Business Studies: Exam Style Questions – 6
Tesco makes green pledge
Supermarket chain Tesco has pledged to revolutionise its business to become a “leader in
helping to create a low-carbon economy” with a raft of new measures to help combat climate
change.
Pledges:






To put new labels on every one of the 70,000 products it sells so that shoppers can
compare carbon costs in the same way they can compare salt content and calorie
counts.
To cut the emissions produced by its stores and distribution centres by 50% by 2020
To slash the amount of CO2 used in its distribution network to deliver each case of
goods by 50% within five years.
To halve the prices of environmentally-friendly products like low-energy light bulbs
To convert Tesco’s lorries to run on 50% biodiesel mix
To provide children with carbon calculators to show how simple changes, like car
sharing, can cut carbon costs.
The central business driver is the reduction of the carbon footprint.
The Wal-Mart pledge:



A $500m (£254m) commitment to use 100% renewable energy
Create zero waste
Cut greenhouse emissions by 2009.
The government has demanded that supermarkets are to …



set and meet targets to cut carbon emissions
use their buying power to demand greener products
to label electrical goods more clearly so that shoppers could more easily buy the most
efficient products.
The new carbon labelling programme - which will eventually extend to more than 50,000
products sold in the UK - will not be immediate. Tesco said it would first have to develop a
“universally accepted and commonly understood” measuring system. The grocer intends to
set up a “Sustainable Consumption Institute” and has commissioned academics at Oxford
University to lead the project at a cost of £5m a year.
According to Defra food transported by air - mainly fresh fruit and vegetables - accounts for
only 0.1% of total food miles, but generates some 13% of total food transport CO2
emissions. Road and air "food miles" generated nearly 18m metric tons of carbon dioxide in
2004, the latest year for which figures are available.
Source: The Guardian 22nd January 2007 (adapted)
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Business Studies: Exam Style Questions – 6
Questions
1. What advantages are there to Tesco of taking a lead in a low-carbon economy?
2. Comment on the marke4itng advantages of the Tesco pledges.
3. Examine the ways in which Tesco and other supermarkets could be even more proactive.
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Business Studies: Exam Style Questions – 6
Carphone suspends Big Brother sponsorship
Carphone Warehouse, Europe’s largest mobile phone retailer, yesterday moved to
distance itself from the controversy surrounding Channel 4’s Celebrity Big Brother,
suspending its £3m sponsorship following alleged racism on the show.
The decision comes as Ofcom, the media regulator, said it had received a record
33,000 e-mails and telephone calls in protest over alleged racist comments made
about Shilpa Shetty, the Bollywood actress, by fellow housemates.
Charles Dunstone, chief executive of Carphone, said he could not associate the brand
with the programme. “We had already made it clear to Channel 4 that were this to
continue, we would have to consider our position. Nothing we saw [on Wednesday]
night gave us any comfort.”
Carphone’s decision comes as its brand image has taken a battering over the past
few months over its customer service. Last week, Mr Dunstone admitted that
Carphone’s brand has been “tarnished” by its struggle to cope with the demand for
its “free” broadband offer.
The reality series is attractive to advertisers because of its two-week run as well as
the size and age of its audiences.
A YouGov survey found:


15 per cent thought Carphone should pull the sponsorship unless Channel 4
took some action
10 per cent thought that it should stop sponsoring Big Brother whatever the
show did.
The YouGov BrandIndex Survey polled almost 1,600 people online between
Wednesday noon and yesterday morning, before Carphone’s suspension.
Source: The Financial Times 22nd January 2007 (adapted)
Questions
1. Examine the importance of establishing a positive image to a brand to a
company such as Carphone warehouse.
2. Why did Carphone warehouse choose Big Brother in particular, to sponsor?
3. Outline the attractions of Big Brother to sponsors.
4. Explain the role of a) Ofcom b) Oftel c) Ofwat d) Offer
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Business Studies: Exam Style Questions – 6
Two food factories set to close
Premier Foods, the owner of brands such as Branston sauces and Ambrosia Creamed
Rice, has announced plans to close two factories putting 400 jobs at risk.
Closures:


King's Lynn in Norfolk
Ashford in Kent factory
Expansions:



Wisbech, Cambs
Worksop, Notts
Long Sutton, Lincs.
It said it hoped employees hit by the closures would remain with the firm. The
closures were necessary – seemingly – owing to the closeness of the fume date.
Source: BBC News 22nd January 2007 (adapted)
Questions
1. Explain the term ‘fume date’.
2. When a factory closes a variety of stakeholders are affected. Identify such
stakeholders and explain how the closure will affect them.
3. Why is the company closing AND expanding factories?
4. How can those hit by closures ‘stay within the firm’?
5. How is the above a classic example of revectoring?
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Business Studies: Exam Style Questions – 6
Praise the company that stays public, for it does good work
I know what you’re thinking: “Why am I working in such a transparent business . . . a
public company, making $1m or $2m and getting beaten up all the time? Why not run a
private business?” Who needs to comply with the regulations designed to make you more
transparent when you could just continue, largely unspotted, as a private company? Freed
from the intrusive gaze of institutional shareholders, it is said, management can take the bold
and radical steps needed to turn businesses round without being penalised by investors in the
short term. Relatively low interest rates allow companies to borrow cheaply while dramatically
cutting costs. This sort of thinking informed Sir Philip Green’s 2004 bid for the British retailer
Marks and Spencer when he offered M&S investors £4 a share to take the company private.
Marks and Spencer’s has shown that it is entirely possible for public companies to execute a
recovery if:
a. the right leadership is in place
b. If investors give managers the time they need to deliver.
Just a few steps down the UK high street from your nearest M&S, you might find a branch of
Debenhams, another retailer that has, unlike M&S, experienced private equity ownership in
the past few years (2003-2006) prior to being floated again last year. Here the story is rather
different. Debenhams’ temporary owners did very well out of the deal, selling off valuable
properties and issuing huge dividends to themselves. But having rejoined the stock market in
May, the company’s performance has been disappointing. And Debenhams’ share price has
slipped from 195p at flotation to about 170p today. Given that private equity owners often
seek nothing more than the most rapid return possible to the stock market, you have to
wonder whether this form of ownership can lay claim to any special virtues at all.
Managers should be stewards of their companies, not merely their semi-detached financial
engineers. To illustrate the difference, consider people who think “home” and people who
think “house” about the place where they live, says Mark Goyder, director of the Londonbased think-tank Tomorrow’s Company. If you think “home” there is an assumption of
continuity. “Money is spent that cannot be recovered in the event of an early sale but adds to
the individual character of that home,” he says.
“Others, particularly those who expect to be moving on again in a few years, make a much
simpler payback calculation. They accept what they inherit by way of carpets and colour
schemes and avoid spending on the longer term, knowing that their time will soon come to
sell.”
Clearly a public company attracts those wishing to put wood behind the arrow – even if only
on a small basis. Having opened the kimono, shareholders are likely to invest -and this
kimono opening is not so readily available in private companies.
Source: The Financial Times 22nd January 2007 (adapted)
Questions
1.
2.
3.
4.
5.
6.
Explain the terms ‘open the kimono’ and ‘put the wood behind the arrow’.
Explain the differences between a private and a public company.
What are the advantages of being a) a private and b) a public company?
Explain what may be meant by ‘the right leadership’?
Outline the factors affecting share prices in general and in particular for Debenhams.
‘Home’…’House’ what is the importance of the difference?
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Business Studies: Exam Style Questions – 6
Credit cards 'lose their lustre'
Credit card users are borrowing less on plastic but relying more on their mortgages
for finance, according to the British Banker's Association (BBA).


Credit card lending in the UK fell by £1.8bn in 2006, the first annual fall since
1993, the BBA said.
Mortgage lending rose by £66.8bn during the same period, representing a
20% increase on 2005.
A decline in the number of 0% interest rate deals being offered to woo new credit
card customers during 2006 is one possible reason for borrowers turning to
alternative sources of finance.
The hedgehog concept, originally applicable to credit cards, was seemingly no longer
applicable.
Source: BBC News 22nd January 2007 (adapted)
Questions
1. Explain the term ‘hedghog concept’
2. Why has demand for credit cards fallen?
3. Explain why mortgage lending has risen and whether such a rise is good for
the economy.
4. Are there any risks of negative equity? What steps can credit card companies
take to improve demand for their services?
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Diet Coke hunk is back
Coca-Cola is tonight bringing back its famous "Diet Coke break" hunk TV ads after a
six-year absence.
Coke is hoping that the multimillion-pound campaign, fronted by a 28-year-old
Frenchman called Francois, will reposition the Diet Coke brand firmly with its
traditional female fan base.
In recent years Coke attempted to move the brand to a more unisex positioning using an animatronic Tortoise called Tort - to pull in more male drinkers.
However, the £8m launch of Coke Zero, dubbed "Bloke Coke", last year has seen the
soft drinks company return the Diet Coke brand to its core positioning.
The new ad, created by London ad agency Vallance Carruthers Coleman Priest,
feature the hunk as a lift engineer.
The campaign will include:
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TV
Cinema
Billboards
Online
press advertising.
It will also include a large-scale "create your own Diet Coke break" on-pack
competition.
The advertisement first appeared in 1996 and featured a group of female office
workers who meet to watch a sexy construction worker strip off his shirt for a Diet
Coke break at 11.30am each day.
Source: The Guardian 22nd January 2007 (adapted)
Questions
1. In the context of ‘elasticity’ examine the importance of a successful brand to
a company.
2. How does a company identify its target market?
3. Comment on the change in market strategy and explain the term ‘core
positioning’.
4. The campaign is using various media. Outline the strengths and weaknesses
of each type of media shown.
5. Does the change in advertising strategy suggest that females think of sex
hewn they drink Diet Coke?
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Business Studies: Exam Style Questions – 6
Smoke-free pubs boost Wetherspoon
JD Wetherspoon says its move to make its pubs smoke-free ahead of a ban on
smoking in enclosed spaces in England next year has benefited its business.



Its English and Welsh pubs which banned smoking last year have reported
2% higher sales than in the same period in 2004, when smoking was
allowed.
In Scotland - where a national ban has already come into force - sales at its
39 pubs were 5.2% higher than before.
Many pub firms have warned that smoking bans could severely hit their
earnings.
The positive trading update boosted Wetherspoon's share price, which rose 6% in
early morning trade on the London Stock Exchange.
From next summer, smoking in enclosed places will be banned in England and
Wales.
Source: BBC News 2nd November 2006 (adapted)
Questions
1. Why was the smoking ban predicted to hit earnings?
2. Is the situation reported above, likely to be the same for the summer results?
3. Why would sales INCREASE. The ban must be having a positive effect – but
why?
4. With hindsight, should pub chains have banned smoking a few years ago?
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Business Studies: Exam Style Questions – 6
Five-times-salary mortgage offer
Abbey, Britain's second largest home loan provider, is offering borrowers five times
their salary in order to help them get onto the property ladder.
The bank is making the offer available to individuals or couples with a deposit of
about 25% and an annual income of £60,000 or more.
Abbey said it was reacting to surging house prices.
A couple borrowing £250,000 would face repayments of about £1,400 a month £17,000 a year.
The current industry standard is for homebuyers to be offered mortgages of up to
three-and-a-half times their salary.
Source: BBC News 2nd November 2006 (adapted)
Questions
1.
2.
3.
4.
5.
What factors determine house prices?
How do changes in house prices affect the macro economy?
If interest rates rise what happens to house prices?
Abbey says it is ‘reacting’. Is it being disingenuous?
What are the likely effects of Abbey’s policy change a) short-term and b) long
term?
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Business Studies: Exam Style Questions – 6
BMW sees worldwide car sales slip
BMW has reported a decline in third-quarter sales as its profits failed to meet market
expectations.
The German carmaker, which also owns the Mini and Rolls-Royce marques, sold
323,064 cars in the three months to 30 September, down 5.5% on a year earlier.
BMW's pre-tax profits increased 9.4% to 720m euros ($918m; £214m) from the
same time last year, below the average analyst target of 742m euros.
Source: BBC News 2nd November 2006 (adapted)
Questions
1. Using the concept of elasticity examine the impact changes in the economy
has on demand for BMW cars.
2. How many cars were sold in the 3 months to September 2005?
3. What strategies could BMW employ to boost car sales?
4. How much were BMW’s pre-tax profits last year?
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Business Studies: Exam Style Questions – 6
Some store money deals 'a swizz'
Financial services from supermarkets leave some customers paying too much, the
consumer watchdog Which? has said.
An investigation into credit cards, loans, savings and insurance offered by nontraditional finance providers found some offers were "a swizz".
Credit cards were particularly bad, with Which? saying that the Morrisons card was
worst value for borrowing.
Borrowing £5,000 from Marks and Spencer was "downright expensive", Which? said costing £348 more than the cheapest provider over three years.
And travel insurance from the Post Office, which is advertised as "great value", was
twice as expensive as elsewhere, the watchdog said.
"Just because supermarkets offer good value on groceries, don't assume this applies
across the board," said Which? editor Neil Fowler.
Source: BBC News 1st November 2006 (adapted)
Questions
1. Is offering financial services part of the supermarkets’ strategy now?
2. How do companies make profits on financial services?
3. What advantages do supermarkets have, compared to banks etc, when
offering financials services?
4. Is the Post Office breaking the law when it says ‘great value’?
5. How can consumer find the cheapest provider for loans?
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Business Studies: Exam Style Questions – 6
Burger King dines on fat profits
Sales of its Stacker sandwich and new restaurant openings helped the world's second
largest burger chain, Burger King, to an 82% quarterly profits rise to $40m (£21m)
in the three months to 30 September.
The popular Stacker features two, three or four beef burgers as well as bacon and
cheese. Sales of its value menu have also surged for the period.
The cheaper food option was introduced to compete against similar offerings from
rivals McDonald's and Wendy's, as consumers tightened their belts in non-essential
spending.
The firm has more than 11,000 outlets around the world, with 90% of them being
franchises.
Source: BBC News 1st November 2006 (adapted)
Questions
1. Does the sale of the Stacker indicate that consumers are no longer worried
about their health?
2. How much were profits for the same time last year?
3. How do outlets such as Wendy’s and McDonalds compete with one another?
4. For fast food outlets which is likely to be the most important element of the
marketing mix?
5. What is a franchise?
6. What are the advantages of a franchise to a) a franchisee and b) a
franchisor?
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Starbucks wins Chinese logo case
Starbucks has won a two-year legal fight in China after a court found that a local
coffee store chain had violated its trademark.
A Shanghai court concluded that Chinese firm Xingbake had infringed the US firm's
rights by using a Chinese name and logo similar to Starbucks.
Starbucks has 300 outlets in China, having opened its first in 1999.
Starbucks uses the name Xingbake in China. In Chinese, Xing means star while bake
sounds like bucks.
Xingbake argued that it had registered its name in 2000, before Starbucks had
secured its trademark in China.
However, Starbucks insisted that it had registered its name and logo in 1996 and
claimed that the use of the Xingbake name in 38 Shanghai outlets violated its
intellectual property rights.
Source: BBC News 2nd January 2006 (adapted)
Questions
1. Is a trademark the same as a logo?
2. How is a trademark likely to affect elasticity of demand?
3. Is using a logo ‘similar’ to one already existing the same as copying? If not
how is that ‘infringement’?
4. Why do firms copy trademarks form other companies?
5. What are ‘intellectual property rights’ and why are they important?
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CBI reports dip in retail sales
UK retail sales experienced their worst performance in five months in October, the
CBI has said.
The business group said only 38% of retailers saw sales rise last month, compared
with 42% who reported a drop.
This meant a balance of -4%, the worst figure in the CBI monthly distributive trades
survey since -16 seen in March.
Richard Snook, economist at the Centre for Economics and Business Research, said
the CBI's latest retail sales figures were not likely to deter the Bank of England from
its expected rate rise next month.
The Bank is widely predicted to increase interest rates from 4.75% to 5% in
November.
Source: BBC News 31st October 2006 (adapted)
Questions
1.
2.
3.
4.
Why does the Bank change interest rates?
What is the likely effect on retailing of a) a rise and b) a fall in interest rates?
Which retailers are likely to see a rise in sales in November?
Examine three ways in which a retailing chain may try to increase sales and
discuss the factor likely to affect the success of its strategy.
5. Who or what are the CBI and what is its function?
6. Is it compulsory to join the CBI?
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Business Studies: Exam Style Questions – 6
Unilever encouraged by sales growth
Unilever said on Thursday that it was encouraged by its top-line growth, as the
Anglo-Dutch consumer goods group said it would work on improving margins that
fell in the third quarter on increased advertising spending.
The operating profit margin slipped by 0.8 percentage points to 14.8 per cent, which
Unilever blamed in part on higher investment in its brands, which range from Dove
soap to Hellmann’s mayonnaise.
In Europe, which accounts for 38 per cent of sales, competition and higher input
costs also hit margins, which fell by 1.8 percentage points in the first nine months of
the year.
Sales were lifted by a strong third quarter in European ice cream sales as well as
price increases.
The shares rose 41p, or more than 3 per cent, o £13.41 in early London trading in
London.
Source: The Financial Times 2nd November 2006 (adapted)
Questions
1.
2.
3.
4.
5.
6.
7.
What is top-line growth?
Outline the main way that retailers seek to improve sales?
Is an improvement in sales likely to lead to an improvement in profits?
Explain the term ‘operating profit margin’
What are the advantages of brands to a) the consumer and b) the retailer?
Examine reasons for the rise in the sale of ice creams.
When share prices rise, does this benefit the company in which the shares
are held
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Business Studies: Exam Style Questions – 6
High profit from low incomes
Over the past two years, the Asian operation of GE Money, the consumer finance
arm of the US conglomerate, has made a push into the world’s fastest-growing retail
banking market, where millions of low-income customers have yet to apply for their
first credit card or personal loan.
Since he took the helm from Jack Welch in 2001, Mr Immelt has been trying to
reshape the group by focusing on businesses that can generate high margins and
double-digit earnings growth.
GE Money advertises its Quik Cash services on local television.” It was really easy to
borrow,” he says. “I didn’t have to use a salary slip or any documents.
“You just show them the ID and an existing credit card, and in less than half an hour
you get the money.”
Source: the Financial Times 23rd October 2006 (adapted)
Questions
1. Suggest reasons why it seems low-income customers especially, have not
applied for a first credit card or personal loan?
2. Explain ‘high margins’ and ‘double digit earnings growth’.
3. If borrowing increases, does that increase a firm’s cash flow?
4. How can a firm increase its cash flow?
5. What is the likely impact of borrowing on an economy that has nearly fullemployment?
6. Which type of goods are normally bought on credit?
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Business Studies: Exam Style Questions – 6
Assuming we have a tin opener . . .
From Mr Barrie Bain.
Sir, Sir Nicholas Stern has made assumptions that, though good in theory, are not
necessarily true.
In the Stern report, assertions by environmental pressure groups are presented as
scientific facts and assumed to be true. If the basic assumptions are not correct,
then the detailed economic analyses are of little use. The Stern committee has
produced a thorough and thoughtful report, but maybe the real scientists need to
have a clearer picture of the mechanism of global warming before the assumptions
of economists cost us unnecessary billions of pounds to little effect - and give
governments another excuse to introduce new taxes.
Barrie Bain,
Tunbridge Wells,Kent TN2 5TE
Source: The Financial Times 2nd November 2006 (adapted)
Questions
1.
2.
3.
4.
Explain the term ‘pressure group’.
How are such groups formed and what is their purpose?
What assumptions – in general – are made by economists?
If the government raises taxes to supposedly reduce global warming, will
there be any negative effects on society?
5. Do government always need an ‘excuse’ to raise taxes?
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Business Studies: Exam Style Questions – 6
Pepsi bubbles up on YouTube
Pepsi is launching a branded channel on YouTube that lures users to its own website
with cash prizes.
Pepsi UK is planning to use YouTube as a bridge to drive traffic to its own recently
launched video-based website, maxyourlife.com.
The promotion, for Pepsi Max, uses two straplines - "Max your YouTube" and "Max
your life" - and invites users to make and post a video of how they would use £1,000
to "max" their day.
Pepsi hopes to go beyond using YouTube purely for short-term promotional purposes
and to build the popularity of the Pepsi Max website in its own right for future
independent campaigns.
Pepsi is also running sponsorship and competitions in conjunction with FHM.com.
Source: The Guardian 31st October 2006 (adapted)
Questions
1.
2.
3.
4.
5.
What is a ‘branded channel’?
Examine how websites are used to market products.
How might using YouTube affect the product life cycle for other products?
Is sponsorship the same as advertising?
Why would Pepsi want to run competitions in conjunction with anyone else?
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Business Studies: Exam Style Questions – 6
Westlife join Woolies for Christmas
Woolworths is ploughing £25m into its Christmas advertising campaign, which
includes a TV commercial featuring Irish boyband Westlife.
The campaign, which launches tonight, is the largest the retailer has invested in a
Christmas campaign in five years and represents a 500% increase in online
marketing spend.
The boyband will appear alongside Woolworths characters Wooly the sheep and
Worth the sheepdog.
The six commercials include a 50 second 'brand' ad, two 30-second 'offer' ads and
three 20-second 'tactical' deal ads.
Source: The Guardian 1st November 2006 (adapted)
Questions
1.
2.
3.
4.
5.
How are advertising budgets determined?
Suggest reasons why the online spend has increased so much.
Do Westlife run any risks by fronting this campaign?
What is a ‘brand ad’?
Suggest reasons why television was chosen rather than YouTube for the
advertisement.
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Employers warned of staff ‘tuning out of workplace’
Staff relations and productivity will suffer if employees are allowed to listen to MP3
players at work, a legal fir has claimed.
Lawyers at Mace & Jones have raised the alarm following the results of a recent
survey, which suggested that more than one in five office workers are listening to
MP3 players while at work.
According to the law firm, members of staff using these devices are isolating
themselves from their surroundings and shutting out their colleagues, which will
have a negative impact on the business.
MP3 players will also affect workers’ concentration levels, and make it easier for staff
to ‘slack off’, it says.
Business owners are being urged to clamp down on this issue, after the survey
revealed that just under a quarter of employees used their MP3 player for up to
three hours during the working day.
Martin Edwards, head of employment law at the firm, said: “It is simply not healthy
for an office if people are tuning out of their surroundings.
“Furthermore there is a real concern that listening to music can interrupt
concentration and lead to less productive workers, which fundamentally costs
business man hours.”
Source: Crimson Business 2006 2nd November 2006
Questions
1. How important are ‘staff relations’?
2. Outline the main ways in which productivity may be increased – and explain
why ‘productivity will suffer’ in the article above.
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Aer Lingus rejects Ryanair's bid
Aer Lingus has asked its shareholders to reject a takeover offer from Ryanair, calling
it "ill-conceived, contradictory and anti-competitive". This is largely because of a
perceived undervaluation of Aer Lingus.


Ryanair made its £1bn bid last month, telling Aer Lingus staff they could earn
£40,000 selling their shares.
The Irish government has a 28% stake in Aer Lingus and has refused to sell
it.
Is Ryanair the same as Aer Lingus?
"Our product offering is differentiated from our peers. It is superior to Ryanair's and
passengers prefer to fly with Aer Lingus."
Source: Aer Lingus
Source: BBC News 3rd November 2006 (adapted)
Questions
1.
2.
3.
4.
Why do people buy shares?
What types of share are there?
Why has Aer Lingus advised against accepting the takeover?
How is the product offering ‘differentiated’?
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Business Studies: Exam Style Questions – 6
Housing slump batters US economy



US economic growth slowed to an annual rate of 1.6% in the third quarter of
2006, its lowest level for three years.
Commerce Department figures showed that the slump in the US housing
market was largely responsible for the loss of economic momentum.
The data showed a 17.4% annual fall in spending on new housing.
During the previous three months the economy had grown by 2.6%. Now the rate is
at its lowest since the first quarter of 2003, when it was 1.2%.
Lower costs at the petrol pump, combined with strong employment figures led to
improving consumer sentiment during October, a survey said.
Treasury Secretary Henry Paulson said the housing boom had been "clearly
unsustainable" and the market had "needed to have a correction".
Source: BBC News 27th October 2006 (adapted)
Questions
1.
2.
3.
4.
5.
Explain the term ‘economic growth’.
How does the housing market affect economic growth?
Changes in the housing market affect businesses – how?
With strong employment figures, is there a possibility of inflation?
Why was the housing boom ‘unsustainable’?
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