AQA A-Level Business Paper 3 (2020)
Analysis: Business 3 (7132/3) - Strategic
Decision-Making
Section 1: Strategic Analysis & Positioning (Questions 1–5)
Multiple Choice
Question 1: Which of the following best describes a blue ocean strategy? A) Competing in
an existing market with lower prices B) Creating uncontested market space with innovative
products C) Focusing on cost leadership in a mature industry D) Using mergers and
acquisitions to dominate a market
Correct Answer: B Rationale: A blue ocean strategy involves creating new, uncontested
markets through innovation, rather than competing in existing markets (red oceans). Lower
prices (A) and cost leadership (C) are red ocean strategies; M&A (D) is a growth strategy,
not blue ocean.
Question 2: A business uses Porter’s Generic Strategies. Which strategy focuses on
offering unique products to a broad market? A) Cost leadership B) Differentiation C) Cost
focus D) Differentiation focus
Correct Answer: B Rationale: Differentiation involves offering unique products/services
to a broad market. Cost leadership (A) focuses on low costs; cost focus (C) and differentiation
focus (D) target niche markets.
Question 3: Which of the following is a limitation of SWOT analysis? A) It only focuses on
internal factors B) It does not prioritise issues C) It is too complex for small businesses D) It
ignores financial data
Correct Answer: B Rationale: SWOT (Strengths, Weaknesses, Opportunities, Threats) lacks
prioritisation of issues, making it difficult to determine which factors are most critical. It
, includes both internal and external factors (A is incorrect); complexity (C) is subjective;
financial data (D) can be incorporated.
Question 4: A business conducts a PESTLE analysis. Which factor would examine changes
in consumer spending habits? A) Political B) Economic C) Social D) Technological
Correct Answer: C Rationale: Social factors in PESTLE include demographics, lifestyles,
and consumer attitudes. Political (A) covers laws/regulations; economic (B) covers
inflation/unemployment; technological (D) covers innovation/automation.
Question 5: Which of the following is an example of backward vertical integration? A) A car
manufacturer acquiring a tyre supplier B) A retailer opening new stores in different regions C) A
software company developing a new app D) A farm selling produce directly to consumers
Correct Answer: A Rationale: Backward integration involves acquiring suppliers (e.g., a
car manufacturer buying a tyre supplier). Opening stores (B) is market development; new
apps (C) are product development; direct sales (D) are forward integration.
Section 2: Business Growth & Expansion (Questions 6–10)
Multiple Choice
Question 6: Which of the following is a disadvantage of organic growth? A) It is slower than
external growth methods B) It requires less capital investment C) It avoids cultural clashes D) It
reduces competition
Correct Answer: A Rationale: Organic growth (internal expansion) is slower than
mergers/acquisitions. It typically requires more time and resources to develop new
products/markets. Capital investment (B) is often higher for external growth; cultural clashes (C)
are an issue with external growth; competition (D) is unaffected by growth method.
Question 7: A business considers franchising as a growth strategy. Which of the following is
an advantage of franchising? A) The franchisor retains all profits B) The franchisee bears most
of the risk C) The franchisor controls all operations D) The franchisee can modify the brand
Correct Answer: B Rationale: Franchisees invest their own capital and assume most of the
risk, while the franchisor earns royalties/fees. Franchisors (A) share profits; control (C) is
limited to brand standards; franchisees (D) cannot modify the brand without approval.
Analysis: Business 3 (7132/3) - Strategic
Decision-Making
Section 1: Strategic Analysis & Positioning (Questions 1–5)
Multiple Choice
Question 1: Which of the following best describes a blue ocean strategy? A) Competing in
an existing market with lower prices B) Creating uncontested market space with innovative
products C) Focusing on cost leadership in a mature industry D) Using mergers and
acquisitions to dominate a market
Correct Answer: B Rationale: A blue ocean strategy involves creating new, uncontested
markets through innovation, rather than competing in existing markets (red oceans). Lower
prices (A) and cost leadership (C) are red ocean strategies; M&A (D) is a growth strategy,
not blue ocean.
Question 2: A business uses Porter’s Generic Strategies. Which strategy focuses on
offering unique products to a broad market? A) Cost leadership B) Differentiation C) Cost
focus D) Differentiation focus
Correct Answer: B Rationale: Differentiation involves offering unique products/services
to a broad market. Cost leadership (A) focuses on low costs; cost focus (C) and differentiation
focus (D) target niche markets.
Question 3: Which of the following is a limitation of SWOT analysis? A) It only focuses on
internal factors B) It does not prioritise issues C) It is too complex for small businesses D) It
ignores financial data
Correct Answer: B Rationale: SWOT (Strengths, Weaknesses, Opportunities, Threats) lacks
prioritisation of issues, making it difficult to determine which factors are most critical. It
, includes both internal and external factors (A is incorrect); complexity (C) is subjective;
financial data (D) can be incorporated.
Question 4: A business conducts a PESTLE analysis. Which factor would examine changes
in consumer spending habits? A) Political B) Economic C) Social D) Technological
Correct Answer: C Rationale: Social factors in PESTLE include demographics, lifestyles,
and consumer attitudes. Political (A) covers laws/regulations; economic (B) covers
inflation/unemployment; technological (D) covers innovation/automation.
Question 5: Which of the following is an example of backward vertical integration? A) A car
manufacturer acquiring a tyre supplier B) A retailer opening new stores in different regions C) A
software company developing a new app D) A farm selling produce directly to consumers
Correct Answer: A Rationale: Backward integration involves acquiring suppliers (e.g., a
car manufacturer buying a tyre supplier). Opening stores (B) is market development; new
apps (C) are product development; direct sales (D) are forward integration.
Section 2: Business Growth & Expansion (Questions 6–10)
Multiple Choice
Question 6: Which of the following is a disadvantage of organic growth? A) It is slower than
external growth methods B) It requires less capital investment C) It avoids cultural clashes D) It
reduces competition
Correct Answer: A Rationale: Organic growth (internal expansion) is slower than
mergers/acquisitions. It typically requires more time and resources to develop new
products/markets. Capital investment (B) is often higher for external growth; cultural clashes (C)
are an issue with external growth; competition (D) is unaffected by growth method.
Question 7: A business considers franchising as a growth strategy. Which of the following is
an advantage of franchising? A) The franchisor retains all profits B) The franchisee bears most
of the risk C) The franchisor controls all operations D) The franchisee can modify the brand
Correct Answer: B Rationale: Franchisees invest their own capital and assume most of the
risk, while the franchisor earns royalties/fees. Franchisors (A) share profits; control (C) is
limited to brand standards; franchisees (D) cannot modify the brand without approval.
