Edexcel practice paper_2__a_

Pearson Edexcel
Business
Advanced Level
Practice Paper 2(a)
Business activities, decisions
and strategy
PRACTICE EXAM PAPER

Write your name here
Centre Number Candidate Number
Surname
Practice paper
Time: 2 hours
You do not need any other materials Total Marks
Paper reference
Paper 2(a)
Other names
Business
Advanced
Paper 2(a): Business activities, decisions and strategy
Instructions
• Use black ink or ball-point pen
• Fill in the boxes at the top of this page with your name, centre number and candidate number
• There are two sections to this question paper
• Answer all questions
• Answer the questions in the spaces provided – there may be more space than you need
Information
• The total mark for this paper is 100
• The marks for each question are shown in brackets – use this as a guide as to how much time
to spend on each question
Advice
• Read each question carefully before you start to answer it
• Try to answer every question
• Check your answers if you have time at the end
Page 2 Edexcel A Level Business Practice Exam Paper 2(a)
©

ANSWER ALL QUESTIONS IN THIS SECTION
Section A
Extract A
Toyota Motor Corporation
Toyota Motor Corporation uses various mission statements for its businesses in different markets. However,
with regard to the business of automobile manufacturing and sales, the company’s mission statement
pertains to its strategic actions in technology. Thus, Toyota’s mission statement is as follows: “Create vehicles
that are popular with consumers.” In expanded form, Toyota’s mission statement includes the following
strategic actions.
• Provide world-class safety to protect the lives of customers.
• Provide optimization of energy/infrastructure to local communities.
• Put high priority on safety and promote product development with the ultimate goal of “completely
eliminating traffic casualties”.
Sources: http://panmore.com/toyota-mission-statement-vision-statement-analysis
Source: http://www.sportsdirectplc.com/~/media/
Files/S/Sports-Direct/annual-report/Annual%20
Report%202015%20-%20FINAL.pdf)
Read the following extracts (A to E) before answering Question 1.
Write your answers in the spaces provided.
©
Extract B
2015 2014
£(‘000) £(‘000)
Non-current Assets 895,386 856,867
Current Assets 878,297 843,872
Current Liabilities 382,621 799,245
Non-current Liabilities 229,511 83,940
Net Assets 1,161,551 817,554
Total Equity 1,161,551 817,554
Extract from the Statement of Financial Position of Sports Direct plc
Edexcel A Level Business Practice Exam Paper 2(a) Page 3

Extract C
Aerospace giants Boeing (BA) and Airbus have huge order backlogs of more than 10,000 aircraft
combined. Both businesses are running at full capacity and are suffering the effects of over-utilisation.
Like many companies worldwide, Boeing embraced outsourcing to manage its capacity utilisation
problems. It raised outsourcing to 70% for the 787 Dreamliner in order to reduce the production time from
six years to four years. However, the result was far from what Boeing expected, as its marquee Dreamliner
project is running late and over budget.
These problems arose from Boeing’s partial implementation of the Toyota (TM) model, without integrating
its key values. Toyota outsourced as much as 70% of its total manufacturing, while monitoring its suppliers
continually to ensure their capability, quality, and timely delivery (using Kaizen techniques). This helped
Toyota manufacture new cars in a much shorter timeframe while maintaining its reputation for high quality.
Sources: http://marketrealist.com/2015/04/supplier-capacity-big-problem-aircraft-manufacturers/
©

Extract D
The Tata Group is India’s largest business group accounting for 5.2% of India’s GDP and operates in over
80 countries. The group operates in seven broad sectors ranging from steel, automobiles, energy, chemicals,
hotels and consumer goods to communication systems with Tata Steel, Tata Motors, Tata Consulting
Services and Tata Power accounting for nearly 50% of the group revenue. Today, the Tata Group comprises
of 96 companies, operates in 6 continents and employs approximately 350,000 people. Inorganic growth
has played a major role in this fast growth story. Starting with the Tetley Acquisition in 2001 for USD 432
million, the group has made acquisitions in most of the sectors it operates in. The highlight of its international
acquisition strategy was the USD 11.2 billion acquisition of Anglo-Dutch firm, Corus (the fourth largest in
the global steel industry).
Acquisitions like above might be undertaken for horizontal acquisition to retain/gain market leadership or
to get a foothold in international markets (market entry) or to leverage on synergies. This was the major
reason why Tata Steel decided to acquire Corus as it helped Tata Steel enter the value added steel market
in Europe. In a merger / acquisition, the Tata Group brings along with it accumulated production experience,
cost effectiveness of production processes and ability to differentiate products.
As the Tata Group continues to follow the inorganic route to growth, the challenges of integration need to
be carefully dealt with. Focusing on methods to facilitate easy integration of companies while preserving
the Tata culture will be of great importance in future acquisitions.
Sources: http://tejas.iimb.ac.in/articles/04.php
©

Edexcel A Level Business Practice Exam Paper 2(a)
©
(b) Using the data in Extract B, calculate the change in Sports Direct’s current ratio between 2014
and 2015. You are advised to show your workings. (4 marks)
1 (a) Explain the factors which influence the mission statement of the Toyota Corporation. (4 marks)

©
(c) Assess the likely impact to a firm such as Boeing of over-utilisation of capacity. (10 marks)

©

©
(d) Assess the reason why firms, such as Toyota, are using Kaizen methods. (12 marks)

©
The directors of Tata are considering two options for further growth. One is to use inorganic growth and the other
is to use organic growth.
(e) Evaluate these two strategies and recommend which one is most suitable for Tata’s future growth.
(20 marks)

©
(Total for Question 1 = 50 marks)
TOTAL FOR SECTION A = 50 MARKS

ANSWER ALL QUESTIONS IN THIS SECTION
Section B
Extract E
The world’s largest indoor theme park—which cost $1,000m to build—opened in Dubai in August 2016.
IMG Worlds of Adventure covers about 28 football fields’ worth of space and features a range of characters
from Cartoon Network and Disney’s Marvel universe, like the Hulk and Spider-Man. Developers of the
theme park expect the park to be operating at full capacity (20,000 visitors daily) by the time Dubai Expo
2020 commences. Data on its expected returns can be seen below.
Sources: http://fortune.com/2016/08/31/img-worlds-adventure-theme-park-dubai/
Read the following extracts (E to H) before answering Question 2.
Write your answers in the spaces provided.
©
Expected Net Cash Flows
Returns($m)
Year 1 61.5
Year 2 65.6
Year 3 79.0
Year 4 120.5
Year 5 227.7
Year 6 276.4
Year 7 281.2

Extract F
Tesco face fresh accusations of ‘bullying’ suppliers
over price cuts
Tesco chief executive Dave Lewis’s attempts to heal relationships with suppliers suffered a blow as it
emerged that the troubled supermarket continues to use its marker power to put pressure on already
squeezed small businesses.
In emails to suppliers, Tesco has demanded price cuts because of the slide in commodity markets and has
threatened to withdraw products if suppliers refuse to capitulate.
The supermarket has been renegotiating supply deals for weeks. It is understood that Tesco are still
demanding cuts from some, despite plans announced last month by Mr Lewis to improve how Tesco
communicates with its partners.
Sources: www.telegraph.co.uk/finance/newsbysector/retailandconsumer/11399558/Tesco-faces-fresh-accusations-
of-bullying-suppliers-over-price-cuts.html
©

©
Extract G
Unilever has bought US start-up Dollar Shave Club
for a reported $1bn (£764m) in cash to compete in
the male grooming market
The four-year-old e-commerce company sells disposable razors and other male grooming products directly
to consumers for as little as $1 a month. Dollar Shave Club has 3.2 million members - but has yet to make
a profit. Founder Michael Dubin, who will remain as chief executive after the takeover, said he was “excited”
by the deal. His company came to global attention after he posted a humorous marketing video about
shaving on YouTube. The video went viral, crashing the company’s server within an hour. It now operates
in the United States, Australia and Canada.
But the company is facing legal action from rival Gillette, owned by Procter & Gamble, seeking unspecified
damages. It claims that the coating used to strengthen its blades infringes on a Gillette patent. Since that
YouTube video, Dollar Shave Club has taken a sizeable slice out of Gillette’s market share. In response Gillette
introduced its own Gillette Shave Club last year. Now the Anglo-Dutch multi-national Unilever wants to use
Dollar Shave Club’s “innovative and disruptive male grooming brand” to compete with Gillette head on.
Unilever already has a foot in the male grooming market with the Axe brand, known as Lynx in the UK.
“We plan to leverage the global strength of Unilever to support Dollar Shave Club in achieving its full
potential in terms of offering and reach,” said Kees Kruythoff, president of Unilever North America. Dollar
Shave Club, which now also sells male personal wash, skincare and hair styling products, logged $152m
in turnover last year and is “on track” to exceed $200m this year. The firm was valued at around $615m
following its latest venture capital funding round in November.
Source: www.bbc.com/news/business-36791928

©
Extract H
Gower Brewery looks for funding
Gower Brewery is looking to expand its production at its Swansea site. The company is also hoping to
increase sales across the UK, with major cities in England targeted.
The family run business, which was founded in 2011 to address the lack of a brewery on the Gower
Peninsula, produces about 35,000 pints per week. Its beers include Gower Power, Gower Gold and Black
Diamond. It relocated to new premises in 2015 as part of a £1m project, backed by a loan from HSBC, a
funding package from Finance Wales and a grant from the Welsh Government.
Matt Joslin, one of directors at the Gower Brewery needs the funding to expand the business as it is
currently at capacity and growth is being stunted due to not being physically able to produce enough beer.
The money will be used primarily to buy new equipment which will enable Gower to ferment and store
more beer.
Source adapted from: www.insidermedia.com/insider/wales/gower-brewery

©
(b) Explain how operating solely as an e-commerce firm might benefit Dollar Shave Club. (4 marks)
2 (a) Using the data in Extract E, calculate the Average Rate of Return for IMG Worlds of Adventure. (4 marks)

©
(d) Assess the likely impact on Dollar Shave Club with the announcement of its takeover by
multi-national giant, Unilever. (12 marks)

©
Gower Brewery is looking for funding to expand the business. The two methods of finance that they are
considering are loan finance or share capital by inviting people to purchase shares in the brewery.
(e) Evaluate these two methods and recommend which one is most suitable for Gower to achieve
their objective of expansion. (20 marks)

Edexcel practice paper_2__a_

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Similar to Edexcel practice paper_2__a_

Similar to Edexcel practice paper_2__a_ (20)

Recently uploaded

Recently uploaded (20)

Edexcel practice paper_2__a_