2025 Edexcel IGCSE Business Practice Paper with Answers

Niche markets target a small, specialized segment of a larger market. Because the customer base is smaller, it often attracts fewer large competitors, allowing a small business to avoid direct competition with major brands.

1 mark for the correct option (A). Reject all other options.

Job enrichment is a non-financial motivation technique that involves giving employees more challenging and interesting tasks to increase their sense of achievement. Profit sharing, piece rate, and commission are all financial incentives.

1 mark for the correct option (A). Reject all other options.

A person specification details the skills, experience, qualifications, and personal attributes needed by the person doing the job. In contrast, a job description outlines the duties and responsibilities of the job itself.

1 mark for the correct option (B). Reject all other options.

A private limited company is an incorporated business, meaning it has a separate legal identity from its owners (shareholders). A sole trader is unincorporated, meaning the business and the owner are legally the same.

1 mark for the correct option (B). Reject all other options.

Job production involves making one-off, unique products to meet the specific requirements of individual customers. Since wedding cakes are custom-designed and unique to order, job production is the most appropriate method.

1 mark for the correct option (C). Reject all other options.

An increase in interest rates means the cost of borrowing rises. Therefore, the business will have to pay more interest on its existing variable rate loans and any new loans it takes out to finance its expansion plans.

1 mark for the correct option (A). Reject all other options.

Secondary market research (often called desk research) involves gathering and analysing information that has already been collected and published by other sources, such as government agencies, trade associations, or research firms, rather than collecting first-hand data from customers.

Award 1 mark for a clear and accurate definition of secondary market research. E.g., The collection of data that already exists or has been collected by others (1). Do not accept definitions of primary market research (such as surveys or focus groups).

Productivity is a measure of the efficiency of production. It compares the volume of output generated to the volume of inputs (such as labor hours, materials, or machinery) used in the production process over a given period.

Award 1 mark for a correct and complete definition. E.g., Output per worker per hour (1) or a measure of how efficiently inputs are converted into outputs (1). Do not accept definitions of 'production' on its own (such as 'the total amount of goods made').

One advantage of secondary market research is that the data has already been collected and compiled by others, meaning it is usually much cheaper and faster to access than conducting primary research.

Award 1 mark for any valid advantage of secondary market research. Examples include: Cheaper to collect/obtain than primary research (1). Quicker to access as the data is already published (1). Useful for gaining a broad overview of the market (1). Accept any other valid response.

Step 1: State the formula for market share: \(\text{Market Share} = \frac{\text{Sales of the Business}}{\text{Total Market Sales}} \times 100\)
Step 2: Substitute the figures into the formula: \(\text{Market Share} = \frac{£680,000}{£8,500,000} \times 100\)
Step 3: Calculate the final percentage: \(\text{Market Share} = 0.08 \times 100 = 8\%\)

1 mark for showing correct method/working: e.g. \(\frac{680,000}{8,500,000} \times 100\)
1 mark for the correct answer: 8% (also accept '8' or '0.08').
Award 2 marks for the correct answer with no workings shown.

A 3-mark explanation must contain a valid point, a development of that point, and an explanation of the consequence for the business.

- **Identification of a benefit (1 mark):** The candidate is already familiar with the business's culture and practices.
- **Development of the point (1 mark):** This means they will require less induction training and can become productive in their new role much faster.
- **Consequence (1 mark):** Consequently, the business saves on recruitment and training costs, improving overall operational efficiency.

Award 1 mark for identifying a valid benefit, plus up to 2 marks for explaining it (maximum 3 marks total).

- **1 mark** for identifying a benefit (e.g., lower recruitment costs, candidate already knows the business, boosts employee motivation/morale).
- **1 mark** for developing the benefit (e.g., because no external advertisements need to be paid for / less induction training is required).
- **1 mark** for explaining the consequence to the business (e.g., which reduces the overall expenses of the business / maintains productivity levels).

*Accept other valid responses.*

Analyse the benefits to PixelCraft of using external recruitment:

1. **Fresh perspectives and new skills:** An external candidate may bring in new technical skills, such as experience with a new programming language or project management methodology (e.g., Agile/Scrum) that the existing team at PixelCraft does not possess. This injection of new ideas can help PixelCraft innovate its mobile applications, keeping them competitive in a fast-paced market.

2. **No vacancy chain created:** If PixelCraft promotes internally, it will leave another vacancy elsewhere in the development team (e.g., a junior programmer post). This would require further recruitment and training costs. By hiring externally, PixelCraft fills the senior role directly, minimizing disruption to ongoing software development projects.

Marking Scheme (6 marks total)

Level 1 (1–2 marks)
- Demonstrates limited knowledge and understanding of external recruitment.
- Points are generic with little or no application to PixelCraft or the software industry.

Level 2 (3–4 marks)
- Demonstrates good knowledge and understanding of the benefits of external recruitment.
- Applied to PixelCraft (e.g., mobile applications, project teams, programming/technical skills).

Level 3 (5–6 marks)
- Offers a detailed analysis showing a clear chain of reasoning.
- Analysis is fully context-specific, explaining how external recruitment benefits a growing software development business (e.g., maintaining development schedules, bringing in cutting-edge tech expertise).

One method of promotion a business could use is advertising (for example, on social media or television). This helps to inform the target market about the new product and its features.

Award 1 mark for any valid method of promotion. Acceptable answers include: Advertising, Sales promotion (e.g. BOGOF, discount codes), Public relations (PR), Sponsorship, Personal selling, Direct marketing. Do not accept 'price' or 'place' on their own.

One non-financial method of motivation is job rotation. This involves moving employees between different tasks or jobs to increase variety and reduce boredom.

Award 1 mark for any valid non-financial method of motivation. Acceptable answers include: Job rotation, Job enrichment, Job enlargement, Team working, Employee empowerment, Recognition/praise, Training. Do not accept financial rewards (e.g., commission, bonus, salary increase, piece rate).

One advantage of external recruitment is that it brings new skills and ideas into the business (1). This is because candidates recruited from outside may have different experiences and perspectives from previous employment (1). This can lead to increased innovation or better problem-solving, which improves the overall efficiency of the business (1).

Award 1 mark for a valid advantage, plus 2 further marks for explaining this advantage up to a total of 3 marks.
- Identification of advantage (1 mark): e.g. Brings new ideas and skills into the business.
- Explanation of why/how (1 mark): e.g. External candidates have worked in other environments and can share different techniques.
- Explanation of consequence (1 mark): e.g. This can lead to more innovation and a competitive advantage for the business.

Accept any other valid response. Do not accept answers that focus on internal recruitment unless contrasted.

A retail business might choose to locate close to competitors because the area is already a known shopping destination for target customers (1). This means the business can benefit from high existing footfall as consumers compare different shops (1). As a result, the business can attract passing trade and increase its sales revenue (1).

Award 1 mark for a valid reason, plus 2 further marks for explaining this reason up to a total of 3 marks.
- Identification of reason (1 mark): e.g. Access to an established customer base / high footfall.
- Explanation of why/how (1 mark): e.g. Customers already visit the location to compare products and prices.
- Explanation of consequence (1 mark): e.g. This increases the chances of attracting new customers and boosting sales.

Accept other valid responses, such as access to skilled labor or shared infrastructure.

A disadvantage of a piece-rate system is that employees may prioritize quantity over quality (1). This is because their pay is directly linked to how many items they produce, leading them to rush (1). Consequently, this can result in a higher level of defective goods, increasing waste and customer complaints (1).

Award 1 mark for a valid disadvantage, plus 2 further marks for explaining this disadvantage up to a total of 3 marks.
- Identification of disadvantage (1 mark): e.g. Quality of products may fall.
- Explanation of why/how (1 mark): e.g. Workers rush to complete more units to maximize their earnings.
- Explanation of consequence (1 mark): e.g. This leads to more wasted raw materials and potential damage to the business's reputation.

Accept other valid responses, such as increased administration costs or insecurity for workers.

### Option 1: High-street location
* **Arguments for:**
* High footfall in the city centre provides a large, steady stream of potential customers, including office workers looking for quick, healthy lunch options. This ensures steady revenue throughout the year.
* High visibility on the high street acts as a natural marketing tool, helping FreshBites establish its brand in a new city.
* **Arguments against:**
* High rental costs will significantly increase fixed costs, raising the break-even point. If the business fails to attract enough health-conscious customers early on, this could lead to cash flow issues.

### Option 2: University campus location
* **Arguments for:**
* Lower rent reduces the fixed costs of the business, lowering the break-even point and financial risk for this second branch.
* Students and academic staff are a strong demographic for organic and healthy options, meaning high demand during term time.
* **Arguments against:**
* Highly seasonal demand. During summer and winter holidays (which can total up to 4 months a year), footfall will drop dramatically, leading to very low revenues while overheads must still be paid.

### Conclusion / Recommendation
* **Sample Recommendation:** FreshBites should choose Option 1. Although the rent is higher, the consistent, year-round demand from city centre office workers and shoppers is safer for long-term survival than the highly seasonal demand of a university campus. Since organic food ingredients have a short shelf-life, a steady, predictable daily demand in Option 1 will also help reduce inventory waste, which would be highly problematic during university holidays in Option 2.

**Level 1: 1-3 Marks**
* Demonstrates basic knowledge of factors affecting location (rent, footfall, target market).
* Application is limited or absent.
* Answer is descriptive with weak, unlinked points.

**Level 2: 4-6 Marks**
* Demonstrates good knowledge of location factors.
* Applied specifically to FreshBites (organic food, healthy eating, office workers, students).
* Chains of reasoning show the impact of high rent or seasonal demand on costs and revenues.
* Evaluation is attempted but is unbalanced (e.g., only looks at one option in detail or lacks a strong comparative conclusion).

**Level 3: 7-9 Marks**
* Robust knowledge and understanding of location decisions and their trade-offs (costs vs. sales potential).
* Highly applied to the context throughout (health-conscious target market, perishable organic ingredients, term times).
* Coherent, logical chains of reasoning comparing the benefits and drawbacks of both options.
* A balanced and fully justified conclusion that explicitly weighs Option 1 against Option 2 to recommend the best strategic path forward for FreshBites.

Secondary market research (also known as desk research) is the process of gathering and analysing data that already exists. This data has been previously collected by other organisations or individuals for a different purpose, such as government statistics, industry reports, or competitor websites.

Award 1 mark for a complete and accurate definition.

* Clear understanding that the data already exists / has been collected by others / is second-hand (1 mark).

* Do not accept definitions of primary market research (e.g. data collected first-hand).

To gain 2 marks, the student must identify a valid reason for locating near suppliers and apply it to the context of GlowCandles Ltd. For example: By locating near its suppliers, GlowCandles Ltd can significantly reduce the cost of transporting heavy and bulky raw materials such as wax and glass jars (1 mark). This reduction in transport costs helps the business to lower its total operating expenses and improve profit margins on its finished scented candles (1 mark).

Award 1 mark for identifying a valid reason or benefit of locating near suppliers (such as lower transport costs, faster replenishment, or reduced damage to materials). Award 1 mark for application to the context of GlowCandles Ltd (such as referencing wax, glass jars, scents, candles, or the pouring process). Maximum of 1 mark can be awarded if there is no application to the context of a candle manufacturer.

To calculate the break-even level of output:

1. First, calculate the contribution per unit:
\(\text{Contribution per unit} = \text{Selling Price} - \text{Variable Cost per unit}\)
\(\text{Contribution per unit} = £40 - £15 = £25\)

2. Next, divide fixed costs by the contribution per unit to find the break-even point:
\(\text{Break-even level of output} = \frac{\text{Fixed Costs}}{\text{Contribution per unit}}\)
\(\text{Break-even level of output} = \frac{£2,400}{£25} = 96\) cakes

• Method mark (1 mark):
Award 1 mark for showing the correct calculation method, e.g., \(\frac{2,400}{40 - 15}\) or \(\frac{2,400}{25}\).

• Accuracy mark (1 mark):
Award 1 mark for the correct answer: 96 (or 96 cakes).

Note: Award full 2 marks for the correct answer of 96 without workings.

To calculate the break-even level of output:

1. First, calculate the contribution per unit:
\(\text{Contribution per unit} = \text{Selling Price} - \text{Variable Cost per unit}\)
\(\text{Contribution per unit} = £40 - £15 = £25\)

2. Next, divide fixed costs by the contribution per unit to find the break-even point:
\(\text{Break-even level of output} = \frac{\text{Fixed Costs}}{\text{Contribution per unit}}\)
\(\text{Break-even level of output} = \frac{£2,400}{£25} = 96\) cakes

• Method mark (1 mark):
Award 1 mark for showing the correct calculation method, e.g., \(\frac{2,400}{40 - 15}\) or \(\frac{2,400}{25}\).

• Accuracy mark (1 mark):
Award 1 mark for the correct answer: 96 (or 96 cakes).

Note: Award full 2 marks for the correct answer of 96 without workings.

An analysis of the potential impacts on Glow Cosmetics includes both positive and negative aspects:

**Positive Impacts (Cost and Competitiveness):**
* **Lower Unit Costs:** Wage rates are significantly lower in developing countries. Relocating production there will substantially reduce Glow Cosmetics' direct labor costs and overall cost of production.
* **Higher Profit Margins or Reinvestment:** Because Glow Cosmetics is a premium brand that commands high prices, lowering its production costs will significantly widen its profit margins. Alternatively, the saved capital can be reinvested into research and development (R&D) for new organic formulas or marketing campaigns, further strengthening its market position.

**Negative Impacts (Quality and Brand Image):**
* **Risk to Product Quality:** Premium organic skincare products require precise manufacturing standards and high-quality control. Workers in lower-wage regions may lack the training or experience required to maintain these standards, potentially leading to inconsistent product batches or contamination.
* **Brand Damage and Ethical Concerns:** If consumers perceive that a premium, organic skincare brand is exploiting cheap labor in a developing country, it could lead to bad publicity. Ethical consumerism is highly relevant to organic product markets, so any damage to the brand's ethical reputation could result in a sharp decline in customer loyalty and sales.

**Marking Scheme (6 Marks total):**

This question assesses AO2 (Application - 2 marks) and AO3 (Analysis - 4 marks).

* **Level 1 (1–2 marks):** Mostly state/identify factors. There is little or no application to the context (Glow Cosmetics, organic skincare). Unstructured or very weak chains of reasoning.
* **Level 2 (3–4 marks):** Some application to the business context. Shows a logical chain of reasoning but may lack depth or focus on only one side (either positive or negative impact only).
* **Level 3 (5–6 marks):** Excellent application throughout, directly connecting lower wages to premium organic skincare dynamics. Offers fully developed, balanced chains of reasoning showing both potential benefits (e.g., higher margins, reinvestment) and drawbacks (e.g., loss of quality, ethical backlash damaging premium status).

If choosing Option 1: Recruiting internally means selecting an existing gym manager who already understands Breeze-Fit's eco-friendly brand values, culture, and standard operating procedures. This will minimise the time and cost required for induction training, which is crucial when opening five new locations simultaneously. It also acts as a powerful motivator for other employees, showing that career progression is possible. However, this creates another vacancy that needs to be filled at their previous gym, and may prevent new, innovative ideas from being introduced. If choosing Option 2: Recruiting externally from hospitality or retail brings in fresh perspectives and advanced customer service techniques. Since these sectors are highly customer-focused, the external manager could help Breeze-Fit improve member retention across the five new gyms. However, external recruitment is expensive due to advertising and agency fees, and the candidate might struggle to adapt to the fitness industry and the business's specific eco-friendly culture. Recommendation: Option 1 is likely better because maintaining the unique eco-friendly brand culture is vital during rapid expansion. An internal candidate can ensure consistency across the new gyms immediately, protecting the brand's reputation.

Level 1 (1-3 marks): Focus is mainly on generic points about internal or external recruitment. Lacks application to the fitness/gym context. Level 2 (4-6 marks): Detailed analysis of one or both options, with some application to Breeze-Fit's situation (e.g., managing five new gyms, eco-friendly focus). Some chain of reasoning is present. Level 3 (7-9 marks): Thorough evaluation of both options, showing clear links to Breeze-Fit's expansion needs. A well-justified recommendation is provided, balancing the trade-offs of the chosen option against the alternative.

To calculate the market share: \(\text{Market Share} = \frac{\text{Sales of the Business}}{\text{Total Market Size}} \times 100\). Substitute the given values into the formula: \(\text{Market Share} = \frac{2.61}{14.5} \times 100 = 18\%\).

Award 1 mark for correct method/substitution: e.g. \(\frac{2.61}{14.5} \times 100\). Award 1 mark for the correct answer: 18% (accept 18 or 0.18).

Introducing financial bonuses can have both positive and negative consequences for Aroma Cafe. On the positive side, baristas will have a direct financial incentive to perform well. This motivation is likely to make them more proactive in upselling premium organic coffees and accompanying pastries. As a result, the average transaction value per customer will rise, leading to higher overall revenues and improved profit margins for the business. On the negative side, a focus on daily sales targets can create a competitive and high-pressure work environment. Baristas might become overly aggressive with their sales pitches to secure their bonuses, which can ruin the calm and friendly atmosphere that Aroma Cafe's customers value. This could lead to a decline in customer satisfaction, causing loyal customers to switch to competitors.

AO1 (2 marks): Award 2 marks for showing knowledge and understanding of financial bonuses as a motivator (e.g. they are financial incentives designed to increase output or sales effort). AO2 (2 marks): Award 2 marks for application to the context of Aroma Cafe (e.g. baristas upselling organic coffees and pastries, impact on cafe atmosphere). AO3 (2 marks): Award 2 marks for analysis, showing a developed chain of reasoning (e.g. explains how active upselling increases average spend and total cafe revenue, or explains how aggressive selling tactics damage customer loyalty and brand reputation).

To evaluate both options, we must look at the advantages and disadvantages of each option for Suki's Scooters (SS):

**Option 1: Internal Recruitment (Promoting the Factory Manager)**
* **Advantages**:
- **Understanding of Culture and Processes**: The current Factory Manager already knows the workers, the existing assembly processes, and the company culture. This means they can start immediately without a long induction period.
- **Motivation**: Promoting from within shows other workers that there are clear career progression paths, which can boost employee retention and morale at SS.
- **Lower Cost**: Advertising and recruitment agency fees are avoided, saving SS valuable capital that can be reinvested in the factory expansion.
* **Disadvantages**:
- **Lack of Fresh Perspective**: The internal manager may not have new ideas on how to optimize production during a period of rapid growth.
- **Creates a Vacancy**: Promoting the Factory Manager leaves their old role empty, requiring SS to recruit and train a new Factory Manager anyway.

**Option 2: External Recruitment (Hiring from a rival automotive manufacturer)**
* **Advantages**:
- **New Skills and Best Practices**: A director from a rival firm will bring fresh perspectives, experience with automated assembly lines, and knowledge of modern lean production techniques.
- **No Internal Friction**: Hiring an external candidate avoids potential jealousy among existing staff who might have wanted the job.
* **Disadvantages**:
- **Higher Risk and Cost**: External recruitment is expensive (using headhunters) and there is a risk that the new hire will not fit the culture of SS.
- **Longer Adjustment Period**: The external candidate will take time to adapt to the specific scooter production line.

**Conclusion/Evaluation**:
Ultimately, SS is experiencing rapid growth and expanding its factory. This suggests that the scale of operations is changing significantly. An external candidate with experience from a rival manufacturer is highly likely to possess the strategic knowledge required to manage large-scale manufacturing expansion successfully. Therefore, despite the higher recruitment costs, Option 2 is recommended to ensure the expansion is managed efficiently and competitively.

**Mark Scheme (12 Marks Total)**

* **Level 1 (1–4 Marks)**:
- Demonstrates basic knowledge of internal and/or external recruitment.
- Generic points with little or no application to SS or the scooter manufacturing context.

* **Level 2 (5–8 Marks)**:
- Applies knowledge of internal and external recruitment to SS (e.g., mentions the Factory Manager, electric scooters, or factory expansion).
- Offers balanced analysis showing the benefits and drawbacks of both options, though some points may lack depth.

* **Level 3 (9–12 Marks)**:
- Provides a detailed and balanced evaluation of both options, highly contextualized to SS's rapid growth and manufacturing context.
- Offers a clear, justified recommendation that directly addresses which option is better for SS and why, acknowledging potential trade-offs (e.g., cost vs. expertise).