9BS0/01 · Paper 1 (co-assessed with Theme 4) · 2 hours · 35% of A-Level · Topics 1.1 – 1.5
1.1 - Meeting customer needs
Dynamic markets: markets are constantly changing due to factors such as changes in consumer tastes and preferences, technological innovation, changes in legislation, new entrants/competitors, and economic conditions. Businesses must adapt their products, marketing strategies, and operations in response.
Risk and uncertainty are often confused. The key distinction is whether probability can be calculated. In an exam, state: risk = quantifiable probability; uncertainty = non-quantifiable.
Limitations of market research:
Use of ICT in market research: online surveys (low cost, wide reach), social media analytics (real-time data on customer opinions), big data analysis (patterns from large datasets), loyalty card data (purchase behaviour).
Market segmentation: dividing a market into groups with similar characteristics.
Sampling methods:
Market mapping: a visual tool that plots competing products/brands on a two-axis grid (e.g. price: low-high vs quality: low-high). Helps identify:
In an exam question asking you to draw or analyse a market map, remember to label both axes, plot competitors accurately, and identify any market gap. Explain what the gap represents.
Adding value: the difference between the selling price of a product and the cost of the inputs used to make it. Ways to add value:
Adding value is not just about charging more; it is about increasing the gap between price and perceived value for the customer. Questions may ask how a business could "add value": link your answer to specific methods above and the business context given.
1.2 - The market
Demand: the quantity of a good or service that consumers are willing and able to buy at a given price over a given time period.
The demand curve slopes downward (left to right): as price rises, quantity demanded falls; this is the law of demand. A change in price causes a movement along the demand curve; a change in any other factor causes a shift of the whole curve.
Factors that shift the demand curve:
Supply: the quantity of a good or service that producers are willing and able to offer for sale at a given price over a given time period.
The supply curve slopes upward: higher prices make it more profitable to produce, so more is supplied. A change in price causes movement along the curve; other factors cause a shift.
Factors that shift the supply curve:
Equilibrium price: the price at which quantity demanded equals quantity supplied; the market clears with no surplus or shortage. On a diagram, it is the intersection of the supply and demand curves.
Using supply and demand diagrams: exam questions commonly ask you to show the effect of a specific event. Remember:
A common question asks you to draw or describe how a specific event affects price and quantity. Always identify whether demand or supply is affected, then state the direction and the new equilibrium.
PED measures the responsiveness of quantity demanded to a change in price.
PED is almost always a negative number (demand and price move in opposite directions); the exam and spec focus on the absolute value |PED|.
| Value | Label | Meaning |
|---|---|---|
| |PED| > 1 | Price elastic | A 1% price change causes a >1% change in quantity demanded. Demand is relatively sensitive to price. |
| |PED| < 1 | Price inelastic | A 1% price change causes a <1% change in quantity demanded. Demand is relatively insensitive to price. |
| |PED| = 1 | Unitary elastic | A 1% price change causes exactly a 1% change in quantity demanded. |
Factors influencing PED:
Significance of PED for businesses: pricing strategy and total revenue.
Total revenue = Price x Quantity. With elastic demand, price and revenue move in opposite directions. With inelastic demand, price and revenue move in the same direction. This is the most commonly tested aspect of PED.
YED measures the responsiveness of quantity demanded to a change in consumer income.
| Value | Good type | Meaning |
|---|---|---|
| YED > 0 | Normal good | Demand rises as income rises. Positive relationship between income and demand. |
| YED > 1 | Luxury (income elastic) | Demand rises proportionally more than income. Examples: foreign holidays, designer goods. |
| 0 < YED < 1 | Necessity (income inelastic) | Demand rises, but less than in proportion to income. Examples: bread, bus travel. |
| YED < 0 | Inferior good | Demand falls as income rises; consumers switch to superior alternatives. Examples: own-brand products. |
Influences on YED:
Significance to firms:
Do not confuse PED and YED. PED: price on the bottom. YED: income (Y) on the bottom. YED can be positive or negative; PED is almost always negative.
1.3 - Marketing mix and strategy
The design mix: the three elements that product design must balance.
Changes in the design mix to reflect social trends:
Types of promotion:
Types of branding:
Ways to build a brand: advertising (consistent message and image), sponsorship (associating brand with events/personalities), celebrity endorsement, quality products and services, distinctive packaging and logo, strong customer service and experience, social media presence.
Benefits of a strong brand:
Changes in branding to reflect social trends:
Factors determining appropriate pricing strategy:
Social-trend influences on pricing:
A common question asks you to recommend a pricing strategy. Always link the strategy to the specific context given: the level of competition, whether the product is new or established, and the nature of the target market.
Distribution channels: how a product moves from producer to consumer.
Changes in distribution to reflect social trends:
Product life cycle (PLC):
Extension strategies: actions taken to prevent or delay decline.
The Boston Matrix: analyses a business's product portfolio using market share and market growth rate.
Advantages and disadvantages of the Boston Matrix:
Marketing strategies for different markets:
Customer loyalty: creating and maintaining loyal customers through loyalty reward schemes; consistently high quality products and service; strong after-sales support; personalised communications; building a strong emotional connection to the brand.
The Boston Matrix is a planning tool, not a prediction. Categorise a product using the business context, then recommend a strategy (invest, harvest, divest, develop) and justify it. Avoid simply labelling without analysis.
1.4 - Managing people
Flexible workforce: adapting the workforce to match business needs.
Employer/employee relations: the quality of relationships between management and the workforce. Effective communication, consultation, and fair treatment promote trust and productivity. Poor relations lead to high labour turnover, absenteeism, low morale, and potential industrial action.
Costs of recruitment, selection and training: job advertising; interviewer time; aptitude testing/assessment centres; lost productivity during vacancy; induction costs; training time and materials; mentor/supervisor time.
Selection methods: application forms and CVs (screening); interviews (face-to-face or panel); aptitude and psychometric tests; work-based tasks/trials; assessment centres (multiple exercises over a day).
Types of training:
Types of organisational structure:
Delayering: removing one or more levels of management from the hierarchy. Effects: reduced costs; flatter, faster-communicating structure; employees gain more responsibility (can motivate); risk of overloading remaining managers; may lead to redundancies and short-term disruption.
When evaluating organisational structure in an exam, consider the context: a small start-up suits a flat structure; a large multinational may need a tall, hierarchical one. Link structure choice to the business's size, strategy, and culture.
Importance of motivation: motivated employees work harder, are more productive, take fewer sick days, are less likely to leave (lower labour turnover), and provide better customer service.
Motivation theories:
Financial incentives:
Non-financial techniques:
A motivation question will usually ask you to apply a theory to a specific context. Link the theory clearly: e.g. if workers need recognition, apply Mayo or Maslow's esteem level. Then evaluate whether the recommended technique will work given the context.
Leadership styles:
Leadership style questions often include a case study with contextual clues. Match the style to the situation: autocratic for crisis/emergency; democratic for complex, creative projects; laissez-faire for expert, self-motivated teams. Always evaluate in context rather than stating one style is universally best.
1.5 - Entrepreneurs and leaders
Entrepreneurs create and run businesses, taking on financial and personal risk in return for potential reward. Their roles include:
Barriers to entrepreneurship: lack of start-up finance; limited business experience; competition from established businesses; regulatory and legal complexities; fear of failure; lack of a clear market opportunity.
Anticipating risk and uncertainty:
Characteristics and skills required: innovation and creativity; willingness to take calculated risks; determination and resilience; vision and strategic thinking; leadership and communication; problem-solving and decision-making; financial literacy.
Financial motives for setting up a business:
Non-financial motives:
Business objectives change over time and with circumstances. A start-up prioritises survival; a growing business may target market share; a mature business may focus on profit maximisation. Questions often ask how and why objectives evolve.
Note - business types by objective (not legal forms): the following are not separate legal structures but describe the goals or operating model of a business:
Opportunity cost: the value of the next best alternative foregone when a decision is made. Every business decision involves a trade-off; choosing one option means giving up the benefits of another.
Opportunity cost underpins much of business decision-making. In an exam, when evaluating a business choice, always acknowledge what is being given up (this is the opportunity cost) and weigh it against the benefits of the decision made.
As a business grows, the founder can no longer manage every aspect personally. The transition from entrepreneur to leader requires significant changes in approach:
The key distinction remains: entrepreneurs create and take risks; leaders inspire and direct others to achieve a shared vision. A successful business requires both qualities, but at different times in the business life cycle.