Business Growth (Edexcel A Level Business): Exam Questions

Read the following extracts (A to D) (opens in a new tab) before answering

Assess whether expanding by organic growth was the right decision for Mumtaz.

Read the following extracts (E to H) (opens in a new tab) before answering

Assess two economies of scale likely to be gained by Pure Gym following its takeover of LA Fitness

Read the following extracts (E to H) (opens in a new tab) before answering

Assess the likely effects for AG Barr of taking over Funkin, the cocktail mixer business

Read the following extracts (E to H) (opens in a new tab) before answering

Assess whether Pure Gym is likely to overcome the possible difficulties of changing LA Fitness’s culture, as a result of the takeover

Read the following extracts (A to C) (opens in a new tab) before answering

Assess the extent to which the problems of rapid growth may have been managed by Tended Ltd

Read the following extracts (A to D) (opens in a new tab) before answering

Assess the extent to which Unilever may benefit from its takeover of Dermalogica.

Extract A

Universal Music Group

Universal Music Group (UMG) is the world’s largest music label, responsible for producing and distributing music. It has the largest market share, with 33.90%, followed by Sony Music Entertainment with 26.91%, Indies with 23.21% and Warner Music Group with 15.98%

UMG’s artists include American and British acts: Taylor Swift, Kendrick Lamar, Elton John, and Sabrina Carpenter. UMG receives a proportion of each artist’s sales of music.

In 2024 its revenue increased by 14.4%, helped by the strong sales for The Tortured Poets Department by Taylor Swift. In the UK alone the album has moved 255,515 copies on physical formats.

However, the potential of Artificial Intelligence (AI) to use artist material owned by UMG and TikTok’s global influence on music consumption, provide challenges to UMG.

(Source: adapted from https://www.universalmusic.com and https://www.musicbusinessworldwide.com/this-analyst-has-watcheduniversal-music-group-closely-for-years-and-hasnt-always-been-megapositive-he-just-upgraded-umgs-stock-for-the-second-time-in-a-year/)

Extract B

Rough Trade Records

Rough Trade is an independent record store, with 7 shops in cities including London and Liverpool.

Its owners are happy to remain small. They avoid locating in areas that already have a strong independent record shop, so as not to create competition for that store. The owners recognise that there are probably 5 or 6 cities where it could open a new Rough Trade record store.

For the year ending December 31, 2022, Rough Trade's Sales Revenue was £14,348,884, Gross Profit of £5,210,500, and Operating Profit was £528,330. Rough Trade's cost of sales and operating expenses both increased significantly during 2022.

Rough Trade pay its staff well above the minimum wage. It makes sure its staff have a good working environment and have the support they need to give great customer service. It also paid out a profit bonus to all staff.

Rough Trade increased its share of the UK market for vinyl to 8.4% (up from 7%). Sales of books and turntables also increased.

(Source: adapted from https://www.musicweek.com/labels/read/rough-trade-retail-reports-record-revenue-amid-vinyl-sales-boom/)

Extract C

Emerging markets and the global music industry

The music industry’s focus has slowly moved towards emerging markets. Labels such as UMG brought Western music influences into these markets through international marketing of global artists. However, regional scenes and local artists are taking on global sounds. K-pop, Reggaeton and Afrobeats are examples of this influence. Sales of artists, such as Tiara Andini in Indonesia and Chris Mj in Chile, are expected to grow.

Emerging markets are vital for streaming services and major labels. Spotify and Apple Music were late to realise the potential of emerging markets. This allowed local streaming services such as JioSaavn in India to provide local consumers with easier access to local music. It also enabled local artists to find new opportunities to become superstars in their home markets. These local streaming services lack a global presence, but successfully focus on regional music.

European and North American artists who are looking for global relevance are turning to local sounds and cultures to differentiate their music.

(Source: adapted from https://www.midiaresearch.com/blog/emergingmarket-music-cultures-are-shaping-the-global-music-industry)

Assess the reasons why Rough Trade Records may choose to stay small.

Read the following extracts (A to D) (opens in a new tab) before answering

Mumtaz’s aim is to become the UK’s market leader in Asian ready meals. To achieve this, it could produce own label ready meals for supermarkets or focus on selling more Mumtaz premium brand name products

Evaluate these two options and recommend which is most suitable for Mumtaz to achieve its aim.

Read the following extracts (A to D) (opens in a new tab) before answering

In 2014 Ferrero International took over the Oltan Group. In 2015 it took over Thorntons.

Using the data in Extract D, evaluate these two takeovers and recommend which one is most likely to have affected the profits of Ferrero International.

Read the following extracts (A to D) (opens in a new tab) before answering

Using the data in Extract D and your own knowledge of business, evaluate and recommend whether Mindful Chef should seek a joint venture with Auchan, France or seek a global merger with companies such as Blue Apron, US.

Read Extracts A to D (opens in a new tab) before answering

Brompton has set itself the objective of expansion. It is considering two options to expand, either by organic or inorganic growth.

Evaluate these two options and recommend which one is the best for Brompton to achieve its objective of expansion.

Extract E

Tesla

Tesla is an American multinational company that designs and manufactures electric vehicles. In 2021, the company had the most worldwide sales of battery electric vehicles, with a market share of 21%. In 2023, it was the world’s most valuable vehicle manufacturer by share value. Tesla’s sales revenue increased from 53.82bn US dollars in 2021 to 81.46bn US dollars in 2022. It made an operating profit of 6.53bn US dollars in 2021 and 13.65bn US dollars in 2022.

Tesla’s largest shareholder is Elon Musk. He is also the company’s Chief Executive.

Tesla’s current product range includes four different cars. These are the Model S, the Model 3, the Model X and the Model Y. The Model 3 is the all-time bestselling plug-in electric car worldwide and, in June 2021, became the first electric car to sell 1 million units globally. The company started production of the Cybertruck in 2023.

(Source: adapted from https://en.wikipedia.org/wiki/Tesla,_Inc. and https://www.macrotrends.net/stocks/charts/TSLA/tesla/income-statement)

Extract F

Tesla’s advanced manufacturing system

Tesla’s factories achieve high levels of capacity utilisation. In 2022, Tesla produced 1.37m vehicles, a 47% increase on the amount produced in 2021.

The company uses a combination of traditional manufacturing techniques, advanced robotics and just-in-time management of stock.

One of the key features of Tesla’s manufacturing process is its use of advanced robotics. The company uses many robots in its factories, which perform various tasks, including welding, painting, and assembly.

Another key feature of Tesla’s manufacturing process is its focus on lean production.

(Source: adapted from https://inventory-management.com/erp/manufacturingerp/teslas-manufacturing-process/ and https://www.statista.com/statistics/715421/tesla-quarterly-vehicle-production/)

Extract G

Tesla’s corporate culture

Tesla places great emphasis on task culture. This type of corporate culture encourages employees to develop solutions to current and emerging problems. Speed affects Tesla’s competitive advantage. Employees are expected to rapidly respond to trends and changes in the market. For example, Tesla’s design teams need to be able to develop products that match or exceed those from rival car manufacturers. Production workers are encouraged to suggest ideas for improving productivity and quality. Continuous innovation is at the heart of Tesla. For example, Tesla continuously researches and develops ideas that help develop cutting-edge electric cars and related products.

(Source: adapted from https://panmore.com/tesla-motors-incorganizational-culture-characteristics-analysis)

Extract H

The electric truck market

The global electric truck market was valued at 392m US dollars in 2020, and is projected to reach 3 862m US dollars by 2030. Market size by volume is forecast to increase from 101,499 trucks in 2022 to 1,067,985 by 2030. The market is dominated by multinational manufacturers, such as Volvo, Mercedes and Ford.

Factors such as government initiatives for increased use of electric vehicles, stronger regulation of the emissions from fossil fuel-powered commercial vehicles, and reducing cost of electric vehicle batteries are driving growth of the electric truck market. However, lack of charging infrastructure and the high price of electric trucks are expected to hinder growth of the market during the forecast period.

(Source: adapted from https://www.alliedmarketresearch.com/electric-truck-market-A06183)

Elon Musk has set the objective of increasing Tesla's market share of the electric vehicle market. To achieve this objective, Elon Musk is considering whether to focus on market penetration of the electric car market or product development through electric trucks.

Evaluate these two options and recommend which one Elon Musk should choose to achieve the objective of increasing Tesla's market share.

Extract D

51 years of independent retail

Jonathan Trumbull Ltd was founded in 1971 in Norwich. It owns three stores: Trumbull, Ginger and Hatters. Estimated expansion costs for one of these stores ranges between £25,000 and £30,000.

The business sells clothing from a variety of brands, including Armani, Tom Ford, and Moschino.

Jonathan Trumbull Ltd's website cost approximately £2,000 to set up. Its IT-based stock system is managed by Swan Retail, which provides a fully integrated customer ordering, stock management and accounting system. Expansion of e-commerce could cost 30% more than the original set-up cost.

Norwich is the largest city in the East of England and is the main regional centre for shopping. It has regularly been voted one of the top five retail destinations in the UK.

(Source: adapted from jonathantrumbull.co.uk and interview with manager)

Extract E

Ginger reopens in its former shop

Ginger has moved back to its original premises in Timberhill. Beckie Kingsley, the store manager, said: 'It is lovely being back in Timberhill. It has a great community spirit, and it is full of thriving independent shops, including other fashion retailers. Everybody is willing to help each other out and we all share ideas.'

(Source: adapted from eveningnews24.co.uk)

Extract F

Extract from Jonathan Trumbull Ltd's statement of financial position

(Source: adapted from © Crown copyright)

Extract G

Competition for Jonathan Trumbull Ltd

In 2023, the multinational clothing retailer, Urban Outfitters, announced the opening of its store in Chantry Place, Norwich's biggest shopping mall.

Online sales increased by 150% in 2022, however Urban Outfitters is also opening new stores. Brick and mortar stores serve as a showroom for products and give customers the opportunity to touch and feel products. Its store layouts are more varied between locations than other retailers, based on stylish loft apartments, with features such as exposed ceilings and wooden floors.

(Source: adapted from eveningnews24.co.uk and marker.medium.com)

To compete with new businesses, such as Urban Outfitters, Jonathan Trumbull Ltd is considering either improving its physical stores in Norwich or expanding its online sales.

Using the data in Extracts D to G, evaluate these two options and recommend which one will help Jonathan Trumbull Ltd compete effectively.