OxfordAQA A-Level Business: Analysing the external environment to assess opportunities and threats (9725) – 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.

This set tests section 3.3.4, Analysing the external environment to assess opportunities and threats, from the OxfordAQA International AS and A-level Business (9725) specification, Version 1.1 (International AS exams from May/June 2027, International A-level exams from May/June 2028). None of it is AS content (International A-level only); Unit 3: Business analysis examines it. If your exams are on the older 9625 specification, practise from that document. Every business here is invented, and the exchange rates are illustrative.

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Questions

1. Identify two areas, other than competition, in which the law within a country can affect a business. [2]

2. Explain one limitation of PESTLE analysis for a business planning its strategy. [3]

3. Saltreach Furnishings imports sofas from Italy at €900 each. The exchange rate moves from £1 = €1.25 to £1 = €1.20. Calculate the percentage increase in the cost of one sofa in pounds. [4]

4. Pellinore Optics sells a lens to Japanese buyers for £250. The exchange rate moves from £1 = ¥190 to £1 = ¥180.

(a) Calculate the yen price before and after the change if Pellinore keeps its pound price. [2] (b) Pellinore could instead hold the yen price at ¥47,500. Calculate its revenue per lens in pounds and explain one reason it might choose this option. [3]

5. The price index for a manufacturer’s main raw material rose from 118.0 to 129.8 in a year. The manufacturer raised its selling prices by 6%. Calculate the percentage increase in raw material prices and comment on what it means for the manufacturer. [3]

6. Wendlebury Brewing has £2,600,000 outstanding on a variable-rate loan. Each year it repays £400,000 of the loan plus interest on the opening balance. The interest rate rises from 4.5% to 6%. Calculate the percentage increase in this year’s total payment. [4]

7. Dunmarrow Ceramics exports tableware. Its largest export market introduces an import quota on ceramics. Analyse how this could affect Dunmarrow’s marketing and operations. [6]

8. Explain the difference between the stakeholder concept and the shareholder concept, using a business decision as an example. [4]

9. Fenwyck Pharmacies runs a chain of pharmacies. Its country’s population is ageing and inward migration is rising. Analyse how these two social changes could affect Fenwyck. [6]

10. Amberlow Insurance plans to use artificial intelligence to assess claims and answer customer queries. Analyse the possible impact on Amberlow’s functional areas and how it could manage the change. [9]

11. Strathdene Batteries is choosing a country for a new factory. Country P offers a large government grant but has poor roads and slow permit approval. Country R offers no grant but has reliable infrastructure and a trade agreement with Strathdene’s main export markets. Analyse the external factors Strathdene should weigh. [6]

12. Hollinsworth Garden Machinery makes petrol lawnmowers. Its revenue rose from £6.0 million to £6.24 million last year, while the national price index rose from 120.0 to 127.2. The government plans stricter emission limits on small petrol engines, a recession is forecast, and a rival has launched app-controlled robotic mowers. Customers increasingly ask about firms’ environmental record.

(a) Calculate the percentage change in Hollinsworth’s revenue in real terms. [4] (b) Evaluate whether Hollinsworth should respond by switching its range to battery-powered and robotic mowers. [16]

Answers

1. Any two: consumer protection [1]; the labour market, including employee rights [1]; environmental issues; health and safety. [2] Examiner insight: “Identify” needs only the area named; a long description of one area earns no more than a short correct name.

2. PESTLE is a snapshot of conditions at one time [1]. Factors such as exchange rates or interest rates can change quickly [1], so a strategy built on it may rest on out-of-date assumptions unless the analysis is reviewed regularly [1]. [3] Examiner insight: An “explain” answer needs the consequence for the business, not just the limitation named.

3. Cost before = 900 ÷ 1.25 = £720 [1]. Cost after = 900 ÷ 1.20 = £750 [1]. Increase = (750 − 720) ÷ 720 × 100 [1] = 4.17% [1]. [4] Examiner insight: Converting euros into pounds means dividing by the euros-per-pound rate; multiplying gives a figure that should look obviously wrong.

4. (a) 250 × 190 = ¥47,500 [1]; 250 × 180 = ¥45,000 [1]. (b) 47,500 ÷ 180 = £263.89 [1], about 5.6% more per lens than before [1]. If Japanese demand for its lenses is price inelastic, a lower yen price would win few extra sales, so taking the higher margin earns more [1]. Examiner insight: Linking the pricing choice to price elasticity is the step that turns a calculation into an explanation.

5. (129.8 − 118.0) ÷ 118.0 × 100 [1] = 10% [1]. Input prices are rising faster than selling prices, so the profit margin per unit is squeezed unless costs are cut elsewhere or prices rise further [1]. [3] Examiner insight: Dividing the 11.8-point rise by 100 gives 11.8%, a common slip; always divide by the earlier index value.

6. Before: 2,600,000 × 0.045 = £117,000, so total payment = £517,000 [1]. After: 2,600,000 × 0.06 = £156,000, so total = £556,000 [1]. Increase = £39,000 [1]. Percentage increase = 39,000 ÷ 517,000 × 100 = 7.54% [1]. [4] Examiner insight: The question asks about the total payment, so capital must be included; the interest alone rises by 33%, which answers a different question.

7. A quota caps the quantity of ceramics allowed in, so Dunmarrow’s export volume may be limited however good its products are [1]. Marketing may focus on higher-value ranges so each permitted unit earns more [1], or redirect promotion to other export markets, which needs new research and spending [1]. Operations face spare capacity if exports fall [1], raising unit costs as fixed costs are spread over less output [1]. It could cut shifts or switch output to the home market; the impact depends on how tight the quota is and how much output goes to that market [1]. [6] Examiner insight: Develop each function into a consequence; describing a quota as a tax gains little.

8. The shareholder concept says a business exists mainly to maximise returns to its owners [1]. The stakeholder concept says it should balance the interests of all groups it affects, such as employees, customers and the community [1]. For example, when deciding whether to close a factory, a shareholder view would focus on the effect on profit and dividends [1], while a stakeholder view would also weigh job losses and the local community [1]. [4] Examiner insight: Credit for the example depends on showing how the two concepts lead to different priorities in the same decision.

9. An older population raises demand for prescriptions, mobility aids and health advice [1], so Fenwyck could extend its range and services, increasing sales per store [1]. It may need staff trained to advise older customers, adding training costs [1]. Rising migration enlarges the labour pool, which may ease recruitment of qualified staff [1]. Migrants may also bring demand for different products and languages [1], so Fenwyck may adapt stock and signage in some areas; how much each change matters depends on where its stores are [1]. [6] Examiner insight: Answers that apply each change to a pharmacy’s products, staff or locations score above general points about population.

10. AI could assess straightforward claims faster than staff [1], cutting unit costs in operations and improving customer service speed [1]. Finance must fund software and data systems up front [1], with savings arriving later, so the payback is uncertain [1]. For HR, fewer claims-handling roles may be needed, which could mean redundancies or redeployment [1], and fear of job losses could lower morale [1]. Marketing could promote faster claims, but errors or unfair decisions by AI could damage trust [1]. Amberlow could consult staff early and retrain them for complex claims [1], and keep human review of disputed claims to protect accuracy and reputation [1]. [9] Examiner insight: Linked chains of reasoning across several functions earn more credit than a list of AI uses.

11. The grant in Country P lowers the start-up cost [1], but it may come with conditions and could be withdrawn later [1]. Poor roads raise transport costs and the risk of late deliveries [1], and slow permits could delay the opening and the return on the investment [1]. Country R’s trade agreement means fewer barriers when exporting to Strathdene’s main markets [1], which may save more each year than a one-off grant [1]. [6] Examiner insight: Weighing a one-off benefit against ongoing costs lifts this above a description of each country.

12. (a) Nominal growth = (6.24 − 6.0) ÷ 6.0 × 100 = 4% [1]. Inflation = (127.2 − 120.0) ÷ 120.0 × 100 = 6% [1]. Real revenue = 6.24 ÷ 1.06 = £5.89 million in last year’s prices [1]. Real change = −1.9% (to 1 d.p.) [1]. (b) The real fall in revenue suggests the petrol range is already losing ground [1]. Stricter emission limits are a legal threat that may raise the cost of meeting standards or end some petrol models [1], so switching protects Hollinsworth from future compliance costs [1]. Customers’ growing interest in environmental records means a low-emission range could support the brand [1] and could fit a CSR message that wins loyalty [1]. The rival’s robotic mowers are a disruptive technology [1]; staying with petrol risks losing customers to the new model [1]. However, switching needs heavy investment in designs, batteries and software skills [1], and a recession will cut demand for income-elastic garden machinery [1], so revenue may fall just when spending peaks [1]. Borrowing for the change could be costly if interest rates rise [1]. Hollinsworth also lacks experience in app-controlled products, so it may be weaker than the rival [1]. A phased switch could balance these, starting with battery mowers that use existing skills [1] and partnering with a technology firm for robotics [1]. On balance, the legal and technological pressures make the switch necessary, because petrol sales look set to shrink whatever happens [1]; the timing and pace should depend on how deep the recession is and how quickly the emission rules take effect [1]. Examiner insight: Evaluation earns more when the judgement uses the real fall calculated in (a) and weighs the changes against each other.

Where marks are usually lost

• Multiplying by the exchange rate when the foreign price should be divided, or the reverse.
• Treating a change in index points as the percentage change.
• Leaving capital repayments out of a total-payment calculation, or using the original loan instead of the outstanding balance.
• Describing a quota as a tax, or a tariff as a quantity limit.
• Naming an external change without tracing its effect to a functional area.
• Treating CSR or AI as automatically good, without weighing costs.
• Ending an evaluation with no clear, supported judgement.

Next steps

• Revise the methods: revision notes
• Go back over the teaching: study guide
• Course hub: OxfordAQA A-level Business
• Tick off topics: printable checklist
• Exam skills: preparing for the Business exams
• Spot weak areas: all free 10-minute diagnostics
• Book a free trial class

Official syllabus

OxfordAQA International AS and A-level Business (9725) specification, Version 1.1, for International AS exams May/June 2027 onwards and International A-level exams May/June 2028 onwards. Published by OxfordAQA.