A Level Section 3: Marketing

25 Marketing Problems of the concept of elasticity when making

decisions:
● Often more than one factor is changing at one time,
1 a What is meant by marketing planning? [2]
so it is difficult to decide what is affecting what.
Marketing planning is the process of determining
● Often you are measuring what happened rather than
the marketing objectives, strategy, budget and tactics.
what will happen.
b Analyse one benefit of marketing planning. [3]
6 What is meant by a moving average? [2]
Benefits of marketing planning are that it helps:
A moving average is a mathematical technique for
• coordinate resources so that the right combination
smoothing out data to find the underlying trend.
of resources is in place
7 a State two ways of forecasting sales. [2]
• set priorities so managers know what is most
Ways of forecasting sales:
important when making a decision
• based on extrapolation
• allocate responsibilities so that everyone knows
• based on expert opinions
who is responsible for what
• based on correlation.
• measure performance so that progress can be
b Analyse one reason why it is important to forecast
measured and changes made if needed.
marketing data. [3]
2 a What is meant by the income elasticity of demand? [2]
Reasons why it is important to forecast
The income elasticity of demand measures the
marketing data:
sensitivity of demand to changes in income
• to plan sales
(measured by the percentage change in quantity
• to plan production
demanded divided by the percentage change in
• to plan cash flows
income).
• to plan workforce needs.
b Analyse what is meant by an income
8 State two sources of ideas for new products. [2]
elasticity of +2. [3]
Sources of ideas for new products include:
A positive number means that an increase in income
● internally, for example employees
increases the quantity demanded. The value 2 means
● externally, for example via patents.
that a given percentage change in income has twice
9 a What is meant by a patent? [2]
the effect on the percentage change in quantity
A patent provides legal protection for a new
demanded, i.e. it is income elastic.
invention.
3 a Analyse what is meant if the promotional
b Analyse one way in which a patent helps a business. [3]
expenditure elasticity is +0.5. [2]
It enables a business to protect its idea and therefore
A positive number means that an increase in
recover the costs of development without others
promotional expenditure increases the quantity
copying it and bringing down the price. A business
demanded. 0.5 means the relationship is inelastic,
can protect its unique idea and this makes demand
i.e. any given percentage change in promotional
more price inelastic.
expenditure has 0.5 times the effect on the
10 What is meant by extrapolation? [2]
percentage change in quantity demanded.
This technique estimates future sales based on past
b If the promotional elasticity is +0.8 what is the
trends. It projects forward from past trends.
effect on demand of an increase in promotional
spending from $4 million to $5 million? [X]
The increase in promotional spending is 25 per
cent; this will lead to a 0.8 × 25% = 20% change in
26 Globalisation
quantity demanded. As the relationship is positive,
an increase in promotion increases quantity
and international
demanded.
4 a What is meant by the cross-price elasticity of
marketing
demand? [2]
1 What is meant by globalisation? [2]
The cross-price elasticity of demand measures the
Globalisation occurs as markets open up to become a
change in the quantity demanded of product A, given
worldwide (global) market in terms of selling to and
a change in the price of product B.
producing in different countries.
b Analyse what is meant if the cross-price elasticity
2 Analyse one way in which globalisation provides an
of good A in relation to the price of B is −3. [2]
opportunity for a business. [3]
It is negative, which means that an increase in the
Ways in which globalisation provides an opportunity
price of B will reduce the sales of A.
for a business:
It is 3 (elastic), which means that a given percentage
● It opens up new markets for sales and growth;
change in the price of B has three times the effect on
markets such as the BRIC economies (Brazil, Russia,
the percentage change in the quantity demanded of A.
India and China), for example, are relatively fast
5 State one problem of the concept of elasticity when
growing and have a rapidly growing middle class. This
making decisions. [2]
creates sales opportunities for many Western firms.

Cambridge International A and AS Level Business © Hodder & Stoughton 2014

A Level Section 3: Marketing
● It opens up opportunities for lower-cost production.
Production costs in economies such as China and
Vietnam have led to a great deal of production
shifting from, for example, the UK to these countries.
(This is known as outsourcing.]
3 Analyse one way globalisation can provide a threat
for a business. [3]
Globalisation can provide a threat for a business
because it allows overseas businesses to target the
domestic market; this may provide more competition in
local markets.
4 State two reasons for increased globalisation. [2]
Reasons for increased globalisation include:
● reduction in barriers to entry into markets
● greater similarity of tastes, making markets more
similar
● improvements in technology and communications
● lower transportation costs.
5 State two factors a business would consider when
deciding which markets to enter. [2]
Factors a business would consider when deciding
which markets to enter include:
● size of market
● likely future sales
● competition
● likely rates of return.
6 State two ways a business might enter a foreign
market. [2]
Ways a business might enter a foreign market include:
● forming alliances with existing businesses in the
country exporting
● working with a local agency to represent them
● setting up own production business.
7 Analyse one factor that might influence how to enter
a foreign market. [3]
Cambridge International A and AS Level Business © Hodder & Stoughton 2014
Factors that might influence how to enter a foreign
market include the following:
● Costs such as the initial cost: this would be higher
for setting up production facilities compared to
selling through an established overseas business, for
example.
● Likely scale of operations: small-scale sales may be
coped with by just exporting the occasional item.
● Attitude to risk: if managers are worried about risk
they might choose an option early on with relatively
low commitment.
● Time frame: over time managers may be more willing
to invest large sums and run their own operations.
● Knowledge of local market: the less a business
knows of the local market the more it may be willing
to work with a local partner.
8 What is meant by a global strategy? [2]
A global strategy treats all markets as the same; it
adopts the same approach for all markets.
9 Analyse one reason for adopting a global strategy. [3]
Reasons for adopting a global strategy:
● opportunity to produce on a large scale, so cost
advantages: by producing using mass production
techniques the business may gain from internal
economies of scale
● easier to manage, as the product and process are the
same all over the world
● consistent brand image.
10 State two possible problems of entering an overseas
market. [2]
Possible problems of entering an overseas market
include:
● cultural differences
● legal differences
● reaction of existing competition.