Theme 3

Question 1

Horizontal integration

Answer 1

T-Mobile + Orange = EE

Question 2

Forward vertical integration

Answer 2

Fords car factory acquiring a car show room

Question 3

Backwards vertical integration

Answer 3

BP securing oil reserves

Question 4

Conglomerate

Answer 4

Pepsi and Quaker Oats

Question 5

Demerger

Answer 5

Fiat > car branch and lorry branch

Question 6

Risk bearing eos

Answer 6

Apple > iPhone, iPad, Mac

Question 7

Managerial eos

Answer 7

Apple employs specialised staff

Question 8

Purchasing eos

Answer 8

Apple buys microchips in bulk

Question 9

External eos

Answer 9

Silicon Valley, 150 tech companies, 60,000+ coders

Question 10

Deos

Answer 10

Failure of Thomas cook partly due to ineffective control and coordination from management

Question 11

Impact of coronavirus

Answer 11

+ video steaming, takeaways, sports fitness equipment
- hotels, airlines and airports, gyms, cinemas

Question 12

Profit maximiser

Answer 12

Apple

Question 13

Revenue maximiser

Answer 13

Early years of Amazon

Question 14

Sales maximiser

Answer 14

Aldi and Lidl

Question 15

Predatory pricing

Answer 15

Tesco selling milk, bread and dairy at low prices to undercut local convenience stores

Question 16

Limit pricing

Answer 16

Tesco limit price to prevent discounters like Aldi and Lidl from growing rapidly in certain locations

Question 17

Contestable market

Answer 17

• rise of challenger banks monzo, revolut and starling who appeal to younger tech savvy customers
• Monzo good at helping younger people manage finance and avoid debt
• starling very friendly mobile app with real time notifications
• open banking initiative (2018) meant major banks to share customer data allowing new firms to construct better targeted services
• digital innovation of niche services - remitly

Question 18

Oligopolistic market

Answer 18

• airlines industry, British airways, easyJet, Ryanair, jet2
• 4 firm concentration ratio 60%
• Ryan air and easyJet engage in price wars
• loyalty programmes like BA executive club
• add on services like extra legroom or seat selection
• high fixed costs like aircraft, slots at major airports
• fuel surcharge fixing (2004-06) overt collusion between BA and Virgin Atlantic
• BA fined £121.5 million

Question 19

Deregulation and privatisation

Answer 19

• deregulation of American Airlines industry removed limited number of routes
• privatisation of British airways
• water industry privatised 1989

Question 20

Anti competitive practices

Answer 20

• CMA can issue fines up to 10% annual revenue
• BA fined £121.5 million for colluding with Virgin Atlantic

Question 21

Helping small businesses grow

Answer 21

• enterprise capital funds/subsidies for start ups
• £400m capital fund
• £5000 subsidies for cyber security firms

Question 22

Nationalisation

Answer 22

• 1948 labour gov nationalised railway became British rail

Question 23

Merger policy

Answer 23

• CMA investigated mergers if over 25% market share or combined annual turnover of more than £70 million
• CMA blocked merger between Asda and Sainsburys which would have resulted in over 30% market share

Question 24

Regulation

Answer 24

• UK energy price cap (Ofgem)
• April - June 2025, £1849 annual price cap
• applies to roughly 22 million UK households
• UK energy market crisis 2021-22, 30 UK suppliers went bankrupt
• Advanz fined £100m for monopoly abuse as they increased price for thyroid drugs by 6000% over a 10 year period

Question 25

Monopolistic competition

Answer 25

• costa, Starbucks, cafe Nero • high density of cafes • product differentiation through product quality, store design, brand, food menu • small start up costs • loyalty cards, ethical branding, social media

Question 26

Perfect competition

Answer 26

• wheat farmers • standardised commodity • food manufacturers and supermarkets well informed • prices set by global market forces not farmers

Question 27

Monopoly

Answer 27

• 2025 apple market share, 48% UK smartphone market • 2023 Apple spent over $30 billion R&D • new tech such as VR Vision Pro headset • advances in AI • purchasing eos like memory chips • risk bearing eos such as iPhones, iPads, macs • committed to carbon neutrality by 2030

Question 28

Monopsony power in labour market

Answer 28

• NHS UK healthcare market 90% market share • employ over 1.4m people • junior doctor wages as low as £14 per hour

Question 29

Trade unions

Answer 29

• NEU (national education union) • 2023 teachers strikes over pay and working conditions

Question 30

Monopsony power in supermarket industry

Answer 30

• the ‘big four’ tesco, sainsburys, Asda and Morrisons 66% market share • Unilever vs tesco marmite war • tesco pulled many Unilever products from online store over price dispute such as marmite and Ben and jerrys • Unilever were pushing for 10% price rise to cover rising imports costs

Question 31

National minimum wage

Answer 31

• 2025, April 21 or over £12.21 • large effect on retailing and hospitality

Question 32

Maximum wage

Answer 32

• fat cat Wednesday 2017 • top bosses earned more in 2.5 days than typical workers earned in entire year (£28,200) • Jeremy corbyn proposed highest paid worker should be paid no more than 20x the lowest paid worker

Question 33

Water industry

Answer 33

* thames water sewage dumping * thames water paid millions in dividends despite high leakage rates * scottish water nationalised, invests profits into infrastructure * ofwat needs to take a tougher stance regulation such as banning bonuses for pollution offences * before 1989 privatisation, ageing infrastructure and water shortages

Question 34

Rail industry

Answer 34

* Network rail state owned * LNER (state) strong performance, high on time arrival rates and consumer satisfaction * british rail before 1990s, underinvestment, inefficiency and stagnation * Scotrail and northern rail reinvest profits back into operating improvements * however scotrail faced strikes and service reductions since nationalisation 2022