EDEXCEL GCSE BUSINESS · PAPER 1
Exam Practice: External Influences
External influences · Understanding external influences on business · Lesson 5 of 5 · 16 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 'external influence'.
Question 2 STATE [1 mark]
State one external influence on a business.
Question 3 OUTLINE [2 marks]
Outline one way a small business could respond to a rise in inflation.
Question 4 EXPLAIN [3 marks]
Explain one way a small shop could respond to a competitor that starts selling online.
Question 5 JUSTIFY [9 marks]
|
SOURCE Rosa runs a small bakery. Inflation has increased the cost of her flour, butter and energy by 15% in a year, and her profit has fallen. Many of her customers are families on tight budgets. Option 1: Raise her prices by 10%. Option 2: Keep her prices the same and cut costs by switching to a cheaper flour supplier and baking fewer types of cake. |
Justify which one of these two options Rosa should choose.
Answers
Check your answer only once you have written one.
Question 1 [1 mark]
A factor outside a business that it cannot control but that affects how it operates.
▸ A factor outside the business / beyond its control that affects it 1 mark
Question 2 [1 mark]
The economic climate.
▸ Any one of: technology; legislation; the economic climate (or a named part of it, e.g. interest rates) 1 mark
Question 3 [2 marks]
It could look for cheaper suppliers (1), so that its costs rise less and it does not have to raise its own prices as much (1).
▸ A response identified, e.g. cheaper suppliers / raise prices / cut waste 1 mark
▸ Developed: how it helps the business 1 mark
Question 4 [3 marks]
The shop could start selling online itself (1). This would let it reach customers who prefer to shop online and are not near the shop (1). As a result it could protect its sales rather than losing those customers to the competitor (1).
▸ A response identified, e.g. sell online / improve service / compete on expertise 1 mark
▸ First linked point of explanation 1 mark
▸ Second linked point of explanation 1 mark
Question 5 [9 marks]
Option 1 would raise her revenue per item, helping to cover the 15% increase in her costs and restore some of her profit. However, many of her customers are families on tight budgets, who are also affected by inflation. A 10% price rise may push them to buy less or switch to a supermarket, so her sales could fall and her total revenue might not rise at all. Option 2 keeps her prices the same, so her price-sensitive customers are less likely to leave. Switching to a cheaper flour supplier and baking fewer types of cake would cut her costs and reduce waste. But cheaper flour could lower quality, and fewer types of cake means less choice, so some customers might be disappointed. On balance Rosa should choose Option 2, because her customers are on tight budgets and a price rise risks losing them to cheaper rivals, while cutting costs protects profit without driving them away. However, this depends on the cheaper flour being good enough that customers do not notice a fall in quality.
▸ AO2 (Application, 3 marks): uses Rosa's context - 15% cost rise, falling profit, families on tight budgets, the two options Level 1-3
▸ AO3a (Analysis, 3 marks): chains of reasoning about each option Level 1-3
▸ AO3b (Evaluation, 3 marks): a justified choice with a supported judgement, e.g. "it depends on" Level 1-3