OxfordAQA A-Level Business: Analysing the industry environment (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.

Every question below targets section 3.3.3, Analysing the industry environment, in the 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. The section is International A-level only and is tested in Unit 3: Business analysis. On the older 9625 course? Follow the 9625 specification. The businesses and figures here are made up.

Before you start: study guide · Quick recap: revision notes · Course hub · Printable 9725 checklist · Free diagnostics

Questions

1. State three factors that would increase the power of suppliers over a business. [3]

2. Tidewick Ferries runs car ferries across a sea strait. Explain what is meant by “substitute threat”, using an example from Tidewick’s industry. [2]

3. Last year 4.8 million passengers crossed the strait by ferry. Tidewick carried 1.68 million. The next three operators carried 1.2 million, 0.72 million and 0.48 million.

(a) Calculate Tidewick’s market share. [2] (b) Calculate the four firm concentration ratio. [2] (c) Explain one reason why rivalry could still be intense despite your answer to (b). [2]

4. Pellwick Flour Mills sells flour at £520 per tonne. The wheat used in one tonne of flour costs £310. Wheat suppliers raise prices by 12%. Pellwick produces 24,000 tonnes a year and last year made a profit of £1.5 million.

(a) Calculate the rise in Pellwick’s annual wheat cost. [3] (b) Calculate this rise as a percentage of last year’s profit. [2]

5. Kiverton Components makes seat frames for car makers. Its sales last year were £64 million. Its largest customer bought £20.8 million and its three largest customers together bought £44.8 million.

(a) Calculate the share of Kiverton’s sales taken by its largest customer and by its three largest customers. [3] (b) Explain two ways Kiverton might reduce the power of its buyers. [4]

6. Thistlemoor Fitness plans to open a boutique fitness studio. Explain two influences on the strength of the entry threat in the boutique fitness industry. [4]

7. Using question 4, analyse how the rise in wheat prices might affect two functional areas of Pellwick Flour Mills. [6]

8. Brindlecote Cabs is a radio taxi firm in a market town. A ride-hailing app has launched in the town with fares about 20% below Brindlecote’s. Analyse two ways Brindlecote might respond to this change in the forces it faces. [8]

9. Thistlemoor Fitness has gathered this information about boutique fitness in its city:

• 14 studios operate; none has more than 10% of the market. The market is growing by about 12% a year.
• Fitting out a studio costs about £60,000, and short leases are easy to find.
• Members pay monthly and can leave with one month’s notice.
• Skilled instructors are in short supply and work freelance for several studios.
• Large gym chains charge lower monthly fees; home workout apps cost even less.

Using Porter’s five forces, evaluate whether boutique fitness in the city is an attractive industry for Thistlemoor to enter. [12]

10. Calderine Paints sells decorative paint. Total sales are £18 million and profit is £1.6 million. Two DIY retail chains that together buy £7.2 million of Calderine’s paint are merging. The merged chain has asked for a 6% price cut on everything it buys from Calderine.

(a) Calculate the share of Calderine’s sales going to the merged chain, and the cost of the price cut as a percentage of profit. [4] (b) Evaluate whether Calderine should accept the price cut. [12]

Answers

1. Any three: few suppliers of the input [1]; the input is unique or has no substitute [1]; switching to another supplier is costly [1]. Also creditworthy: the business is a minor customer for the supplier; the supplier could enter the business’s industry itself. [3] Examiner insight: “State” questions reward brief, separate points; three versions of “few suppliers” tend to gain credit only once.

2. Substitute threat is the risk that customers meet the same need with a different kind of product [1], such as crossing the strait by air or through a new tunnel or bridge rather than by ferry [1]. [2] Examiner insight: A rival ferry operator is not a substitute; using one as the example is likely to lose the application mark.

3. (a) 1.68 ÷ 4.8 × 100 [1] = 35% [1]. (b) (1.68 + 1.2 + 0.72 + 0.48) ÷ 4.8 × 100 [1] = 85% [1]. (c) Ferry crossings are a fairly standard service, so customers choose mainly on price [1]; ferries have high fixed costs, so operators cut fares to fill spare capacity [1]. [6] Examiner insight: A high concentration ratio shows few large firms, not low rivalry; answers that treat it as proof either way tend to lose the explanation marks.

4. (a) New wheat cost = 310 × 1.12 = £347.20 [1]; rise per tonne = £37.20 [1]; annual rise = 37.20 × 24,000 = £892,800 [1]. (b) 892,800 ÷ 1,500,000 × 100 [1] = 59.5% [1]. [5] Examiner insight: Show each stage of working, per tonne and then per year, so the examiner can follow your method even if one figure slips.

5. (a) Largest customer: 20.8 ÷ 64 × 100 = 32.5% [1]. Top three: 44.8 ÷ 64 × 100 [1] = 70% [1]. (b) Win customers in other industries, such as bus or rail seat makers [1], so no single car maker can threaten a large share of sales and Kiverton can resist price cuts [1]. Design frames around Kiverton’s own patented fittings [1], which raises the cost to car makers of switching supplier and so weakens their bargaining power [1]. [7] Examiner insight: Each “way” needs an action and a reason it weakens buyer power; naming the action without the reason leaves the point undeveloped.

6. Set-up costs are low: about £60,000 to fit out, with easy short leases [1], so many new studios can open, which makes the entry threat strong [1]. Customer loyalty is weak: members can leave on one month’s notice [1], so a newcomer can win members quickly, again strengthening the threat [1]. [4] Examiner insight: Influences gain more credit when tied to the barriers to entry in the specification and to evidence in the case.

7. Finance: costs rise by £892,800, cutting profit by 59.5% [1]. This reduces retained profit, so Pellwick may delay investment in new milling equipment [1], and lower profit may make lenders less willing to lend [1]. Marketing: Pellwick may need to raise flour prices by £37.20 per tonne (7.2%) to protect its margin [1]. Its buyers, bakeries and supermarkets, may switch to rival mills if flour is a standard product [1], so marketing may focus on long-term contracts or quality to justify the price [1]. [6] Examiner insight: Analysis credit comes from a chain of cause and effect using case figures; two separate one-line statements gain limited credit.

8. The app is a new entrant that increases rivalry and offers customers a cheaper option [1]. Response 1: cut fares to match [1]. This keeps price-sensitive customers [1], but with fares 20% lower Brindlecote’s margin may disappear, and the app may be able to absorb losses for longer [1]. Response 2: target segments the app serves poorly, such as pre-booked airport runs, school contracts and older customers who phone rather than use apps [1]. These customers value reliability and a known driver more than price [1], so Brindlecote faces less direct rivalry [1]. However, the segment may be too small to replace lost volume, so Brindlecote may also need its own booking app [1]. [8] Examiner insight: Each response should have a consequence and a limitation; one-sided responses tend to stay in the lower analysis levels.

9. Rivalry is high: 14 studios with none above 10% means many similar firms [1], although 12% market growth eases rivalry because firms can grow without taking members from each other [1]. Entry threat is high: £60,000 set-up cost and short leases are low barriers [1], so even if Thistlemoor succeeds, new studios can copy it quickly [1]. Buyer power is fairly high: members can leave on one month’s notice [1], so prices must stay competitive [1]. Supplier power is high for instructors: skilled instructors are scarce and freelance [1], so they can demand higher fees, raising Thistlemoor’s main cost [1]. Substitute threat is high: gym chains and apps meet the same fitness need more cheaply [1]. Judgement: four of the five forces are strong, so margins are likely to be thin [1]. Growth is the main attraction, and the low entry cost limits Thistlemoor’s risk if it fails [1]. The industry is attractive only if Thistlemoor can differentiate, for example by tying top instructors to exclusive contracts; otherwise it is unattractive [1]. [12] Examiner insight: Strong answers rate each force with case evidence and finish with a judgement on overall attractiveness; five descriptions with no conclusion tend to be held back.

10. (a) 7.2 ÷ 18 × 100 = 40% [1]. Cost of cut = 7.2 × 0.06 = £0.432 million [1]. 0.432 ÷ 1.6 × 100 [1] = 27% of profit [1]. (b) The merger raises buyer power: one buyer will take 40% of sales [1], so losing it would remove a large share of volume and contribution [1]. For accepting: Calderine keeps its biggest outlet and protects factory utilisation [1], and the 27% fall in profit may be smaller than the loss if the chain stocked a rival brand [1]. Against: accepting signals weakness, and the chain may demand further cuts in future [1]. Rivals may face the same demand, but if they refuse, the chain may still need Calderine’s paint [1]. Alternatives: build sales to trade decorators and online [1], which spreads buyer power over many smaller customers [1]; or strengthen the brand so shoppers expect to find Calderine on the shelf [1], which weakens the chain’s ability to delist it [1]. Judgement: Calderine should negotiate rather than accept 6% outright, perhaps a smaller cut tied to a longer contract [1], while growing other channels so that within a few years no buyer takes such a large share; the decision depends on how easily the chain could switch to a rival brand [1]. [16] Examiner insight: In evaluation questions, a supported recommendation that uses the calculated figures and says what it depends on tends to gain more credit than a balanced list.

Where marks are usually lost

• Rating a force without evidence from the case.
• Using a rival product as an example of a substitute.
• Treating the concentration ratio as proof of high or low rivalry on its own.
• Forgetting to multiply a per-unit cost change by annual volume.
• Dividing by sales instead of profit when asked for a percentage of profit.
• Naming a way to influence a force without explaining why it weakens that force.
• Analysing the firm’s internal strengths instead of the industry’s structure.
• Ending a five forces evaluation without a view on overall attractiveness or a clear recommendation.

Next steps

• Recap: revision notes
• Full teaching: study guide
• Five forces and SWOT together: mission, objective and SWOT analysis practice
• PESTLE (3.3.4): external environment practice
• Spot weak topics: free diagnostics
• Track progress: 9725 topic checklist
• Answer technique: exam preparation guide
• OxfordAQA A-level Business hub
• 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.