OxfordAQA A-Level Business: Strategic options: choosing which markets to compete in and what products to offer (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 practises section 3.4.1 Strategic options: choosing which markets to compete in and what products to offer, 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. This is International A-level only material, tested in Unit 4: Business strategy. Students completing the older 9625 specification should practise from their own specification. Every business named below is invented.

Full teaching: study guide · Recall: revision notes · Course page: OxfordAQA A-level Business · Checklist: printable 9725 list · Quick diagnostics

Questions

1. State two features of a strategic decision. [2]

2. Explain what is meant by a strategy and why having one is significant for a business. [3]

3. Quarrendon Foods makes biscuits for its home market. Identify the Ansoff strategy shown by each move.

(a) Selling its existing biscuits in a neighbouring country. [1] (b) Signing deals with more convenience stores in its home cities to stock its existing range. [1] (c) Launching oat breakfast bars for its current shoppers. [1] (d) Buying a chain of gyms. [1]

4. Explain why market penetration is usually the lowest-risk option in the Ansoff matrix. [3]

5. Skerrow Kayaks made 7,830 kayaks last year. Its capacity is 10,800 kayaks a year. Total kayak sales in its home market were 58,000.

(a) Calculate Skerrow’s capacity utilisation. [2] (b) Calculate Skerrow’s share of the home market by volume. [2]

6. Skerrow has chosen market development, selling its kayaks to tour operators in coastal holiday regions abroad. Explain how this strategy links to decisions in its marketing and finance functions. [4]

7. Tamsett Optics has non-current liabilities of £8.4 million and total equity of £5.6 million. It is considering diversification into hearing-test clinics.

(a) Calculate Tamsett’s gearing. [2] (b) Explain one implication of your answer for funding the diversification. [2]

8. Mirefield Pet Foods plans product development: a grain-free dog food for its existing pet-shop customers. Explain two implications for its operations function. [4]

9. Ravensoak Hotels runs eight hotels in its home country and plans to open hotels in a country where it has never traded. Analyse how this market development strategy could affect its human resources function. [6]

10. Tillinghast Print’s main product is printed catalogues for retailers. Orders have fallen for three years as retailers move to online catalogues, and a new managing director has been appointed.

(a) Identify two reasons from the case why Tillinghast may need to change its strategy. [2] (b) Analyse one challenge Tillinghast may face in changing its strategy. [4]

11. Brindmoor Dairy makes yoghurt. Data:

• Home yoghurt market: £400 million two years ago, £380 million last year
• Brindmoor’s yoghurt sales: £48 million two years ago, £41.8 million last year
• Capacity utilisation: 68%; gearing: 18%
• Yoghurt sales in a neighbouring country are growing about 7% a year; Brindmoor has no presence there

The directors are choosing between Option A, market development (exporting its yoghurts to the neighbouring country), and Option B, diversification (opening a chain of frozen-yoghurt cafés at home).

(a) Calculate the percentage change in the size of the home market and the change in Brindmoor’s market share. [4] (b) Evaluate which option Brindmoor should choose. [12]

12. Lunsford Glassworks makes glass bottles for drinks companies. Last year 45 employees produced 31,500 cases of bottles. This year 48 employees produced 30,240 cases. Six employees left this year; the industry labour turnover rate is 6%. The directors plan product development: lightweight bottles for their existing drinks-company customers.

(a) Calculate labour productivity for both years and the percentage change. [3] (b) Assess how far this data should influence the decision to pursue product development. [8]

Answers

1. Any two: difficult to reverse [1]; high risk; involves significant resources; usually a one-off decision [1]. [2] Examiner insight: Each feature must be distinct; “expensive” and “uses a lot of money” make the same point and tend to be credited once.

2. A strategy is a long-term plan for how a business will achieve its objectives [1]. It gives every function a shared direction [1], so scarce resources are allocated to the same priorities rather than wasted on conflicting projects [1]. [3] Examiner insight: Credit beyond the definition needs a developed consequence; a list of three unlinked benefits earns less than one explained chain.

3. (a) Market development [1]. (b) Market penetration [1]. (c) Product development [1]. (d) Diversification [1]. Examiner insight: Read which element is new in each move; naming the box without that check is how (a) and (c) get swapped.

4. The business sells products it already makes to customers it already knows [1], so it needs little research, new investment or new skills [1]. Its knowledge of demand and rivals makes results easier to predict, so the chance of costly failure is lower [1]. [3] Examiner insight: “Usually” matters; answers that call penetration risk-free can lose credit, because rivals may retaliate.

5. (a) 7,830 ÷ 10,800 × 100 [1] = 72.5% [1]. (b) 7,830 ÷ 58,000 × 100 [1] = 13.5% [1]. Examiner insight: Show the substituted formula before the answer, and give the % sign; a bare 0.725 does not answer the question as set.

6. Marketing must research tour operators’ needs abroad [1] and set prices and distribution suited to those regions, which shapes its promotion budget [1]. Finance must fund set-up costs such as overseas sales staff and shipping before revenue arrives [1], and may need to manage currency risk if prices are set in another currency [1]. [4] Examiner insight: Both named functions are needed; an answer covering only marketing leaves half the question unanswered, however well developed.

7. (a) 8.4 ÷ (8.4 + 5.6) × 100 [1] = 60% [1]. (b) Gearing of 60% is high, so lenders may refuse further loans or charge higher interest [1]; Tamsett may have to fund the clinics from share capital or retained profit, or delay the plan [1]. Examiner insight: Capital employed includes non-current liabilities; dividing by equity alone gives 150%, which is a different measure.

8. It may need new suppliers of grain-free ingredients [1], which could raise unit costs or create supply risk while contracts are set up [1]. Production lines may need cleaning or separating to avoid grain contamination [1], which could reduce output of existing products while changes are made [1]. [4] Examiner insight: Each implication needs an operations consequence; “it will need new machines” alone is a point without development.

9. Ravensoak must recruit local staff who know the language and customs [1], which raises recruitment costs and takes time before hotels open [1]. Managers sent from home need training in local laws and culture [1]; without it, mistakes over contracts or guest expectations could damage service quality [1]. Pay and conditions must follow local employment law and wage levels [1], so HR may run two sets of policies, adding to workload and the risk of perceived unfairness between countries [1]. [6] Examiner insight: Reasoning that stays tied to Ravensoak’s move abroad earns analysis credit; generic HR points that would apply to any firm gain less.

10. (a) Falling demand as retailers move online [1]; a new managing director who may set new objectives [1]. (b) Staff skilled in print production may resist change [1] because they fear job losses or new ways of working [1]. This can slow the change and lower productivity [1], so Tillinghast may need to retrain staff and explain the reasons early, adding cost and time [1]. Examiner insight: For “identify from the case” questions, points must come from the stem; outside reasons gain little.

11. (a) Market change = (380 − 400) ÷ 400 × 100 [1] = −5% [1]. Share before = 48 ÷ 400 × 100 = 12%; share after = 41.8 ÷ 380 × 100 = 11% [1]; change = −1 percentage point [1]. (b) The home market shrank by 5% and Brindmoor’s share fell from 12% to 11% [1], so staying with penetration alone is unattractive: a threat in its main market [1]. Option A uses proven products and existing production [1]; capacity utilisation of 68% means about a third of capacity is idle, so exports could lower unit costs [1]. The 7% growth abroad is an opportunity matched to these strengths [1]. However, Brindmoor has no presence there, so it needs distributors and must meet local standards and tastes [1]; chilled export logistics may add cost [1]. Option B spreads risk away from supermarket yoghurt [1], but Brindmoor lacks retail and café-management skills and must lease sites and hire staff [1], the largest outlay for the least experience [1]. Its 18% gearing means borrowing for either option is possible [1]. Judgement: Option A is better, because it uses existing strengths against a growing market with lower risk; it depends on finding a reliable distributor and on exchange rates staying favourable [1]. [12] Examiner insight: Strong evaluations use the calculated figures and finish with a decision plus what it depends on; balanced lists with no judgement tend to score in the middle.

12. (a) Last year 31,500 ÷ 45 = 700 cases per employee; this year 30,240 ÷ 48 = 630 [1]. Change = (630 − 700) ÷ 700 × 100 [1] = −10% [1]. (b) Productivity fell by 10% [1], so unit labour costs are rising: a weakness that could make new, possibly more complex lightweight bottles costly to produce [1]. Labour turnover is 6 ÷ 46.5 (average of 45 and 48 staff) × 100 = 12.9%, more than double the 6% average [1], so skills may be lost just when new production methods must be learned [1]. On the other hand, the product is for existing customers, so Lunsford keeps its market knowledge, and lighter bottles may cut customers’ transport costs [1]. The data is internal only; it shows nothing about customer demand or rivals’ plans [1], and one year’s fall may reflect new staff still in training [1]. Judgement: the data should delay rather than stop the plan; Lunsford should tackle turnover and productivity first, then check demand before investing [1]. Examiner insight: “Assess how far” needs a limit on the data as well as its use; answers that only interpret the figures miss the evaluative credit.

Where marks are usually lost

• Swapping market development and product development by not checking which element is new.
• Calling penetration risk-free.
• Dividing by total equity instead of capital employed in gearing.
• Writing “per cent” for a change in market share instead of percentage points.
• Giving functional implications that do not mention the case business or its strategy.
• Answering a two-function question with only one function.
• Using reasons from outside the case when told to identify them from the case.
• Ending an evaluation without a decision or without saying what it depends on.

Next steps

• Key terms and checklists: revision notes
• Full explanations: study guide
• SWOT calculations: 3.3.1 data questions
• All 9725 topics: OxfordAQA A-level Business hub
• Mark off what you know: 9725 checklist
• How the papers work: OxfordAQA A-level Business exam preparation
• Check your weak spots: 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.