Cambridge A Level Business (for first examination in 2016) 9609 — 2025 Oct/Nov Paper 4 · Variant 3

2 Advise Sarah on whether PEST analysis is the most useful approach for SH in developing a new business strategy. [20]

Mark scheme: 2 Advise Sarah on whether PEST analysis is the most useful approach for SH in developing a new business 20 strategy. Level AO1 Knowledge AO2 Application AO3 Analysis AO4 Evaluation and 2 marks 8 marks 7 marks understanding 3 marks Description Description Description Description 3 7–8 marks 6–7 marks Developed analysis of Effective evaluation the overall strategy that A developed judgement/conclusion identifies connections is made in the business context between causes, impacts that draws together developed and/or consequences. evaluative comments which balance some key arguments in the business context. 2 2–3 marks 2 marks 4–6 marks 3–5 marks Developed Developed Developed analysis of Developed evaluation knowledge of application of individual strategic • A developed relevant key relevant point(s) element(s) that identifies judgement/conclusion is term(s) and/or to the business connections between made. factor(s) is used context. causes, impacts and/or • Developed evaluative to answer the consequences. comments which balance question. some key arguments. 2 Level AO1 Knowledge AO2 Application AO3 Analysis AO4 Evaluation and 2 marks 8 marks 7 marks understanding 3 marks Description Description Description Description 1 1 mark 1 mark 1–3 marks 1–2 marks Limited Limited Limited analysis that Limited evaluation knowledge of application of identifies connections • A judgement/conclusion is relevant key relevant point(s) between causes, impacts made with limited supporting term(s) and/or to the business and/or consequences. comment/evidence. factor(s) is used context. • An attempt is made to balance to answer the the arguments. question. 0 0 marks 0 marks 0 marks 0 marks No creditable No creditable No creditable response. No creditable response. response. response. 2 Advise Sarah on whether PEST analysis is the most useful approach for SH in developing a new business strategy. Responses may include: AO1 Knowledge and understanding Knowledge (max 1 mark) can be awarded for knowledge about approaches, can be awarded for understanding of the approaches up to two marks including: • Blue ocean strategy aims to combine product differentiation with low-cost to develop new markets and demand.It is about finding uncontested markets to gain a competitive advantage. Comparison with red ocean strategy awardable. • Scenario planning - Managers consider the main risks and uncertainties and adopt different strategies for different scenarios. Flexible approach. • uncertainties that affect their business. • SWOT analysis: Strengths, weaknesses, opportunities, threats. SWOT is very easy to construct so can be subjective. • Porter’s five forces – threats of substitutes, supplier power, threat of entry, buyer power, competitive rivalry • Core competence framework – core competencies lead to the development of core products. Core products are not necessarily sold to final consumers. Instead, they are used to produce many end-user products. • Ansoff matrix – Market penetration, market development, diversification, product development. Different options open to a marketing manager when considering new opportunities for sales growth. It includes thinking of the market in which the business is going to operate and the product(s) it plans to sell. Business decides whether to remain in the existing market or to enter new ones along with whether to sell existing products or develop new ones. • Force field analysis - It weighs up the potential advantages and disadvantages of a decision before a choice is made. It gives managers an insight that will allow them to strengthen the forces supporting a decision and reduce the forces that oppose it. • Decision trees - consider all of the options open to a manager, the different possible outcomes resulting from these options, the chances of these outcomes occurring, and the economic returns from these outcomes. • PEST analysis – It focuses on the macro environment (Note: Mentioning of PEST or political, economic, social and technological is not Knowledge as they are in the question and case respectively). 2 Other knowledge marks may be awarded for: • The meaning and purpose of a business strategy; plan of action to achieve the vision and objectives of a business and upon which decisions are made. • The meaning and purpose of strategic management (the entire process of identifying, choosing and implementing the planning of business activity): analysis (identifying options and understanding the business, market and external environment), choice (between strategic options) and implementation (the decision making of implementing a strategic decision). • (do not reward repetition of Appendix 4, but understanding of the model is rewardable). For identifying an approach and follows for the definition of the approach up to two DEV to gain the full 3 marks. Award for any explanation of a policy that affects a business’ strategy, up to a max of 2 marks. Some basic knowledge about a Blue ocean strategy . policy, so only K. 1 K for identification and 1 DEV Blue ocean strategy , aims to combine product differentiation with low-cost to for a point of explanation develop new markets and demand. . 1 K for identification and 2 DEVs Blue ocean strategy , aims to combine product differentiation with low-cost to for two points of explanation develop new markets and demand. . It is about finding uncontested markets to gain a competitive advantage. . Note – Candidates can gain full marks for AO1 from one term that is explained ( + + ) or from two terms partially explained ( + and + ). The mentioning of PEST or Political, Economic, Social and Technological cannot be awarded for knowledge as it is stated in the case study but any understanding of it can. No other AO2, AO3 OR AO4 marks can be awarded without AO1. AO2 Application Application (max 2 marks) can be awarded for applying knowledge, analysis or evaluation of approaches and their usefulness on developing a new business strategy for SH. 2 Candidates MUST apply this to SH’s business model – a lot of this will come from the appendices • Data about from Appendix 4; • Political – government actions to encourage more investment into country D from multinational companies • Economic – recovery from economic recession, rising inflation and high cost of producing goods • Social – increased online shopping, importance of technological advances when choosing a gaming headset, price sensitivity of consumers, increased immigration by young people • Technological – increasing use of artificial intelligence in market research and potential for new product techniques • SH’s revenue declining. New competitor became market leader. • Market share reduced • Asked an external management consultant business to create a PEST analysis. • New business strategy needed to enable SH to return to profitability. AO3 Analysis ( and and ) , including: Analysis for the usefulness of PEST analysis: • Analysis of the political forces: • government actions to encourage more investment into country D from multinational companies which may lead to new competitors entering the gaming headset market in country D • Analysis of the economic forces: • recovery from economic recession – the marketing strategy was created during an economic boom but the elements of the strategy may need to change for a recession. SH continued with the same strategy that was effective during prosperous economic times • high inflation and high cost of production – squeezed disposable incomes may affect consumer buying habits/choices and the ability of SH to make a profit. Limited scope for further price rises to increase profit margins. • Analysis of the social forces: • increased online shopping – the impact of this on SH’s decision to sell headsets through retail stores • importance of technological advances when choosing a gaming headset – consumers value the technological advances of SH’s products but is price becoming more important due to the current economic climate • price sensitivity of consumers • increased immigration by young people. 70% of gaming headsets are purchased by consumers under 30 years old. • Analysis of the technological forces: • increased use of artificial intelligence in market research – does SH use this technology in its market research? • potential for new production techniques – could they reduce the cost of producing the headsets to offset the high cost of production? However, would capital investment be recovered by the production cost savings? 2 Analysis for the usefulness of PEST analysis; • Enables the consultant to consider the impact of external factors on the potential success of the business strategy and the different strategic choices • Internal policies/strategies may need to change to achieve success in light of the external factors Arguments against the usefulness of PEST analysis: • The model is relatively simplistic • The results are a snapshot in time – the forces will change. Are the factors identified in 2025 relevant for 2027? • The strategy for the future will be based on estimates/predictions • This approach was completed by an external management consultancy business with no investment in SH – to what extent can this information be relied upon to base future decisions? • Does not consider new external influences in the future Candidates may choose to contrast other approaches with PEST. Candidates need to identify an approach and provide developed analysis to get to L2, this then needs to be counterbalanced to get to L3. If a candidate does this twice, they will gain 8 marks. 2 AO4 Evaluation Evaluation ( and and ) including: L1 limited supporting evidence – answering the question with a brief explanation L2 developed supporting evidence - Reason is developed further L3 developed supporting evidence with context – Level 1 and 2 is answered in context. • A judgement about the usefulness of PEST analysis when developing a new business strategy for SH. • Judgement may depend upon; the validity of the data, the external environment in country D, whether SH is staying in the same market, or whether it will diversify, the use of other approaches in tandem with PEST analysis. • Weighing up of the relevant arguments for the use of PEST analysis in making decisions about developing a new business strategy for SH. • Weighing up of the relevant arguments for the use of other approaches instead of (or in tandem with) PEST analysis. Accept all valid responses. 2 Exemplars and annotations for AO4 (assuming relevant AO1 has been awarded): No credit (no L1 (limited L2 (developed supporting L3 (developed supporting supporting evidence) evidence) supporting evidence with evidence) context) Overall SWOT analysis Overall SWOT analysis seems to Overall SWOT analysis seems Overall SWOT seems to be the better be the better approach to develop to be the best approach to analysis seems to approach to develop the business strategy. This is develop the business strategy be the better the business strategy because SWOT will cover all to achieve profit through approach to This is because SWOT areas that PEST will. However, diversification. However, the develop the will cover all areas that the effectiveness of SWOT needs effectiveness of SWOT needs business strategy PEST will not. to be considered as it is all to be considered as it is all qualitative values. This means qualitative values. This means that SH will make choices to that SH will make choices to diversify with quantitative factors. diversify with quantitative factors. Especially that SH’s financials such as Total annual revenue has dropped from 46 m in 2021 to 26 m in 2024 and ROCE from 8 to (4). 2 No credit (no L1 (limited L2 (developed supporting L3 (developed supporting supporting evidence) evidence) supporting evidence with evidence) context) Overall I think SH Overall I think SH Overall I think SH should use Overall I think SH should use should use several should use several several approaches to achieve a several approaches to achieve approaches to approaches to achieve new business strategy. SH a new business strategy. SH achieve a new a new business should use SWOT and PEST to should use SWOT and PEST to business strategy strategy. SH should look at the external and internal look at the external and internal use SWOT and PEST environment and have a full environment and have a full to look at the external picture of the business This will picture of the business This will and internal allow SH to look at their strengths allow SH to look at their environment and have and find new ways to recover strengths and find new ways to a full picture of the which will increase sales and recover which will increase business profits. sales and profits. SH’s strength of innovation allows it to be different and demand premium prices which means when recession recovers and with their extensive advertising and use of celebrity to promote their products sales and profits will start increasing again.

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