CAIE IGCSE Business Studies 3.3 Marketing Mix Questions

Award 1 mark for identification of each relevant advantage (max 2).

Award 1 mark for each relevant reference to this business (max 2).

Award 1 mark for each relevant explanation (max 2).

Points might include:

- Can target specific groups of customers [k] which could help encourage brand loyalty [an] at each of the 5 locations [app]

- Low-cost [k] so fewer cash outflows/lower expenses [an] which could help improve the profit margin of 25% [app]

- Cover wide area/seen by many people [k] increasing sales/revenue/attract customers [an] for the cafe [app]

- Quick to update [k] so can spend time on other tasks [an] such as analysing the financial statements [app]

- Can reach groups that are difficult to reach any other way [k]

Other appropriate responses should be credited.

To use words from the stem as application, the reference must be appropriate (i.e. make sense) in relation to the point being made.

The following words are likely to be appropriate for this question:

- Café

- Selling food/drinks or examples such as coffee

- 5 (cafés)

- 25% (profit margin)

- Improve profit margin

- $ 600000 (revenue)

- $ 150000 (profit)

- $ 750000 (capital employed)

- Tertiary sector

Other appropriate examples can be credited.

Advantages must be to the business not the customer.

Award 1 mark for each relevant reason (max 2).

Award 1 mark for each relevant reference to this business (max 2).

Points might include:

- Increase sales / customers [k] of his handmade product [app]

- To differentiate the product (from competitors) [k] when using ecommerce [app]

- Helps promote / aids recognition [k] of his furniture [app]

- Create / maintain customer loyalty / customers will keep buying its products rather than competitors [k] which could be important for this start-up business [app]

- Can charge higher price [k] helpful as it's a niche market [app]

Other appropriate responses should also be credited.

To use words from the stem as application the reference must be appropriate (i.e. make sense) in relation to the point being made.

Award 1 mark for each relevant advantage/disadvantage (max 2).

Award 1 mark for each relevant reference to this business (max 2).

Points might include:

Advantages:

- Helps establish a high-quality image/customers may think it is a good quality [k] which may also help as want to be ethical [app]

- Can quickly recover research/development costs [k] which is important as developed a new product [app]

- Higher revenue per item [k] for its chocolate [app]

- May have a lower break-even output [k]

Disadvantages:

- High price might discourage (potential) customers [k] for this social enterprise [app]

- High prices/profitability could encourage competitors to enter market [k] so may not be able to support local farmers [app]

Other appropriate responses should be credited.

To use words from the stem as application, the reference must be appropriate (i.e. make sense) in relation to the point being made.

The following words are likely to be appropriate for this question:

- Social enterprise

- Cocoa beans

- Local farmers

- Chocolate (bar)

- Retailers

- Ethical

- (Developed) a new product

- Legal controls over marketing

Other appropriate responses can be credited.

Award 1 mark for identification of each relevant advantage/disadvantage (max 2).

Award 1 mark for each relevant reference to this business (max 2).

Award 1 mark for each relevant explanation (max 2).

Points might include:

Advantages:

- Producers can sell in large quantities to retailers [k] increasing revenue [an] from its new product [app]

- Reduced costs (compared to selling direct to consumers) [k] increasing profit margin [an] in this social enterprise [app]

- Retailer shares the cost of holding inventory [k] lowering expenses [an]

- Retailers will promote the product [k] reducing the cost of promotion/increasing sales [an]

- Access wider range of customers [k]

Disadvantages:

- No direct contact with consumer [k] about its chocolate bar [app] so may not adapt to changing needs [an]

- Final price (paid by consumer) is often high [k] so may be uncompetitive [an]

- Retailer takes some of profit away from the producer [k]

- Producer loses some control of marketing mix [k]

- Retailers usually sell competitors' products as well [k]

Other appropriate responses should also be credited.

To use words from the stem as application, the reference must be appropriate (i.e. make sense) in relation to the point being made.

The following words are likely to be appropriate for this question:

- Social enterprise

- Cocoa beans

- (Make) bars of chocolate

- Ethical

- (Local) farmers

- Legal controls over marketing

Other appropriate responses can be credited.

Award 2 marks for identification of each relevant threat (max 2).

Award 2 marks for each relevant reference to this business (max 2).

Award 2 marks for each relevant explanation (max 2).

Points might include:

- More competition / difficult to stand out from competition [k] especially as it's a new business [app] leading to less revenue [an]

- No passing trade [k] so could mean fewer sales [an] which could influence Caleb's location decision [app]

- Not everyone has access to the internet [k] which reduces its target market [an] for this niche market product [app]

- Cost to design / maintain website [k] increasing cash outflows [an]

- Lack of personal service / no face-to-face contact with customers [k] which might make it difficult to develop brand loyalty [app] which could damage its reputation [an]

- Need to pay for pop-ups to advertise on popular sites / feature at top of search engine listings [k]

- Risk of hackers / fraud [k]

Other appropriate responses should also be credited.

To use words from the stem as application the reference must be appropriate (i.e. make sense) in relation to the point being made.

The following words are likely to be appropriate for this question:

- (Handmade) furniture or examples such as tables/chairs

- Legal controls over marketing

- Location decision

- New business / start-up

- Niche market

- Brand loyalty (is important)

- Entrepreneur

Other appropriate examples in context can still be credited.

Award up to 2 marks for identification of relevant points.

Award up to 2 marks for relevant development of points.

Award up to 2 marks for a justified decision as to which is the most important element of the marketing mix for a business.

Points might include:

This is a general question so there are no
marks for application.
Promotion [k]

- Raises awareness / informs potential customers [an] leading to more sales [an]

- Attracts / persuades potential customers [an] increasing revenue [an]

- Creates / builds brand image [an] increasing customer loyalty [an]

- Way to communicate with customers [an]

Product [k]

- Without a product there is nothing to sell / if dislike the product customers will not buy it [an]

- A poor / bad quality product will not last long in the market [an] so time / money spent developing it would be wasted [an]

- Good quality product can encourage customer loyalty [an]

- Good quality can improve brand image [an]

Place [k]

- Close / near target market / customers [an] to ensure sales [an]

- A suitable location might have high rent [an] leading to increased costs / higher prices [an]

Price [k]

- A low price could create image of low quality [an] damaging its reputation [an]

- If price is too low, may not cover costs [an]

- If the price is too high, the business may be less competitive [an] lowering market share [an]

- If the price is too high, could lead to fewer sales (as customers cannot afford it) [an]
Other appropriate responses should be credited.

Justification might include:

One element is promotion [k]. This is important as more people are aware of your business [an]. The product also matters [k] as this is what people are buying so without a product there is nothing to sell [an]. Product is the most important element, because if it is unique, this can help the business standout [eval] which means the business has a better chance of attracting / maintaining customers. [eval]

Relevant points might include:

Language differences:
- Promotional material may need translation into other languages, increasing costs.
- Instructions for using farming equipment may not be understood, creating health and safety problems.

Lack of knowledge of the market:
- AD may not know the needs of farmers in other countries.
- Equipment may not suit soils in other countries.
- Marketing requirements may be very different, so promotion may not reach the potential market and sales may be low.

Changes in exchange rates:
- If country Z's exchange rate appreciates, AD's exported tractors may have higher prices in other countries, making AD less competitive, reducing sales and making entry harder.

Conclusion - justification may include:
- Language differences can be overcome by paying a business to translate promotional leaflets and instructions; this is a one-off cost. Lack of market knowledge may require expensive research, an agency or a joint venture. Exchange-rate movements are unpredictable and cannot be controlled by AD.
- If AD's equipment suits other countries or can be adapted easily, lack of market knowledge may be overcome and sales should increase.
- Appreciation may make exported equipment more expensive, but AD could reduce its profit margin to keep foreign-currency prices unchanged.