Practise Edexcel Business questions on market structure, demand, competition and market research, using case evidence to judge how firms respond to market conditions.
Sources for use with
Extract E
Niche brands are increasing their mass market appeal
In the last 10 years there has been an increase in the number of health and well-being brands moving from a niche to a mass market. Many health products are benefitting from increased revenue, due to growing consumer desires to live healthier lives. These brands are no longer viewed as exclusive products and are now purchased by more customers each year. One of these brands is Pukka, which sells premium priced speciality tea. The global speciality tea market is predicted to grow by $50bn between 2021 and 2026. Extract F
About Pukka
Pukka sells a range of speciality teas including herbal, organic and fruit teas. Entrepreneurs Sebastian Pole and Tim Westwell launched Pukka in 2001. Sebastian had been interested in plants and conservation for many years. He was determined to follow his dream to start a business selling a healthy product. Sebastian saw an advertisement of Tim’s which offered to help start up an ethical business. They agreed to meet to discuss their ideas and Pukka was formed shortly afterwards. From the first moment Tim and Sebastian met, they were the perfect match. Although they had completely different personal skills, they shared a common marketing objective, to create a business that would benefit the health of people. Tim had 10 years’ experience as a business management consultant. They spent many hours in Tim’s house planning their future strategy. They worked evenings and weekends to turn their ideas into a successful business.
A retailer selling Pukka tea decreased the price of a packet of tea from $10 to $8. Sales increased from 2,500 packets to 3,500 packets per week.
Calculate the price elasticity of demand (PED) for the packets of tea. You are advised to show your working.
Extract F
About Pukka
Pukka sells a range of speciality teas including herbal, organic and fruit teas. Entrepreneurs Sebastian Pole and Tim Westwell launched Pukka in 2001. Sebastian had been interested in plants and conservation for many years. He was determined to follow his dream to start a business selling a healthy product. Sebastian saw an advertisement of Tim’s which offered to help start up an ethical business. They agreed to meet to discuss their ideas and Pukka was formed shortly afterwards. From the first moment Tim and Sebastian met, they were the perfect match. Although they had completely different personal skills, they shared a common marketing objective, to create a business that would benefit the health of people. Tim had 10 years’ experience as a business management consultant. They spent many hours in Tim’s house planning their future strategy. They worked evenings and weekends to turn their ideas into a successful business.
Analyse two factors, other than price, that may have caused an increase in the demand for Pukka tea.
Sources for use with Extract D In congested Istanbul, companies get goods to you fast There has been a rapid growth in the demand for shopping services in Istanbul, Turkey. These on-demand services are expanding because transportation can be slow. Businesses are making use of new technology, wages are rising and more people have access to smartphones. Shopping services such as Kapgel and Getir offer innovative delivery solutions to meet the needs of their customers. Both firms have different approaches, but aim to meet people’s immediate needs and develop customer loyalty by using technology to develop apps and deliver goods as quickly as possible. Kapgel has designed an app to allow customers to shop from a wide number of stores and supermarkets. The customer creates a basket of goods on the app and a delivery person shops for these items and delivers directly to the customer. Deliveries are made within one hour for a delivery fee of 5 Turkish Lira (US $0.85). Kapgel does not keep any stock and uses part-time and temporary delivery people, rather than employing workers on a permanent and full-time basis. Getir owns many warehouses around Istanbul to stock over 1,000 different products, including food items and small electrical goods. Customers select from the 1,000 items using an app on their smartphone. Getir employs over 350 people for this delivery business and have an average delivery time of 9 minutes and 6 seconds. Unlike Kapgel’s delivery fee, Getir adds a cost to each product. It has a minimum shopping total of 15 Turkish Lira (US $2.55) before it will deliver an order.
Extract E BiSU Water Delivery In Turkey, most tap water is not drinkable. Delivery services in the past were slow and not well organised. On-demand delivery services such as BiSU have changed the water delivery market in Turkey. Customers can now order water using an app on their smartphone. They can have it delivered quickly and at a time to suit them. BiSU has a large team of delivery drivers. The business was launched in 2015 and has expanded to many cities in Turkey, receiving over 100,000 orders a month from 38,000 users. Water prices depend on the brand requested and the region the water is delivered to.
In 2018, incomes in Turkey increased by 6% and BiSU sales increased from 100,000 deliveries to 112,000 deliveries a month.
Using this data, calculate the income elasticity of demand for BiSU. You are advised to show your working.
Analyse two factors that may lead to a change in the supply of delivery services in Turkey.
Sources for use with
Extract A
The Ice Cream Market
The global ice cream market value is expected to reach $89bn by 2023 and is attracting many new businesses to the market. Unilever dominates the global market with a 22% share. It owns 8 of the 15 top selling brands. Its brands include Magnum, Cornetto and Ben & Jerry’s. Nestlé is Unilever’s closest rival having 4 brands in the top 15. The sales of low‑quality ice cream have been declining, due to the increased demand for premium ice cream. There are many factors contributing to the growth of the ice cream market. These include innovative flavours and the rise in incomes. Niche markets are developing to cater for an increase in demand for organic and naturally sweet desserts. There is an increase in demand for ice cream from consumers above the age of 50.
Extract B
Oppo Ice Cream
Everyone loves ice cream. We all know it is a delicious treat but know it is not a healthy one. However, a business called Oppo has created an ice cream with 60% fewer calories and less sugar than standard ice cream. Oppo claims that one portion of its ice cream contains fewer calories than an apple. Brothers Charlie and Harry Thuillier came up with the idea while on holiday in Brazil. When they returned home, Charlie left his graduate job to dedicate himself full‑time to developing a healthier ice cream. During their primary market research the brothers used two methods, interviews and product trials. They interviewed people who worked in the ice cream industry including a leading industry professional named Gary Martin who had worked on the Häagen‑Dazs ice cream brand. After months of experimenting with different recipes, Charlie and Harry developed a winning recipe that replaced cream and sugar with fresh milk, coconut oil and stevia leaf. Oppo initially conducted product trials in a few supermarkets to test if the product would sell, and now the ice cream is stocked in over 1,600 UK stores. After two years of hard work in Harry’s kitchen the brothers had achieved what they set out to do. Even though they were told by some industry professionals that they would not succeed, the pair persevered and their determination paid off. The business is now continuing to grow and is expanding internationally.
Milk and cream are used to produce ice cream.
Construct a supply and demand diagram to show the impact of a decrease in the price of milk and cream on the ice cream market.
Analyse two factors that might influence the price elasticity of demand (PED) for ice cream.
Sources for use with
Extract E
Niche brands are increasing their mass market appeal
In the last 10 years there has been an increase in the number of health and well-being brands moving from a niche to a mass market. Many health products are benefitting from increased revenue, due to growing consumer desires to live healthier lives. These brands are no longer viewed as exclusive products and are now purchased by more customers each year. One of these brands is Pukka, which sells premium priced speciality tea. The global speciality tea market is predicted to grow by $50bn between 2021 and 2026. Extract F
About Pukka
Pukka sells a range of speciality teas including herbal, organic and fruit teas. Entrepreneurs Sebastian Pole and Tim Westwell launched Pukka in 2001. Sebastian had been interested in plants and conservation for many years. He was determined to follow his dream to start a business selling a healthy product. Sebastian saw an advertisement of Tim’s which offered to help start up an ethical business. They agreed to meet to discuss their ideas and Pukka was formed shortly afterwards. From the first moment Tim and Sebastian met, they were the perfect match. Although they had completely different personal skills, they shared a common marketing objective, to create a business that would benefit the health of people. Tim had 10 years’ experience as a business management consultant. They spent many hours in Tim’s house planning their future strategy. They worked evenings and weekends to turn their ideas into a successful business.
Extract F
About Pukka
Pukka sells a range of speciality teas including herbal, organic and fruit teas. Entrepreneurs Sebastian Pole and Tim Westwell launched Pukka in 2001. Sebastian had been interested in plants and conservation for many years. He was determined to follow his dream to start a business selling a healthy product. Sebastian saw an advertisement of Tim’s which offered to help start up an ethical business. They agreed to meet to discuss their ideas and Pukka was formed shortly afterwards. From the first moment Tim and Sebastian met, they were the perfect match. Although they had completely different personal skills, they shared a common marketing objective, to create a business that would benefit the health of people. Tim had 10 years’ experience as a business management consultant. They spent many hours in Tim’s house planning their future strategy. They worked evenings and weekends to turn their ideas into a successful business.
Analyse two factors, other than price, that may have caused an increase in the demand for Pukka tea.
Sources for use with Extract D In congested Istanbul, companies get goods to you fast There has been a rapid growth in the demand for shopping services in Istanbul, Turkey. These on-demand services are expanding because transportation can be slow. Businesses are making use of new technology, wages are rising and more people have access to smartphones. Shopping services such as Kapgel and Getir offer innovative delivery solutions to meet the needs of their customers. Both firms have different approaches, but aim to meet people’s immediate needs and develop customer loyalty by using technology to develop apps and deliver goods as quickly as possible. Kapgel has designed an app to allow customers to shop from a wide number of stores and supermarkets. The customer creates a basket of goods on the app and a delivery person shops for these items and delivers directly to the customer. Deliveries are made within one hour for a delivery fee of 5 Turkish Lira (US $0.85). Kapgel does not keep any stock and uses part-time and temporary delivery people, rather than employing workers on a permanent and full-time basis. Getir owns many warehouses around Istanbul to stock over 1,000 different products, including food items and small electrical goods. Customers select from the 1,000 items using an app on their smartphone. Getir employs over 350 people for this delivery business and have an average delivery time of 9 minutes and 6 seconds. Unlike Kapgel’s delivery fee, Getir adds a cost to each product. It has a minimum shopping total of 15 Turkish Lira (US $2.55) before it will deliver an order.
Extract E BiSU Water Delivery In Turkey, most tap water is not drinkable. Delivery services in the past were slow and not well organised. On-demand delivery services such as BiSU have changed the water delivery market in Turkey. Customers can now order water using an app on their smartphone. They can have it delivered quickly and at a time to suit them. BiSU has a large team of delivery drivers. The business was launched in 2015 and has expanded to many cities in Turkey, receiving over 100,000 orders a month from 38,000 users. Water prices depend on the brand requested and the region the water is delivered to.
Analyse two factors that may lead to a change in the supply of delivery services in Turkey.
Sources for use with
Extract A
The Ice Cream Market
The global ice cream market value is expected to reach $89bn by 2023 and is attracting many new businesses to the market. Unilever dominates the global market with a 22% share. It owns 8 of the 15 top selling brands. Its brands include Magnum, Cornetto and Ben & Jerry’s. Nestlé is Unilever’s closest rival having 4 brands in the top 15. The sales of low‑quality ice cream have been declining, due to the increased demand for premium ice cream. There are many factors contributing to the growth of the ice cream market. These include innovative flavours and the rise in incomes. Niche markets are developing to cater for an increase in demand for organic and naturally sweet desserts. There is an increase in demand for ice cream from consumers above the age of 50.
Extract B
Oppo Ice Cream
Everyone loves ice cream. We all know it is a delicious treat but know it is not a healthy one. However, a business called Oppo has created an ice cream with 60% fewer calories and less sugar than standard ice cream. Oppo claims that one portion of its ice cream contains fewer calories than an apple. Brothers Charlie and Harry Thuillier came up with the idea while on holiday in Brazil. When they returned home, Charlie left his graduate job to dedicate himself full‑time to developing a healthier ice cream. During their primary market research the brothers used two methods, interviews and product trials. They interviewed people who worked in the ice cream industry including a leading industry professional named Gary Martin who had worked on the Häagen‑Dazs ice cream brand. After months of experimenting with different recipes, Charlie and Harry developed a winning recipe that replaced cream and sugar with fresh milk, coconut oil and stevia leaf. Oppo initially conducted product trials in a few supermarkets to test if the product would sell, and now the ice cream is stocked in over 1,600 UK stores. After two years of hard work in Harry’s kitchen the brothers had achieved what they set out to do. Even though they were told by some industry professionals that they would not succeed, the pair persevered and their determination paid off. The business is now continuing to grow and is expanding internationally.
Milk and cream are used to produce ice cream.
Construct a supply and demand diagram to show the impact of a decrease in the price of milk and cream on the ice cream market.
Sources for use with
Extract E
Niche brands are increasing their mass market appeal
In the last 10 years there has been an increase in the number of health and well-being brands moving from a niche to a mass market. Many health products are benefitting from increased revenue, due to growing consumer desires to live healthier lives. These brands are no longer viewed as exclusive products and are now purchased by more customers each year. One of these brands is Pukka, which sells premium priced speciality tea. The global speciality tea market is predicted to grow by $50bn between 2021 and 2026. Extract F
About Pukka
Pukka sells a range of speciality teas including herbal, organic and fruit teas. Entrepreneurs Sebastian Pole and Tim Westwell launched Pukka in 2001. Sebastian had been interested in plants and conservation for many years. He was determined to follow his dream to start a business selling a healthy product. Sebastian saw an advertisement of Tim’s which offered to help start up an ethical business. They agreed to meet to discuss their ideas and Pukka was formed shortly afterwards. From the first moment Tim and Sebastian met, they were the perfect match. Although they had completely different personal skills, they shared a common marketing objective, to create a business that would benefit the health of people. Tim had 10 years’ experience as a business management consultant. They spent many hours in Tim’s house planning their future strategy. They worked evenings and weekends to turn their ideas into a successful business.
A retailer selling Pukka tea decreased the price of a packet of tea from $10 to $8. Sales increased from 2,500 packets to 3,500 packets per week.
Calculate the price elasticity of demand (PED) for the packets of tea. You are advised to show your working.
Sources for use with Section B
Extract C
Competition in the Entertainment Industry
The games console market is dominated by three businesses; Sony, Microsoft and Nintendo. For many years Sony’s PlayStation console dominated the market. However, Nintendo regained its leadership position for the first time since 2009 with the sales of its new game console, the Switch.
In 2019, Nintendo sold 17.3 million Switch consoles, Sony sold 17.1 million PlayStation consoles, and Microsoft remained in third place, selling 10 million Xbox consoles.
Extract D
Nintendo’s Goal: Bringing Smiles to People’s Faces
Nintendo was founded in 1899 in Japan. It produced traditional Japanese playing cards. In 1970, Nintendo started the development of games consoles and video games. The entertainment market is dynamic, and Nintendo’s goal is to create fun experiences through product innovation.
Nintendo has sold more than 4.7 billion video games and more than 750 million game console units. This is because of the iconic characters it has created, including Super Mario, Donkey Kong, and Pokémon. Its most successful games consoles included Game Boy and the Wii. The Game Boy became the first handheld console to sell in large numbers but is no longer manufactured and the Wii has declining sales. In 2018, the Nintendo Switch was launched, which allows users to enjoy games anytime, anywhere, with anyone.
Extract E
Organisational changes at Nintendo
Nintendo recently made changes to its organisation that positively impacted on the business. Nintendo merged its two game development divisions, which were previously separate. One division had focused on consoles used in the home like the Wii while the other created games for handheld devices like the 3DS. Combining the two divisions aimed to speed up the development of products and allow Nintendo’s creative teams to share ideas and technology.
The use of a matrix organisation has proved to be a good move given the nature of the Switch, which is both a handheld device and a home console. This differentiates it from other games consoles in the market. The main benefit of the reorganisation is that it allows Nintendo to be more flexible with how it uses its game developers and other employees.
The price elasticity of demand (PED) is estimated to be −1.5 for games consoles.
If Nintendo reduces its console prices by 8%, calculate the estimated percentage change in demand. You are advised to show your working.
Sources for use with
Extract A
The Ice Cream Market
The global ice cream market value is expected to reach $89bn by 2023 and is attracting many new businesses to the market. Unilever dominates the global market with a 22% share. It owns 8 of the 15 top selling brands. Its brands include Magnum, Cornetto and Ben & Jerry’s. Nestlé is Unilever’s closest rival having 4 brands in the top 15. The sales of low‑quality ice cream have been declining, due to the increased demand for premium ice cream. There are many factors contributing to the growth of the ice cream market. These include innovative flavours and the rise in incomes. Niche markets are developing to cater for an increase in demand for organic and naturally sweet desserts. There is an increase in demand for ice cream from consumers above the age of 50.
Extract B
Oppo Ice Cream
Everyone loves ice cream. We all know it is a delicious treat but know it is not a healthy one. However, a business called Oppo has created an ice cream with 60% fewer calories and less sugar than standard ice cream. Oppo claims that one portion of its ice cream contains fewer calories than an apple. Brothers Charlie and Harry Thuillier came up with the idea while on holiday in Brazil. When they returned home, Charlie left his graduate job to dedicate himself full‑time to developing a healthier ice cream. During their primary market research the brothers used two methods, interviews and product trials. They interviewed people who worked in the ice cream industry including a leading industry professional named Gary Martin who had worked on the Häagen‑Dazs ice cream brand. After months of experimenting with different recipes, Charlie and Harry developed a winning recipe that replaced cream and sugar with fresh milk, coconut oil and stevia leaf. Oppo initially conducted product trials in a few supermarkets to test if the product would sell, and now the ice cream is stocked in over 1,600 UK stores. After two years of hard work in Harry’s kitchen the brothers had achieved what they set out to do. Even though they were told by some industry professionals that they would not succeed, the pair persevered and their determination paid off. The business is now continuing to grow and is expanding internationally.
Analyse two factors that might influence the price elasticity of demand (PED) for ice cream.
Extract B Kirklees Active Leisure (KAL) K A L is a UK-based charity focusing on the provision of leisure services. It was established by Kirklees Council in 2002. KAL operates 12 leisure centres, all of which include several health and fitness facilities. Some have tennis courts, some have football pitches and six have swimming pools. Off-peak membership costs £19.95 per month to use the facilities at less busy times and £29.95 per month at peak times, when demand is highest. It includes access to all health and leisure facilities, fitness classes and swimming pools. KAL has a high number of members so many of its peak time classes are full each week, leading to complaints from members. Following the global health crisis and changes in economic variables, such as increased energy costs, KAL has been under considerable financial pressure. At the end of 2022, it was decided that KAL's costs could only be reduced significantly by temporary reductions in the number of facilities operated. Two of the swimming pools and two of the leisure centres were closed completely during the winter of 2022/23. However, one of the pools closed was used by a number of local schools and re-opened in early 2023. Members were consulted on ideas to decrease costs and/or increase revenue. These included raising the monthly membership fee, reducing opening times of facilities, increasing the number of volunteers instead of paid employees and reducing the temperature of the swimming pools.
Extract C Selected information from KAL's statement of comprehensive income for the year ended 31 March 2022
Assess the likely impact on demand for off-peak K A L membership if the price is increased from £19.95 per month.
Extract A
China's smartphone market
In 2021, the sale of smartphones in China decreased by 9% due to component shortages and lower consumer spending. Smartphone users in China are now keeping their devices longer before upgrading to new models. However, sales of Apple smartphones increased due to its new camera and 5G features giving it a competitive advantage.
Extract B
Market share of smartphone sales in China 2021
Extract C
The folding smartphone is likely to remain a niche product
In 2021, 1.3 billion smartphones were sold globally. Seven million of these were folding models. This represents 0.5% of the smartphone market. It is predicted that by 2025, this share could rise to 1.8%. One of the most popular folding phones is the Samsung Galaxy Z Flip3, priced at over $1 000.
Extract D
Realme aims to compete with Apple and Samsung
Realme is a Chinese business that started in 2018. It manufactures and sells smartphones. Realme has been successful in markets where consumers are seeking high specification phones and fashionable designs at a low price. It is now the second-largest smartphone provider in India. In 2021, Realme launched its smartphones in Europe and other regions outside of China in an attempt to increase its 6% global market share. It sold 20 million smartphones in 2021, an increase of 48% from the previous year. In comparison, Apple sold 80 million smartphones in the period of October to December 2021. Realme aims to sell 85 million smartphones in 2022.
A retailer increased the price of the Apple smartphone by 8%. It has a price elasticity
of demand (PED) of -0.5.
Explain how the data above is likely to affect the revenue of the retailer.
Sources for use with Extract D In congested Istanbul, companies get goods to you fast There has been a rapid growth in the demand for shopping services in Istanbul, Turkey. These on-demand services are expanding because transportation can be slow. Businesses are making use of new technology, wages are rising and more people have access to smartphones. Shopping services such as Kapgel and Getir offer innovative delivery solutions to meet the needs of their customers. Both firms have different approaches, but aim to meet people’s immediate needs and develop customer loyalty by using technology to develop apps and deliver goods as quickly as possible. Kapgel has designed an app to allow customers to shop from a wide number of stores and supermarkets. The customer creates a basket of goods on the app and a delivery person shops for these items and delivers directly to the customer. Deliveries are made within one hour for a delivery fee of 5 Turkish Lira (US $0.85). Kapgel does not keep any stock and uses part-time and temporary delivery people, rather than employing workers on a permanent and full-time basis. Getir owns many warehouses around Istanbul to stock over 1,000 different products, including food items and small electrical goods. Customers select from the 1,000 items using an app on their smartphone. Getir employs over 350 people for this delivery business and have an average delivery time of 9 minutes and 6 seconds. Unlike Kapgel’s delivery fee, Getir adds a cost to each product. It has a minimum shopping total of 15 Turkish Lira (US $2.55) before it will deliver an order.
Extract E BiSU Water Delivery In Turkey, most tap water is not drinkable. Delivery services in the past were slow and not well organised. On-demand delivery services such as BiSU have changed the water delivery market in Turkey. Customers can now order water using an app on their smartphone. They can have it delivered quickly and at a time to suit them. BiSU has a large team of delivery drivers. The business was launched in 2015 and has expanded to many cities in Turkey, receiving over 100,000 orders a month from 38,000 users. Water prices depend on the brand requested and the region the water is delivered to.
In 2018, incomes in Turkey increased by 6% and BiSU sales increased from 100,000 deliveries to 112,000 deliveries a month.
Using this data, calculate the income elasticity of demand for BiSU. You are advised to show your working.
Sources for use with Section A
Extract A
The soft drink industry is dominated by Coca-Cola and PepsiCo
Two brands of soft drinks, Coca-Cola and PepsiCo, have dominated the non-alcoholic drinks market for many years. The brands are well known and recognised around the world. Coca-Cola is the larger of the two companies with more than 500 brands. The companies do not have major threats from competition because they both have high levels of brand loyalty, extensive distribution networks and huge economies of scale. They spend enormous amounts of money on innovation, advertising, marketing, and strengthening their distribution channels.
Extract B
Coca-Cola: Who we are
We are the world’s largest soft drinks company. Our brands include Diet Coke, Coca-Cola Zero, Fanta, Sprite, Dasani, Powerade, Minute Maid and Gold Peak. Over 1.9 billion of our drinks are enjoyed by consumers in more than 200 countries each day.
Our market research on Diet Coke
We focus on the needs of our consumers by going into the market to listen to their views and collect feedback on new drinks. One of our recent research projects focused on Diet Coke, known as Coca-Cola light in most international markets. The drink is sold in more than 110 countries. Our aim is to offer new flavours and a modern look to the product to attract new consumers as well as maintaining the brand loyalty of our current fans. As part of the research, we used face-to-face surveys to gather data from more than 10,000 people. We wanted their ideas and views on new packaging and new flavours, including Ginger Lime and Twisted Mango. These new products will be available in 2019.
Our rewarding work environment: benefits and rewards
We value our workers and understand working is not just about pay and benefits. We provide a positive working environment to enable staff to build a career and also maintain a good work-life balance. We regularly assess our benefits programs to ensure employees receive the benefits they value. The financial benefits include competitive pay, annual bonuses and performance-related pay.
The income elasticity of demand (YED) in a country for Coca-Cola is 0.5. The average income in the country increases by 5%. Calculate the percentage change in quantity demanded of Coca-Cola. You are advised to show your working.