The dynamic nature of business - Worksheets, Questions and Revision

10 original exam-style questions - 3 pages of questions with a full mark scheme - free printable PDF.

Download PDF Jump to mark scheme (page 4)The dynamic nature of business revision guide

This topic is chapter 5 of GCSE Business: Business in the real world and enterprise Practice Book 2.

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1.7 The dynamic nature of business

AQA 8132 · Calculators not allowed · about 50 minutes

Total Marks

Name: _______________________________ Date: ____ / ____ / ______

Answer ALL questions in the spaces provided. In your longer answers, use relevant business terminology and apply your points clearly to the scenario given.

State two examples of a change in technology that could create a new business opportunity.

(Total for Question 1 is 2 marks)

Which one of the following is most likely to be a reward of taking a business risk that succeeds?

A) Loss of personal savings
B) Higher profit than before
C) Legal action from customers
D) Reduced market share

(Total for Question 2 is 1 mark)

Yusuf decides to go ahead and open his gluten-free bakery.

(a)State two financial risks that Yusuf might face by opening his bakery.(2)

(b)State two potential rewards for Yusuf if his bakery is successful.(2)

(Total for Question 3 is 4 marks)

State two features of a highly competitive (dynamic) market.

(Total for Question 4 is 2 marks)

Which one of the following is an example of non-price competition?

A) Reducing the selling price of a product
B) Offering a longer product guarantee than rival businesses
C) Increasing the selling price to raise profit margin
D) Copying a rival business's exact selling price

(Total for Question 5 is 1 mark)

State two reasons why an entrepreneur might decide the potential reward of a business idea is worth the risk.

(Total for Question 6 is 2 marks)

Yusuf is weighing up whether his bakery idea will work.

(a)Explain one reason why Yusuf's business idea might succeed.(3)

(b)Explain one reason why Yusuf's business idea might fail.(3)

(Total for Question 7 is 6 marks)

Analyse two reasons why new businesses often fail within their first three years.

(Total for Question 8 is 6 marks)

Analyse the possible impact on PrintNow of failing to respond to the arrival of the national printing chain.

(Total for Question 9 is 6 marks)

A friend tells Yusuf that 'the safest way to reduce the risk of starting a new business is to choose a business idea that nobody else has ever tried before.'
To what extent do you agree with this statement? Justify your answer.

(Total for Question 10 is 9 marks)

Mark scheme · 1.7 The dynamic nature of business

Question 1

B1 one acceptable change in technology linked to a new opportunity, e.g. the growth of smartphone apps creating demand for app-development businesses
B1 a second acceptable change in technology linked to a new opportunity, e.g. wider availability of 3D printing creating demand for custom-printed goods, or faster home broadband creating demand for streaming/delivery services
Answer: Any two, e.g. growth of smartphone apps; wider availability of 3D printing; faster/wider broadband enabling streaming or online delivery services.

Question 2

B1 B cao
Answer: B

Question 3

(a) B1 one acceptable financial risk, e.g. he could lose the money he has invested in the business
(a) B1 a second acceptable financial risk, e.g. the bakery may not earn enough revenue to cover its costs and could make a loss
(a) Answer: Any two, e.g. losing his invested savings; the business making a loss if revenue does not cover costs.
(b) B1 one acceptable reward, e.g. he could earn a higher income/profit than in his previous job
(b) B1 a second acceptable reward, e.g. he gains independence and control over his own business decisions
(b) Answer: Any two, e.g. higher income/profit; independence and control over decisions.

Question 4

B1 one acceptable feature, e.g. many rival businesses sell similar products
B1 a second acceptable feature, e.g. businesses must adapt quickly, or prices and products change frequently, to stay ahead of rivals
Answer: Any two, e.g. many rival businesses selling similar products; businesses must change/adapt quickly to stay competitive.

Question 5

B1 B cao
Answer: B

Question 6

B1 one acceptable reason, e.g. the potential profit is high enough to justify the risk taken
B1 a second acceptable reason, e.g. the entrepreneur has researched the market and believes there is strong customer demand
Answer: Any two, e.g. the potential profit justifies the risk; market research suggests strong customer demand.

Question 7

(a) B1 identifies a reason linked to the scenario, e.g. there is already unmet customer demand for gluten-free cakes
(a) B1 develops the point, e.g. by meeting this demand Yusuf can attract customers who currently have nowhere local to buy gluten-free products
(a) B1 links clearly to a likely business outcome, e.g. this should generate steady sales and revenue for the new bakery
(a) Answer: Yusuf has identified a genuine gap in the market (customers already asking for gluten-free cakes), so meeting that demand should attract customers and generate steady sales.
(b) B1 identifies a reason linked to the scenario, e.g. a larger, established business (such as a supermarket) could start selling its own gluten-free cakes at a lower price
(b) B1 develops the point, e.g. Yusuf's bakery would then struggle to compete on price with a much bigger rival
(b) B1 links clearly to a likely business outcome, e.g. this could reduce Yusuf's sales and threaten the survival of the bakery
(b) Answer: A larger, established rival (e.g. a supermarket) could undercut Yusuf's prices with its own gluten-free range, reducing his sales and threatening the bakery's survival.

Question 8

Level 1 (1-3): Identifies one or two reasons for business failure with little or no development; the link to the business is limited or missing.
Level 2 (4-6): Identifies reasons and develops them into a clear chain of reasoning that shows how each reason leads to business failure; may use a relevant example.
Indicative content:
- Cash-flow problems: the business runs out of money to pay everyday costs before it becomes profitable.
- Poor market research: the owner misjudges customer demand, so not enough people buy the product.
- Strong competition: an established rival with more resources takes customers away from the new business.
- Poor financial management: the owner does not keep accurate records or control spending, leading to losses.
- Insufficient start-up finance: the business does not have enough capital to survive its early, less profitable months.
- Owner lacking relevant skills or experience: poor decisions in areas such as pricing, staffing or marketing.
- Unexpected rise in costs: e.g. rent, wages or raw material prices increase faster than revenue.

Question 9

Level 1 (1-3): Identifies one or two possible impacts with little or no development; the chain of reasoning is limited or missing.
Level 2 (4-6): Develops a clear chain of reasoning showing how failing to respond leads to a specific, well-explained impact on PrintNow.
Indicative content:
- PrintNow could lose customers to the cheaper, larger rival, since price is often a deciding factor for similar services.
- Falling customer numbers would reduce PrintNow's revenue.
- Lower revenue combined with unchanged fixed costs (e.g. rent, wages) could cause cash-flow problems.
- Persistent cash-flow problems increase the risk that PrintNow eventually has to close.
- PrintNow may be unable to afford to invest in new equipment or marketing, weakening it further against the national chain.
- If PrintNow tries to cut costs to compete on price without responding strategically, service quality could fall, damaging its reputation and losing further customers.

Question 10

Level 1 (1-3): Makes simple, undeveloped comments on the statement, with little application to Yusuf's situation and no clear judgement.
Level 2 (4-6): Gives a developed argument for or against the statement, applying it to Yusuf's situation, but does not fully weigh both sides or reach a clearly justified judgement.
Level 3 (7-9): Weighs arguments for and against the statement, applies them clearly to Yusuf's situation, and reaches a justified judgement supported by the analysis given.
Indicative content:
- Agree: an idea nobody else has tried faces no direct competitors, so a first-mover can build a loyal customer base and set prices without being undercut.
- Agree: being first with a genuinely new idea can generate free publicity and media interest, helping the business grow quickly.
- Disagree: an idea nobody has tried may mean there is no proven customer demand for it, which is itself a major risk.
- Disagree: entering a market where competitors already exist can be safer, because it proves demand already exists, as with Yusuf's gluten-free bakery, based on customers already asking for the product.
- Disagree: untried ideas often need more time and money to educate customers about the product, which increases financial risk rather than reducing it.
- Judgement: novelty on its own does not reduce risk; what actually reduces risk is thorough market research and clear evidence of real customer demand, whether the idea is new or already established.
- A strong answer should conclude that the statement is only partly true, and should reference Yusuf's own evidence-based idea to support the judgement.

The dynamic nature of business - Worksheets, Questions and Revision

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