EDEXCEL GCSE BUSINESS · PAPER 1
Exam Practice: The Competitive Environment
The competitive environment · Spotting a business opportunity · Lesson 5 of 5 · 13 marks · 25 minutes
Name Date
Answer all questions. Use the context of the business in the question where one is given.
Question 1 DEFINE [1 mark]
Define the term 'competitor'.
Question 2 STATE [1 mark]
State one factor a business could use to judge the strengths and weaknesses of a competitor.
Question 3 OUTLINE [2 marks]
Outline one way a small business could compete with a larger competitor.
Question 4 EXPLAIN [3 marks]
Explain one way that competition might affect the decisions a small business makes.
Question 5 ANALYSE [6 marks]
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SOURCE Hana owns an independent bookshop in a small town. A large chain bookshop has just opened a branch on the same high street. The chain sells best-sellers at lower prices than Hana, and has a much bigger range. Hana's shop is known for friendly staff who recommend books, and for its children's reading events. |
Analyse the impact of the new competitor on Hana's business.
Answers
Check your answer only once you have written one.
Question 1 [1 mark]
Another business that sells similar products or services to the same customers.
▸ A business selling similar products / to the same customers 1 mark
Question 2 [1 mark]
Customer service.
▸ Any one of: price; quality; location; product range; customer service 1 mark
Question 3 [2 marks]
By offering better customer service (1), such as knowing regular customers by name, which a large business with many branches may struggle to match (1).
▸ A way identified, e.g. customer service / quality / location / specialist range / USP 1 mark
▸ Developed in context 1 mark
Question 4 [3 marks]
It may decide to lower its prices (1). If a competitor sells a similar product more cheaply, customers may switch to the competitor (1). Lowering prices could protect the business's sales, but it would reduce the profit it makes on each item (1).
▸ A decision identified, e.g. pricing / quality / customer service / location / product range 1 mark
▸ First linked point of explanation 1 mark
▸ Second linked point of explanation 1 mark
Question 5 [6 marks]
The chain sells best-sellers at lower prices, so customers who only care about price may switch to it. This means Hana's sales of popular books are likely to fall, reducing her revenue. If she lowers her prices to compete, she will make less profit on each book, which is difficult for a small business with higher costs. However, the competition may push Hana to focus on her strengths. Her friendly staff and children's reading events are customer service the chain may not offer. By promoting these, she can give customers a reason to keep choosing her shop, which means she can protect her loyal customers without having to win a price war she cannot afford.
▸ AO2 (Application, 3 marks): uses the context - the chain's lower prices and range, Hana's staff and reading events Level 1-3
▸ AO3a (Analysis, 3 marks): chains of reasoning showing the impact on Hana's sales, prices and profit Level 1-3