Business Studies 0450/12 February/March 2021: question paper and mark scheme

Mark scheme

1(a) Define ‘limited liability’. 2 Do not award ‘owners have a separate legal identity to the business’ as this does not explain Award two marks for a full definition. Award one mark for a partial definition. the term. The liability of shareholders / owners in a company is limited to only the For 2 marks must have the idea of owners and amount they invested [2] the money invested. OR The shareholders in a limited liability company which fails only risk losing the amount they have invested in the company (and not any of their personal wealth) [2] OR Its owners are not liable (responsible) for a company’s debts – this means that owners can lose what they have invested (but not their personal possessions). [2] Partial definition e.g. Shareholder only loses what they have put in [1] OR Owners won’t lose their personal assets if the business fails [1] 1(b) Define ‘niche market’. 2 Award two marks for a full definition. Award one mark for a partial definition. A small, usually specialised, segment of a much larger market [2] OR Involves selling goods to small clearly identifiable segments of a market [2] Partial definition e.g. selling to a small part / small segment of a (large) market [1] OR part of the market with specific needs / characteristics [1] 1(c) Outline two opportunities for consumers of using e-commerce when 4 To use words from the stem as application the purchasing RJJ’s products. reference must be appropriate (make sense) in relation to the point being made. Award one mark for each relevant opportunity (max 2). The following words are likely to be appropriate Award one mark for each relevant reference to this business (max 2). for this question: • Women Opportunities might include: • Shoes • Convenience / no need to leave the house / products can be • Niche market delivered to you / can order anytime / save travel costs [k] when buying shoes [app] Other appropriate examples can still be credited. • Better information / easy to compare prices and products between different websites / access to reviews to make more informed decisions [k] which may be important when it is a niche market [app] • Wider choice / consumers can easily access products from businesses in other countries [k] • Lower prices / avoids having to pay extra to allow for retailers’ profit margin [k] Other appropriate responses should also be credited. 1(d) Explain two factors RJJ’s Finance Director should consider when 6 To use words from the stem as application the deciding on a source of finance for the expansion. reference must be appropriate (make sense) in relation to the point being made. Award one mark for identification of each relevant factor (max 2). The following words are likely to be appropriate Award one mark for each relevant reference made to this business (max for this question: 2). • Shoes • Niche market Award one mark for each relevant explanation (max 2). • Public limited company / limited liability • Takeover (a competitor) Points might include: • Profit decreased / $50 000 • Amount of money required [k] as operate in a niche market [app] they may not have enough retained profits, so have to borrow / look for external Other appropriate examples can still be credited. sources [an] • Length of time / how long to repay / how long the finance is needed Do not award purpose as [k] as this is stated in for [k] as a long-term project such as the takeover [app] would need the question. to use a long-term source [an] • Level of existing borrowing [k] particularly as profit fallen by $50 000 [app] so if have a high level of debt lenders may not be willing to lend any more money [an] • Type of business [k] because they are a public limited company [app] may be seen as lower risk so offer lower interest rates [an] • Credit history / financial status / amount of assets the business has / liquidity [k] as lenders will want to know if you have the ability to repay [an] • Security / collateral [k] • Interest / cost of finance [k] • How quickly the business needs the money [k] Other appropriate responses should also be credited. 1(e) Do you think a takeover of a competitor is the best way for a large 6 This is a general question so there are no marks business to grow? Justify your answer. for application. Award up to two marks for identification of relevant points. Candidates can discuss other ways a business can grow but evaluation must focus on the Award up to two marks for relevant development of points. question set. Award up to two marks for justified decision as to whether the takeover of For both evaluation marks judgement must clearly a competitor is the best way for a large business to grow. relate to a large business. Points might include: Do not award mirror answers. • Possible economies of scale [k] leading to lower average costs [an] • Reduced / less competition / increase market share [k] so able to increase prices / revenue [an] • Access to new skills / expertise [k] • (Bad reputation as) may need to make some workers redundant / negative impact on employee motivation / job insecurity [k] lowering productivity [an] • High cost [k] which the business might not have / be able to afford [an] • Possible clash of management styles / different objectives [k] • Diseconomies of scale e.g. communication problems [k] leading to higher average costs [an] Other ways to grow can also be discussed such as: • Expand product range [k] which can help better control / manage speed of change [an] • Merger [k] • Joint venture [k] Other appropriate responses should also be credited. 1(e) Justification might include: Takeover will allow a business to reduce the number of competitors [k] which can increase market share [an]. However, as the business is already large there is a risk of diseconomies of scale as a result of a business growing too quickly [k] increasing average costs [an]. While internal growth is slower, it may be safer especially when the business is large as by being able to control the rate of growth could allow managers time to plan how they would reduce problems such as communication to help to increase the chances of success [eval] [eval].

Mark scheme

2(a) Define ‘market segmentation’. 2 For 2 marks need the idea of dividing the market and for characteristics / preferences. Award two marks for a full definition. Award one mark for a partial definition. Dividing the whole market into segments by consumer characteristics and then targeting different products to each segment [2] OR An identifiable subgroup of a whole market in which consumers have similar characteristics or preferences [2] Partial definition e.g. Dividing the (whole) market into smaller groups [1] OR Part of the market in which consumers have similar characteristics / preferences / interests and choices [1] 2(b) Identify two pricing methods. 2 Only award the first two responses given. Award one mark per pricing method (max 2). Candidates must identify, and not simply describe, the pricing method. Points might include: • (Market / price) skimming • Penetration (pricing) • Cost-plus (pricing) • Competitive (pricing) • Promotional (pricing) Other appropriate responses should also be credited. 2(c) Outline two factors which could affect the accuracy of ABA’s market 4 To use words from the stem as application the research. reference must be appropriate (make sense) in relation to the point being made. Award one mark for each relevant factor (max 2). The following words are likely to be appropriate Award one mark for each relevant reference to this business (max 2). for this question: • Flights or associated words such as airline/ Points might include: planes • Sample selected / type of sample / sample not representative of the • 60 countries population / how carefully sample drawn up [k] of consumers buying • Customer experiences (short-distance) flights [app] • Pricing method • Wrong sample size / sample too small [k] • Market segmentation • Type of market research / wrong method research chosen / who • Sustainable development carried out the research [k] to collect feedback about customer • Multinational company experiences [app] • People may not answer truthfully / people say what you want to hear Other appropriate examples can still be credited. / may not (fully) answer questions [k] leading to the business choosing the wrong pricing method [app] Do not award country X as application. • Wording of questions / wrong questions asked / poorly written questions / people do not understand the questions [k] so don’t gather views about sustainable development [app] • Way / how questions are asked by the interviewer [k] as may be used in 60 countries [app] • Where carry out market research [k] • Age of the information / data out of date [k] • Bias [k] • Time available [k] Other appropriate responses should also be credited. 2(d) Explain two benefits to ABA of being a multinational company. 6 To use words from the stem as application the reference must be appropriate (make sense) in Award one mark for identification of each relevant benefit (max 2). relation to the point being made. Award one mark for each relevant reference made to this business (max The following words are likely to be appropriate 2). for all responses on this question: • Flights or associated words such as airline/ Award one mark for each relevant explanation (max 2). planes • 60 countries Points might include: • Market segmentation • Spreading risk [k] as not reliant on one market for all its sales / fall in • Customer experiences sales in one country can be offset by increase in another [an] as • Market research operate in 60 countries [app] • Pricing method • Increase sales / access new markets / new customers [k] for its • Sustainable development flights [app] to increase revenue [an] • Improve brand image / reputation [k] to help increase / maintain Other appropriate examples can still be credited. customer loyalty [an] • Access government support / grants [k] Do not award country X as application. • Avoid barriers to trade [k] which could reduce costs [an] so may be able to change its pricing method [app] Do not award answers about the advantages of a • Reduced tax liability / take advantage of favourable tax rates / lower being large e.g. economies of scale, easy access taxes [k] to finance. Other appropriate responses should also be credited. 2(e) Do you think using renewable energy is the best way for a tertiary 6 This is a general question so there are no marks sector business to contribute to sustainable development? Justify for application. your answer. Candidates can discuss other ways to contribute Award up to two marks for identification of relevant points. to sustainable development. Award up to two marks for relevant development of points. Do not credit answers which clearly refer to a manufacturing business such as: Award up to two marks for justified decision as to whether using renewable energy is the best way for a tertiary sector business to contribute to • Change production methods sustainable development. • Reduce output • Restore land to nature when finished Points might include: For both evaluation marks judgement must clearly Renewable energy: relate to a business in the tertiary sector. • High cost (of installing environmentally friendly equipment) [k] which the business may not be able to afford [an] • May not provide sufficient power / not a reliable power source [k] leading to lost sales / revenue [an] • Retailer may not use a high amount of energy [k] Other options might include: • Recycle [k] but not all materials can be recycled [an] • Change to environmentally friendly packaging / stop using (single- use) plastic / disposable materials [k] but may have limited control over materials [an] • Reduce amount they purchase / use [k] so fewer resources are needed [an] • Only buy from suppliers who provide environmentally friendly products [k] • Reduce waste [k] which may help increase efficiency [an] and lower average cost [an] • Avoid unnecessary travel by promoting a work from home policy [k] • Not throw waste products down the drain / into the river [k] Other appropriate responses should also be credited. 2(e) Justification might include: Renewable energy may be expensive to install [k] which the business may not be able to afford [an]. However, a tertiary sector business is unlikely to have much influence over products themselves [k] and not all the products / materials used in a tertiary sector business can be recycled which would have a limited impact [an]. Therefore, renewable energy is the best way for a tertiary sector business especially as the money and resources saved by using renewable energy can reduce long-term costs [eval] [eval].

Mark scheme

3(a) Calculate the values of X and Y. 2 Answers must be shown as negative values to be credited. Award one mark for each correct calculation. X: (300) Y: (400) 3(b) Define ‘batch production’. 2 Do not credit answers which simply reorder the words e.g. production done in batches. Award two marks for a full definition. Award one mark for a partial definition. The production of goods whereby each batch of products passes through one stage of production at the same time before moving on to the next stage [2] OR A production method where similar items are produced together – a whole batch moves through the different stages of production together [2] OR Is where a quantity of one product is made, then a quantity of another item will be produced [2] Partial definition e.g. similar items made together (in a group) [1] 3(c) Identify four methods a business could use to ensure the quality of 4 Only award the first four responses given. its products. Award one mark for each relevant method (max 4). Points might include: • Quality control / hire inspectors • Quality assurance • (Additional) training for employees / use skilled workers • Total quality management / Kaizen/ quality circles • Improve or use high quality raw materials • Introduce automation / new technology / machinery • (Apply for a) quality mark / ISO scheme / quality standard Other appropriate responses should also be credited. 3(d) Explain two ways SMR could overcome its cash-flow problems. 6 To use words from the stem as application the reference must be appropriate (make sense) in Award one mark for identification of each relevant way to overcome cash relation to the point being made. flow problems (max 2). The following words are likely to be appropriate Award one mark for each relevant reference made to this business (max for this question: 2). • Batch production • Snack/food business Award one mark for each relevant explanation (max 2). • Sports events • 3 / part-time (employees) Points might include: • Correct use of data from table 3.1 such as • Negotiate longer credit terms with suppliers / delay payment of bills closing balance $(1200) in June [k] for ingredients for snacks [app] to keep cash in the business for longer [an] Other appropriate examples can still be credited. • Overdraft [k] would allow the business to have a negative cash balance for a while [an] for this snack/food business [app] Note: The analysis should focus on effect on cash • Asking customers to pay earlier / offering discounts to encourage inflow or outflow. Candidates can use the same quicker payments / insisting on cash sales [k] to get over $900 in analysis for both answers where appropriate. May [app] would allow business to receive cash inflow sooner [an] • Bank loan [k] as this would increase cash inflow [an] • Reduce level of stock bought [k] • Increase number of customers [k] could increase cash inflows [an] • Delay / cancel purchases of capital equipment /sel surplus non- current assets [k] • Find cheaper suppliers [k] Other appropriate responses should also be credited. 3(e) Do you think paying bonuses is the best way to motivate employees 6 This is a general question so there are no marks in a small business? Justify your answer. for application. Award up to two marks for identification of relevant points. For both evaluation marks judgement must clearly relate to a small business. Award up to two marks for relevant development of points. Award up to two marks for justified decision as to whether paying bonuses is the best way to motivate employees in a small business. Points might include: • Workers can feel recognised / special if they receive a bonus (which then motivates them) [k] • Taylors’ theory suggests money is the main motivator [k] which could lead to an increase in productivity [an] • Business only has to pay out if the target is reached [k] • Maslow’s theory suggests that money is needed to meet basic needs [k] and each level must be achieved before you can move to the next level [an] • Not all employees are motivated by bonuses / money is not the only motivator [k] • May only have a short-term boost to motivation [k] so any increase in productivity may only be temporary [an] • Increases costs [k] which a small business may not be able to afford / reduces capital available for other purposes [an] • If some employees receive a bonus and others don’t this may lead to conflict [k] • Employees may be demotivated by unrealistic targets [k] 3(e) Other methods might include: • Praise [k] involves no additional cost [an] • Job rotation [k] but may have to pay for training / not all employees able or willing to switch between jobs [an] lowering quality / output [an] • Opportunities for promotion [k] • Profit-sharing [k] • Increase wage rates [k] • Fringe benefits (only once) [k] Other appropriate responses should also be credited. Justification might include: Bonuses could lead to conflict if one employee receives a bonus and another does not [k]. This could decrease productivity [an]. An alternative could be praise [k] which could motivate employees as they feel valued by their managers [an]. I do not think offering bonuses is the best method because small businesses may be short of finance and may not be able to afford to pay bonuses. Whereas a non-financial method such as praise can be just as effective at no extra cost to the business [eval] [eval].

Mark scheme

4(a) Identify two ways of measuring the size of a business. Only award the first two responses given. Award 1 mark per way [max 2]. Points might include • (Value of) capital employed • Market share • Value of output / value of sales / revenue • Number of employees • Value of business • Number of customers / volumes of output / number of services Other appropriate responses should also be credited. 4(b) Identify two methods of training employees. 2 Only award the first two responses given. Award one mark per method (max 2). Two from: • Induction • On-the-job • Off-the job 4(c) Outline two effects of a high rate of labour turnover to SCT. 4 To use words from the stem as application the reference must be appropriate (make sense) in Award one mark for each relevant effect (max 2). relation to the point being made. Award one mark for each relevant reference to this business (max 2). The following words are likely to be appropriate for this question: Points might include: • 50 employees • (Higher) cost of recruiting new / replacing workers [k] as have 50 • Trained (employees) employees [app] • (Handmade) Tables or associated words such • (Higher) cost of training new employees [k] as all workers need to be as wood trained [app] • Factory • Disruption to production / lower productivity / lower output / more • Autocratic leadership style mistakes / lower quality [k] when making tables [app] • Relocate • Can damage business reputation / more difficult to recruit new • Small (business) employees [k] especially as manager has an autocratic leadership style [app] Other appropriate examples can still be credited. • Takes managers time away from other important work [k] which might be a problem as it’s a small business [app] • Time taken to recruit new / replace workers [k] for the factory [app] • Time taken to train new employees [k] Other appropriate responses should also be credited. 4(d) Explain two factors SCT should consider when deciding on the 6 To use words from the stem as application the location of a new factory in the same country. reference must be appropriate (make sense) in relation to the point being made. Award one mark for identification of each relevant factor (max 2). The following words are likely to be appropriate Award one mark for each relevant reference made to this business (max for this question: 2). • 50 employees • Trained (employees) Award one mark for each relevant explanation (max 2). • Tables • High labour turnover Points might include: • Small (business) • Cost of land [k] to see if they can afford it [an] as they are a small business [app] Other appropriate examples can still be credited. • Availability / cost of (suitable) labour [k] as they will need trained employees [app] otherwise quality may drop [an] • Government influence or examples such as grant / legal controls [k] which may influence or restrict where / how the business is allowed to operate [an] when making tables [app] • Access to suppliers / raw materials [k] as if far away could increase transport costs [an] • Transport / communication links [k] • Access to power / water [k] • Possible external economies of scale [k] • Enough space / scale of production [k] Other appropriate responses should also be credited. 4(e) Do you think autocratic leadership is the best style for a small 6 This is a general question so there are no marks business to use? Justify your answer. for application. Award up to two marks for identification of relevant points. Advantages of one method can be presented as disadvantages of the other method but do not Award up to two marks for relevant development of points. award the same point twice as mirror answers are not accepted. Award up to two marks for justified decision as to whether autocratic leadership is the best style for a small business. For evaluation to be awarded justification will usually follow on from relevant analysis of points. Points might include: Autocratic leadership • Decisions can be made quickly [k] so able to respond to opportunities quicker / so work can happen more quickly [an] • No employee involvement / employees cannot give opinions / ideas / one-way communication [k] which can demotivate them [an] leading to absenteeism / higher labour turnover [an] • Employees are closely supervised [k] so leaders / managers have less time to spend on other tasks [an] could lead to more mistakes [an] Other leadership styles might include: Democratic leadership [k] • Can lead to more / better ideas [an] increasing productivity [an] • Allows for better relationships between workers and managers [an] • Involving employees in decisions / likely to delegate [an] can help improve employee motivation [an] • Takes time to ask people especially when many employees [an] • Unpopular decisions cannot be made using this method [an] • Some employees may not want / cope with extra responsibility [an] 4(e) Laissez-faire leadership [k] • Highly motivating for employees as given most responsibility [an] • Task / work may not be suitable to delegate power [an] Other appropriate responses should also be credited. Justification might include: Decisions are made more quickly with autocratic leadership [k] so employees can get on with their tasks sooner [an]. One problem is that there is no input from employees [k] so the business could miss out on new ideas [an]. Overall, I think it can be a good style when you need to make quick decisions but as a small business is less likely to have specialist managers for each department, they need to embrace the ideas of all employees, even if this takes longer [eval] [eval].