Business Studies 0450/12 February/March 2022: question paper and mark scheme

Mark scheme

1(a) Identify two reasons for globalisation. 2 Only award the first two responses given. Award 1 mark per reason (max 2). Points might include: • Free trade agreements / economic trading blocs / reduction in trade barriers • Improved/cheaper transport/travel links • Improved communication networks/technology • Emerging markets are quickly expanding / rapid economic growth in developing countries • Change in government economic policy / allowing foreign company to set up operations in own country • Increased labour migration Other appropriate responses should also be credited. 1(b) Define ‘depreciation of an exchange rate’. 2 Award 2 marks for a full definition. Award 1 mark for a partial definition. A currency’s value falls against another currency [2] OR The value of the currency goes down with respect to another (currency) [2] OR When the value of a currency falls – it buys less of another currency than before [2] Partial definition e.g. currency is weaker/falling [1] OR can buy less with currency [1] 1(c) Outline one possible objective for each of the following stakeholder 4 To use words from the stem as application the groups of CXN. reference must be appropriate (i.e. make sense) in relation to the point being made. Award 1 mark for each relevant objective (max 2). Award 1 mark for each relevant reference to this business (max 2). The following words are likely to be appropriate for this question: .Points might include: • Glass/bottles Government: • 130 (employees) • Increase tax (revenue) / paid correct amount of tax [k] from the • (Export to) 39 countries manufacture of bottles [app] • Flow production • Provide/increase number of jobs / minimum unemployment benefits • Sustainable development to pay [k] • Globalisation • Expect business to stay within the law [k] Other appropriate examples in context can still Employees: be credited. • Increase pay / wages / receive fair wage / regular payments [k] for its 130 employees [app] • Better/safe working conditions [k] when using flow production [app] • Access to training/development [k] because the business is trying to contribute to sustainable development [app] • Job security [k] • Have contract of employment [k] • Work provides motivation / opportunities for promotion [k] Other appropriate responses should also be credited. 1(d) Explain one advantage and one disadvantage to CXN of using flow 6 Note: To use words from the stem as application production. the reference must be appropriate (i.e. make sense) in relation to the point being made. Award 1 mark for identification of each relevant advantage/disadvantage (max 2). The following words are likely to be appropriate Award 1 mark for each relevant reference to this business (max2). for this question: Award 1 mark for each relevant explanation (max 2). • Glass/bottles • 130 (employees) Points might include: • 39 countries Advantages: • Sustainable development • High output / fast production / increase efficiency [k] of bottles [app] so • Globalisation able to meet orders (on time) [an] • Benefit from economies of scale [k] leading to lower average/unit Other appropriate examples in context can still costs [an] be credited. • Can produce 24 hours a day / continuous production [k] so able to produce large output [an] Do not award points such as faster/cheaper on • Allows for capital intensive methods / fewer employees [k] so only own as too vague. need 130 employees [app] reducing labour cost [an] Disadvantages: • Inflexible (if demand changes) [k] especially as export to 39 countries [app] which could lead to high level of wastage [an] • Lower motivation (as work may be boring) [k] so employees are less efficient / lower output / high labour turnover [an] • If one machine breaks down whole production line stops [k] lose output / fewer sales [an] • High set up/machinery costs [k] leading to large cash outflows [an] Other appropriate responses should also be credited. 1(e) Do you think using renewable energy is the best way for a 6 This is a general question so there are no marks manufacturing business to contribute to sustainable development? for application. Justify your answer. Some points could be awarded for different Award up to 2 marks for identification of relevant points. options, but do not award the same point twice. Award up to 2 marks for relevant development of points. Award up to 2 marks for a justified decision as to whether using Do not award points such as less pollution, renewable energy is the best way for a manufacturing business to lower carbon footprint, protect environment as contribute to sustainable development. likely to apply to all methods. Points might include: • No/low energy bill [k] which reduces expenses [an] • Need to use fewer scarce resources / conserve natural resources / supply not limited / does not run out [k] • High set up cost [k] which business might not be able to afford [an] • Amount of energy can depend on weather conditions / may not be a reliable source of power [k] which could lead to less output / delays in production [an] Other methods might include: • Develop environmentally friendly production methods [k] reduce amount of waste [an] leading to lower average costs [an] • Use fewer resources [k] which can (also) help reduce production costs [an] • Develop new environmentally friendly products/packaging [k] which may help attract new customers/markets [an] • Recycle waste [k] which helps reduce amount of materials needed [an] • Replant trees (where land has been cleared) [k] • Reuse materials [k] Other appropriate responses should also be credited. 1(e) Justification might include: Renewable energy might not be reliable source of power [k] which could lead to delays in production [an]. Another way is to develop new environmentally friendly products [k]. Whilst this could involve high set up costs [an], I think it is a better way because the new products could also help attract new customers which not only helps the manufacturer recover the initial costs [eval] it can also encourage others to contribute to sustainable development by using its greener products [eval].

Mark scheme

2(a) Identify X and Y. 2 Award 1 mark for each correct answer. X: (Total) revenue / total value of sales Y: Margin of safety 2(b) Define ‘total cost’. 2 Award 2 marks for a full definition. Award 1 mark for a partial definition. Fixed costs and variable costs (combined) [2] OR All the variable and fixed costs of producing the total output [2] OR Fixed costs + (total) variable cost [2] Partial definition e.g. all costs added together [1] 2(c) Identify four factors a service business should consider when 4 Only award the first four responses given. deciding on a suitable location. Do not award access to raw materials as this is Award 1 mark for each relevant factor (max 4). not appropriate for a service sector business. Points might include: • Demand / market potential / number of customers • Accessibility for customers / parking spaces / transport links • Availability of suitable/vacant site / size of premises • Rent/taxes/cost of site • Near to other businesses/shops/competitors • Availability/cost of labour • Security • Legal controls/government influence • Infrastructure or examples such as access to electricity/water • Owner’s personal preference Other appropriate responses should also be credited. 2(d) Explain two ways having a business plan could help Nancy. 6 To use words from the stem as application the reference must be appropriate (i.e. make sense) Award 1 mark for identification of each relevant way (max 2). in relation to the point being made. Award 1 mark for each relevant reference to this business (max 2). Award 1 mark for each relevant explanation (max 2). The following words are likely to be appropriate for this question: Points might include: • Book (shop) • Help get a bank loan/finance [k] for her book shop [app] as lender • Market research can see that the business is able to repay [an] • Break-even chart/margin of safety • Provide targets / sense of purpose / direction / focus [k] for her new • (Suitable) location business [app] as can see what she needs to do to achieve her • E-commerce aims [an] • New/start-up business • Help decision-making [k] such as whether to use e-commerce [app] • Entrepreneur so does not waste time/money on the wrong target market/products [an] Other appropriate examples in context can still • Act as a checklist/way to monitor progress [k] for this entrepreneur be credited. [app] • Help set budgets [k] to help calculate her margin of safety [app] • Help organise resources / labour requirements / marketing strategy [k] Other appropriate responses should also be credited. 2(e) Do you think the threats of e-commerce are greater than the 6 This is a general question so there are no marks opportunities for a new business? Justify your answer. for application. Award up to 2 marks for identification of relevant points. Some points could be awarded for different Award up to 2 marks for relevant development of points. options, but do not award the same point twice. Award up to 2 marks for a justified decision as to whether the threats of e-commerce are greater than the opportunities for a new business. Points must focus on impact on the business and not customers. Points might include: Threats: • Increased/high competition [k] which could make it harder to calculate what is a competitive price / may have to set lower price [an] • Unfamiliarity / customers are less likely to buy from a business they don’t know [k] lowering revenue [an] • High cost of design of website (as must be clear/attractive/easy to use) [k] which the business might not be able to afford [an] • Technical problems/no power [k] so may lose potential sales [an] Opportunities: • Increase potential number of customers / sales / can access customers around the world [k] increasing its market share [an] • (Low cost) way to promote/advertise business [k] which can raise awareness [an] • Fewer employees needed [k] so lower labour costs [an] • No/fewer shops [k] Other appropriate responses should also be credited. Justification might include: One threat is increased competition [k] so the business may have to set lower prices [an]. However, e-commerce can help new businesses as it could mean a larger potential market [k] leading to higher revenue [an]. I think there are more opportunities because competition is an issue that any new business must manage [eval] and the wider market means that it may still be able to generate sales needed to have a successful start [eval].

Mark scheme

3(a) State two stages of the business cycle. 2 Only award first two responses given. Award 1 mark per stage (max 2). Two from: • Recession • Growth • Boom • Slump 3(b) Calculate D2G’s gross profit margin. Show your working. 2 Award only 1 mark if 60% is written as part of the answer but is not given as the final answer. Award two marks for a correct answer. Award one mark for correct method but incorrect answer. Must have % to gain 2nd mark. Correct answer: 60% [2] Method: gross profit divided by revenue * 100 [1] OR 12 000 / 20 000 * 100 [1] If correct answer given with no working shown, award 2 marks. 3(c) Outline, with reference to D2G, the difference between profit and 4 To use words from the stem as application the cash. reference must be appropriate (i.e. make sense) in relation to the point being made. Award 1 mark for relevant knowledge of profit and/or cash (max 1). Award 1 mark for showing understanding of difference between profit The following words are likely to be appropriate and cash (max 1). for this question: Award 1 mark for each relevant reference to this business (max 2). • Driving school / teach people to drive or related words such as lessons, learners Points might include: • (New) car/vehicle or related words such as • Cash is needed to pay day-to-day costs [k] such as fuel for the car petrol/fuel [app] whereas profit is necessary for the long-term survival [k] of his • $2000 profit driving school [app] • $12 000 (gross profit) • Cash may be received beforehand [k] so the profit of $2000 [app] • $20 000 (revenue) will not increase until later [k] when the driving lessons have taken • 3 years place [app] • Business cycle • D2G may offer credit to customers [k] for the driving which is counted in profit of $2000 [app] but the cash is not yet received [k] Other appropriate examples in context can still until the lesson takes place [app] be credited. • Profit is a source of finance [k] • Profit is a measure of success [k] To award four marks candidates must include a • Profit is a reward for risk-taking [k] clear reference to the difference between cash • Cash is necessary to help avoid cash flow problems [k] and profit. Other appropriate responses should also be credited. 3(d) Explain two ways D2G might respond to an increase in competition. 6 To use words from the stem as application the reference must be appropriate (i.e. make sense) Award 1 mark for identification of each relevant way (max 2). in relation to the point being made. Award 1 mark for each relevant reference to this business (max 2). Award 1 mark for each relevant explanation (max 2). The following words are likely to be appropriate for this question: Points might include: • Driving school / teach people to drive or • Decrease prices [k] making it more affordable for customers [an] of related words such as lessons, learners his driving school [app] • $2000 profit • Increase advertising [k] which can help raise awareness / attract • (New) car/vehicle or related words such as customers to use its service (rather than competitors) [an] petrol/fuel • Improve/maintain customer relationships [k] to help ensure customer • $12 000 (gross profit) loyalty [an] and maintain its profit of $2000 [app] • $20 000 (revenue) • Add/develop new products/services [k] to set it apart /stand out from • 3 years the competition [an] • Look for new markets [k] which could help widen its customer base Other appropriate examples in context can still [an] so able to increase its revenue of $20 000 [app] be credited. Other appropriate responses should also be credited. 3(e) Do you think leasing is the best source of finance for a small 6 This is a general question so there are no marks business to use for a new vehicle? Justify your answer. for application. Award up to 2 marks for identification of relevant points. Some points could be awarded as either an Award up to 2 marks for relevant development of points. advantage/disadvantage for different options, Award up to 2 marks for a justified decision as to whether leasing is the but do not award the same point twice as this is best source of finance for a small business to use for a new vehicle. repetition. Points might include: Leasing: • Business does not have to find a large sum of cash to purchase the vehicle [k] which can allow the business to obtain/use the vehicle more quickly [an] • Care and maintenance are carried out by the leasing company [k] which can lower expenses [an] • Total cost is higher than purchasing the vehicles outright [k] which increases total cash outflow [an] • Do not own asset [k] so cannot sell the vehicles if not needed any more / need (more) cash [an] Other options include: (Bank) loan [k] • Can repay over a long period [an] • Interest payable [an] so will add to costs [an] Retained profit [k] • No need to repay [an] • Immediately available [an] • May not have sufficient funds [an] Other appropriate responses should also be credited. 3(e) Justification might include: Using leasing means the business does not have to find a large sum of cash initially [k] so the business can obtain the vehicle more quickly [an]. Another option is a bank loan [k] but this would have interest payable [an]. I think leasing is the best option especially as a small business may struggle to convince the bank to provide the necessary finance to buy a new vehicle [eval]. So, while it may work out to be more expensive at least the business is able to obtain the (new) vehicle that it needs to operate [eval].

Mark scheme

4(a) Define ‘delegation’. 2 Award 2 marks for a full definition. Award 1 mark for a partial definition. Giving a subordinate the authority to perform particular tasks [2] OR When a manager gives authority to another employee to complete a task (although the manager retains the ultimate responsibility for the completion of the task) [2] Partial definition e.g. manager gives task to employee [1] OR subordinate given task to do [1] 4(b) Identify two motivational theories. 2 Only award the first two responses given. Award 1 mark per theory (max 2). Points might include: • Taylor's (scientific theory) • Maslow's (Hierarchy of needs) • Herzberg's (two-factor theory) Other appropriate responses should also be credited. 4(c) Outline two benefits to WTB of having part-time employees. 4 To use words from the stem as application the reference must be appropriate (i.e. make sense) Award 1 mark for each relevant benefit (max 2). in relation to the point being made. Award 1 mark for each relevant reference to this business (max 2). The following words are likely to be appropriate Points might include: for this question: • Reduces labour costs / when not working no need to pay [k] to make • Factory the (breakfast) cereal [app] • 600 (production workers/employees) • More flexible in hours of work [k] in the factory [app] • (Breakfast) cereal • Easier to ask employees just to work at busy times [k] • Private limited company • Easier to extend operating hours by working evenings/weekends [k] • Public limited company • Provides a wider range of skills/experiences of the workforce [k] of • Delegation 600 employees [app] • Motivational theories / improve motivation • Helps keep experienced employees [k] which may be important as • Planning to expand business is planning to expand [app] • Training • Can attract well qualified employees who need to have flexible hours [k] Other appropriate examples in context can still be credited. Other appropriate responses should also be credited. 4(d) Explain two reasons why training might be important to WTB. 6 To use words from the stem as application the reference must be appropriate (i.e. make sense) Award 1 mark for identification of each relevant reason (max 2). in relation to the point being made. Award 1 mark for each relevant reference to this business (max 2). Award 1 mark for each relevant explanation (max 2). The following words are likely to be appropriate for this question: Points might include: • Factory • Improve efficiency / increased output / faster production [k] which • 600 (production workers/employees) could help lower (average) cost [an] in the factory [app] • (Breakfast) cereal • More skilled / flexible employees / workers know what to do [k] so • Private limited company able to cover absences of others [an] who work part-time [app] • Public limited company • Fewer mistakes / better quality [k] from its 600 employees [app] • Delegation which could lower costs of rework [an] • Motivational theories / improve motivation • Increase motivation [k] which can help reduce labour turnover / • Part-time (employees) encourage employee loyalty/retention [an] • Planning to expand • Fewer customer complaints [k] about its cereal [app] increasing customer loyalty [an] Other appropriate examples in context can still • Less supervision needed [k] so able to make more use of delegation be credited. [app] so managers have time to focus on other activities [an] • Fewer accidents / ensure safe working conditions [k] • Helps introduce a new process [k] Other appropriate responses should also be credited. 4(e) Do you think a public limited company is a better form of business 6 This is a general question so there are no marks organisation for a growing business than a private limited for application. company? Justify your answer. Some points could be awarded as either an Award up to 2 marks for identification of relevant points. advantage/disadvantage of each option, but do Award up to 2 marks for relevant development of points. not award the same point twice as this is Award up to 2 marks for a justified decision as to whether a public repetition. limited company is a better form of business organisation for a growing business than a private limited company. Do not award the following points if candidate identifies comparisons to private limited Points might include: companies as they apply to both forms of Public limited company: organisation: • Access to very large amounts of capital [k] which does not need to • Shareholder may expect dividends to be be repaid [an] paid • Shares available on the stock exchange / can sell shares to public • Divorce of ownership and control [k] • Have limited liability • Cannot control who buys the shares / no restriction on who can buy • Have shareholders shares [k] which increases the risk of a takeover [an] • Incorporated/separate legal identity • More legal requirements / controls to follow / must hold an annual • Must issue financial data / accounts general meeting [k] which increases costs / time-consuming [an] available to public • Selling shares to the public is expensive [k] Private limited company: • Can only sell shares to friends/family [k] which could limit amount of finance able to raise [an] • Able to control who buys the shares [k] which can help reduce risk of takeover [an] Other appropriate responses should also be credited. 4(e) Justification might include: A public limited company has better access to capital [k] which can help finance expansion [an]. Whereas a private limited company can control who buys the shares [k] which can reduce the risk of being taken over [an]. Becoming a public limited company is better because as the business is growing having access to more funds is likely to be very important otherwise it could delay its plans [eval], whereas a private limited company is restricted to a smaller group of people so may not be able to raise sufficient funds [eval].