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Business Studies · May / June 2025 · Paper 22 · Question 3

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  • 3(a)[8]

    Explain four ways market research information can help a business. Award 1 mark for each way market research information can help a business (max 4). Award a maximum of 1 additional mark for each explanation of the way. There are no application marks for this question. Relevant ways might include:

    Helps identify the target market – so can advertise more effectively to this market
    Helps to find a gap in the market – so the business can develop a new product to increase sales
    Helps identify where consumers purchase products – so can use the most effective distribution channel
    Helps identify the price customers are willing to pay – so know the most effective pricing strategy to use
    Helps identify which promotional methods consumers are attracted to – so can use these to increase sales
    Helps identify which products do not meet consumers’ needs – so can stop producing these products
    Helps identify competitors – so that they know the best way to compete with them
    Helps identify change in customer preferences/tastes/market trends
    Helps identify customer needs
    Helps to sell into a new market For example: Helps to find a gap in the market (1)

    so the business can develop a new product that meets customer needs (1).

  • 3(b)[12]

    Consider the following two ways TSE could purchase the raw materials for its factories. Which way should TSE use? Justify your answer (12)

    Head office in country P purchases the raw materials for all TSE factories
    TSE’s factory managers in each country purchase raw materials locally Level Description Sound application of knowledge and understanding of relevant business concepts using appropriate terminology. Detailed discussion of both ways. Well-justified recommendation. Candidates discussing both ways in detail, in context and with a well-justified recommendation, including why the alternative way was rejected, should be rewarded with the top marks in the band. 9–12 Sound application of knowledge and understanding of relevant business concepts using appropriate terminology. Detailed discussion of one way. Judgement with some justification / some evaluation of choice made. Candidates discussing at least one way in detail and applying it to the case should be rewarded with the top marks in the band. 5–8 Limited application of knowledge and understanding of relevant business concepts. Limited ability to discuss the ways with little/no explanation. Simple judgement with limited justification / limited evaluation of choice made. Candidates outlining the ways in context should be rewarded with the top marks in the band. 1–4 No Creditable Response Relevant points might include: Advantages Disadvantages Head office in country P purchases the raw materials for all TSE factories
    Able to make bulk purchases – discounts received – lowering variable costs / lower cost of materials such as rubber – lower average costs – increasing profit margin / possibly allowing lower selling prices
    Easier to check and standardise the production of tennis balls in different countries as all raw materials are the same quality – maintains reputation for good quality sports equipment
    Senior managers could find it easier to control subordinates – mistakes less likely to be made as managers are experienced in making these decisions – leading to better reputation
    The managers at TSE’s factories may not have the skills to carry out the tasks that have been delegated to them – so better decisions are made by head office
    Increased transport costs for raw materials to be taken to each of the 10 factories – factories may be in other countries increasing transport costs
    Do not have the raw materials available at the different factories – so may not satisfy local demand for particular sports – reducing sales
    May need warehouses for storage of raw materials before they are sent out to factories in the 10 countries – increases costs Advantages Disadvantages TSE’s factory managers in each country purchase raw materials locally
    Managers can order better quality raw materials to produce equipment for local sports – increases demand / improved competitiveness of equipment used in playing sports in that country – increases revenue
    Head/senior managers can now focus on the most important tasks at head office – make better decisions
    May increase motivation of managers of TSE’s factories leading to higher productivity
    May develop skills of managers in other countries
    May be unable to meet sudden increase in demand for specific sports equipment – if raw materials are not available – may lose customers as disappointed – lose reputation / customers do not return
    May delay the production of tennis balls – as need to wait for raw materials if problems with local availability – loses reputation for demand being satisfied quickly
    The factory managers may not have the skills to make these decisions – leading to stocking the wrong quantities of raw materials Recommendation Justification could include:
    All raw materials purchased by head office is the best way as this will allow considerable cost savings due to purchasing economies of scale and lower unit costs. This will allow TSE to keep prices low and to be more competitive with other similar sport equipment manufacturers. Whereas it may be more difficult to ensure the quality of raw materials if they are purchased by the factory managers which could damage the brand reputation.
    Each factory manager purchasing their own raw materials is the best way to choose because each manager can meet the local demand for specific sports, and this will attract more customers leading to higher revenue.
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