansoff’s matrix and Conflicts in business decision making from the OCR A Level Business (H431) specification, Version 2.1 (January 2026). All businesses and figures are invented. See the study guide and the revision notes. The course hub is OCR A Level Business, and the printable list is the checklist. Try the free diagnostics first.

Questions

1. Zephmoor Print makes wedding stationery. Identify the Ansoff quadrant for each of these strategies. (a) Selling the same stationery to customers in Ireland. (b) Adding printed gift wrap, sold to its existing customers. (c) Offering existing customers a discount on repeat orders. (d) Buying a firm that makes garden furniture and selling it to garden centres. [4]

2. Explain the nature and purpose of Ansoff’s matrix. [4]

3. Marnoch Dairy sells milk to supermarkets. Distinguish between market development and product development, using an example from Marnoch Dairy for each. [4]

4. Nessbury Fabrication makes steel parts for car makers and employs 120 people. It is considering diversifying into house building. Analyse the risk of this strategy for Nessbury’s stakeholders. [6]

5. Vossler Audio is choosing between two options, figures in £000.

Launch a new speaker: cost 60, a 0.55 chance of a payoff of 210 and a 0.45 chance of a payoff of 30. Upgrade the current speaker: cost 10, a certain payoff of 55.

(a) Calculate the expected value and the net gain of each option. [4] (b) Explain one qualitative factor that could lead managers to choose the upgrade even if the launch has the higher net gain. [2]

6. A business must choose one of two projects, each costing £120,000. Net cash inflows are:

Year	1	2	3	4
Project P	£50,000	£50,000	£40,000	£30,000
Project Q	£20,000	£30,000	£50,000	£90,000

Discount factors at 10%: 0.909, 0.826, 0.751, 0.683.

(a) Calculate for each project the payback period, the average rate of return and the net present value. [6] (b) Explain why the payback results conflict with the other two. [3]

7. Explain two strengths and one limitation of using a decision tree when making a business decision. [6]

8. Ulverly Tiles makes ceramic floor tiles. Sales have been flat at £14m for three years and the profit margin is 6%. The owner wants sales 20% higher within four years. Cash in the bank is £1.1m. Three options are proposed.

Option 1: a discount scheme for builders’ accounts it already supplies, costing £150,000 a year. Option 2: selling its present tiles to builders’ merchants in Germany, costing £1.5m. Option 3: a new range of waterproof wall panels for its existing customers, costing £900,000.

Recommend and justify an option for Ulverly. [9]

9. Assess the usefulness of Ansoff’s matrix to a business choosing a growth strategy. [8]

10. Dovrane Logistics delivers goods for retailers. It plans a refrigerated delivery service for its existing clients at a cost of £450,000. Forecast net cash inflows are £110,000, £120,000, £130,000, £130,000 and £120,000 in years 1 to 5. Discount factors at 8%: 0.926, 0.857, 0.794, 0.735, 0.681. Targets: payback within 3.5 years and ARR of at least 9%. A decision tree gives a 0.5 chance of a payoff of £900,000 and a 0.5 chance of £250,000. The two drivers who know refrigeration will soon retire, and the bank will lend only £300,000. Evaluate whether Dovrane should go ahead. [12]

11. Strathby Clinic opened three new physiotherapy clinics in a neighbouring county in 18 months. The business forecast 40 patients a day at each. Actual numbers average 22 a day. Staff turnover is high, patient satisfaction has fallen and the overdraft is at its limit. Evaluate the main reasons for the failure of the expansion so far. [6]

Answers

1. (a) Market development [1]. (b) Product development [1]. (c) Market penetration [1]. (d) Diversification [1]. [4] Examiner insight: A one-word quadrant answers an “identify” question; extra explanation is unlikely to add anything, while a vague label such as “expansion” identifies nothing.

2. Nature: a model that sorts growth strategies into four quadrants [1] by whether the products and the markets are new or existing [1]. Purpose: to show managers the range of growth options [1] and compare the risk of each, supporting strategic decisions [1]. [4] Examiner insight: Separate what it is from what it is for; a list of quadrants describes the model but does not explain its purpose.

3. Market development: selling existing products in a new market [1], for example selling Marnoch’s milk in another region or to cafes [1]. Product development: selling new products to the existing market [1], for example launching flavoured milk drinks for its supermarkets [1]. [4] Examiner insight: A distinction needs both items contrasted. State what is new in each, and make the example fit that definition.

4. Diversification is high risk because Nessbury has neither house building skills nor knowledge of that market [1]. Employees may lose jobs if costly mistakes force cuts, or may gain work if it succeeds [1][1]. Shareholders could lose dividends and share value if the project fails and drains cash from the steel parts business [1][1]. Car makers may see slower deliveries if management attention moves elsewhere [1]. [6] Examiner insight: Tie each stakeholder effect to the strategy and its cause; a list of stakeholders with no consequence reads as description.

5. (a) Launch: expected value = 0.55 × 210 + 0.45 × 30 = 115.5 + 13.5 = 129 [1]; net gain = 129 − 60 = 69, that is £69,000 [1]. Upgrade: expected value = 55 [1]; net gain = 55 − 10 = 45, that is £45,000 [1]. (b) The launch could damage the brand if the new speaker is unreliable [1], and the upgrade protects the reputation and a known customer base, which matters beyond the figures [1]. [6] Examiner insight: Show the multiplication and subtract the cost, since an expected value is not a net gain; link any qualitative factor to the choice made.

6. (a) Payback: P is 2 years for £100,000, then £20,000 of £40,000, so 2.5 years [1]; Q is £100,000 after 3 years, then £20,000 of £90,000, so 3.22 years [1]. ARR: P profit = 170 − 120 = £50,000, average £12,500, so 10.4% [1]; Q profit = 190 − 120 = £70,000, average £17,500, so 14.6% [1]. NPV: P present value = 45,450 + 41,300 + 30,040 + 20,490 = £137,280, so NPV £17,280 [1]; Q present value = 18,180 + 24,780 + 37,550 + 61,470 = £141,980, so NPV £21,980 [1]. (b) Payback favours P because it returns cash sooner [1]. ARR and NPV favour Q because its larger later inflows give more total profit and value [1]. Payback ignores cash after the cost is recovered, while ARR and NPV use the whole project [1]. [9] Examiner insight: State units and round consistently. In an explanation, name what each method measures; saying the answers differ only restates the question.

7. Strength: it weighs each outcome by its probability [1], so a risky option is compared fairly with a safer one [1]. Strength: it sets out the choices and their costs visually [1], which aids discussion [1]. Limitation: the probabilities and payoffs are estimates and may be biased [1], so small errors can change the best option, and the expected value may never occur [1]. [6] Examiner insight: Each point needs a reason as well as a label.

8. Option 1 is market penetration [1], Option 2 market development [1], Option 3 product development [1]. Target: sales of 14 × 1.2 = £16.8m, so £2.8m more [1]. Option 1 is cheap and low risk but may squeeze a 6% margin and not lift sales by £2.8m [1]. Option 2 costs £1.5m, more than the £1.1m cash in the bank, so needs borrowing, with unfamiliar customers [1]. Option 3 costs £900,000, within cash, and uses existing customers, but needs new production skills [1]. Recommendation: Option 3, because it is affordable and builds sales with known customers [1], subject to testing whether builders want panels [1]. [9] Examiner insight: Rank the options against the objective and the stated cash, and say why the rejected options are weaker, not only why the chosen one is good.

9. Strength: it presents every growth option in one simple framework [1], allowing quick comparison [1]. Strength: it links strategy to risk, showing that moving away from current products and markets raises risk [1]. Limitation: it has no financial figures, so it cannot show which option is profitable [1]. Limitation: it ignores resources and the reactions of rivals [1], and the risk ranking is only a guide [1]. Judgement: useful as a first screen but not enough alone [1], so add investment appraisal and qualitative judgement [1]. [8] Examiner insight: An “assess” answer is stronger when it ends in a judgement about how far the matrix helps, not just two lists.

10. Payback: £110,000 + £120,000 + £130,000 = £360,000 after 3 years, so a further £90,000 of £130,000 gives 3.69 years, which misses the 3.5 year target [1][1]. ARR: total inflows £610,000, profit £160,000, average £32,000, which is 7.1%, below the 9% target [1][1]. NPV: present values 101,860 + 102,840 + 103,220 + 95,550 + 81,720 = £485,190, so NPV = £35,190 [1][1]. Decision tree: expected value = 0.5 × 900,000 + 0.5 × 250,000 = £575,000, so net gain £125,000 [1]. The tools conflict: NPV and the tree support going ahead, but payback and ARR miss their targets [1]. Qualitative: serving existing clients (product development) is a moderate risk [1], but the retiring drivers and a £300,000 loan limit against £450,000 are serious constraints [1]. Judgement: proceed only if the funding gap is solved and replacement staff are secured, because NPV is slightly positive and the probability is a guess [1][1]. [12] Examiner insight: Explain a conflict by the tools’ different measures, and show how the case constraints change the decision.

11. Over-optimistic forecasts: actual patients are 22 against 40, which is 55% of the forecast [1], so revenue falls well short. Poor handling of the new market: high staff turnover and lower satisfaction suggest staff and customers there were misjudged [1][1]. Financial strain: three clinics at once left the overdraft at its limit, so there was no margin for error [1]. Judgement: the forecast was the main cause because the other problems follow from lower demand and cash pressure [1], though the pace of expansion made the failure worse [1]. [6] Examiner insight: Use the case figures and decide which cause came first; unranked problems are only partly evaluative.

Where marks are usually lost

• Naming a quadrant without showing what is new in the strategy.
• Saying diversification is risky without explaining why.
• Listing stakeholders without a consequence for each.
• Calculating payback, ARR or NPV without comparing the result to a target.
• Treating a conflict between tools as an error, not explaining it.
• Recommending a strategy without dismissing the others.
• Finishing an evaluation without a judgement.

Frequently asked questions

Are these OCR A Level Business H431 past paper questions? No. They are original practice questions written for Marlbridge on Ansoff’s matrix and conflicts in business decision making. Use them alongside OCR’s own past papers.

Is an expected value the same as a net gain? No. An expected value weighs each outcome by its probability; the net gain is the expected value minus the cost of the option. Show the multiplication and then subtract the cost.

How do you explain why decision making tools give different answers? Name what each method measures, such as speed of payback, average profit or discounted value. Saying only that the answers differ restates the question.

What does an “assess” question on a model need? Strengths and limitations, followed by a judgement about how far the model helps the business in the case. Two lists with no judgement are only partly evaluative.

How do you recommend a growth strategy in an exam answer? Rank the options against the business’s objective and the cash available, and say why the rejected options are weaker as well as why your choice is good.

Next steps

• Review the revision notes and the study guide.
• Visit the OCR A Level Business hub and the checklist.
• Take the free diagnostics.
• Book a free trial class.

Official syllabus

OCR, Advanced GCE in Business (H431) specification, Version 2.1 (January 2026), for first assessment in 2017: Business objectives and strategy, content points Ansoff’s matrix and Conflicts in business decision making.