CAMBRIDGE INTERNATIONAL AS & A LEVEL BUSINESS: TEACHER’S RESOURCE

•
By identifying consumer needs, appropriate products are produced. These are likely to survive
for longer and make higher profits.
• Being the best does not guarantee success.
• Market research ensures that there is constant feedback from consumers and allows the
product to adapt to changing consumer tastes.
Arguments for the statement include:
• By focusing on product research, high-quality products are developed. This will attract
customers who value quality and technological advance above other factors.
• Market research does not guarantee success.
Overall conclusion or evaluation may focus on the use of market research to reduce the risk of
product development and to ensure that consumer needs are being met. Simply having the best-
designed product on the market does not guarantee success.
2 a By age: creating different drinks to meet the tastes of different age groups; making marketing more
cost-effective; raising awareness of the product within the specific group.
By geography: targeting different countries so global tastes are catered for; increasing costs of
marketing as different advertising is required for different products.
b Allocating resources to CRM: the objective of CRM is to build strong customer relationships
through the use of marketing so that the loyalty of existing customers can be maintained. This
requires the firm to communicate with the customer to gain information to guide marketing tactics
to meet customer needs.
Benefits include:
• It is cheaper to retain customers than to attract new customers.
• Repeat purchases and brand loyalty ensure sales.
• It reduces the number of customers buying from competitors.
• It may be particularly important for products that are bought frequently or where fashions
change quickly.
• Long-term impact on sales rather than short-term impact.
Aim to reduce price:
• Offering a lower price will, other things being equal, increase the quantity demanded as there
is an inverse relationship between price and quantity.
• Lower prices make products more competitive.
• It reduces the profit margin so does not necessarily increase profit.
• Competitors may react by reducing price, therefore starting a price war.
• Low prices may change customer perception of the quality.
Overall conclusion or evaluation may consider the importance of how responsive demand is to
a change in price. CRM may be an effective way of increasing differentiation of the business in a
competitive market.

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 CAMBRIDGE INTERNATIONAL AS & A LEVEL BUSINESS: TEACHER’S RESOURCE

Data response questions

1 Furniture Metallica (FM)
a i It only sells to other businesses.
ii  Market growth refers to the change in sales volume or sales value, over a specified period of
time, within the market as a whole.
b i Market share = (firm’s sales in the time period ÷ total market sales in the time period) × 100
(43 ÷ 180) × 100 = 23.8%
ii FM’s sales have decreased and there is a downward trend in FM’s market share. The
company’s product range might be too old-fashioned to meet customers’ current needs.
c Change in type of promotion: targeting different market segments; making greater use of
advertising; making consumers aware of the product.
Change in pricing strategy, perhaps offering incentives to buy at first, in order to penetrate the
market, to establish market share.
d Benefits:
• FM can identify the precise characteristics of market segments within the furniture market.
• It can produce products to appeal to particular segments, e.g. rich corporate customers. If
FM wishes to enter the European market or expand further in the Asian market, it will need
to understand the different product needs within the market. There are likely to be differing
consumer needs according to geographical location. For example, the style of office and
consumer furniture in different parts of Asia and Europe will not be the same; the case study
refers to metal furniture not being fashionable in Europe.
• FM will be able to target promotional activity more effectively, e.g. advertising in high-class
magazines for wealthy segments.
• FM can use the most effective distribution channels to reach each segment, e.g. exclusive
furniture stores for high-income groups.
• FM can set prices which will reflect consumer expectations.
Costs:
• Market research is necessary to understand the different segments of the market. This may
be expensive and require some primary research, although it is likely that market intelligence
reports can be acquired at relatively low cost from organisations such as Mintel.
• There will be high promotional costs associated with trying to appeal to different segments, as
there will be a need for differentiated advertising and promotions. Therefore, FM will miss out
on marketing economies of scale.
• If FM focuses on a particular segment, such as rich corporate customers, there could be
problems if changes in the external environment cause that segment to change their
spending patterns.
Conclusion or evaluation might focus on the need for FM to make significant change to its
marketing mix. Given the weak performance of FM in the Malaysian market, there appears to be
a pressing need for the business to become more market-orientated if it is to survive. Thus, using
market segmentation represents an effective way for FM to become more responsive to the needs
of the market.

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 CAMBRIDGE INTERNATIONAL AS & A LEVEL BUSINESS: TEACHER’S RESOURCE

2 Adidas and Rapha

a i Low cost as the product is not changed.
ii A part of a whole market in which consumers have similar characteristics.
b i $222 billion × 1.0362 = $238.27 billion
ii  As market share is the ratio of a firm’s sales compared to sales in the whole market, if sales
growth is slower than the total market sales growth then a firm’s market share will decrease.
Therefore, Adidas must increase sales by more than 3.6% if it aims to increase its share of this
global market.
c Mass marketing occurs when a firm targets the market as a whole, e.g. Adidas selling cheap
shoes to rural areas of India on a large scale. This can lead to cost advantages as undifferentiated
marketing can be used and economies of scale are likely.
Mass marketing can be very profitable if the business has a high market share. Sales will be high
and costs relatively low, so the profit from this marketing strategy could be high.
d A specialist market has less competition because larger firms are unlikely to enter as there are no
economies of scale and so higher unit costs. Businesses such as Rapha are unable to target larger
markets, which restricts growth over time and therefore reduces potential revenue. Such firms
should remain in the niche market as they understand their market better. This is more important
than targeting the mass market, as the time and money required could cause problems in all
functional areas, threatening survival of the business.
Rapha should be able to make specially designed shoes for each market segment and, with
its brand image, it should be able to charge high prices, leading to high profit per unit. Niche
marketing requires high costs of market research and product differentiation. Rapha may or may
not be able to afford this. Adidas might also try to enter niche markets and then, because Adidas
has cost benefits, Rapha might struggle to survive.
An overall evaluation/conclusion is needed, which might consider the importance of the objectives
of the owners/directors of the business and the brand image they want to build up and maintain
for this business.

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 CAMBRIDGE INTERNATIONAL AS & A LEVEL BUSINESS: TEACHER’S RESOURCE

Exam-style questions and sample answers have been written by the authors. In examinations, the way marks are awarded may
be different.

Coursebook answers
Most of the answers are in ‘outline’ form indicating the appropriate points and skills that learners need
to include in their answers. They provide the necessary guidance to allow learners to develop and extend
the points for a fuller answer that contains the relevant skills. In many instances, there may be other valid
approaches to answering the question.

Chapter 18
Business in context
Learners’ discussion might include:
Benefits:
• Relatively cheap form of market research.
• Can be up-to-date.
• Helps identify trends in the market.
• Provides a basis for further primary research.
• Less time-consuming than primary research.
Problems:
• May not provide a representative sample as it is a self-selecting group of commentators.
• Not all consumers participate, e.g. elderly consumers are underrepresented.
• Not designed for the specific needs of the business so it may need to be supplemented by primary research.

Activities
Activity 18.1
1 Learners’ answers might include:
• IKEA will be able to predict the impact of demographic changes in society on its sales. For
example, as IKEA knows that its core customers are aged between 25 and 50 years old, it can
analyse demographic projections to see if this core group is increasing or decreasing in size. Such
knowledge will contribute to decisions about the marketing mix.
• Understanding customers will help IKEA to design products and store layouts to appeal to them.
Research will also guide decisions about other elements of the marketing mix. For example, IKEA
can identify the importance of designing good-value products that are also fashionable. This
knowledge will help reduce the risks associated with new product launches.

Activity 18.2
1 High GDP per capita suggests the exporter might use premium products to target the market; the size
of market at $1.3 billion suggests that there might be scope for the exporter’s products; the increasing
trend of low-fat and health-food products on offer will help identify the type of food to sell; retail food
sales have grown 20% between 2013 and 2019 and this might be extrapolated to forecast future sales.

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 CAMBRIDGE INTERNATIONAL AS & A LEVEL BUSINESS: TEACHER’S RESOURCE

2 Learners’ own answers.

3 Data was not gathered for specific purpose so may not be fit for purpose, reducing its benefit and not
providing a full picture of the specific market that the business is targeting. Data is limited and does
not provide enough information regarding the target market. The information does not take into
account external influences that might impact on the future of this market, so the business cannot be
confident that these figures will be replicated.
Evaluation could consider which limitation is likely to be most important in this case or could
introduce a new limitation such as the absence of qualitative data. Qualitative data, based on primary
research, from consumers that provides an insight into why they shop where they do could be very
important, but this is not provided in the data given.

Activity 18.3
1 Learners’ answers might include:
• Research reduces the risk of failure. Carlos needs to identify likely demand for his restaurant or
takeaway. Important decisions about the marketing mix need to be taken, including which style
of cuisine to sell to locals and tourists. Without conducting market research, Carlos will not
understand the local market and he is therefore more likely to make inappropriate decisions.
• Research will explain existing patterns of sales. For example, it will identify why the well-known
fast-food chain recently closed its outlet in the resort. There may be no takeaway in the area
because there is a lack of demand.
2 Demographic data. For example, age distribution data could help Carlos determine whether to
decorate the restaurant to appeal to younger people.
Income data. This may help set appropriate prices for the menu.
3 Advantages:
• Secondary research is easy to collect and often cheap. Data is readily available (particularly from
the government), therefore the information can be acquired quickly.
• Demographic data for the coastal area may help assess Carlos’s target market, e.g. young or old.
• Market intelligence reports provide detailed information about the market and will identify key
national trends in the restaurant trade.
Disadvantages:
• Market intelligence reports are relatively expensive for a business start-up to purchase.
• Secondary data was collected for some other purpose. Therefore, much of it will not be applicable
to the situation Carlos faces in the small coastal resort. It is unlikely that Carlos will be able to
identify whether Spanish cuisine could be successful in the resort.
• Secondary data is often out of date. Census data may be collected only every ten years.
• It is not always possible to validate the accuracy of secondary data.
Evaluation may focus on:
• The relative cost of data compared to its accuracy for Carlos’ needs.
• Secondary research is often a useful starting point, helping to identify information that is needed
from subsequent primary research.
• Primary research, although relatively expensive, is needed to answer the questions that Carlos
needs to ask.

Activity 18.4
1 The median of an even number of results is the mean of the middle two results when data has been
placed in order. In this case, these two middle results are 8 and 10, so the median = 9 hours.
2 The number of results less than 9 is equal to the number of results more than 9.

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Activity 18.5
1 a
120 ÷ 20 = 6
b
There are two modal results of 4 and 7.
c
When placed in rank order, the middle two results are 5 and 6, so the median = 5.5.
d
Mean: the arithmetic average. This could be useful as it would enable calculation of the cost of
promotion if it is based on the number of visits to a petrol station.
Mode: the value that occurs most frequently. This would be of limited value to planning the new
promotion campaign.
Median: the middle value. The median is the most important value when the data has several
values that occur frequently, and several relatively high values. The mode will not give a unique
answer and the mean will be skewed towards the higher values.

Activity 18.6
1 a 3
b 36 ÷ 64 × 100 = 56.25%
2 a 0.11 × 200 = 22
b 0.34 × 200 = 68
c 0.125 × 200 = 25
3 a Thursday. It has the lowest number of customers.
b 0.25 × 28 × 10 = $70 in vouchers.

Exam-style questions
Short answer questions
1 Primary research data is researched for a specific purpose. Secondary research data already exists as it
was not collected for the specific use of one business.
2 Secondary research will help to identify past data and trends, establish market size and the number of
competitors. Therefore, it may enable the expense of primary research to be avoided if the secondary
data suggests unfavourable market trends.
3 It might be inaccurate because it is out of date. Secondary data was often collected some time before
use and this means that, for example, market data is misleading.
4 Primary research is designed specifically to meet the needs of one business so will be focused on
collecting data required by that business for decision-making.
5 Learners’ answers will vary, e.g. the sample used may not be representative of the whole population the
business is interested in.
6 It can influence the sample used and the type of consumers that should be included in the sample.
7 As the whole population is usually too large to be surveyed, a sample reduces the cost of
data collection.
8 Disadvantage: the sample may be too small to be representative of the target market and therefore the
data collected might be of limited use.
9 The information provides more in-depth understanding of customer motivation, e.g. why they buy a
particular brand rather than another one.
10 Qualitative research is based on non-numerical opinions and, in contrast, quantitative data is based on
numerical results.
11 Quantitative gives results for statistical analysis, e.g. on average, how many times consumers visit a
supermarket each week. Qualitative gives the reasons behind consumers’ decisions, e.g. to purchase
from one supermarket rather than a competing one.
12 Size determines whether the sample is representative of the population.

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 CAMBRIDGE INTERNATIONAL AS & A LEVEL BUSINESS: TEACHER’S RESOURCE

13 When considering launching a new product. There may be a lack of relevant secondary research data
available if no similar product is on the market.
14 Learners’ answers might include one of: average sales by store size, number of customers passing
possible store locations, age demographics of area.
15 Learners’ answers might include one of: sample size is too small to provide statistically valid data;
the sampling method is not random; the question design is leading and therefore influences
respondents’ answers.
16 a 25% of 40 = 10
b 5% of 40 = 2
17 The mode identifies the most frequently purchased products or size of products.
18 Learners’ answers might vary, e.g. the range of sizes of clothes bought by consumers would help a
business order inventory by size.

Essay questions
1 a
Learners’ answers might include two of: to reduce the risk of starting a business; as part of a
business plan to support application for loans; to reduce the risk of new product launches; to
predict future changes in demand and therefore set targets for sales and production; to understand
patterns in sales of existing products and market trends, and influence marketing tactics. Learners
should apply and explain any two points to the context of an entrepreneur starting a business.
b Detailed market research can help a newly launched product be successful by, e.g. identifying the
needs of consumers in the target market; ensuring the product has been designed to meet these
needs; pricing the product in line with what consumers have indicated they are prepared to pay.
However, in evaluation, there are many reasons why detailed market research may not prevent a
newly launched consumer product from failing. Analyse at least two reasons why market research
data might not prevent a new product from failing to achieve sales targets.
An overall conclusion or judgement is needed.
2 a Learners’ answers will vary, but could include any two of:
Primary research
• It is the collection of first-hand data, original information gathered by the firm or on behalf
of the firm, e.g. a supermarket carrying out a survey to establish customer needs.
• The data collected has never been published in any form.
• The data will be directly related to a firm’s specific needs. A consumer survey will be designed
to discover specific aspects of consumer needs relevant to the firm.
• Primary research is typically expensive to collect. This is because it requires significant labour
input and expertise if the results are to be trusted.
Secondary research
• This is the collection of data from second-hand sources, e.g. a supermarket using government
statistics on the demographic profile of a particular region.
• It is pre-existing data that has already been published in some form. Data may, for example, be
found on the internet, in libraries or sourced from the government.
• Usually the data has not been collected to meet the specific research needs of the firm – it was
collected for some other purpose. Trade magazines publish information of general interest to
specific sectors.
• Secondary research is relatively cheap to collect.
b Secondary research data could provide information about the demographics of the area; the
performance of existing franchises in the chain; the number of competitors; trends in the market
for fast food. This information would help reduce the risk of opening the franchise and provide a
base for further primary research.
Evaluation should include an assessment of why secondary research might be inadequate in this
case, suggesting that primary research might be necessary too.

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 CAMBRIDGE INTERNATIONAL AS & A LEVEL BUSINESS: TEACHER’S RESOURCE

Data response questions

1 Cosmos
a i High cost.
ii The group of people from the target population selected to take part in market research.
b i 6 ÷ 20 × 100 = 30%
ii Learners’ answers will vary, e.g.:
Insufficient surveys sent out. Posting 20 surveys will not gain a large enough sample. If the
sample size is too small then the results are unlikely to be representative. Postal surveys
typically have a high rejection rate so a representative sample is less likely.
Surveys were not sent to a representative sample. Cosmos wanted data to help create a sporty
and youthful image. However, questionnaires were not sent to the target market and included
elderly respondents.
c Secondary research could have limitations such as:
• The market and demographics of consumers seem to be changing, which will make existing
secondary data out of date quickly. Cosmos should not base important decisions on data that
is not as up-to-date as possible.
• There are several large competitors. Secondary data, which has not been collected for Cosmos’
particular needs, will not provide Cosmos with details of the reasons why consumers might
prefer to buy competitors’ drinks. This data could only be gathered from primary research.
d Learners’ answers might include:
• A face-to-face questionnaire or survey using judgement sampling. The interviewer would choose
appropriate respondents, e.g. young and/or sporty people. This would enable Cosmos to find
out whether the image of its drinks was youthful in the eyes of the target population. Using a
questionnaire would enable quantitative data to be collected. The sample needs to be large enough
to give Cosmos some confidence in the results. However, unless a probability sample is used, it is not
possible to identify the degree of confidence in the results. Conducting a random sample may be
difficult as Cosmos would need a database of the target population from which to draw respondents.
• A focus group of young people. This would allow Cosmos to collect more qualitative data
about their drinks and the competition. In a focus group, more in-depth information is collected
that could indicate why advertising was not more successful, whether the taste of the drink
was right, the quality of the packaging and whether the image was positive. However, running
a focus group successfully requires a skilled market researcher who is able to pursue relevant
lines of questioning and avoid unduly influencing the group. This makes focus groups relatively
expensive and the information collected is unlikely to be representative as the sample is so small.
• In-depth interviewing. This would also collect qualitative data as it is less structured than
using a simple questionnaire. This is time-consuming and labour intensive, therefore it is
relatively expensive. However, the data collected should reveal much about consumers’
impressions of Cosmos’s products and help explain why Cosmos is being less successful.
Evaluation should justify which primary research technique is suitable. Justification may relate to:
• Relative cost and ease of implementing the technique.
• Likelihood of gaining representative data.
• The merits of qualitative versus quantitative data.
• Timescale for collecting the data.

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2 GCB
a i It provides reasons for statistical results.
ii  A description of a business’s typical consumers, including demographic and psychographic
characteristics.
b i Proportion of total sales: 3 000 ÷ 11 000 × 100 = 27%
Proportion of total sales revenue: 300 000 ÷ 800 000 × 100 = 37.5%
ii  It is a high-value product so although sales units are only 27% of total sales, the revenue from
this product accounts for a higher proportion of total revenue.
c Market research can be used to understand the needs of customers and therefore influence the
marketing tactics used by a business. It is particularly useful in this case to understand the different
needs between household consumers and commercial customers.
Research can also identify trends in the market and help predict future demand changes.
Researching the changing demand patterns between hand-powered mowers and engine-driven
mowers would help GCB analyse the reasons for changing its product portfolio.
d Learners’ answers will vary, e.g:
Secondary research. This should be done before primary research as it will help identify trends and
the scope of the necessary primary research. The following resources could be used:
• Trade association and magazines. If GCB is a member of a trade association, it will have
access to information from the association. This is likely to include data on sales in the market
segment that GCB is considering.
• Market intelligence reports. These can be expensive but are the result of professional market
research. Organisations such as Mintel will publish reports into consumer and industrial
markets, including the gardening sector. Such a report will provide detailed background
information on market size and growth.
• Government data. GCB may be interested in data on the economy and predictions for future
economic growth.
Primary research. This is typically more expensive and time-consuming to collect but is specific to
GCB’s needs. GCB’s primary research will be constrained by the size of its marketing budget and
the time available to conduct the research. It would be important to get a representative sample of
the market it intends to enter.
• A survey could be conducted by contacting potential customers by telephone or post. Using
a questionnaire, quantitative data could be collected. This would enable GCB to evaluate the
demand for the product and the key elements of the marketing mix such as price.
• A random sample should be used if possible to ensure that results are representative.
• In-depth interviews with potential clients would be useful for gathering qualitative
information. However, this is more expensive and depends on whether businesses are willing
to participate.
Evaluation may consider the cost and time implications of the research in relation to the resources
available to GCB. Is the market changing quickly? Are competitors introducing new products?
The more dynamic the environment, the greater the importance of primary research.

6 Cambridge International AS & A Level Business – Stimpson & Farquharson © Cambridge University Press 2021
 CAMBRIDGE INTERNATIONAL AS & A LEVEL BUSINESS: TEACHER’S RESOURCE

Exam-style questions and sample answers have been written by the authors. In examinations, the way marks are awarded may
be different.

Coursebook answers
Most of the answers are in ‘outline’ form indicating the appropriate points and skills that learners need
to include in their answers. They provide the necessary guidance to allow learners to develop and extend
the points for a fuller answer that contains the relevant skills. In many instances, there may be other valid
approaches to answering the question.

Chapter 19
Business in context
Learners’ discussion might include marketing decisions about:
• Product: including five-star accommodation, educational excursions and mahout training.
• Pricing: high prices are set.
• Promotion: advertising in quality newspapers, publicity and the website.
• Place: through wholesale bookings and direct selling.
It is important to give the same unique quality image so that there is consistency in the message to
potential customers. If there is inconsistency between the different marketing elements, customers will be
confused and less likely to be satisfied if they stay at the resort because expectations may not be met. These
marketing decisions ensure that the product can be targeted effectively.

Activities
Activity 19.1
1 a A feature that differentiates the product from competition. A unique selling point or proposition.
b A name, symbol or image that differentiates a product from its competitors.
2 Facebook’s brand value could have been harmed by negative publicity such as concerns about its use
of personal data or by the increasing use of alternative social media platforms by younger people.
3 Technology: Apple has been innovative and its smartphones use the latest technology such as
facial recognition.
Design and build quality: Apple products have a reputation for product design and high-quality
components.
4 Tangible: the ‘secret formula’ used for Original Coca-Cola; customers enjoy the taste of the product
and its consistency; the classic design of its bottles, logo and use of red on its cans which make its
products instantly identifiable.
Intangible: the image and reputation that customers identify with were built by aggressive promotion
over many decades.
Evaluation may include an assessment that in practice, it is very difficult to separate these two elements
of a successful product; that the many millions of $ Coca-Cola (and its main competitors) spend
each year mainly serve to establish the intangible elements of the brand because the actual product
differences are not that great between competing cola products.

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