Business Studies 0450/12 February/March 2023: question paper and mark scheme

Mark scheme

1(a) Define ‘inflation’. 2 For both marks must have reference to increase in prices [1] and the time element [+1]. Time is Award 2 marks for a full definition. Award 1 mark for a partial definition. +1 only. An increase in the general price level of goods and services over time [2] Partial definition e.g. an increase in the price of goods/services [1] 1(b) Identify two ways technology could change production methods. 2 Only award the first two responses given. Award 1 mark for each relevant way (max 2). Ways might include: • Wide variety/new products can be designed/made • High/faster output • Fewer mistakes / better quality / more accurate / less waste • Fewer employees / replace labour • Automation / become capital intensive • Mechanisation / use (more) machinery • Computer-aided design (CAD) / 3D design • Computer-aided manufacturing (CAM) / 3D printing/robotics • Computer-integrated manufacturing (CIM) Other appropriate responses should also be credited. 1(c) Outline two ways HCB could become more ethical. 4 To use words from the stem as application the reference must be appropriate (i.e. make sense) Award 1 mark for each relevant way (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 Ways may include: on this question: • Pay fair wages [k] to its 200 employees [app] • Cars • Ensure fair working conditions for employees [k] in its factory [app] • Factory • Pay suppliers on time [k] when buying materials for its cars [app] • 200 employees • Pay fair price to suppliers [k] • New technology/ changed production • Charge customers fair prices / not fix prices with competitors [k] method • Source environmentally friendly materials / less pollution / not dump waste / use renewable energy (allow only once) [k] Other appropriate examples can also be credited. Other appropriate responses should be credited. 1(d) Explain two ways HCB could be affected by an increase in the 6 To use words from the stem as application the interest rate in country X. reference must be appropriate (i.e. make sense) in relation to the point being made. Award 1 mark for a relevant way (max 2). Award 1 mark for each relevant reference to this business (max 2). The following words are likely to be appropriate Award 1 mark for each relevant explanation (max 2). for this question: • Cars Points might include: • Factory • Increase costs of finance/borrowing [k] so less cash/funds to spend • 200 employees on other areas of the business [an] such as becoming more ethical • New technology / change production [app] method • Decreased demand/fewer sales [k] which could lower revenue [an] • (More) ethical from its cars [app] • More difficult to get/more expensive to take out a loan [k] for the Other appropriate examples can also be factory [app] which could delay investment [an] credited. • Delay investment [k] into new technology [app] so may become less competitive [an] Some points can be awarded as [k] or [an] but do not award the same point twice. Other appropriate responses should also be credited. 1(e) Do you think manufacturing businesses will always benefit from 6 This is a general question so there are no marks the introduction of import tariffs? Justify your answer. for application. Award up to 2 marks for identification of relevant points. Award up to 2 marks for relevant development of points. Award up to 2 marks for a justified decision as to whether manufacturing businesses will always benefit from the introduction of import tariffs. Points might include: • Higher costs of importing raw materials [k] which could lead to higher prices / lower its profit margin / so may need to find new suppliers locally [an] • May increase price of imported finished goods / imported goods more expensive [k] which may lead to fewer sales / less revenue / less imports/increase demand for locally made products [an] • Other countries may retaliate/introduce import tariffs [k] making it more difficult to export [an] Other appropriate responses should also be credited. Justification might include: Imported goods will become more expensive [k] leading to fewer sales [an]. However, businesses have higher costs if they are importing raw materials [k] which could lead to an increase in prices [an]. Overall, whether businesses benefit is likely to depend on the proportion of raw materials which are imported [eval], especially if there are no alternative local suppliers it is more likely to be negatively affected [eval].

Mark scheme

2(a) Identify two possible causes of business failure. 2 Only award the first two responses given. Award 1 mark for each relevant cause (max 2). Causes may include: • Poor planning/lack of objectives • Cash flow problems / lack of working capital • Poor management skills / lack experience / lack of knowledge • Overexpansion / business expands too quickly • Lack of demand/sales / (too much) competition • Poor marketing • Economic influences / changes in business environment Other appropriate response should also be credited. 2(b) Calculate WFH’s acid test ratio for 2022. Show your working. 2 Award 2 marks for correct answer. Award 1 mark for correct method but incorrect answer. Correct answer: 0.5:1 [2] Correct method e.g. (current assets - inventory) / current liabilities [1] OR 20 000/40 000 [1] OR (50 000 – 30 000) / 40 000 [1] Where 0.5 is shown with no working, can award two marks. 2(c) Identify four reasons why businesses hold inventory. 4 Only award the first four reasons given. Award 1 mark for each relevant reason (max 4). Points might include: • To maintain production • To protect against delays from suppliers • To benefit from economies of scale • To benefit from special offers / supplier discounts • To reduce transport costs • To meet unexpected changes in demand / sudden order • To meet seasonal changes in demand • To meet orders/ meet (high) demand Other appropriate responses should also be credited. 2(d) Explain why the following two stakeholder groups might be 6 To use words from the stem as application the interested in WFH’s financial statements. reference must be appropriate (i.e. make sense) in relation to the point being made. Award 1 mark for a relevant reason (max 2). Award 1 mark for each relevant reference to this business (max 2). The following words are likely to be appropriate Award 1 mark for each relevant explanation (max 2). on this question: • Hats Points might include: • 15 000 / 10 000 / cash has decreased • ($10 000) / loss Employees: • 50 000 / 60 000 (current assets) • To know if they have job security / whether made redundant [k] as • High levels of inventory profit is falling [app] so may decide to look for jobs elsewhere [an] • 30 000 / 20 000 / 10 000 increase • To know if they will receive wage payments on time [k] as there is (inventory) less cash in the business [app] so may not be able to cover their • 0.5 (acid test ratio) OFR applies basic needs/better standard of living [an] • Mass market • To know whether to ask for a pay rise [k] when making hats [app] • Business might fail they might look at the level of profit [an] Other appropriate examples can also be Suppliers: credited. • To see current level of debt [k] to help decide whether to give/extend trade credit [an] for materials needed for the hats [app] The [k] and [an] can be interchangeable. • To see level of cash /liquidity [k] to know whether they will receive payments on time [an] • To know whether will receive payment on time [k] as if not may stop supplying [an] especially as WFH might fail [app] • Assess level of sales [k] as high/low may lead to additional/fewer orders [an] Other appropriate responses should also be credited. 2(e) Do you think it is always better for a business to sell to a mass 6 This is a general question so there are no marks market? Justify your answer. for application. Award up to 2 marks for identification of relevant points. Award up to 2 Some points could be expressed as the marks for relevant development of points. advantage or disadvantage of each method but Award 2 marks for a justified decision as to whether it is always better do not award the same point twice. for a business to sell to a mass market. Points might include: Mass marketing: • (Potential for) high sales/customers [k] increases revenue [an] • Benefit from economies of scale [k] so lower average/unit costs (an) • Spreads risk [k] so falling sales in one area may be offset by sales elsewhere [an] • High levels of competition [k] may mean have to lower prices [an] Niche marketing [k] • May be possible to charge higher prices [an] which can increase profit margin [an] • Able to closely meet customer needs [an] could lead to high customer loyalty [an] • Opportunity to earn higher profits might attract new competitors [an] so prices may have to be reduced [an] Other appropriate responses should also be credited. Justification might include: Businesses in a mass market may benefit from economies of scale [k] which reduces average costs [an]. However, a niche market [k] may be better as businesses are able to charge higher prices [an]. I think it is better for a business to operate in a mass market because lower average costs may allow lower prices which is likely to attract more customers which could mean a higher overall amount of revenue than is possible in a niche market. [eval]. [eval]

Mark scheme

3(a) Identify two responsibilities of supervisors. 2 Only award the first two responses given. Award 1 mark for each responsibility (max 2). • Provide feedback/report to managers (on progress/issues) • Give out tasks/orders (to employees) • Make sure employees carry out tasks • Check/monitor quality of work/product • Check workers are being efficient Other appropriate responses should also be credited. 3(b) Identify two methods of written communication. 2 Only award the first two responses given. Award 1 mark for each relevant method (max 2 marks). Points might include: • Letter • Notice/notice board • Text • Memo • Email • Newsletter • Website • Social media/Facebook/WhatsApp • Billboards/posters • Leaflets/flyer • (Local/national) newspapers • (Specialist/general) magazines Other appropriate answers should also be credited. 3(c) Outline two benefits to AH of taking over a competitor. 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: • Increase in market share [k] from 5% [app] • Insurance • Benefit from economies of scale [k] in the competitive market [app] • 5% (market share) • Power to set/influence market prices [k] for insurance [app] • 1000 employees • Gain brand name of competitor [k] • 50 supervisors • Gain skills/resources (from other business) [k] • Competitive market • Protection from risk of takeover [k] Other appropriate examples can be awarded. Other appropriate responses should also be credited. 3(d) Explain one advantage and one disadvantage to AH of its 6 To use words from the stem as application the supervisors using an autocratic leadership style. reference must be appropriate (i.e. make sense) in relation to the point being made. Award 1 mark for a relevant advantage/disadvantage (max 2). Award 1 mark for each relevant reference to this business (max 2). The following words are likely to be appropriate Award 1 mark for each relevant explanation (max 2). for responses on this question: • Insurance business Points might include: • 1000/950 employees • 50 (supervisors) Advantages: • Take over a competitor • Quick/faster decision-making [k] so can respond to opportunities • Competitive market sooner [an] such as taking over a competitor [app] • 5% (market share) • Do not need to consult with employees [k] leading to quick(er) • Methods of communication decision-making [an] • Decisions are made by (more) experienced workers [k] so less Other appropriate examples can be credited. chance of mistakes [an] in the insurance business [app] Disadvantages: • Demotivate employees [k] from the 1000/950 employees [app] leading to higher labour turnover / because they have no input into decisions [an] • Supervisors have less time to focus on other tasks [k] leading to lower productivity / as employees are closely monitored [an] • Lack of ideas from employees [k] Other appropriate responses should also be credited. 3(e) Explain two sources of finance which could be used to fund 6 This is a general question so there are no marks business growth. Which source of finance would be the best to for application. use? Justify your answer. Some points can be expressed as an advantage Award up to 2 marks for identification of relevant points. Award up to 2 or disadvantage of different sources but only marks for relevant development of points. award once. Award 2 marks for a justified decision as to which source of finance should be used to fund business growth. Points might include: (Bank) loan [k] • Can receive all the money at once [an] • (Long time to) repay [an] • Need to pay interest [an] which can increase costs [an] Retained profit [k] • No repayment costs [an] • May not be enough funds available [an] Sell shares /share issue [k] • No need to repay /permanent source of capital [an] • Will dilute ownership / lead to loss of control [an] • Shareholders may expect dividends [an] • Sell (unwanted) non-current assets [k] Other appropriate responses should also be credited. 3(e): Justification might include: One option is a bank loan [k] but the business will need to pay interest [an]. An alternative could be retained profits [k] as there is no need to repay [an]. I think a bank loan is the best source because there may not be sufficient retained profit which may delay the expansion. [eval] [eval]

Mark scheme

4(a) Identify two ways legal controls could affect marketing strategy. 2 Only award the first two responses given. Award 1 mark for each relevant way (max 2). Points may include: • Cannot make misleading/false claims in advertisements / may have to change/withdraw/restrict how or where advertise/promote • Increase costs/time (spent on marketing) • May have to change what is written on packaging / make sure product description is accurate/not misleading on packaging • Could lead to restrictions about where they can sell it • Cannot sell underweight goods • Goods must be fit for purpose • Cannot charge less than minimum price set / cannot charge more than maximum price set / cannot fix prices (with competitors) Other appropriate responses should also be credited. 4(b) Define ‘quality control’. 2 Award 2 marks for a full definition. Award 1 mark for a partial definition. Checking for quality at the end of the production process [2] OR Checking the quality of goods through inspection [2] Partial definition e.g. Checking the (standard/quality of) work [1] 4(c) Outline two reasons why Viktor might use sampling when carrying 4 To use words from the stem as application the out market research. reference must be appropriate (i.e. make sense) in relation to the point being made. Award 1 mark for each relevant reason (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: • Start-up • Cheaper (than researching the whole market) [k] which is important • Photography for a start-up business [app] • 5 employees • Quicker (than researching the whole market) [k] to find out what • Sole trader photography customers want [app] Other appropriate examples can be credited. Other appropriate responses should also be credited. 4(d) Explain two disadvantages to Viktor of operating as a sole trader. 6 To use words from the stem as application the reference must be appropriate (i.e. make sense) Award 1 mark for each relevant disadvantage (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 responses on this question: Points might include: • Photography • Difficult to raise capital [k] which could restrict growth [an] of the • Start-up/new business photography business [app] • 5 employees • Unlimited liability [k] of his start-up business [app] so his personal • (Carry out) market research assets are at risk if he cannot pay debts [an] • Motivate employees • Has all the responsibility / make decisions on own [k] so may lead • Legal controls (over marketing) to wrong decisions being taken [an] • May have to work long hours [k] Other appropriate examples can be credited. • Business does not have a separate legal identity [k] • No continuity of business/ if die, the business will close [k] • No one to share risks/losses with [k] Other appropriate responses should also be credited. 4(e) Explain two ways a service business could motivate its 6 This is a general question so there are no marks employees. Which would be the best way to use? Justify your for application. answer. Some development could be expressed as an Award up to 2 marks for identification of relevant points. Award up to 2 advantage or disadvantage of different methods marks for relevant development of points. but only award the same point once. Award 2 marks for a justified decision as to which is the best way for a service business to motivate its employees. Points might include: • Bonus [k] employees will try to achieve targets set [an] • Job rotation [k] (as variety) can make the work more interesting [an] • Job enrichment [k] as employees feel that they are being given more responsibility [an] • Training [k] so employees have a higher level of skills [an] • Increase wage (rate) [k] increases business costs [an] • Profit sharing [k] which only pay if a profit is made [an] • Praise [k] no cost / free [an] • Commission [k] employees will have an incentive to try to sell more products [an] • Opportunities for promotion [k] Other appropriate responses should also be credited. 4(e): Justification might include: Bonus [k] as employees will try to achieve targets set by the business [an]. Whereas job rotation [k] creates a more flexible workforce [an]. I think that job rotation is best as the flexible workforce means that services can still be offered when other employees are absent [eval] which could still help the business to achieve its targets [eval].