Practice Exam Paper Pack 2019

PRACTICE EXAM PAPER PACK 2019

Pearson Edexcel Business Advanced Level

Paper 3: Investigating Business in a Competitive Environment PAPER C

Instructions Time allowed: 2 hours There are two sections to this question paper Answer all questions using the space provided The total mark for this paper is 100 The marks for each question are shown in brackets

QUESTION PAPER

Section A ANSWER ALL THE QUESTIONS

Read the following extracts (A to D) before answering Question 1. Write your answers in the spaces provided.

Extract A Market trends of the UK package holiday market

The major selling-points of package holidays are that consumers consider them convenient and easy to arrange. Package holiday businesses can use this as a point of differentiation in an increasingly complex travel market. Package holiday businesses need to change the perception that their holidays are all about ‘sun, sea and sand’. Awareness needs to be raised of the diverse mix of holidays available. Whilst the classic beach holiday remains the most popular package holiday, cruises, escorted tours and luxury packages also attract significant numbers of consumers.

• 43% of overseas holidaymakers aged 16-34 book a package, rising to 49% of 35-54s and peaking at 57% amongst those aged 55+. • 46% of adults say they would be willing to pay extra for a package holiday that was tailormade to their personal preferences. Agreement peaks amongst 16-34-year olds at 59%. • 57% of adults under the age of 35, agree that ‘Booking accommodation separately instead of a package means that you can find more interesting accommodation (e.g. Airbnb, ‘boutique’ hotels)’. • At 52% versus 45%, under-35s are more likely than over-35s to agree that ‘I would prefer to book a package holiday with a tour operator that has a reputation for responsible tourism’. • 35% of adults agree that ‘The weakness of the Pound means I am now more likely to consider an all-inclusive package holiday’. Agreement peaks amongst 16-34-year olds, 48% of whom say they are now more likely to consider an all-inclusive package.

As they age, overseas holidaymakers are more likely to book a package. Demographic trends point to a growing opportunity for the package market amongst older travellers in the coming years. Brands also need to reinvigorate the appeal of the traditional package holiday to attract younger travellers brought up in an era of low-cost air travel and online DIY holiday booking. The way to engage younger generations with package holidays is to make them more customised to individual preferences. Package holidays also need to adapt to the challenge posed by the urban hipster appeal of Airbnb and boutique hotel chains.

Younger travellers express far higher levels of concern about economic factors than older travellers. 16-34-year olds tend to value travel very highly but face more financial constraints than older consumers.

Source: Adapted from: Mintel ‘Package verses Independent holidays’ UK, April 2018

PRACTICE EXAM PAPER PACK 2019 Copyright tutor2u 2019 Page 2 Extract B Jet2holidays

Jet2holidays is the package holiday division of the low-cost airline Jet2.com. In 2016 the airline expanded from its original northern bases into Birmingham and Stansted. Jet2holidays has also announced further capacity growth for summer 2018 with 37 new routes planned. The group’s airline fleet has also expanded with 14 new Boeing 737-800 aircraft delivered during winter 2017/18, following 16 new aircraft the previous year. During the ‘summer half’ of 2017 Jet2holidays took 1.81 million customers on package holidays. This was an annual increase of 41%.

Unlike its main rivals TUI and Thomas Cook, Jet2holidays has no travel agents and states that it has no current intentions of opening any. TUI and Thomas Cook both stopped selling Jet2holidays products via their own shops during 2017.

As well as focusing on its direct online sales, Jet2holidays also sells a large proportion of its holidays through independent high street travel shops. This enables it to capture a growing slice of the mass market for beach package holidays.

Jet2holidays concentrates on the short haul market. It does offer flights to New York during winter months but has no current plans to develop a full long haul programme. The long haul package segment is dominated by TUI, Thomas Cook and specialist tour operators/agents such as Virgin Holidays.

Extract C Market shares of the leading package holiday businesses

Company 2012 2018 TUI 43.0% 44.4% Jet2holidays 6.3% 24.2% Thomas Cook 32.0% 19.7% Expedia 5.7% 11.6%

Extract D Kuoni to launch new online tailormade brand

Luxury long-haul specialist package holiday business Kuoni is to launch a new online brand at the end of June 2018. It aims to fill the gap between a traditional package holiday and a fully personalised tailor-made package put together by a travel professional. Customers will be able to choose a set package and then customise it by adding personal extras. Kuoni plans to use new technology to enable more holiday components to be assembled online than have previously been available. It is targeting the global niche of wealthier consumers around the world who are prepared to pay large amounts for a luxury, personalised holiday.

PRACTICE EXAM PAPER PACK 2019 Copyright tutor2u 2019 Page 3 1 (a) Using the data in Extract A, assess two likely impacts of demographic change on the demand for package holidays (8 marks)

PRACTICE EXAM PAPER PACK 2019 Copyright tutor2u 2019 Page 4 (b) Assess the importance of recruitment and selection for the future success of Jet2holidays (10 marks)

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PRACTICE EXAM PAPER PACK 2019 Copyright tutor2u 2019 Page 6 (c) Assess the likely value of targeting global niche markets for a business such as Kuoni (12 marks)

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PRACTICE EXAM PAPER PACK 2019 Copyright tutor2u 2019 Page 8 Jet2holidays has set itself the objective of becoming the market leader of the UK package holiday market. To achieve this objective it is considering either entering the long haul market or targeting the 16-34 year old market

(d) Evaluate these two options and recommend which one Jet2holidays should choose to achieve its objective of becoming the market leader. (20 marks)

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PRACTICE EXAM PAPER PACK 2019 Copyright tutor2u 2019 Page 11 Section B ANSWER ALL THE QUESTIONS

Read the following extracts (E to H) before answering Question 2. Write your answers in the spaces provided.

Extract E How the launch of lastminute.com heralded a new era for the travel agency

At the end of the 1990s, Brent Hoberman had been surprisingly successful at turning up at posh hotels while away on business and charming staff into giving him a room on the night at a knock- down price. While most of us would have probably spoke of the ruse to our friends - he decided it had the makings of a business.

Joining forces with Martha Lane-Fox, they decided that everyone should be able to live a five-star lifestyle, but at three-star prices. They thought if they could fill up empty hotel rooms and restaurant tables ‘at the last minute’, by young professionals looking for new experiences, then this could be broadened to travel.

Nowadays the online travel is a way of life - back then it was truly innovative - so when the concept was combined with the emerging technology, they, and the world, swiftly realised that might just be on to something.

But while other start-ups of the time were flash in the pans, why did lastminute.com not only survive but thrive?

Well, they were very careful with the company’s money, reinvesting it into technology and they worked hard to make sure customers loved what we were doing.

Source: Adapted from: https://lmgroup.lastminute.com/about-us/our-history.aspx

Extract F Lastminute.com’s business model

Lastminute.com is an online travel company that handles 10 million customers a year. It offers its services in 40 countries and is available in 17 languages. The company employs 1,200 workers in 12 countries, of whom 300 are website developers and software engineers. It makes great use of m-commerce, 35% of its bookings are made via smartphones

In the past 3 years, lastminute.com has moved from its old business model of ‘hotel and flights only’ to a more comprehensive holiday-focused proposition. The company has invested in Dynamic Package technology and added products such as concert and restaurant bookings. Lastminute.com has the ambition to be the relevant and most inspiring travel company, committed to enriching the lives of travellers.

Source: Adapted from: https://lmgroup.lastminute.com/about-us/our-history.aspx

PRACTICE EXAM PAPER PACK 2019 Copyright tutor2u 2019 Page 12 Extract G Selected financial information for lastminute.com

2017 2016 Operating profit 1,575m 1,443m Non-current liabilities 55,838m 32,181m Total equity 102,612m 133,506m

Source: lastminute.com interim report 2018

Extract H Lastminute.com’s brand image

It has been 20 years since lastminute.com launched its website at the height of the dotcom boom with the aim of bringing late holidays deals online. At the time the idea was revolutionary but in a dynamic market staying at the top of the travel industry is not easy.

It does still have strong brand awareness, with 79.5% of UK consumers aware of the brand. That puts it sixth on a list of 35 travel brands, above rival online sites such as Booking.com but behind Expedia and Trivago. However, it performs less well when it comes to consumer perceptions of the brand. Its Index score (which includes value, quality and reputation) is 8.7, which puts it eighth in the list and behind Booking.com and Expedia.

The travel industry is a competitive market. Alongside more traditional airlines and travel agents is a constant influx of new players from Skyscanner to Airbnb, making it difficult for established brands to remain as market leaders. According to lastminute.com’s head of marketing: “Holidays aren’t a fast moving good. It’s something you do once or twice a year, so you need to be high in people’s mind all the time, while also keeping up with all the new rivals.”

Source: Adapted from article in Marketing Week

PRACTICE EXAM PAPER PACK 2019 Copyright tutor2u 2019 Page 13 2 (a) Assess the importance of two entrepreneurial characteristics shown by Brent Hoberman and Martha Lane Fox, that contributed to the success of lastminute.com (8 marks)

PRACTICE EXAM PAPER PACK 2019 Copyright tutor2u 2019 Page 14 (b) Assess the extent to which factors contributing to increased globalisation, has been the most important influence on lastminute.com’s business model (10 marks)

PRACTICE EXAM PAPER PACK 2019 Copyright tutor2u 2019 Page 16 (c) Assess, using relevant ratio calculations, whether the owners of lastminute.com would be pleased with the financial performance of the company (12 marks)

PRACTICE EXAM PAPER PACK 2019 Copyright tutor2u 2019 Page 18 The directors of lastminute.com are considering how to improve its brand image. One option is to implement a strategy of continuous improvement (kaizen). The second option is to focus on attracting new customers by adding products such as concert and restaurant bookings.

(d) Evaluate these two options and recommend which one lastminute.com should choose in order to improve its brand image (20 marks)