OCR GCSE Business: Business Activity, Marketing and People — 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 available free from your board.

Related: Business Activity, Marketing and People revision notes

Section A of the live J204/01 paper is 15 multiple-choice questions worth 1 mark each (15 marks); Section B (65 marks) uses stimulus material drawn from real business contexts. The Section A below follows that format. Section B here is a shorter set of topic practice questions, not a full 65-mark section.

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Section A — Multiple choice

1. Which of the following is a characteristic of a successful entrepreneur? [1] A. Determination B. Avoiding every risk C. Relying on others to make all decisions D. Preferring a fixed salary to profit

2. A business plan is most likely to help a new business to: [1] A. guarantee a profit in its first year B. avoid paying tax C. obtain finance from a bank D. remove all competition

3. An owner of a business with limited liability: [1] A. is personally responsible for all of the business’s debts B. can lose only the amount they have invested in the business C. must run the business alone D. cannot take on any employees

4. Which type of business can sell its shares to the general public on a stock exchange? [1] A. Sole trader B. Partnership C. Private limited company D. Public limited company

5. Which of the following is an internal stakeholder? [1] A. Employees B. Customers C. Local community D. Suppliers

6. A cinema chain buys a rival cinema chain. This is an example of: [1] A. diversification B. organic growth C. horizontal integration D. vertical integration

7. Which of the following is a primary market research method? [1] A. Census data B. Focus group C. Internal sales records D. A newspaper article

8. A gym offers cheaper membership to customers aged under 25. The gym is segmenting its market by: [1] A. gender B. income C. location D. age

9. A games console is launched at a high price, which is lowered once rival consoles appear. This pricing method is: [1] A. skimming B. cost-plus pricing C. competitor pricing D. penetration pricing

10. At which stage of the product life cycle do sales usually level off, with competition at its strongest? [1] A. Introduction B. Growth C. Maturity D. Decline

11. Total sales in a market are £2 000 000. One business’s sales in this market are £300 000. The business’s market share is: [1] A. 6.7% B. 15% C. 30% D. 66.7%

12. A manager has six employees who report directly to her. This number is the manager’s: [1] A. authority B. chain of command C. delegation D. span of control

13. An employee works 20 hours a week on a permanent contract. This way of working is: [1] A. part-time work B. full-time work C. self-employment D. temporary work

14. Which of the following is a method of selection, rather than part of recruitment? [1] A. A job advertisement B. A job description C. An interview D. A person specification

15. Which of the following is a non-financial method of motivation? [1] A. Bonuses B. Praise C. Fringe benefits D. Profit sharing

Section B

16. A new business is planning its market research.

(a) Identify two primary research methods and two secondary research sources. [4] (b) Explain one advantage and one disadvantage of primary research. [4]

17. Explain three pricing strategies a new business could use, giving a suitable situation for each. [6]

18. Explain the stages of the product life cycle and state one extension strategy. [5]

19. Evaluate whether financial incentives are the most effective way to motivate staff in a small restaurant. [9]

20. Explain why a business that has just started trading and a long-established business may have different objectives. [3]

21. Explain the difference between unlimited and limited liability, and explain why this distinction matters for raising external capital. [4]

22. A bakery with three shops plans to grow.

(a) State one method of organic growth the bakery could use. [1]

(b) The bakery takes over the flour mill that supplies it. Identify this type of external growth. [1]

(c) Explain one advantage to the bakery of growing by taking over its supplier. [3]

23. Explain the difference between internal and external recruitment, and state one advantage of a flat organisational structure over a tall one. [4]

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Answers

Section A (multiple choice): 1. A 2. C 3. B 4. D 5. A 6. C 7. B 8. D 9. A 10. C 11. B 12. D 13. A 14. C 15. B

16. (a) Primary: questionnaires, interviews, focus groups, observation, test marketing [1] [1]. Secondary: government statistics, competitors’ published accounts, market reports, internal sales records, internet research [1] [1]. (b) Advantage: the data is collected for this specific purpose and is up to date, so it directly answers the business’s question and is not available to rivals [1] [1]. Disadvantage: it is expensive and time-consuming to collect, and a small or biased sample may give unrepresentative results [1] [1].

17. Any three, 2 marks each: Penetration pricing — set a low price to gain market share quickly; suitable when entering a competitive market with many substitutes [1] [1]. Price skimming — set a high price initially; suitable for a technologically innovative product with few competitors [1] [1]. Competitive pricing — match rivals’ prices; suitable in a market where products are very similar [1] [1]. Cost-plus pricing — add a fixed margin to unit cost; suitable when the business needs to guarantee each sale covers its costs [1] [1].

18. Introduction — sales are low and promotion spending is high [1]. Growth — sales rise rapidly and the product may become profitable [1]. Maturity — sales peak and level off; competition is strongest [1]. Decline — sales fall as tastes change or better products appear [1]. Extension strategy: new packaging, a new target market, a price reduction or a modified version of the product [1].

19. For financial incentives: staff in a restaurant are often on low pay, so a bonus or higher wage directly addresses their most pressing need [1]; piece-rate or commission on upselling gives an immediate, measurable link between effort and reward [1]; pay is also a key factor in retention, which reduces the cost of recruiting and training in a high-turnover industry [1]. Against: Herzberg argued pay is a hygiene factor — it removes dissatisfaction but does not create lasting motivation [1]; non-financial methods such as praise, training, job rotation and responsibility can be more powerful and cost nothing [1]; financial incentives can also encourage the wrong behaviour, such as rushing service to increase covers, damaging quality [1]. Judgement: in a small restaurant with limited funds, non-financial motivators are likely to be more sustainable and affordable [1]. However, pay must first be at least fair and competitive, or no amount of praise will retain staff [1] — so the best approach combines a fair basic wage with recognition and development [1]. (OCR marks this nine-mark question by level of response against a holistic mark scheme, not by awarding a separate mark for each point; the bracketed marks above indicate the credit-worthy content expected, not a point-by-point tally.)

20. A new business is likely to aim first for survival, covering its costs and building a customer base [1], while an established business may aim for growth, market share or higher profit [1], because objectives change as a business evolves: once survival is secure, the owners can take on the risk of expansion [1].

21. Unlimited liability means the owner’s personal assets are at risk if the business cannot pay its debts (sole traders, partnerships) [1]. Limited liability means shareholders can lose only what they invested (private and public limited companies) [1]. This matters because investors are far more willing to buy shares in a business where their personal wealth is protected [1], making limited liability the structure that makes raising significant external capital feasible [1].

22. (a) Any one: opening a new shop, increasing output, gaining new customers (for example, supplying cafés), developing new products [1].

(b) A vertical takeover (backward, towards its supplier) [1].

(c) One advantage identified, for example control over the supply of flour [1], explained: the bakery no longer depends on an outside supplier’s prices or delivery times [1], applied: so it can keep bread quality consistent and avoid running short of flour on busy days in its three shops [1]. Other creditable advantages: lower input costs, or the mill’s profit staying within the business.

23. Internal recruitment is cheaper and faster and appoints a known quantity, but brings no fresh ideas and leaves another vacancy to fill [1]. External recruitment offers a wider pool and new perspectives, but is slower and costlier [1]. A flat structure has fewer layers and a wider span of control, giving faster communication and more delegation than a tall structure [2].

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Where marks are usually lost

• Confusing primary with secondary research.
• Naming a pricing strategy without a suitable context.
• Omitting a stage of the product life cycle.
• Treating “evaluate” as “describe” and not weighing both sides.