1
20 marks
Read the case study in the Insert (opens in a new tab).
Sanjay is considering two options for the growth of Speed-e-Puds Ltd.
Would you advise him to choose Option 1 or Option 2?
Justify your answer.
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Changes in Scale (AQA A Level Business): Exam Questions
Exam code: 7132
Syllabus Edition
First teaching 2023
Last exams
3 hours17 questions
2
25 marks
To what extent is organic growth always preferable to external (inorganic) growth as a method of business expansion?
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3
1 mark
A food manufacturer buys two businesses: a direct competitor and a food wholesaler.
What is this an example of?
Backward vertical integration and forward vertical integration
Conglomerate integration
Horizontal integration and backward vertical integration
Horizontal integration and forward vertical integration
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4
25 marks
Is it inevitable that large, growing businesses will eventually experience rising unit costs? Justify your view.
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5
12 marks
Read the case study in the Insert (opens in a new tab).
Logger Boards Ltd’s growth has been organic rather than external.
Analyse why Bodhi may have preferred organic growth to external growth.
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6
1 mark
A business is able to reduce unit costs because of lessons learned throughout the period in which it has existed. This is known as:
economies of scale.
economies of scope.
synergy.
the experience curve.
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7
16 marks
Case Study
Ocado venture with M&S
Marks & Spencer (M&S) started to sell its popular food range online for the first time in September 2020, by forming a venture (also known as a joint venture) with Ocado. Ocado is a solely online supermarket that has well-established distribution networks and market-leading advanced technology.
M&S funded its part of the £1.5bn venture by selling £600m of shares to existing shareholders and by cutting shareholder dividends by 40%.
M&S stated that it had always believed M&S branded food should be available online and combining with Ocado was a ‘win-win’ situation that would drive long-term growth of both businesses.
Following the announcement of the venture, Ocado’s share price rose by 3%.
The launch of the venture followed over a year of hard work and required senior managers from both businesses to work together to make it happen.
Are ventures a good way for all businesses to grow?
Justify your view.
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8
1 mark
The leadership crisis occurs at the end of which of Greiner’s stages of growth?
Growth through collaboration
Growth through creativity
Growth through delegation
Growth through direction
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9
1 mark
Statement 1: ‘External growth requires a business to integrate with another business that is located in a different country.’
Statement 2: ‘Organic growth requires a business to use its own resources to expand its size.’
Read statements 1 and 2 and select the correct option from the following options.
Statement 1 is true. Statement 2 is true.
Statement 1 is true. Statement 2 is false.
Statement 1 is false. Statement 2 is true.
Statement 1 is false. Statement 2 is false.
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10
16 marks
Case Study
Zani
Zani PLC is a jewellery retailer. Its products include rings, necklaces and bracelets that are made with precious metals and gemstones. Zani PLC has a strong brand reputation for unique designs. The company targets high-income earners. The price elasticity of demand for Zani PLC’s products is estimated to be –0.4.
Zani PLC was established in 2005 by Ted Zani. Ted had previously worked for a big multinational jewellery business but left because he wanted to be his own boss. He set up the business with venture capital. In its early years, with Ted in charge, the company had a power culture (according to Handy’s model). Shareholders felt a change of culture was necessary as the business got bigger and so Ted was replaced as Chief Executive in 2013.
Zani PLC set up 16 of its own stores in its first eight years. The company has continued to grow since then by selling 150 franchises around the world.
Zani PLC has grown by selling franchises.
To what extent is selling franchises a good way for any business to grow?
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11
1 mark
Which one of the following statements is true?
Backward vertical integration is impossible for a retailer.
Conglomerate integration narrows the product range.
Forward vertical integration allows a business better access to its raw materials.
Horizontal integration should give a business an immediate increase in market share.
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12
16 marks
Case Study
Marks and Spencer plc is one of the UK’s leading retailers. It provides its own-brand food, clothing and home products in 1433 stores worldwide and online.
Appendix A Extracts from Marks and Spencer plc’s published
financial accounts
Balance sheet as at 1 April 2017
£ million | |
Assets | |
Non-current assets | 6 569 |
Current assets | 1 723 |
Liabilities | |
Current liabilities | 2 368 |
Non-current liabilities | 2 774 |
Net assets | 3 150 |
Equity | |
Total equity | 3 150 |
Appendix B Marks and Spencer plc’s revenue and operating profit
2013–14 to 2016–17
Appendix C Marks and Spencer plc customer data for financial
year ending 1 April 2017
Total number of customers | Percentage change on previous year | Average number of times a year a customer buys from Marks & Spencer | Percentage change on previous year | |
Food | 20.5 million | +2.0% | 22.5 | 0% |
Clothing and home | 24.6 million | 0% | 7.2 | –5.3% |
Appendix D Marks and Spencer plc online data
2016–17 | Percentage change on previous year | |
Total online revenue | £836.3 million | +5.6% |
Weekly site visits | 8.3 million | +11% |
Appendix E Information on Marks and Spencer plc’s Board of
Directors in 2017
International experience: directors come from the following
countries
China Germany Hong Kong India Japan Italy
UK Spain Netherlands Poland South Africa USA
Gender diversity: 70% of directors are male, 30% female
Industry sector experience of directors: retail 90%, consumer 100%, finance 60%, e-commerce and technology 40%
Appendix F Marks and Spencer plc’s share price
In April 2017 a rival business was considering taking over Marks and Spencer plc. box How useful do you think the data provided in Appendices A to F might have been to this rival business when deciding whether to make a take-over bid? Justify your answer.
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13
24 marks
Read the case study in the Insert.
Jack plans to grow his business rapidly over the next few years. To what extent is it possible for businesses to overcome the problems caused by rapid growth?
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14
1 mark
A farmer takes over a retailer in order to sell its produce. This is an example of
horizontal integration.
backward vertical integration.
forward vertical integration.
conglomerate integration.
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15
1 mark
Which type of crisis is most likely to occur at point 3 of Greiner’s model of growth shown below?
Leadership crisis
Autonomy crisis
Red tape crisis
Control crisis
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16
16 marks
Case Study
Apex Digital Solutions plc
Apex Digital Solutions plc is a UK-based technology consultancy specialising in cybersecurity software and data analytics. Founded in 2008, the company has grown rapidly to employ over 300 highly qualified staff, and now serves clients across the financial services, healthcare and government sectors.
Apex's competitive advantage has been built on three foundations: deep technical expertise in cybersecurity, a portfolio of proprietary software products developed in-house, and strong, long-term relationships with clients in high-trust sectors. These capabilities have proven difficult for competitors to replicate, and have allowed Apex to command premium prices.
Following strong organic growth, Apex's directors are now considering a significant change in strategic direction: the acquisition of a manufacturer of specialist hardware security devices. The directors believe that offering fully integrated hardware-software security systems would open up new market opportunities. However, the proposed acquisition would require Apex to take on substantial additional debt, increasing its already-rising gearing ratio.
Financial data for Apex Digital Solutions plc is shown in Appendix 2.
Appendix 2: Extracts from the financial records of Apex Digital Solutions plc (year ending 31 March 2026)
Item | £000 |
|---|---|
Non-current assets | 20,000 |
Current assets | 8,000 |
Current liabilities | 4,000 |
Non-current liabilities (long-term loans) | 9,000 |
Total equity | 15,000 |
Profit from operations | 3,600 |
Additional information: Apex's gearing ratio three years ago was 22%.
The directors of Apex Digital Solutions plc are proposing to acquire a manufacturer of specialist hardware security devices.
Evaluate whether Apex Digital Solutions plc should proceed with this acquisition.
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17
16 marks
Case Study
BeanStone Coffee Ltd
BeanStone Coffee Ltd is an independent premium coffee shop chain with 45 outlets across England. Founded in 2010 by entrepreneur Maya Osei, the business has built a strong reputation for high-quality, single-origin coffee, ethically sourced directly from small-scale producers. Each outlet is individually designed to create a distinctive, welcoming atmosphere, and BeanStone's baristas receive extensive training in both coffee preparation and customer service.
In recent years, BeanStone has faced growing competition from budget coffee operators and large national chains. In response, the directors are considering two strategic initiatives:
Launching a lower-priced sub-brand, BeanStone Express, using a penetration pricing strategy to attract price-conscious customers without changing the main BeanStone range
Expanding to 100 outlets by 2030 using a franchising model to accelerate growth without requiring significant further capital investment from the company
To support its broader growth plans, BeanStone is also evaluating an investment in a central coffee roasting facility. This would reduce BeanStone's dependence on third-party roasters, improve quality control and reduce long-term costs. Financial data for this proposed investment is shown in Appendix 1.
Appendix 1: Proposed investment in a new central roasting facility
Initial investment cost: £500,000
Estimated useful life: 5 years
Residual value at end of Year 5: £0
Year | Forecast annual profit (£) |
|---|---|
1 | 60,000 |
2 | 80,000 |
3 | 100,000 |
4 | 120,000 |
5 | 140,000 |
BeanStone Coffee Ltd's directors are proposing to expand from 45 to 100 outlets by 2030 using a franchising model.
Evaluate whether franchising is the most appropriate method of growth for BeanStone Coffee Ltd.
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