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Business Studies · Oct / Nov 2025 · Paper 22 · Question 2

0450

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  • 2(a)[8]

    Explain two benefits and two limitations of a business operating in a niche market. Award 1 mark for each benefit/limitation (max 2 benefits/2 max limitations). Award a maximum of 1 additional mark for each explanation of the benefit/limitation. There are no application marks for this question. Relevant benefits might include:

    Fewer businesses may be competitors in this part of the market – less need to spend on marketing the product
    The needs of the consumer can be more closely focused on – therefore their needs will be met giving high consumer satisfaction
    Increased sales and revenue as product meets customer needs
    Higher price can be charged – as product may be seen as high-status or exclusive
    Increased customer loyalty Relevant limitations might include:
    Niche markets are usually relatively small – therefore sales are likely to be smaller than in a mass market
    Limits potential growth in the market – profits may be limited in the future
    May mean the business specialises in one product – increased risk if the product has a fall in demand
    Small size of the market means that economies of scale are unlikely – resulting in higher unit costs
    High profits may attract competitors into the market – prices may have to be reduced For example: The business can focus more closely on customer needs (1)

    therefore their needs will be met giving high consumer satisfaction (1).

  • 2(b)[12]

    Using Appendix 2 and other information, consider the following three elements of the possible marketing mix for FF’s new shop. Which element is likely to be the most important? Justify your answer.

    Price – cost-plus pricing
    Place – selling some flowers through wedding planners
    Promotion – television advertising Level Description Sound application of knowledge and understanding of relevant business concepts using appropriate terminology. Detailed discussion of two or more elements. Well-justified conclusion. Candidates discussing all three elements, in context and with a well-justified conclusion, including why the alternative elements were 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 at least one element. Judgement with some justification / some evaluation of choice made. Candidates discussing two or more elements in detail and applying these 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 elements with little/no explanation. Simple judgement with limited justification / limited evaluation of choice made. Candidates outlining the three elements in context should be rewarded with the top marks in the band. 1–4 No creditable response. Relevant points might include: Advantages Disadvantages Price – cost- plus pricing
    Method is relatively easy to apply
    Different mark-ups can be applied for different brides depending on the type of flowers used in the arrangement
    Each product sold can earn a higher profit for the business – as it can closely meet the requirements of the individual customer in this niche market – and charge a higher price for the flower arrangement
    Need to calculate total costs to be able to calculate the price to charge for wedding flowers – may take time to collect the figures and may not be accurate if difficult to calculate the proportion of fixed costs per product
    Price may be higher than price of competitors’ – reducing sales and revenue
    Profit overall is only made if sufficient sales are made to cover fixed costs as well as the variable costs
    There is no incentive to reduce costs – as any increase in costs will be passed on to the customer Advantages Disadvantages Place – selling some flowers through wedding planners
    May have a larger market as now also sell to businesses that plan weddings for customers – may have higher revenue from sales of wedding flowers
    All storage costs paid by the wedding planner – may reduce costs for FF – flowers are perishable and may need specialist equipment to keep the high quality of the flowers
    Promotional activities are carried out and paid for by the wedding planner
    Part of the profit kept by the wedding planner – as discounts will be required by the wedding planner – lower return for Kathryn on her investment in her small business
    Slower way to get the flower arrangements to the customer – wedding flowers may lose quality as not as fresh when stored for longer periods of time
    Does not have complete control over the way the business is marketed – cannot display flower arrangements in the way chosen by Kathryn
    May be higher price as includes the wedding planner’s profit – may be less competitive Advantages Disadvantages Promotion – television advertising
    The advert will be seen by a large audience – potentially increases the target market – increasing sales and revenue
    The wedding flowers and arrangements can be shown in a very favourable way – with happy brides holding their flowers – moving images can convey the mood of high-quality products and enjoyable celebrations – increasing sales
    May encourage customers to visit the shop when they might not otherwise be aware of the shop
    Can target adverts to be shown during TV shows that the target market may be watching – such as bridal/wedding programmes
    Can be very expensive – increasing costs for FF
    FF may not be able to afford many adverts – so reducing their effectiveness as not on television very often
    Young consumers who are getting married may not watch television very often as more likely to use social media – reducing effectiveness of advertising and reducing potential sales Conclusion Justification might include:
    Cost-plus pricing will be the most important element of the marketing mix as it will allow different mark-ups for different flower arrangements for high income customers who are getting married leading to higher revenue and possibly more profit. Selling to wedding planners may reduce the high-quality of the flowers as it may take longer to get to the customer, reducing customer satisfaction and television advertising may be limited given the large budget needed to have a television campaign.
    Selling to wedding planners will allow Kathryn to increase the number of customers for her flowers to use in arrangements and flower arrangements for weddings – this may give word-of-mouth advertising – leading to higher sales from the shop.
    Advertising on television may mean that customers from across the city are likely to see the adverts and visit the shop – leading to higher sales of wedding flowers.
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