Key term
Edexcel A-Level Economics B 9EB0
Scarcity, Choice and Potential Conflicts
Enterprise, Business and the Economy
Introducing the Market
Topic overviewConsumer objectives and the demand curveMovements along and shifts of the demand curveProducer objectives and the supply curveMovements along and shifts of the supply curveEquilibrium price and quantityExcess demand, excess supply and market forcesShifts in demand and supply in real marketsLimitations of the supply and demand modelFunctions of the price mechanismMass markets, niche markets and market growthMarket research and consumer insightMarket segmentationMarket mapping and competitive advantageAdding value, pricing decisions and dynamic markets
The Role of Credit in the Economy
Topic overviewBanks and the channelling of savings into investmentBank lending, interest rates and collateralRisk in business decision-makingLimited and unlimited liabilityLoans, overdrafts and trade creditVenture capital, share capital and leasingOwner's capital, retained profit and other sources of financeChallenges in obtaining credit and the impact of credit on the economy
Market Failure and Government Intervention
Revenue, Costs, Profits and Cash
Topic overviewSales volume and sales revenueFixed, variable, total and average costsPercentage change in revenue, costs and profitContribution and the break-even pointMargin of safety and the limitations of break-even analysisProfit as an incentive: market entry and exitGross, operating and net profitProfit margins and how firms increase profitCash flow, cash-flow forecasting and business survival
Business Growth and Competitive Advantage
Topic overviewObjectives of business growthInternal and external economies of scaleDiseconomies of scale and the problems of growthCorporate culture in a growing businessOrganic and inorganic growthHorizontal, vertical and conglomerate integrationInnovation, research and development and competitive advantageState funding for research and developmentThe product life cycle and extension strategiesMarket information in the digital economyDigital technology and the supply side of businessThe long tail and wider geographical marketsCosts, prices and firm survival in a digital marketHow small firms compete
Firms, Consumers and Elasticities of Demand
Topic overviewCalculating and interpreting price elasticity of demandFactors influencing price elasticity of demandPrice elasticity of demand and total revenuePrice elasticity of demand in niche and mass marketsPricing strategiesChoosing the right pricing strategyOnline sales, price comparison and pricing decisionsNon-price competition and the demand curveDevising a marketing approachIncome elasticity of demand
Productive Efficiency
Life in a Global Economy
Topic overviewCharacteristics of globalisationCauses of globalisation over the last fifty yearsGrowth in the UK and the BRIC economiesIndicators of growth and developmentDeveloped, emerging and developing economiesMean and median incomesSpecialisation and the gains from international tradeTrading blocsVisible and invisible trade and the impact of cheap importsExchange rate changes and their impact on firmsReading exchange rate and effective exchange rate data
The Economic Cycle
Topic overviewThe economic cycle: boom, slowdown, recession and recoveryImplications of the economic cycle for firmsThe circular flow of income, injections and withdrawalsAggregate demand and its componentsAggregate supply, input costs and productivityInflation, deflation and disinflationPrice indices and the rate of inflationReal and nominal values, constant and current pricesDemand-pull and cost-push inflationThe impact of inflation on firms and individualsEmployment, underemployment and the measurement of unemploymentThe causes of unemploymentThe impact of unemployment on firms and individuals
Introduction to Macroeconomic Policy
Globalisation
Topic overviewThe growing economic power of China and IndiaAfrica and other emerging marketsRising incomes, firms and shifting employment patternsNominal and real valuesIndex numbersTrade liberalisation and economic growthSpecialisation and comparative advantageForeign direct investment and growthTrade creation and trade diversionTrading blocs and the single marketTrading blocs, firms and growing interdependenceProtectionism: tariffs, quotas and other trade barriersTrade negotiations and international institutionsExchange rate changes and the Eurozone
Economic Factors in Business Expansion
Topic overviewPush factors: saturated markets and competitionPull factors: economies of scale and risk spreadingOffshoring and outsourcingExtending the product life cycle through overseas marketsRaising capacity utilisationAssessing a market: disposable income and exchange ratesEase of doing business, infrastructure and political stabilityLocation of production: costs, labour and natural resourcesLocation of production: trade blocs, incentives and return on investment
Impact of Globalisation on Global Companies
Topic overviewGlobalisation and glocalisationEthnocentric, polycentric and geocentric approaches to global marketsPrice and non-price competition in global marketsBranding and differentiation in global marketsCultural and language barriers in global marketsAdapting marketing strategy for niche and mass markets
Impact of Globalisation on Local and National Economies
Topic overviewMultinational corporations and local labour marketsMultinational corporations and local firmsMultinationals, the local community and the environmentForeign direct investment, growth and the balance of paymentsTechnology transfer, skills and business cultureMultinationals and consumersTax revenues and transfer pricingStakeholder conflicts, pay and working conditionsEmissions, waste disposal and supply chain ethicsEthical marketing: labelling and promotionControlling multinational corporations
Global Labour Markets
Inequality and Re-Distribution
Topic overviewAbsolute and relative poverty and how they are measuredMeasuring inequality: the Lorenz curve and the Gini coefficientReducing poverty: growth, development and international aidThe impact of inequality on individuals, firms and the economyRe-distribution of income and wealth through taxation and services
Competition and Market Power
Topic overviewMarket structures across the spectrum of competitionPerfect competition and what the model explainsMarket structure, pricing strategies and consumersNon-price competition and the limitations of perfect competitionContestability, ease of entry and barriers to entryBarriers to entry, market structure and economies of scaleConcentration ratios, interdependence and tacit agreementPrice discriminationAverage and marginal cost, revenue and profitContribution, business objectives and pricing strategiesProductive and allocative efficiencyProductivity, market orientation and interrelated markets
Market Power and Market Failure
Topic overviewCartels, collusion and restrictive practicesMonopsony, natural monopoly and power in the labour marketThe implications of market failure for firms, consumers and governmentPromoting competition: anti-competitive practices, mergers and privatisationRegulating natural monopolies and protecting consumers and employeesThe Competition and Markets Authority and EU competition policyThe benefits and costs of regulation
Market Failure Across the Economy
Macroeconomic Policies and Impact on Firms and Individuals
Topic overviewAggregate demand and its componentsAggregate supply, full capacity output and the output gapThe multiplier effectShifts in AD and AS: inflation, unemployment and growthFiscal policy: government spending and taxationMonetary policy: the Bank of England, interest rates and quantitative easingDemand-side policies on the AD/AS diagram: investment, jobs and pricesTime lags, policy conflicts and the limits of demand-side policyMarket-based supply-side policiesInterventionist supply-side policiesSupply-side policies on the AD/AS diagram: strengths and weaknessesComparing macroeconomic policies and judging their success
Risk and the Financial Sector
Topic overviewRisk and uncertainty in business decisionsEconomic shocks and their impact on firmsExchange rate risk and forward marketsInsurance and the management of business riskMobilising savings and lending for business investmentAssessing creditor risk and lending to individualsPayments, equity markets and the exchange of goods and servicesThe central bank: the MPC, monetary policy and financial regulationThe Global Financial Crisis and banking regulation
Business Growth and Competitive Advantage
- 14 subtopics
- 42 things to know
- Papers 2 and 3
What Business Growth and Competitive Advantage covers
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.
Where it is assessed
Papers 2 and 3
Competing in the global economy, then the synoptic paper on the pre-released context.
Check the Pearson Edexcel specification ↗The 14 subtopics
Each one has its own page.
- Objectives of business growthPower 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.Open →
- Internal and external economies of scaleEconomies 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.Open →
- Diseconomies of scale and the problems of growthRecall 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.Open →
- Corporate culture in a growing businessCorporate 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.Open →
- Organic and inorganic growthOrganic 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.Open →
- Horizontal, vertical and conglomerate integrationHorizontal, 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.Open →
- Innovation, research and development and competitive advantageResearch 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.Open →
- State funding for research and developmentForms 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.Open →
- The product life cycle and extension strategiesThe 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.Open →
- Market information in the digital economyRecall 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.Open →
- Digital technology and the supply side of businessMicromarketing, 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.Open →
- The long tail and wider geographical marketsThe 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.Open →
- Costs, prices and firm survival in a digital marketHow 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.Open →
- How small firms competeUnique 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.Open →
What you need to know
Answer each one before you reveal it.
Your recallNot started
Key term
Why does a firm wanting to enter a foreign market quickly often buy a local business?
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How does a good relationship with suppliers help a small firm compete?
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Define economies of scale.
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Define diseconomies of scale.
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Define corporate culture.
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Define horizontal integration.
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Define research and development.
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Give two forms that state support for business research can take.
Process
What are the five stages of the product life cycle, in order?
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Define viral marketing.
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Define micromarketing.
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How does the long tail affect consumer welfare?
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What happens to the profits of established firms when digital entry becomes easy?
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Why does a firm that grows gain more power over its suppliers?
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Distinguish between internal and external economies of scale.
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Name three causes of diseconomies of scale.
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How can a strong corporate culture raise productivity?
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Define inorganic growth.
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Define vertical integration.
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Distinguish between invention and innovation.
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Why does the free market produce less research than is socially desirable?
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Describe the shape of a typical product life cycle when sales are plotted against time.
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Why is viral marketing attractive to a firm with a small promotional budget?
Evaluation
What is the main cost advantage of micromarketing over mass advertising?
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Why does selling into a wider geographical market help a firm achieve economies of scale?
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What is the effect of digital competition on the prices charged in a market?
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Define a niche market in the context of how small firms compete
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Define market share.
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Name four types of internal economy of scale.
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Why does internal communication worsen as a firm grows?
Evaluation
Why can corporate culture be a durable source of competitive advantage?
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What is a hostile takeover?
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Distinguish between backward and forward vertical integration.
Process
Define process innovation.
Evaluation
Give one argument against state funding of business research.
Process
Why is promotional spending heaviest during the introduction stage?
Key term
What is the main risk of relying on viral marketing?
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Why do a firm's fixed costs become a smaller share of each sale as its online business grows?
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What two obstacles does a firm still face when selling online to overseas consumers?
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Define creative destruction.
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Why can a small firm earn a high margin in a niche market?
Take Business Growth and Competitive Advantage further
The same content, four other ways.
Commonly confused
Pairs that lose marks when they are blurred together.
Merger vs Takeover
Merger: an agreement between two firms of similar standing to combine into a single new business. Takeover: one firm buying a controlling shareholding in another, which the target's board may resist.
Backward vertical integration vs Forward vertical integration
Backward vertical integration: a move up the production chain towards the firm's own suppliers of inputs. Forward vertical integration: a move down the production chain towards the firm's customers or distributors.
Invention vs Innovation
Invention: the creation of a new idea or device for the first time. Innovation: bringing a new idea to market successfully as a product or a production method.
Questions from this topic
Each one with the model answer underneath.
- 1
Why does a firm that grows gain more power over its suppliers?
Model answer
A larger firm buys in bigger volumes, so suppliers depend on its orders and it can negotiate lower prices and longer credit terms.
- 2
Define market share.
Model answer
Market share is one firm's sales expressed as a percentage of total sales in the market.
- 3
A firm sells £12 million of output in a market worth £80 million a year. State its market share.
Model answer
Its market share is 15%.
- 4
How does greater market power over consumers allow a firm to raise its profit?
Model answer
With fewer close substitutes available, demand becomes less price elastic, so the firm can raise price and lose relatively little volume.
- 5
Why is brand recognition valuable to a growing business?
Model answer
A recognised brand reduces the effort consumers spend searching, builds loyalty and lowers the cost of winning each new customer.
- 6
How can growth raise a firm's total profit even when its profit per unit is unchanged?
Model answer
Total profit is the margin per unit multiplied by the number of units sold, so selling more at the same margin raises profit.
What is inside Levo
Six ways to work the same material.
Business Growth and Competitive Advantage revision questions
- What does Business Growth and Competitive Advantage cover in Edexcel A-Level Economics B?
- 14 subtopics: 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. Each one has its own page with questions and model answers.
- How is Business Growth and Competitive Advantage organised?
- By the Edexcel 9EB0 specification, subtopic by subtopic, so it matches the order you are taught it in.
Every question in Business Growth and Competitive Advantage, on a schedule.
Attempt a question from memory, write the correct version, then attempt it again. Levo records the jump between your first attempt and your last, and brings each question back on the day you are due to forget it.
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