A Level Business SPECIMEN PAPER: PAPER 2

A Level Business SPECIMEN PAPER: PAPER 2 Pearson Edexcel Level 3 Advanced GCE in Business (9BS0)

Introduction This specimen paper has been produced to complement the sample assessment materials for Pearson Edexcel Level 3 Advanced GCE in Business and is designed to provide extra practice for your students. The specimen papers are part of a suite of support materials offered by Pearson. The specimen papers do not form part of the accredited materials for this qualification.

General marking guidance All candidates must receive the same treatment. Examiners must mark the last candidate in exactly the same way as they mark the first. Mark schemes should be applied positively. Candidates must be rewarded for what they have shown they can do rather than be penalised for omissions. Examiners should mark according to the mark scheme not according to their perception of where the grade boundaries may lie. All the marks on the mark scheme are designed to be awarded. Examiners should always award full marks if deserved, i.e. if the answer matches the mark scheme. Examiners should also be prepared to award zero marks if the candidate s response is not worthy of credit according to the mark scheme. Where some judgement is required, mark schemes will provide the principles by which marks will be awarded and exemplification/indicative content will not be exhaustive. Brackets around parts of words / phrases in this mark scheme indicate the possible additional words / phrases candidates may write as their answer. They must not be awarded twice for an answer relating to one bullet point. Where a word is underlined, that word must be included in the answer to be awarded a mark for that point. When examiners are in doubt regarding the application of the mark scheme to a candidate s response, a senior examiner must be consulted before a mark is given. Crossed-out work should be marked unless the candidate has replaced it with an alternative response.

Write your name here Surname Other names Centre Number Pearson Edexcel Level 3 GCE Business Advanced Paper 2: Business activities, decisions and strategy Specimen paper Time: 2 hours Candidate Number Paper Reference 9BS0/02 You do not need any other materials. Total Marks Instructions Use black ink or ball-point pen. Fill in the boxes at the top of this page with your name, centre number and candidate number. Answer all questions. Answer the questions in the spaces provided there may be more space than you need. Information The total mark for this paper is 100. The marks for each question are shown in brackets use this as a guide as to how much time to spend on each question. Advice Read each question carefully before you start to answer it. Try to answer every question. Check your answers if you have time at the end. Turn over S48723A 2015 Pearson Education Ltd. 1/1/1/1/1/1/1 *S48723A0116*

Answer ALL questions. SECTION A Write your answers in the spaces provided. Read the following extracts (A to E) before answering Question 1. Extract A Crowdcube Crowdcube is the world s leading investment crowdfunding platform. It enables anyone to invest alongside professional investors in businesses wanting to start-up, are in their early stage and those wanting to expand. There is a 160,000 strong crowd looking for more interesting investments. Crowdcube is free, quick and has no obligations for potential investors. One business seeking investment is HAIRCVT. It is attempting to revolutionise the 10bn hairdressing industry in the UK and France by providing an online marketplace for hairdressers to showcase themselves and for consumers to find and book them. HAIRCVT aims to take a significant share of online hair bookings over the next 5 years. It hopes to raise 200,000 in return for 10% of the company s shares. 5 10 Extract B (Source adapted from: https://www.crowdcube.com/?utm_source=bing&utm_medium=cpc&utm_ campaign=crowd%20funding&utm_term=crowd%20funding%20business) Facebook extracts adapted from 2013 annual report 2013 2012 $m $m Current assets 13 070 11 267 Non-current assets 4 825 3 836 Total assets 17 895 15 103 Current liabilities 1 052 1 052 Non-current liabilities 1 500 Total equity 15 470 11 755 Operating profit 2 804 538 2 *S48723A0216*

Extract C Business culture at Google Google believes that it is really the employees who make Google the kind of company it is. It hires people who are highly intelligent and creative, and favours ability over experience. Although Google s employees share common goals and visions for the company, they come from a variety of different backgrounds and speak dozens of languages to reflect the global audience that Google serves. Google strives to maintain the open culture often associated with start-ups, in which everyone is a hands-on contributor and feels comfortable sharing ideas and opinions. In weekly meetings not to mention over email or in the café Google s employees ask questions directly to executives about any number of company issues. The company s offices and cafés are designed to encourage interactions between employees both within and across teams, and to encourage conversation about work as well as play. 5 10 Extract D (Source adapted from: www.google.com/about/company/facts/culture) Business culture at Yahoo! Chief Executive, Marissa Mayer, has banned staff from working from home. She considers this decision to be a key part of her strategy for changing the culture at Yahoo! When an email from human resources dropped into the inbox of Yahoo! staff, banning them from working from home, it angered many staff. They considered this to be a backwards step in an age where working from home is standard in many of the most successful companies in the technology sector. 5 Some of the best decisions and insights come from hallway and cafeteria discussions, meeting new people, and informal meetings, the email stated. Speed and quality are often sacrificed when we work from home. Extract E (Source: article adapted from http://www.telegraph.co.uk/finance/newsbysector/ mediatechnologyandtelecoms/9892282/yahoo-boss-bans-working-from-home.html) Tech sector star performer in UK economy The UK s technology sector enjoyed robust growth in the final quarter of 2014. It had the widest performance gap between the technology industry and the rest of the UK economy for almost six years; according to KPMG s Tech Monitor UK survey. Interest rates at a historically low figure of 0.5% have contributed to the growth of the technology sector along with the launch of new products such as cloud-based initiatives, more emphasis placed on marketing and strong demand for technology-enabled services. 5 (Source adapted from: http://startups.co.uk/tech-sector-star-performer-in-uk-economy) *S48723A0316* 3 Turn over

1 (a) Explain how crowdfunding might help HAIRCVT raise 200 000. (4) (b) Using the data in Extract B, calculate the change in Facebook s return on capital employed (ROCE) between 2012 and 2013. You are advised to show your working. (4) 4 *S48723A0416*

(c) Assess the likely impact on the corporate culture of a business such as Yahoo! of banning staff from working from home. (10) *S48723A0516* 5 Turn over

(d) Using Extract E, assess whether or not interest rates of 0.5% might have contributed to the robust growth of the UK s technology sector. (12) 6 *S48723A0616*

Google wish to improve the productivity of their employees. The two strategies they are considering are either empowerment or using financial rewards. (e) Evaluate these two strategies to increase labour productivity and recommend which one is most suitable for a business such as Google. (20) *S48723A0716* 7 Turn over

(Total for Question 1 = 50 marks) TOTAL FOR SECTION A = 50 MARKS 8 *S48723A0816*

SECTION B Read the following extracts (F to I) before answering Question 2. Extract F Stock control diagram 700 600 Stock Level 500 400 300 reorder level 200 100 buffer stock level 0 1 2 3 4 5 6 7 8 Months Extract G Rochdale company in court over worker s severe chemical burns Rochdale fabric firm PW Greenhalgh and Co was fined 10,000 by the Health and Safety Executive (HSE) after an employee fell into a vat of bleach and suffered severe chemical burns over most of his body. The HSE investigation showed that the business had not carried out a risk assessment or staff training for using the bleaching equipment. HSE found it was common practice for employees to climb onto the containers, which did not have lids, when the machine became jammed. HSE issued legal notices relating to unsafe working practices. PW Greenhalgh and Co has since carried out risk assessments and implemented safe systems of work, using lids, handrails and by fitting permanent stepladders to all the bleach containers. 5 10 The Health and Safety at Work Act 1974 states: It shall be the duty of every employer to ensure, so far as is reasonably practicable, the health, safety and welfare at work of all his employees. (Source adapted from: http://press.hse.gov.uk/2014/ rochdale-company-in-court-over-workers-severe-chemical-burns/) *S48723A0916* 9 Turn over

Extract H SKA Textiles SKA Textiles was founded in 1975 and is one of the UK s leading textile manufacturers. The family-run company has grown steadily and today has one of the largest colour matching and physical fabric testing laboratories in the UK, as well as some of the largest dye machines in Europe. Having originally specialised in knitting and dyeing yarns for ladies fashion wear, today the company s impressive range of materials are used by retailers such as Next, Marks & Spencer and Primark. Investment in new machinery has allowed SKA Textiles to diversify into new markets with new products, such as specialist yarns and fibres suitable for upholstery; car seats; the fire services and the aerospace sector. 5 10 The high performance materials which the company produces today, have earned SKA Textiles a reputation as an advanced textiles manufacturer. Extract I (Source adapted from: http://www.skatextiles.co.uk/about.html) Research and development (R&D) expenditure on UK textile products was 20 million in 2012, representing 0.1% of the 12.2 billion spent on manufacturing R&D. Indeed, R&D expenditure in textiles is one of the lowest of all manufacturing product groups. As output and jobs in the textile industry have fallen, so too has R&D expenditure on textile products; a fall of 37.2% between 1994 and 2012. This compares with a 19.9% increase in R&D expenditure on manufacturing products as a whole over the same period. 5 R&D expenditure on textile products compared with expenditure on manufacturing products 160 Index: 1994 = 100, 2012 prices Textile products Manufacturing products 140 120 100 80 60 40 20 0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 (Source adapted from: http://www.ons.gov.uk/ons/rel/uncategorised/summary/changing-shape-of-ukmanufacturing---textiles/sty---textile-industry-average-wage-lowest-within-uk-manufacturing.html) 10 *S48723A01016*

SKA Textiles has constructed the decision tree below to decide whether to invest in new machinery or increase its training budget. Success 0.7 20m Invest in new machinery ( 10m) Failure 0.3 5m Success 0.8 8m Increase training budget ( 5m) Failure 0.2 3m 2 (a) Using the data above, calculate the expected value and net gain of each option. You are advised to show your workings. (4) *S48723A01116* 11 Turn over

(b) Using the data in Extract F, explain how stock levels fell to zero in month five. (4).. 12 *S48723A01216*

(c) Assess the likely impact of health and safety legislation on a textile business, such as P W Greenhalgh and Co. (10) *S48723A01316* 13 Turn over

(d) Assess the possible impact of the decline in R&D expenditure on the productivity of UK textile businesses. (12) 14 *S48723A01416*

SKA Textiles uses the Ansoff Matrix when deciding on its marketing strategies. The two strategies they are considering are market penetration or diversification. (e) Evaluate these two strategies and recommend which one is most suitable for SKA Textiles. (20) *S48723A01516* 15 Turn over

16 *S48723A01616* (Total for Question 2 = 50 marks) TOTAL FOR SECTION B = 50 MARKS TOTAL FOR PAPER = 100 MARKS Every effort has been made to contact copyright holders to obtain their permission for the use of copyright material. Pearson Education Ltd. will, if notified, be happy to rectify any errors or omissions and include any such rectifications in future editions.

Question Number 1 (a) Answer Knowledge 1, Application 2, Analysis 1 Mark Knowledge: 1 mark for understanding of crowdfunding e.g funding a business venture by raising small amounts of money from a large number of people, typically via the internet. Application: 2 marks for answers in the context of HAIRCVT, e.g Access to 160,000 potential investors who are members of Crowdcube Hopes to raise 200,000 in return for 10% of the shares. Analysis: 1 mark for answers that explain the a benefit of using crowdfunding to raise finance e.g A relatively cheap way to raise finance which is an important factor for a small business An alternative to borrowing from banks who are often reluctant to lend to small businesses Only have to give up a small proportion of shares so can retain control. (4)

Question Number 1 (b) Answer Knowledge 1, Application 3 Mark Quantitative skills assessed: QS1: calculate, use and understand ratios, averages and fractions Knowledge: 1 mark for identifying formula for Return on capital employed Operating profit x 100 Capital employed Application: 3 marks for Calculation for 2012 538 x 100 = 4.05% (1,500 + 11,755) Calculation for 2013 2804 x 100 = 18.12% 15,470 Change in value = 18.12 4.05 = 14.07% NB: if answer given is 14.07% award 4 marks (4)

Question Number Indicative content 1 (c) Knowledge 2, Application 2, Analysis 3, Evaluation 3 Mark Business culture is the unwritten code that affects the attitude and behaviour of staff Existing culture staff currently can work from home which suggests they are trusted. This means that if they are banned from remote working, staff will lose motivation and this may affect the culture negatively Resistance to change staff will feel threatened and consider remote working to be more practical therefore productivity might suffer, resulting in fewer software developments Importance of good communication culture may be negatively affected because staff were informed by an email rather than face to face. This may create suspicion and resentment and consequently absenteeism and labour turnover could rise. Potential counterbalance: Culture could be improved by a more positive working atmosphere due to greater staff interaction in the work place rather than staff working at home. This could lead to the development of more innovative software products The working environment may be more productive, as decision making may be quicker and of better quality, due to greater staff interaction at work both formally and informally. This could result in new innovations being launched earlier than the competition. Potential judgement The impact on the culture of Yahoo! may be positive if employees are convinced or effectively persuaded of the benefits of this change A negative impact may be that some staff may resent and resist this change leading to lower motivation and higher absenteeism. (10)

Level Mark Descriptor 0 A completely inaccurate response. Level 1 1 2 Isolated elements of knowledge and understanding recall based. Weak or no relevant application to business examples. Generic assertions may be presented. Level 2 3 4 Elements of knowledge and understanding, which are applied to the business example. Chains of reasoning are presented, but may be assertions or incomplete. A generic or superficial assessment is presented. Level 3 5 6 Accurate and thorough knowledge and understanding, supported throughout by relevant and effective use of the business behaviour/context. Analytical perspectives are presented, with developed chains of reasoning, showing cause(s) and/or effect(s). An attempt at an assessment is presented, using quantitative and/or qualitative information, though unlikely to show the significance of competing arguments. Level 4 7 10 Accurate and thorough knowledge and understanding, supported throughout by relevant and effective use of the business behaviour/context. A coherent and logical chain of reasoning, showing cause(s) and/or effect(s). Assessment is balanced, wide ranging and well contextualised, using quantitative and/or qualitative information, and shows an awareness of competing arguments/factors leading to a supported judgement

Question Number Indicative content 1 (d) Knowledge 2, Application 2, Analysis 4, Evaluation 4 Mark Interest rates are the price of borrowed money. High interest rates may therefore deter businesses from borrowing as this could increase risk/reduce profits. Historically low interest rates of 0.5% mean that firms may be encouraged to borrow due to the low cost of repayments. This could increase demand from customers who may purchase technology products, financed by taking out loans Technology firms could borrow money to invest in employing more staff, training in new software, expanding into bigger facilities, marketing and purchasing expensive, new equipment. This could lead to improved quality and productivity Investment in this industry is important due to its fast changing nature. Therefore, companies in this industry may need access to finance in order to be innovative. Potential counterbalance: Growth in this industry has also been due to new products ( cloud based initiatives ), marketing and a strong and growing demand for technology enabled services. All of these factors indicate that the technology industry is successful because it is providing the products that consumers want Successful businesses in the technology sector may not need to borrow as they can finance investment through retained profits. This is a better source of finance as it is cheaper and less risky than borrowing Even with low interest rates, banks may be reluctant to lend, especially to start up businesses in the technology sector

Potential judgement Low interest rates will benefit technology companies who prefer to finance their investment and expansion plans through borrowing rather than selling shares Low interest rates would only have assisted growth through lower borrowing costs, arguably the most important reason has been due to new products and demand for more technology based services. (12) Level Mark Descriptor 0 A completely inaccurate response. Level 1 1 2 Isolated elements of knowledge and understanding recall based. Weak or no relevant application to business examples. Generic assertions may be presented. Level 2 3 4 Elements of knowledge and understanding, which are applied to the business example. Chains of reasoning are presented, but may be assertions or incomplete. A generic or superficial assessment is presented. Level 3 5 8 Accurate and thorough knowledge and understanding, supported throughout by relevant and effective use of the business behaviour/context. Analytical perspectives are presented, with developed chains of reasoning, showing cause(s) and/or effect(s). An attempt at an assessment is presented, using quantitative and/or qualitative information, though unlikely to show the significance of competing arguments. Level 4 9 12 Accurate and thorough knowledge and understanding, supported throughout by relevant and effective use of the business behaviour/context. A coherent and logical chain of reasoning, showing cause(s) and/or effect(s). Assessment is balanced, wide ranging and well contextualised, using quantitative and/or qualitative information, and shows an awareness of competing arguments/factors leading to a supported judgement

Question Number Indicative content 1 (e) Knowledge 4, Application 4, Analysis 6, Evaluation 6 Mark Indicative content option 1 Employee productivity measures the output per employee in a given time period A human resource strategy is the approach used by an organisation in order to achieve its human resource objectives Google s recruitment policy is based upon recruiting intelligent and creative employees who might expect to be given the freedom to make their own decisions, resulting from empowerment. They may be motivated more by being allowed greater independence rather than through financial rewards Google s use of consultation and empowerment with opportunities for extensive interaction with senior executives and fellow workers may be an important motivator in terms of designing software. This may lead to better decision making and motivation as a result of working in teams plus recognition from senior managers, which are important motivators according to Mayo Higher levels of motivation resulting from the use of empowerment fulfils employees self-esteem needs according to Maslow. This may result in benefits such as improved quality and productivity. Google could gain from improved productivity, as fixed costs will be spread over more units, resulting in lower unit costs. Indicative content option 2 Some employees may prefer the incentive of financial rewards such as bonus payments or profit share, because of the direct link to improved productivity. Financial rewards have a direct link to improved performance according to F.W Taylor and also as a means of recognition for good performance. This meets employees self-esteem needs according to Maslow

Senior managers may prefer using financial rewards as they can measure the performance of employees and identify the most productive workers. As well as rewarding the most productive workers financially, they can also be identified for promotion Financial rewards are important in order to attract intelligent and creative employees. Google is in a competitive market and in order to attract and retain the best staff away from rivals such as Microsoft and Facebook, they need to ensure that their employees enjoy high levels of pay and financial benefits. Potential recommendations Empowerment may be more suitable due to the fact that Google employs intelligent, creative workers who would expect to be given the freedom to make their own decisions Financial rewards may be more suitable because money is an important motivator for most employees as it provides direct recognition for good performance Ideally Google should employ a combination of both strategies to improve the productivity of their employees (20)

Level Mark Descriptor 0 A completely inaccurate response. Level 1 1 4 Isolated elements of knowledge and understanding. Weak or no relevant application of business examples. An argument may be attempted, but will be generic and fail to connect causes and/or consequences. Level 2 5 8 Elements of knowledge and understanding, which are applied to the business example. Arguments and chains of reasoning are presented, but connections between causes and/or consequences are incomplete. Attempts to address the question. A comparison or judgement may be attempted, but it will not successfully show an awareness of the key features of business behaviour or business situation. Level 3 9 14 Accurate and thorough knowledge and understanding, supported throughout by relevant and effective use of the business behaviour/context. Uses developed chains of reasoning, so that causes and/or consequences are complete, showing an understanding of the question. Arguments are well developed. Quantitative and/or qualitative information is introduced in an attempt to support judgements, a partial awareness of the validity and/or significance of competing arguments and may lead to a conclusion. Level 4 15 20 Accurate and thorough knowledge and understanding, supported throughout by relevant and effective use of the business behaviour/context. Uses well-developed and logical, coherent chains of reasoning, showing a range of cause and/or effect(s). Arguments are fully developed. Quantitative and/or qualitative information is/are used well to support judgements. A full awareness of the validity and significance of competing arguments/factors, leading to balanced comparisons, judgements and an effective conclusion that proposes a solution and/or recommendations.

Question Answer Number 2 (a) Knowledge 1, Application 3 Mark Quantitative skills assessed: QS 3: construct and interpret a range of standard graphical forms QS 8: use and interpret quantitative and non-quantitative information in order to make decisions Knowledge: 1 mark for implicit understanding of decision trees Application: 3 marks for Inserting values for investing in new machinery and increasing the training budget: (0.7 x 20) + (0.3 x 5) and (0.8 x 8) + (0.2 x 3) Calculating expected values for investing in new machinery and increasing the training budget: (0.7 x 20) + (0.3 x 5) 10 = 5.5m (0.8 x 8) + (0.2 x 3) - 5 = 2m (4)

Question Number 2(b) Answer Knowledge 1, Application 2, Analysis 1 Quantitative skill assessed: QS 9: interpret, apply and analyse information in written, graphical and numerical forms Knowledge: 1 mark for implicit understanding of a stock control diagram/definition of stock control diagram Application: 2 marks for reference to two of the following: Reorder level 300 Reorder quantity 600 Lead Time 1 month Mark Analysis: 1 mark for stating a reason how stock level fell to zero e.g In month five stock levels fell more rapidly than in previous months. Normal lead time was insufficient to replace stock. (4)

Question Number Indicative content 2 (c) Knowledge 2, Application 2, Analysis 3, Evaluation 3 Mark Health and safety legislation ensures that employers are responsible for the health, safety and welfare at work of all their employees, so that accidents at work should be minimised through training, risk assessment and safe working conditions By having safe working practices employers may benefit from a good reputation, less absenteeism as well as avoiding expensive fines and compensation claims. This could lead to the business gaining more sales as well as saving money that could be reinvested By complying with health and safety legislation, employers may develop better working relations with employee representatives. This could to fewer disputes and a better working environment Potential counterbalance P W Greenhalgh & Co Ltd will face increased costs from investment in training, protective clothing and safe equipment to comply with legislation. These increased costs could lead to uncompetitive prices and a loss in sales. Increased bureaucracy required due to having to provide evidence to health and safety inspectors, as well as the opportunity cost resulting from non productive time spent on training and risk assessment. This could result in managers spending less time on how to improve business performance Potential judgement Impact may be positive as the business could avoid fines and compensation claims as well as gaining a good reputation Impact may be negative as complying with the legislation could increase costs and make the business uncompetitive, particularly with foreign rivals who may have less regulation. (10)

Question Number Indicative content 2 (d) Knowledge 2, Application 2, Analysis 4, Evaluation 4 Mark Research and development is the scientific investigation necessary to discover new products or manufacturing processes Research and development (R&D) expenditure on textile products totalled 20.0 million in 2012, 0.1% of the 12.2 billion spent on manufacturing R&D R&D expenditure on textile products has fallen 37.2% between 1994 and 2012. This compares with a 19.9% increase in R&D expenditure on manufacturing products as a whole over the same period In the context of textiles this could result in less innovation in manufacturing processes, consequently older production methods may be less efficient and produce poorer quality. This could be due to machinery being slower, suffering from more breakdowns and requiring increased maintenance Textile manufacture is predominantly labour intensive, a lack of R&D spending could mean less investment in more efficient capital intensive means of production. This may result in higher unit costs and uncompetitive prices due to lower productivity Potential counterbalance Productivity is also affected by other factors such as lack of investment in training, low morale of the workforce (jobs in the textile sector have fallen), old machinery, poor management, lack of marketing and product development Textile manufacture is mainly labour intensive, lack of training and low morale may result in a fall in productivity and quality due to fact that workers are unskilled. Potential judgement R&D may be the most important factor for the decline in productivity because it may result in a lack of innovation and investment in more efficient production methods

R&D may not be the most important factor due to the fact that textile production is labour intensive. This could mean that low productivity is due to lack of training and/or low morale (12) Level Mark Descriptor 0 A completely inaccurate response. Level 1 1 2 Isolated elements of knowledge and understanding recall based. Weak or no relevant application to business examples. Generic assertions may be presented. Level 2 3 4 Elements of knowledge and understanding, which are applied to the business example. Chains of reasoning are presented, but may be assertions or incomplete. A generic or superficial assessment is presented. Level 3 5 8 Accurate and thorough knowledge and understanding, supported throughout by relevant and effective use of the business behaviour/context. Analytical perspectives are presented, with developed chains of reasoning, showing cause(s) and/or effect(s). An attempt at an assessment is presented, using quantitative and/or qualitative information, though unlikely to show the significance of competing arguments. Level 4 9 12 Accurate and thorough knowledge and understanding, supported throughout by relevant and effective use of the business behaviour/context. A coherent and logical chain of reasoning, showing cause(s) and/or effect(s). Assessment is balanced, wide ranging and well contextualised, using quantitative and/or qualitative information, and shows an awareness of competing arguments/factors leading to a supported judgement

Question Number 2(e) Indicative content Knowledge 4, Application 4, Analysis 6, Evaluation 6 Indicative content option 1 Mark Ansoff s Matrix is a decision making tool that can be used to assess the degree of risk involved in a chosen strategy in order to choose the best decision Diversifications is launching a new product in a new market Market penetration is a strategy of attempting to increase market share through increased sales of existing products in existing markets Indicative content option 2 The company has also adopted a strategy of diversification by producing specialist products for a range of different markets e.g upholstery; automotive seating; the fire services; the MOD, and the aerospace sector. This has enabled it to spread risk as it is no longer dependent on one market. As a result the company is in a stronger position as it is not over dependent upon one market It has also given the company more opportunities for expansion and increased sales. By expanding into more markets, the business may become more well known as well as increasing its sales revenue. This could result in increased profitability and an opportunity to grow the business Potential recommendation SKA Textiles should adopt a market penetration strategy due to the fact that their existing products are well known, they supply a wide range of customers and they have extensive knowledge of the ladies fashionwear market. It is the safer option SKA Textiles should adopt a diversification strategy due to the fact that selling to new markets provides more growth opportunities. It could enable them to enhance their reputation as an advanced textiles manufacturer in a range of markets (20)