1. Pearson Edexcel
Business
Advanced Level
Practice Paper 1(b)
Marketing, people and
global businesses
PRACTICE EXAM PAPER

2. 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 1(b)
Other names
Business
Advanced
Paper 1 (b): Marketing, people and global businesses
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
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3. ANSWER ALL QUESTIONS IN THIS SECTION
Section A
Extract A
Starbucks in China
China is an emerging market where an aspirational middle class trust Western food companies more than
Chinese firms, especially after recent food scandals. Coffee chain Starbucks have had huge success in China
yet have been criticised by the Chinese media for their high pricing – a medium latte is priced a third higher
than one in Chicago. Starbucks have argued that the costs of sourcing ingredients such as milk and coffee
beans have added to their costs in addition to high rent in areas of high footfall. Senior Starbucks officials
state that profit margins are similar to other operations in America. Imported products often cost more in
China because of high import duties and tax rates. Roasted coffee beans, for example, draw an import duty
of 15 percent and a sales tax of an additional 17 percent.
Their localisation strategy has worked – Starbucks have 18 design studios around the world so they can
design outlets around the local culture. People in China often visit Starbucks in large groups therefore
moveable furniture allows consumers to rearrange stools and sit together at huge tables. Flavours like red
bean Frappuccino’s and green tea have been added to menus to appeal to local taste buds.
Starbucks used 3 different joint ventures to gain insights into the different cultures in North, South and East
China so they could localise their stores accordingly. Competition is becoming intense in Chinese cities with
Taiwanese chain UBC, Costa from the UK and large chains like KFC and McDonalds with their McCafe
coffee shops offering much lower prices.
Sources: www.reuters.com/article/us-starbucks-china-pricing-idUSBRE99K17H20131021 and
www.linkedin.com/pulse/starbucks-competition-china-antonio-graceffo
Read the following extracts (A to C) before answering Question 1.
Write your answers in the spaces provided.
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4. Extract C
Spotify’s Revenue Skyrockets
With $2.18 billion in revenue Spotify continues to dominate the booming music streaming market, however,
most of this is cancelled out by the huge royalty costs to record companies and artists resulting in overall
losses. Music streaming has totally changed the way consumers buy their music with rapid market growth
while downloads have declined along with sales of CD’s and other formats. The market is constantly
changing with new rivals like Apple Music attempting to differentiate by having playlists chosen by people
rather than computer algorithms. Meanwhile new rival Google Play Music has started offering a family plan
which allows unlimited access for up to 6 family members for $14.99 per month.
Sources: www.statista.com and The Economist June 13th 2015
Extract B
Worldwide paid subscribers of music streaming services
Total paid
subscribers
54.4m
30.0m
11.0m
3.9m 3.5m 3.0m 3.0m
Source: www.statista.com
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5. 1 (a) Using extracts B&C calculate the worldwide market size by value for paid music streaming. (4 marks)
(b) Explain how a firm such as Starbucks can benefit from branding. (4 marks)
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6. (c) Assess the suitability of using a geocentric (mixed) approach to marketing for Starbucks in China. (10 marks)
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8. (d) Assess the suitability for a firm such as Spotify of choosing to operate in a dynamic market. (12 marks)
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Starbucks are considering selling more coffee in China using either cost-plus pricing or competitive pricing.
(e) Evaluate these two options and recommend which one is most suitable for a business such
as Starbucks operating in China. (20 marks)
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12. (Total for Question 1 = 50 marks)
TOTAL FOR SECTION A = 50 MARKS
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13. ANSWER ALL QUESTIONS IN THIS SECTION
Section B
Extract D
Lush
Lush is one the of the UK’s most ethical retailers of handmade soaps and beauty products. The brainchild
of Mark and Mo Constantine, Lush is renowned for its natural products and extensive list of ethical practices.
Its fundamental founding principle is the profound avoidance of animal testing. After going bankrupt with a
firm called “Cosmetics to Go” Mark learned that making a profit was not a nice optional extra. ‘That was a
very good discipline for Lush. We had no money. Everything had to be profitable. If it wasn’t, there was no
money for tomorrow.’ Lush is a private limited company that works with franchisee partners around the world
who manage stores in countries like the US and Australia. There are 105 UK stores with 900 more overseas
across 49 countries. Lush, who recently opened stores in emerging markets, generated a turnover of £454m
and a pre-tax profit of £23.3m.
Lush is constantly evolving its ethical policies. When it discovered that by using palm oil it was contributing
to the destruction of orangutan habitats, it eliminated palm oil from its products. Its Lush charity was
launched to support suppliers by creating better working and living environments, funded by 2% of Lush’s
product and packing spend. “We don’t just take into account the labour accounts and the working rights,
but also the environmental problems,” says Simon Constantine, head of ethical buying at Lush.
Mark tries to avoid hierarchy and sends DVD’s with information about new stock to each employee every
quarter. He talks about employing the right people with the right attitude such as Paulo Mellet, a buyer
for Lush who died of cerebral malaria contracted while digging trenches for a farmer in Ghana. Mellet
spearheaded a number of environmental campaigns and worked closely with suppliers around the world,
including setting up a deal for Lush to buy cocoa butter from a Columbian peace village. “If you have the
right people and they have the right attitude, it’s surprising how brilliant it can be,” said Constantine of his
departed colleague. “If we hadn’t allowed him to do that, he wouldn’t have worked with us,” he said. “If you
employ passionate and committed people and you give them that freedom and they’ve got a broad enough
imagination, incredible things happen.”
Source: adapted from http://elitebusinessmagazine.co.uk/sales-marketing/item/meet-the-ethical-entrepreneurs-solving-
social-issues and /www.greenbiz.com
Read the following extracts (D to G) before answering Question 2.
Write your answers in the spaces provided.
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14. Extract E
Brexit is a huge negative for Japanese companies
in the UK
Some of Japan’s biggest companies have warned that the UK withdrawing from the European Union trading
bloc would be bad news. Nissan UK Ltd whose factory near Sunderland employs 6700 staff and makes
480,000 vehicles a year – more than half of which are exported to EU countries – has expressed concern
over the prospect of higher tariffs following a British exit.
Campaigners who wanted the UK to leave the EU argued that Britain would still be able to trade with Europe
but more as a Free Trade Area than a Single Market. They argued that European countries like Germany have
more to lose by starting a tariff war since firms like Mercedes and BMW rely on the UK market. Moreover,
since the decision to leave the EU, a weakened pound has helped sales in Europe for firms like JLR and Nissan.
Automotive sales growth is looking robust according to experts. The global car market will grow 2.8 percent
a year on average, with global sales of 110 million cars per year by 2023.
Source: adapted from www.theguardian.com/world/2016 and http://www.cnbc.com/2016/07/05/
Extract F
Nissan announces €3,000 price cut in Europe
for the all-electric Leaf
Nissan has announced a significant €3,000 price cut in Europe for the all-electric Leaf.
After reducing the price tag of the U.S. spec Leaf by $6,400, the European version will also be a lot more
affordable from now on. Taking into consideration available incentives, a customer in France can get the car
for €25,990 while someone in UK can order it for £23,490.
Source: adapted from http://www.motor1.com/news
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15. Extract G
Pound weak against the Euro
At the time of writing, the British pound is now worth €1.19. The pound has been struggling against
other currencies since the referendum that saw the majority of British voters opt to leave the EU.
Source: www.poundsterlinglive.com
2 (a) Using the data from extract F and G calculate how much in pounds a UK consumer would save
buying a Nissan Leaf car in Euros from France rather than buying it from the UK. (4 marks)
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16. (b) Explain how a Multinational Corporation (MNC) like Nissan locating in the UK could benefit
the UK’s National economy. (4 marks)
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17. (c) Assess whether Mark Constantine set up Lush for non-finanicial motives. (10 marks)
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19. (d) Assess the potential impact of the UK leaving the EU trading bloc on a UK car manufacturer
such as Nissan UK Ltd. (12 marks)
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21. Mark Constantine, the founder of Lush is looking to expand the company throughout the world. He is considering
using either a paternalistic or democratic style of leadership.
(e) Evaluate these two options and recommend which one is most appropriate for Mark in
leading the company. (20 marks)
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23. (Total for Question 2 = 50 marks)
TOTAL FOR SECTION B = 50 MARKS
TOTAL FOR PAPER = 100 MARKS
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