Business Growth and Competitive Advantage | Edexcel A-Level Economics B (9EB0)
Business Growth and Competitive Advantage
- 182 questions
- 14 subtopics
- Theme 2: the wider economic environment
- Paper 2 and Paper 3
Business Growth and Competitive Advantage is examined in Paper 2, Competing in the global economy, and in Paper 3, The economic environment and business.
It covers objectives of business growth, internal and external economies of scale, diseconomies of scale and the problems of growth, corporate culture in a growing business, organic and inorganic growth, horizontal, vertical and conglomerate integration, innovation, research and development and competitive advantage, state funding for research and development, the product life cycle and extension strategies, market information in the digital economy, digital technology and the supply side of business, the long tail and wider geographical markets, costs, prices and firm survival in a digital market and how small firms compete.
Sample questions from Business Growth and Competitive Advantage
Answer each one closed book first, then open the answer.
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Objectives of business growth
Why is brand recognition valuable to a growing business?
Show the answer
A recognised brand reduces the effort consumers spend searching, builds loyalty and lowers the cost of winning each new customer. -
Internal and external economies of scale
Define minimum efficient scale.
Show the answer
Minimum efficient scale is the lowest output at which a firm has exhausted its economies of scale and reaches its lowest long-run average cost. -
Corporate culture in a growing business
What is meant by a risk-taking culture?
Show the answer
A risk-taking culture encourages staff to try new ideas and accepts that some will fail, which suits firms competing through innovation. -
Organic and inorganic growth
Why do acquisitions frequently fail to deliver the savings promised?
Show the answer
The bidder often overpays, the two cultures clash, and the cost of integrating systems and staff exceeds the savings expected. -
Innovation, research and development and competitive advantage
How does process innovation affect a firm's cost curves?
Show the answer
It lowers the cost of producing each unit, shifting the average and marginal cost curves downwards and widening the margin at any given price. -
State funding for research and development
How can a government encourage innovation without paying for it directly?
Show the answer
It can enforce patents firmly, fund technical education and use public procurement to guarantee an early market for a new product. -
Market information in the digital economy
Why is viral marketing attractive to a firm with a small promotional budget?
Show the answer
The audience is reached at almost no cost per person, so a small firm can gain exposure that would otherwise require a large advertising spend. -
Digital technology and the supply side of business
What is the consequence for a firm of a shortage of digitally skilled workers?
Show the answer
It must pay a wage premium or leave projects undone, which raises costs and slows its response to online rivals.
The 14 subtopics
One subtopic is one session. Work down the list.
| Subtopic | What it covers | Questions |
|---|---|---|
| Objectives of business growth | Power over suppliers and consumers, market share and calculating it, brand recognition, total profit from growth, growth in sales revenue against growth in profit, managerial motives, resisting a takeover, market share against sales volume, and accepting low profit to enter an overseas market. | 13 |
| Internal and external economies of scale | Economies of scale, internal against external economies and their types, purchasing, technical, financial and managerial economies, calculating average cost at different outputs, the long-run average cost curve, minimum efficient scale as a barrier to entry, and the competitive advantage of scale. | 14 |
| Diseconomies of scale and the problems of growth | Recall questions on diseconomies of scale and their causes, the upward-sloping stretch of the long-run average cost curve, and the control problems growth brings. | 13 |
| Corporate culture in a growing business | Corporate culture and how it shows itself, its effect on productivity and competitive advantage, risk-taking culture, culture clashes after mergers, dilution through rapid growth, how leaders change culture, short-termism, reputation, bureaucratic culture, and running an acquired brand separately. | 12 |
| Organic and inorganic growth | Organic and inorganic growth, mergers against takeovers, how a retailer grows organically, the relative risk of each route, buying a rival, hostile takeovers, losing market share while growing, why acquisitions disappoint, synergy, entering a foreign market by acquisition, and access to finance. | 13 |
| Horizontal, vertical and conglomerate integration | Horizontal, vertical and conglomerate integration, backward and forward vertical integration, classifying examples, the motive for conglomerate integration, the benefits of horizontal integration, cost savings and risks of vertical integration, competition authorities, brand control, and the conglomerate discount. | 14 |
| Innovation, research and development and competitive advantage | Research and development, invention against innovation, process and product innovation and their effects on costs and demand, market power, patents, monopoly profit as an incentive, dynamic efficiency, under-investment in research, first-mover advantage and network effects, payback on research, and pharmaceuticals. | 14 |
| State funding for research and development | Forms of state support for business research, why free markets under-provide research, research tax credits, funding university research, international competitiveness, arguments against state funding, crowding out, opportunity cost, indirect encouragement of innovation, grants for small firms, long-run growth, and domestic research conditions. | 12 |
| The product life cycle and extension strategies | The five stages of the product life cycle, sales and cash flow in development, the shape of the life cycle, promotion at introduction, price and profit through the stages, extension strategies, product portfolios, life cycle and pricing, why extending is cheaper than replacing, short and long life cycles, and withdrawal. | 13 |
| Market information in the digital economy | Recall questions on price comparison sites and search costs, what transparency does to elasticity and to collusion, viral marketing and its risk, and how reviews reduce information failure. | 13 |
| Digital technology and the supply side of business | Micromarketing, customer data and its cost advantage and drawback for consumers, lower costs of online retailing, spreading fixed costs, power between manufacturers and retailers, last-mile delivery, demand for digitally skilled workers and training, automated warehousing, and real-time stock management. | 13 |
| The long tail and wider geographical markets | The long tail in online retailing, stocking slow-selling products, why high-street shops cannot serve it, recommendation systems, consumer welfare, how selling online widens a geographical market, niche survival and economies of scale, obstacles to overseas sales, wider competition, record labels and publishers, and third-party marketplaces. | 12 |
| Costs, prices and firm survival in a digital market | How digital technology lowers barriers to entry, profits and prices under digital competition, creative destruction and industries replaced by digital substitutes, very low marginal costs and market concentration, network effects as a barrier to entry, loss-making firms valued highly, automation and employment, and firm creation and closure. | 12 |
| How small firms compete | Unique selling points and product differentiation, niche markets with their margins and risks, flexibility, customer service, supplier relationships, local knowledge, avoiding price wars, e-commerce, low-cost differentiation, employee relationships, and how an independent bakery survives beside a supermarket. | 14 |
How the guide is worked
Answering a question from memory stores it far better than reading the answer again. The guide runs that as a fixed procedure on one subtopic at a time, about twenty minutes a session.
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Step 1 · Closed book
Cover the answers. Work through one subtopic and write down what you can. Leave blanks where you have nothing.
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Step 2 · Open book
Go back to the top. Read each printed answer and write it out in full, including the ones you had right.
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Step 3 · Closed book again
Same questions, same order, from memory. The gap between pass one and pass three is the session result.
Read the full method, the return schedule and the research behind it.
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