Pearson Edexcel
Business Advanced Level
Paper 3 Extract Short (2024) | Asos
Extract A
Asos
Following on from an operating profit of £190.1m in 2021, Asos posted a £9.8m full-year operating loss in 2022.
Asos blamed “supply chain disruption” as part of the reason for such significant losses.
By the end of August 2022, Asos was holding over £1 billion worth of unsold inventory. Asos blamed an increase
in customer returns and a shift from casual wear to more formal wear as people returned to the office following
the Covid-19 lockdowns.
As part of the shake-up, Asos plans to operate a “shorter buying cycle with an accelerated speed to market,
facilitating an enhanced customer proposition that offers new products more regularly”.
It aims to do this by introducing more off-site “clearance routes” that will help it clear stock earlier and reduce
inventory held in warehouses, “which in turn will reduce the volume currently sold on promotion via the Asos site”.
(Source adapted from: Asos writes off unsold inventory in a bid to refresh the brand - Retail Gazette
1 Assess one drawback to Asos of holding too much stock.
(12 marks)
One drawback of Asos holding too much stock could be
that they won't to sell all of those clothes . This
manage
clothes are
is because
trendy only for a certain period
of time and then they are much less likely to sell . This
would decrease Asos's profitability as the clothing market
*casual to
formal wear
is dynamic -> demands for clothes change rapid. Asos
very
retailer will lose finances unsold stock
as a in , becoming less
and less
profitable in the
long term
However Asos's stocks that
large could mean
they will be
able to cover all the demand if items become viral through
social media or popular again trends tend
as to
repeat
themselves This · would mean that Asos would be the
More space to write on next page
Page 1 Pearson Edexcel A Level Business Paper 3 Extract Short (2024)
first business to
offer these products gaining a
competitive advantage .
This would mean large cash inflows in the short-terms .
Overall
,
Asos wouldn't benefit from holding too much stock as
seen in 2022 in their large operating profit loss This depends .
on whether the clearance routes in the opposite case would
be The most important factor able to
successful . is to be
customers demands
respond to in a
dynamic clothing market
More space to write on next page
Pearson Edexcel A Level Business Paper 3 Extract Short (2024) Page 2
Page 3 Pearson Edexcel A Level Business Paper 3 Extract Short (2024)
Pearson Edexcel
Business Advanced Level
Paper 3 Extract Short (2024) | Asos
Mark Scheme
Question Indicative content Mark
Number
1 Knowledge 2, Application 2, Analysis 4, Evaluation 4
• As fashion trends change quickly, for example, from casual wear to more formal
wear, this can leave Asos with a lot of stock it cannot sell. This needs to be sold via
the ‘clearance route’, which could mean Asos makes a loss on some stock. In 2022,
Asos made a loss of £9.8m, which could result in business failure if not effectively
managed
• Asos was holding a lot of stock (over £1bn), which comes with associated costs
such as storage and insurance. Higher costs may need to be passed to customers
through higher prices. This may not be possible in such a competitive market with so
many alternative clothing retailers
• Holding too much stock can affect the cash flow of the business. This may result in
Asos having less cash to purchase new, more fashionable clothing
Potential counter-balance
• Asos may need to hold stock to be responsive to demand. Customers often require
fashion at short notice, for example, for an event. Customers may not be prepared,
therefore to wait a long time to receive their order
• Holding stock could allow Asos to benefit from purchasing economies of scale, by
buying in large quantities from suppliers. This could help it to reduce costs and prices
and therefore be more competitive in the market
• Buffer stock can allow Asos to respond to changes in demand despite any potential
supply chain issues. If anything prevents inventory from being delivered to the ware
house, buffer stock would allow Asos to still trade
Possible judgement
• Too much stock in such a competitive market could be detrimental to costs and
therefore profit margins. Asos should not therefore hold too much stock
• In this industry, customers are very sensitive to delivery times, and therefore holding
stock can help Asos be more responsive to customers and increase its chance of
success (12)
Page 1 Pearson Edexcel A Level Business Paper 3 Extract Short (2024)
Level Mark Descriptor
0 • A completely inaccurate response.
Level 1 1-2 • Isolated elements of knowledge and understanding – recall based.
• Weak or no relevant application to business examples.
• Generic assertions may be presented.
Level 2 3-4 • Elements of knowledge and understanding.
• Which are applied to the business example.
• Chains of reasoning are presented, but may be assertions or incomplete.
• A generic or superficial assessment is presented.
Level 3 5-6 • Accurate and thorough knowledge and understanding.
• Analytical perspectives are presented, with developed chains of reasoning, showing
cause(s) and/or effect(s).
• An attempt at an assessment is presented using quantitative and/or qualitative information.
• Supported throughout by use of the business behaviour/context, though unlikely to show
significance of competing arguments.
Level 4 7-10 • Accurate and thorough knowledge and understanding.
• A coherent and logical chain of reasoning, showing cause(s) and/or effect(s).
• Assessment is balanced, well contextualised, using quantitative and/or qualitative
information.
• Supported throughout by relevant and effective use of the business behaviour/context, and
shows an awareness of competing arguments/factors leading to a supported judgement.
Pearson Edexcel A Level Business Paper 3 Extract Short (2024) Page 2
Pearson Edexcel
Business Advanced Level
Paper 3 Extract Short (2024) | Crew Clothing
Extract A
Crew Clothing
Crew Clothing was established in 1993. The idea behind the brand was ‘to create timeless clothes inspired by
the British coast.’ It was founded by Alistair Parker-Swift, a professional skier. This was Alistair’s first menswear
collection. Alistair also ran a successful windsurfing school at the time, and the range was inspired by the ocean
and coastal life.
Alastair’s first collection consisted of items including a rugby shirt, detailed with Crew’s iconic ’93 patch. Crew
now has over 100 stores, as well as ranges for men, women, and children, but the clothes have always retained
a ‘coastal feel.’
Source (adapted from): Our Story | Crew Clothing Company
1 Assess the benefit to Crew Clothing of segmenting the market.
(10 marks)
Market segmentation is
benefitial to Clothing (CC) as
Crew their collections
have
always had a "coastal feel" -segmenting their market by
lifestyle This helps target
rightpopulationthat would es
. them the
interested in their clothes That b
.
vag
volume making them more
profitable in the long run as
they
will have more
loyal customers with repeated purchases
However market segmentatition could also limit the number
their customers by
of only focusing on one type of
2
customer. This would lower their potential of higher
sales volume and greater cash flow , which could then
be used for a further expansion of the CC stores
or the development of new collections such as the
,
new men's collection .
More space to write on next page
Page 1 Pearson Edexcel A Level Business Paper 3 Extract Short (2024)
Overall it would be benefitial for CC to use market
segmentation as it would increase the brand's popularity
within right people
the ,
and so would gain a com-
petitive advantage in the
dynamic clothing market
customers
always being responsive to demand as
they don't need to
customers
offer various kinds of clothing
for these .
More space to write on next page
Pearson Edexcel A Level Business Paper 3 Extract Short (2024) Page 2
Page 3 Pearson Edexcel A Level Business Paper 3 Extract Short (2024)
Pearson Edexcel
Business Advanced Level
Paper 3 Extract Short (2024) | Crew Clothing
Mark Scheme
Question Indicative content Mark
Number
1 Knowledge 2, Application 2, Analysis 3, Evaluation 3
• Crew Clothing segments the market based on behaviour/lifestyle as the clothes have
a coastal feel.
• Tailoring the products to people who enjoy the coast/sports can help Crew to
~
understand the market and create products that suit the target market. For example,
the clothes have always retained a ‘coastal feel’ so this style could help the products
to be more appealing to the target market and increase sales.
• Crew can conduct more targeted market research amongst people who windsurf/
spend time at the coast etc. This could help to make the marketing mix more tailored
to the target market, for example promotion could be focused on areas where people
who buy these clothes are likely to see it.
• Focusing on a smaller segment of the market can ensure prices are tailored towards
the target market. Crew can research the income of the targeted group and the
amount they would be prepared to spend on ‘coastal wear’ to help make decisions
around pricing strategies.
Potential counter-balance
• Crew could be missing a large section of the population who would be interested in
-
buying its clothing, effectively limiting the size of the market. It could be missing out on
people who would be interested in buying these clothes.
• It can be expensive to create different ranges/options for different market segments.
This could raise the cost for Crew and reduce profits.
• By focusing on a narrow segment, Crew risk putting ‘all its eggs in one basket.’ If the
market for coastal wear declined, Crew wouldn’t have alternatives to fall back on,
(10)
making this a riskier strategy.
Possible judgement
• This has been a successful strategy for Crew since 1993 and it has grown to over 100
stores. This suggests that segmenting the market by lifestyle was a good choice for
Crew, and something it should continue to do.
• It depends whether sales are stagnant for Crew or if it is seeking future growth. Such
a niche segment may not provide many opportunities for expansion, so therefore
segmenting the market may not be a good long-term strategy.
Page 1 Pearson Edexcel A Level Business Paper 3 Extract Short (2024)
Level Mark Descriptor
0 • A completely inaccurate response.
Level 1 1-2 • Isolated elements of knowledge and understanding – recall based.
• Weak or no relevant application to business examples.
• Generic assertions may be presented.
Level 2 3-4 • Elements of knowledge and understanding.
• Which are applied to the business example.
• Chains of reasoning are presented, but may be assertions or incomplete.
• A generic or superficial assessment is presented.
Level 3 5-6 • Accurate and thorough knowledge and understanding.
• Analytical perspectives are presented, with developed chains of reasoning, showing
cause(s) and/or effect(s).
• An attempt at an assessment is presented using quantitative and/or qualitative information.
• Supported throughout by use of the business behaviour/context, though unlikely to show
significance of competing arguments.
Level 4 7-10 • Accurate and thorough knowledge and understanding.
• A coherent and logical chain of reasoning, showing cause(s) and/or effect(s).
• Assessment is balanced, well contextualised, using quantitative and/or qualitative
information.
• Supported throughout by relevant and effective use of the business behaviour/context, and
shows an awareness of competing arguments/factors leading to a supported judgement.
Pearson Edexcel A Level Business Paper 3 Extract Short (2024) Page 2
Pearson Edexcel
Business Advanced Level
Paper 3 Extract Short (2024) | Japanese Denim
Extract A PointExplain Analyse Context (H)
- -
Japanese Denim Answer-Justify It depends most important
-
-
In the fiercely competitive world of denim, Japanese manufacturers have successfully differentiated themselves
by embracing traditional craftsmanship and utilising natural indigo dye. This strategic move has not only elevated
the quality of their denim but has also positioned them as industry leaders capable of charging premium prices.
Natural indigo is derived from the Indigofera plant, offering a deeper, richer colour which lasts far longer than
synthetic dyes. Natural indigo production’s scarcity and labour-intensive nature contribute to elevated production
costs, but consumers willingly pay a premium for the perceived exclusivity and superior quality. Japanese denim
manufacturers have carved out a lucrative niche and built a formidable competitive advantage in the global
denim industry.
what-how-context -
why
1 Assess the value to Japanese denim manufacturers of using a differentiation strategy.
(10 marks)
A differentiation strategy would be valuable to a
japanese denim manufacturers
will allow them to
because it gain a competitive advantage against other denim
manufacturers .
This
This will be done through higher quality materials and
longer-lasting dye .
differentiation has
collect
also increased their
ability to use the indigofera plant ,
which is
costly to
,
con-
tributing to their
ability to
charge premium prices . This will increase their competitive
advantage in the jean market , having loyal customers who
more purchase
stabe cash-flow
repeatedly resulting in a
for these manufacturers .
However , using the differentiation strategy might not be valuable as high prices
that result it will attract limited amount of people
come as a
from using , only a
people with
higher disposable incomes This limits the amount of target
their
>
-
market , limiting theiramount of sales compared to more affordable strategy
such as cost-minimisation . This will ultimately decrease their market share
due to less customers interested in such a niche category of jeans
.
More space to write on next page
Page 1 Pearson Edexcel A Level Business Paper 3 Extract Short (2024)
Overall ,
a
differentiation strategy will be valuable to a
japanese denim
business as it will help increase their added value due to their luxury
This is the most important factor because this they will
image. way
suit their customer's needs , providing luxury , long-lasting denim .
More space to write on next page
Pearson Edexcel A Level Business Paper 3 Extract Short (2024) Page 2
Page 3 Pearson Edexcel A Level Business Paper 3 Extract Short (2024)
Pearson Edexcel
Business Advanced Level
Paper 3 Extract Short (2024) | Japanese Denim
Mark Scheme
Question Indicative content Mark
Number
1 Knowledge 2, Application 2, Analysis 3, Evaluation 3
• Hand crafted manufacturing process allows higher prices to be charged. Many
consumers are happy to pay a premium for the craftsmanship that goes into Japanese
denim
• Higher prices could allow for higher margins, allowing manufacturers to invest in better
production or expansion
• Using natural indigo creates a higher quality denim which last much longer than
synthetic dye. This could ensure customers remain more loyal to Japanese denim
increasing sales long term and ensuring high customer retention
Potential counter-balance
• This strategy is very labour-intensive and therefore expensive. This raises the cost of
production, potentially reducing profit margins
• Higher costs could cause higher prices. Customers may not be prepared to pay higher
prices for something they do not feel is worth it. This could mean this strategy is
uncompetitive in the long run
• The denim market is very saturated. This strategy may not help Japanese denim
maintain a competitive advantage as it could be easily replicated by a competitor
Possible judgement
• Customers are increasingly concerned with sustainability. Longer lasting products are
likely to be an effective source of differentiation
• Denim products range in price significantly. This may not be an effective strategy,
particularly during times when consumers are more cost conscious (10)
Page 1 Pearson Edexcel A Level Business Paper 3 Extract Short (2024)
Level Mark Descriptor
0 • A completely inaccurate response.
Level 1 1-2 • Isolated elements of knowledge and understanding – recall based.
• Weak or no relevant application to business examples.
• Generic assertions may be presented.
Level 2 3-4 • Elements of knowledge and understanding.
• Which are applied to the business example.
• Chains of reasoning are presented, but may be assertions or incomplete.
• A generic or superficial assessment is presented.
Level 3 5-8 • Accurate and thorough knowledge and understanding.
• Analytical perspectives are presented, with developed chains of reasoning, showing
cause(s) and/or effect(s).
• An attempt at an assessment is presented using quantitative and/or qualitative information.
• Supported throughout by use of the business behaviour/context, though unlikely to show
significance of competing arguments.
Level 4 9-12 • Accurate and thorough knowledge and understanding.
• A coherent and logical chain of reasoning, showing cause(s) and/or effect(s).
• Assessment is balanced, wide ranging and well contextualised, using quantitative and/or
qualitative information.
• Supported throughout by relevant and effective use of the business behaviour/context, and
shows an awareness of competing arguments/factors leading to a supported judgement.
Pearson Edexcel A Level Business Paper 3 Extract Short (2024) Page 2
