OCR GCSE Business: Business Activity, 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: Business Activity, Marketing and People revision notes

---

Section A

1. Define entrepreneur and state three characteristics of a successful one. [4]

2. Name the four elements of the marketing mix. [2]

Section B

3. Distinguish between primary and secondary market research.

(a) Give two methods of each. [4] (b) Explain one advantage and one disadvantage of primary research. [4]

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

5. Explain the stages of the product life cycle and state one extension strategy. [6]

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

Section C

7. Define added value and explain one way a business can increase it without lowering price. [3]

8. Distinguish between unlimited and limited liability, and explain why this distinction matters for raising external capital. [4]

9. A bakery pays 80p in ingredients and packaging per loaf and sells at £2.20. It sells 500 loaves a day with fixed costs of £400 a day.

(a) Calculate the added value per loaf and the total daily profit. [3]

(b) Calculate the break-even output in loaves per day. [2]

10. Compare internal and external recruitment, and state one advantage of a flat organisational structure over a tall one. [4]

---

Answers

1. An entrepreneur is someone who takes the risk of setting up and running a business, combining the factors of production [1]. Characteristics: risk-taking, determination and resilience, creativity or innovation, organisation, confidence [1] [1] [1].

2. Product, price, place, promotion [2 — 1 mark for two correct].

3. (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].

4. 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].

5. Development — costs are incurred but there are no sales [1]. 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].

6. 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].

7. Added value is the difference between the cost of inputs and the selling price [1]. It can be increased through brand, quality, convenience, design or service, rather than through price alone — for example, better packaging or faster delivery lets a business charge more without changing its ingredients [2].

8. 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].

9. (a) Added value = 2.20 − 0.80 = £1.40 [1]; total contribution = 1.40 × 500 = £700; profit = 700 − 400 = £300 per day [2].

(b) Break-even output = fixed costs ÷ contribution per unit = 400 ÷ 1.40 = 286 loaves (to the nearest whole loaf) [2].

10. 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].

---

Where marks are usually lost

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