Business Studies 0450/12 February/March 2019: question paper and mark scheme

Mark scheme

1(a) What is meant by ‘niche market’? 2 For 2 marks must have both elements Clear understanding (2) e.g. a highly specialised [1] subpart of a larger market Do not credit answers such as small market [1] OR small number of customers or small Some understanding (1) e.g. selling to a small part / small segment of the group as these do not explain the term market OR specialist market OR part of the market with specific needs and characteristics 1(b) Identify two disadvantages to a business of having part-time employees. 2 Do not credit points such as less motivated / less efficient OR less skilled/less trained as Knowledge (2 × 1) – award one mark for each relevant disadvantage these are based on unknown assumptions Disadvantages may include: Do not credit answers which confuse part- • May take longer / more expensive to recruit two part-time workers than time employees with temporary workers. one full time worker • Can be less committed to the business OR more likely to leave • Difficult to communicate / co-ordinate / lack of continuity as not there all the time • Extra training costs as need to train more people • Manager may spend more time supervising two workers instead of one 1(c) Identify and explain two possible reasons why Anna and James formed a 4 Application marks may be awarded for business partnership. appropriate use of the following: • Ice cream Knowledge (2 × 1) – award one mark for each relevant reason (max 2) • Shop Application (2 × 1) – award one mark for each explanation in context • Part-time • Niche market Advantages may include: • High quality • Access to more capital (than sole trader)[k] to open a shop [app] • Questionnaires • Shared responsibilities OR share decision making OR share workload [k] • Long queues to deal with customer complaints [app] • Poor customer service • Share costs OR share risk [k] of operating in a niche market [app] • Always busy • New ideas into the business [k] about how to deal with long queues [app] • More skills OR expertise OR can specialise in different areas [k] so such Do not credit comparative points such as as managing the 3 part-time employees [app] less paperwork OR fewer legal requirements unless clear reference to limited companies. 1(d) Identify and explain one advantage and one disadvantage to Anna and 6 Application marks may be awarded for James’s business of asking customers to complete questionnaires. appropriate use of the following: • Business partners Knowledge (2 × 1) – award 1 mark for identification of advantage / • Ice cream disadvantage (Max 2) • Shop Application (2 × 1) – award 1 mark for each relevant reference to this business • Part-time Analysis (2 × 1) – award 1 mark for each relevant explanation • Niche market • High quality Relevant points may include: • Long queues • Poor customer service Advantage: • Always busy • Large amounts of information can be collected in a short period of time [k] • Many people can be asked the same questions [k] helps increase the Accepts answers that refer to either online sample size [an] or paper based questionnaires • Respondent has time to consider question so more likely to complete [k] Do not credit points such as cheap or as do not have to complete whilst in shop [app] expensive on own as there is no cost • Relatively easy to analyse (as standard responses) [k] about poor information to make comparisons. customer service [app] so quickly able to do something to solve it [an] Do not credit answers which refer to why the market research has been carried out as Disadvantage: this does not answer the question set • Questions may be poorly worded OR difficult to phrase questions properly Note points should relate to business not OR people interpret questions in a different way [k] so business makes the customers. wrong decisions [an] about the ice cream [app] • People may not tell the truth OR say what they think sounds good [k] • Simple questionnaires cannot tell the meaning behind a response [k] • Customers may not return / fill in the questionnaires [k] • May have to pay someone with the right skills to design the questionnaire properly [k] 1(e) Do you think Anna and James should move to a larger shop? Justify your 6 Application marks may be awarded for answer. appropriate use of the following: • Business partners Knowledge (1) – award 1 mark for identification of relevant issue(s) (Max 1) • Ice cream Application (1) – award 1 mark for a relevant reference made to this business • Part-time Analysis (2 × 1) – award up to 2 marks for relevant development of points • Niche market Evaluation (2) – justified decision as to whether the business should move to a • High quality larger shop • Questionnaires • Long queues Relevant points might include: • Poor/bad customer service • Access to more customers / increase sales [k] by reducing the problem of • Always very busy long queues [app] which can increase revenue [an] • May need to recruit more employees [k] to sell its ice cream [app] which Note: candidate’s final decision can be increases recruitment costs [an] either for or against moving to a larger shop. • Business may not be known in new location [k] as its in a different part of Do not credit shop as application as stated the city [app] increasing costs of advertising to raise awareness [an] in question. • Could lose some existing customers if move too far away OR may not gain Question does allow for a one-sided sufficient extra customers in new location [k] as it’s a niche market [app] answer. • Access to capital OR possible increase in rent of a larger shop [k] which will increase fixed costs [an] which they may not be able to afford [an] • Possibility of increased competition in new location [k] • Legal controls may restrict where they can move to [k] • More storage [k]

Mark scheme

2(a) Identify two economies of scale. 2 Do not credit answers such as internal or external economies of scale Knowledge (2 × 1) – award one mark for each economy of scale Examples may include: • Purchasing / bulk buying • Marketing • Financial • Managerial • Technical 2(b) What is meant by ‘redundancy’? 2 For 2 marks must clearly understand idea that it is the job role that no longer exists Clear understanding [2] e.g. when an employee is no longer needed because the job no longer exists Do not credit answers such as fired or Some understanding [1] e.g. when an employee is no longer needed OR loses dismissed as this is not the same concept job OR job role has gone Do not credit reasons why the job may no longer exist 2(c) Identify and explain one advantage and one disadvantage to GXC of 4 Application marks may be awarded for using flow production. appropriate use of the following: • Car components Knowledge (2 × 1) – award one mark for each relevant advantage / • 100 employees OR 30% redundant OR disadvantage (max 1 for each) redundancy Application (2 × 1) – award one mark for each relevant explanation in context • Economies of scale of business • Car manufacturers • Stakeholders Relevant points may include: • (Invested in) new machinery • Imports raw materials Advantage: • Exports to country Y • High output OR fast production [k] of car components [app] • Low cost per unit [k] due to economies of scale [app] Do not credit points such as faster OR • Can produce 24 hours a day OR continuous production [k] cheaper on own • Allows for specialisation / simple repetitive tasks allows for greater use of unskilled labour [k] • Allows for fewer employees [k] so can make 30% redundant [app] Disadvantage: • (Boring) system of work leading to low motivation of workers [k] due to use of new machinery [app] • If one machine breaks down the whole production line will stop [k] so not able to meet demand of car manufacturers [app] • High set up costs [k] • High cost of storage [k] as will need larger amounts of imported raw materials [app] • Inflexible if demand changes [k] 2(d) Identify and explain two stakeholder groups that could be affected by 6 Application marks may be awarded for GXC’s decision to invest in new machinery. appropriate use of the following: • Car components Knowledge (2 × 1) – award one mark for identification of each relevant • 100 employees redundant OR 30% of stakeholder (max 2) workforce OR redundancy Application (2 × 1) – award one mark for each relevant reference made to this • Economies of scale business • Car manufacturers Analysis (2 × 1) – award 1 mark for each relevant development • Imported raw materials Relevant points may include: Do not credit new machinery as application • Employees [k] as 70% of the workforce may feel less secure in their jobs as stated in question [app+an] OR as 100 employees [app] would lose their jobs/source of income [an] Do not credit shareholders as we do not • Customers [k] as quality may become more consistent [an] of the car know what type of business this is components [app] • Government [k] as may need to pay more unemployment benefit [an] • Suppliers [k] of imported raw materials [app] as business may require inventory in larger amounts OR different timescales [an] • Local community [k] as machinery may create a lot of noise pollution [an] • Banks/lenders [k] • Owners [k] • Pressure groups OR trade unions [k] 2(e) Do you think GXC’s Managing Director should be worried about the 6 Application marks may be awarded for recent appreciation of the exchange rate of country X’s currency? appropriate use of the following: • Car components Knowledge (1) – award one mark for identification of relevant issue(s) (Max 1) • 100 employees redundant OR 30% of Application (1) – award one mark for a relevant reference made to this workforce business • Economies of scale Analysis (2 × 1) – award up to two points for relevant development of points • Car manufacturers Evaluation (2) – justified decision as to whether GXC should be worried about • Stakeholders the appreciation • [Imports] raw materials Relevant points might include: Note: candidate’s final decision can be • Exporting goods appear more expensive / can result in higher prices [k] either for or against being worried about the which may decrease demand / sales in country Y [an] for car components appreciation [app] Question does allow for a one-sided • Imports become cheaper [k] when buying its raw materials [app] reducing answer. GXC’s costs [an] so may be able to lower prices [an] so they may be able to be more competitive / increase sales [an]

Mark scheme

3(a) Calculate the total cost of producing 3 million cricket bats. 2 Clear understanding (2) = $12 200 000 [2] Some understanding (1) e.g. FC+ VC OR 200 000 + (4 × 3 million) OR 200 000 + 12 000 000 [1] 3(b) What is meant by ‘variable cost’? 2 Do not accept examples of variable costs Do not accept the phrase ‘costs that vary’ Clear understanding [2] e.g. costs which change directly with OR in proportion on its own as this is re-wording the question to the number of items sold or produced. Some understanding [1] e.g. costs which change OR costs that vary with sales / output [1] 3(c) Identify and explain one advantage and one disadvantage to Sachin’s 4 Application marks may be awarded for business of advertising in a national newspaper. appropriate use of the following: • Cricket bats Knowledge (2 × 1) – award one mark for each relevant • Mass market advantage/disadvantage (max 2) • Demand rapidly increases Application (2 × 1) – award one mark for each relevant explanation in context • 3 million (per year) of business • Correct use of relevant data from table • Every 2 weeks Relevant points may include: Do not credit points such as cheaper/more Advantage: expensive as this is a relative term and we • A large number of people will see the advert [k] about cricket bats [app] do not have any cost data • Adverts can be cut out and kept for reference [k] • A lot of information can be included [k] for the mass market [app] Disadvantage: • People may not notice/read/understand the advert [k] so demand may stop (rapidly) increasing [app] • Target market may not buy the newspaper [k] • Will have to pay to advertise [k] every two weeks [app] 3(d) Identify and explain two advantages to Sachin’s business of selling to the 6 Application marks may be awarded for mass market. appropriate use of the following: • Cricket bats Knowledge (2 × 1) – award one mark for identification of each relevant • Demand rapidly increases advantage (max 2) • 3 million Application (2 × 1) – award one mark for each relevant reference made to this • Correct use of relevant data from table business • Two years ago Analysis (2 × 1) – award 1 mark for each relevant development of point • (National) newspaper Relevant points may include: • High number of sales/may find new customers [k] as demand increasing rapidly [app] can increase revenue [an] • Can benefit from economies of scale [k] as selling 3 million products [app] so able to lower average costs [an] • No need to develop specialist products [k] such as different cricket bats [app] lowering development costs [an] • Increased recognition/status [k] as only started two years ago [app] 3(e) Do you think Sachin should delegate some tasks to employees? Justify 6 Application marks may be awarded for your answer. appropriate use of the following: • Cricket bats Knowledge (1) – award one mark for identification of relevant issue(s) (Max 1) • Mass market Application (1) – award one mark for a relevant reference made to this • National newspaper business • Every two weeks Analysis (2 × 1) – award up to two points for relevant development of points • Demand rapidly increases Evaluation (2) – justified decision as to whether Sachin should delegate some • Two years ago tasks • 3 million • Correct use of relevant data from table Relevant points might include: • Difficult to run the business on his own • Sachin is less likely to make mistakes [k] which helps protect his reputation • 30 (employees) [an] • Marketing or production decisions • Sachin cannot do all the jobs on his own/needs to reduce his workload [k] Note: candidate’s final decision can be as demand is increasing [app] so can focus on other key/important tasks either for or against delegating some tasks [an] • Employees may feel more motivated/important [k] which could increase Question does allow for a one-sided productivity/output [an] of cricket bats [app] answer. • Employees may feel demotivated if they are given more work to do [k] which may increase labour turnover (an) • Employees may need training to complete the additional tasks [k] which may increase costs (an) • Sachin is still responsible for errors [k] • Workers may not have the necessary skills/make poor decisions [k] which could lead to lower demand/less output / damage reputation [an] • Sachin would lose some control [k]

Mark scheme

4(a) Identify two methods of secondary market research. 2 Knowledge [2 × 1] – award one mark for each relevant method Relevant methods include: • Government statistics • Newspaper OR magazine articles • Internet OR online sources • Paying for market research agencies • Trade associations reports • Company records 4(b) What is meant by ‘chain of command’? 2 For 2 marks must have idea of ‘orders or instructions’ and ‘who between’. Clear understanding [2] e.g. the structure in an organisation which allows instructions to be passed down from senior management to lower levels Some understanding [1] e.g. shows who gives orders 4(c) Identify and explain two advantages to DGC of being a multinational 4 Application marks may be awarded for company. appropriate use of the following: • Public limited company Knowledge (2 × 1) – award one mark for each relevant advantage (max 2) • High quality/branded Application (2 × 1) – award one mark for each relevant explanation in context • Clothes and/OR shoes of business • Women • 10 countries Advantages may include: • Different social and cultural trends • Spread risk [k] as operates in 10 countries [app] • Franchises OR shops • Access to new markets/higher sales/more customers/increase market • Expand (into country Z) share [k] for their high quality products [app] • Improve/maintain brand image [k] Do not credit points about production e.g. • Avoid barriers to trade [k] reduce production costs OR lower labour costs OR lower health and safety costs OR • Reduce tax liability/take advantage of favourable tax laws [k] land costs [k] OR easier access to raw • Reduce transport costs [k] materials as this is a retailer. • Remain competitive [k] Do not credit answers which focus on • Access government grants/support [k] advantages of a being large e.g. economies of scale 4(d) Identify and explain two factors that DGC should consider when 6 Application marks may be awarded for choosing a source of finance for expansion. appropriate use of the following: • Public limited company Knowledge [2 × 1] – award one mark for identification of each relevant factor • High quality/branded (max 2) • Clothes and shoes Application [2 × 1] – award one mark for each relevant reference made to this • 10 countries business • Multinational company Analysis [2 × 1] – award 1 marks for each relevant development • Shops OR franchise Relevant points may include: Do not credit answers which suggest • Use/purpose of finance [k] as buying shops [app] which needs long term possible sources of finance the business finance [an] could use • Legal structure [k] DGC is a public limited company [app] could be seen as a lower risk [an] • Level of existing loans [k] of this multinational company [app] which if high means less likely to be given additional loans [an] • Interest rates/cost of finance [k] • Time to repay OR time span [k] as it is a long term project would need to use a long term source [an] • Amount needed [k] as may not have enough funds to use internal methods so would have to borrow [an] • Security [k] as this may help to guarantee loans [an] • Credit history OR financial status [k] lenders will want to know if you are able to repay [an] 4(e) Do you think DGC should open shops in country Z as a franchise? Justify 6 Application marks may be awarded for your answer. appropriate use of the following: • Public limited company Knowledge (1) – award one mark for identification of relevant issue(s) (Max 1) • High quality/branded Application (1) – award one mark for a relevant reference made to this • Clothes and shoes business • Women Analysis (2 × 1) – award up to two marks for relevant development of points • 10 countries Evaluation (2) – justified decision as to whether DGC should open shops as a • Expand for first time franchise. • Different social and cultural trends • Multinational company Relevant points might include: • Franchisee pays a fee to use the brand name [k] so DGC do not have to Note: candidate’s final decision can be raise as much capital [an] when entering a new market with different either for or against opening shops as a cultural and social trends [app] franchise • Expansion is much faster [k] for this public limited company [app] Question does allow for a one-sided • DGC will receive a share of franchisee’s profits [k] providing an extra answer. source of revenue [an] Do not credit shop as application as stated • Franchisees will have local knowledge [k] increasing chance of higher in question. sales [an] of clothes and shoes [app] Do not credit points about production as this • Poor management of one franchise could damage whole business is a retailer. reputation [k] decreasing demand [an] for shoes and clothes [app] • The franchisee keeps some of the profits from the outlet [k] • DGC will be expected to offer help and advice [k] which can increase costs [an] • Opening own shops will allow DGC to have total control [k]