Business Studies 0450/12 February/March 2024: question paper and mark scheme

Mark scheme

1(a) Define ‘added value’. 2 For two marks needs reference to the difference between both cost and selling price/what the Award 2 marks for a full definition. Award 1 mark for a partial definition. product is sold for. The difference between the selling price of a product and the cost of bought-in materials and components. [2] Partial definition e.g. improvement to the product/that makes it worth more [1] 1(b) Define ‘secondary sector’. 2 For two marks need idea of manufacture/produce and from what/where the Award 2 marks for a full definition. Award 1 mark for a partial definition. products are made from (primary sector/raw materials). Manufactures goods using raw materials (provided by the primary sector). [2] Do not award examples. OR Uses manufacturing to transform the raw materials generated in the primary sector into a product. [2] OR Firms that process/manufacture goods from natural resources. [2] Partial definition e.g. make a product [1] 1(c) Outline two reasons why TCH’s business objectives might have 4 To use words from the stem as application, the changed. reference must be appropriate (i.e. make sense) in relation to the point being made. Award 1 mark for each relevant reason (max 2). The following words are likely to be appropriate Award 1 mark for each relevant reference to this business (max 2). for this question: • Bakery Points might include: • Pastries/cakes • Previous objectives have been achieved / previous objectives were • Small (business) unrealistic [k] at the bakery [app] • 3 years • Change of owners/managers [k] over the last 3 years [app] • Secondary sector • Changes in the government objectives/legal controls [k] affecting • 6 employees secondary sector businesses [app] • Expand/expansion • Change in customer preferences / demand / follow new trends [k] so may need more/less than 6 employees [app] Other appropriate examples can be credited. • Change in competition [k] which may be why want to business to expand [app] Other appropriate responses should be credited. 1(d) Explain two non-financial methods of motivation TCH could use. 6 To use words from the stem as application, the reference must be appropriate (i.e. make sense) Award 1 mark for each relevant method (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 for this question: Award 1 mark for each relevant explanation (max 2). • Bakery • Pastries/cakes Points might include: • Small (business) • Job rotation [k] increases the variety of the work / which can reduce • 3 years boredom of workers [an] at the bakery [app] • Secondary sector • Job enrichment [k] for the 6 employees [app] as they are being • 6 employees given more responsibility / as can use their full range of abilities [an] • Expand/expansion • Training [k] so employees have a higher level of skills [an] when • External recruitment making pastries/cakes [app] • Business objectives • Delegation [k] which allows employees to make decisions / as workers feel empowered [an] so TCH’s manager(s) can focus on Other appropriate examples can be credited. expansion [app] • Praise [k] which is no cost/free [an] for this small business [app] Analysis can focus on explaining what the • Teamworking [k] can increase sense of belonging/loyalty [an] so method is or how it can increase motivation. less need to use external recruitment [app] The same analysis can be used for different • Opportunities for promotion [k] so are given a role higher up in the points, but only award once. hierarchy [an] • Recognition / Employee of the month [k] Other appropriate responses should be credited. 1(e) Explain two methods of external recruitment a business could use. 6 This is a general question so there are no marks Which is likely to be the best method to use? Justify your answer. for application. Award up to 2 marks for identification of relevant points. The same analysis can be used for different points, but only award once e.g. many people Award up to 2 marks for relevant development of points. will see / not many people will see. Award up to 2 marks for a justified decision as to which method of Do not award: external recruitment a business should use. • Methods of selection e.g. interviews Points might include: • Specialist magazines [k] can target potential employees interested in this industry/type of work [an] • Online recruitment sites / social media / website [k] which can reach large numbers of people / include detailed information [an] but not everyone has access to the internet [an] • Recruitment agencies [k] which saves administration time [an] but recruitment agencies charge a fee for their services [an] • (Government-run) job centres [k] as no cost to the business [an] but only reach those people who are actively looking for a job [an] • Local newspapers [k] which people could ignore [an] • National newspapers [k] but must pay to advertise [an] which increases costs [an] Other appropriate responses should be credited. Justification might include: Recruitment agencies [k] which saves administration time [an]. Another method is online recruitment sites [k] which can reach many people [an]. An online recruitment site is the best method because having access to a wider pool of people can make it easier to find the right person for the role [eval] which may reduce the need to readvertise in future [eval].

Mark scheme

2(a) Identify two characteristics of a recession. 2 Only award the first two responses given. Award 1 mark per characteristic (max 2). Examples might include: • Rising unemployment • GDP falls / negative • Low levels of consumer spending / falling consumer confidence / fewer sales • Falling prices • Low/falling inflation • Low(er) business profit • Low(er) tax revenue for government • Low(er) levels of business output • Businesses fail/close • Low(er) levels of business investment • Low(er) business confidence • Low(er) interest rates Other appropriate responses should be credited. 2(b) Define ‘pressure group’. 2 For two marks needs idea of a group with a common/same interest and idea of influence on Award 2 marks for a full definition. Award 1 mark for a partial definition. business/government decisions. Pressure groups are groups of people who act together to try to force Do not award: businesses or governments to adopt certain policies. [2] • Examples e.g. boycott/protest. OR People who have a common interest who take action to change/influence business/government decisions [2] Partial definition e.g. people who try to influence business activities. [1] OR Group formed by people with a common interest [1] OR People who take action against a business [1] 2(c) Outline two ways PLY could be affected by legal controls over 4 To use words from the stem as application, the business activity affecting the environment. reference must be appropriate (i.e. make sense) in relation to the point being made. Award 1 mark for each relevant way (max 2). The following words are likely to be appropriate Award 1 mark for each relevant reference to this business (max 2). for this question: • Hats Points might include: • Pressure groups • May have to use renewable sources of energy / may have to • Factory change their energy sources [k] in its factory [app] • Recession • May have to change materials used / find new supplier [k] which • Environmentally friendly could be difficult to do in a recession [app] • Pressure groups • May have to relocate [k] to produce hats [app] • Mass market • May have to reduce waste / find alternative ways to dispose of waste [k] leading to fewer issues with pressure groups [app] Other appropriate examples can be credited. • May have to change what they make / redesign products [k] to ones that are environmentally friendly [app] Do not award: • May have to pay tax / obtain licence to pollute / pay fines [k] which • Advantages/disadvantages of being could affect its cash-flow forecast [app] environmentally friendly • May have to lower/limit output [k] • Examples of environmental damage • May have to change production method / buy new machinery (that pollutes less) [k] • May have to change the packaging [k] • Require more training/retraining [k] Other appropriate responses should be credited. 2(d) Explain one advantage and one disadvantage of PLY using email 6 To use words from the stem as application, the to communicate with its customers. reference must be appropriate (i.e. make sense) in relation to the point being made. Award 1 mark for each relevant method (max 2). The following words are likely to be appropriate Award 1 mark for each relevant reference to this business (max 2). for this question: • Hats Award 1 mark for each relevant explanation (max 2). • Mass market • Recession Points might include: • Environmentally friendly • Market research Advantages: • Sell online • Can be sent to many people at once / in different countries [k] which can save time / allow the business to focus on other activities Other appropriate examples can be credited. [an] such as becoming environmentally friendly [app] • Low cost [k] which lowers expenses [an] during the recession [app] Some points could be [k] or [an] but only award • Can be saved for future reference / can refer to message [k] which once e.g. not know if message understood. can help avoid disagreements / deal with complaints [an] • Can be read at a time that suits the customer [k] • Can add attachments/images to the message [k] Disadvantages: • May be language barriers / complex language used [k] so customer may not understand message [an] about the hats [app] • Not all customers may have an email address / no access to technology / server issues / may not receive message / may go into junk folder [k] so customer is not able to read / check it [an] • Can be sent to wrong person/people [k] which may reduce sales/revenue [an] • Too many emails received [k] so may be difficult to pick out the relevant information [an] • Cannot see body language [k] • No immediate feedback [k] Other appropriate responses should be credited. 2(e) Explain two reasons why a business uses market research. Which 6 This is a general question so there are no marks reason is likely to be the most important? Justify your answer. for application. Award up to 2 marks for identification of relevant points. The same analysis can be used for different points, but only award once. Award up to 2 marks for relevant development of points. Some points can be [k] or [an] but only award Award up to 2 marks for a justified decision as to which reason for using once e.g. know what to produce. market research is likely to be the most important. Points might include: • Identify customer needs / wants / demand / target market [k] to ensure sales / revenue / so know where to sell / can produce products that meet customer needs / what amount to produce [an] • Find out about competition / competitors’ products [k] to help gain competitive advantage / decide prices / improve products [an] • Help predict changes in trends [k] so can spot possible gaps in the market [an] • Help predict current/future size of market [k] to help make decisions / help inform the marketing mix [an] • Help decide what / amount to produce / buy right amount of materials / goods [k] to keep variable costs low / reduce wastage [an] • To decide price / what price to set [k] so able to cover costs [an] • Help decide where to locate / operate from / know where to sell [k] • Help decide how to promote/promotion strategy for its products [k] Other appropriate responses should be credited. Justification might include: It can help identify customer needs [k] which reduces risk when developing new products [an]. It also helps to decide how to price the products [k] which could increase sales [an]. Identifying customer needs is more important as if a business develops a product that customers don’t want, it is unlikely to generate any revenue, whatever the price set. [eval] [eval]

Mark scheme

3(a) Identify one cash inflow and one cash outflow for a business. 2 Only award the first response given for each. Award 1 mark for a cash inflow and 1 mark for a cash outflow (max 1 for each). Answers might include: Cash inflows: • Cash sales • Money/payment from trade receivables • Sale of non-current assets / sell unwanted machinery / land • Cash received from loan/grants • Cash/funds from investors/shareholders Cash outflows: • Money/payments to trade payables / purchase goods or materials / pay suppliers • Pay wages/salaries • Pay expenses or examples such as rent • Purchase non-current assets / purchase machinery / land • Repay loans/debts • Pay dividends • Cash purchases Other appropriate responses should be credited. 3(b) Identify two factors which might affect the source of finance a 2 Only award the first two responses given. business chooses to use. Do not award: Award 1 mark per factor (max 2). • Examples of sources of finance. Answers might include: • Size/legal form of business • Amount required • Length of time required for / whether short-term or long-term • Level of existing loans/debts/borrowing • Purpose/reason for finance • Interest/cost of finance • How quickly/urgently need money • Credit history • Security/collateral Other appropriate responses should be credited. 3(c) Identify four ways a market can be segmented. 4 Only award the first four responses given. Award 1 mark per way (max 4). Points might include: • Age • Socio-economic grouping • Gender • Income • Ethnic background • Family size • Lifestyle/interests • Personality • Attitudes • By use of product • Location/region Other appropriate responses should be credited. 3(d) Explain two advantages to FR of being a multinational company. 6 To use words from the stem as application, the reference must be appropriate (i.e. make sense) Award 1 mark for each relevant advantage (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 for this question: Award 1 mark for each relevant explanation (max 2). • Hotel or related words e.g. rooms, chefs • 18 countries Points might include: • Expand • Access to cheaper labour [k] which could increase profit • Cash-flow forecast margin/lower total costs [an] for the hotel [app] • New markets • Access to bigger/new markets [k] which can increase sales/revenue/increase market share [an] in the 18 countries [app] Other appropriate examples can be credited. • Spreads risk [k] when expanding [app] as sales falling in one country may be offset by rising sales in another country [an] Some points can be [k] or [an] but only award • Access to government grants [k] which could increase cash inflows once e.g. lower costs, increased sales, [an] and improve its cash-flow forecast [app] increased revenue. • Better image / reputation [k] which could allow them to set higher prices / attract more customers [an] The same analysis can be used for different • Take advantage of lower tax rates [k] points, but only award once. Other appropriate responses should be credited. Do not award: • Access/cheaper raw materials / lower production costs as this is a tertiary sector business. 3(e) Explain two ways a cash-flow forecast could be used by a 6 This is a general question so there are no marks business. Which is likely to be the most important way? Justify for application. your answer. Some points can be [k] or [an] but only award Award up to 2 marks for identification of relevant points. once e.g. liquidity problems. Award up to 2 marks for relevant development of points. Award up to 2 marks for a justified decision as to which use of a cash- flow forecast is the most important. Points might include: • Support loan applications/attract investors [k] to show if the business has sufficient cash to repay a loan [an] • To know how much cash is available for paying bills/wages [k] so they can arrange an overdraft if necessary [an] • To identify if there will be a cash-flow problem/identify shortfalls [k] so they can cut back on spending/take corrective action [an] • To show if the business is likely to run short of cash [k] avoid having a lack of liquidity [an] • To manage the cash flows in and out of the business [k] so will be aware of how much cash is available when operating [an] • To help plan/make decisions [k] so waste fewer resources [an] Other appropriate responses should be credited. Justification might include: One use is to support loan applications [k] as it can show if the business has sufficient cash to repay the loan [an]. It could help identify a potential cash-flow problem [k] so that the business can cut back on spending if necessary [an]. The most important use is identifying possible cash flow problems as if there isn’t enough cash to cover day- to-day expenses then the business may not be able to operate whereas it may still be able to operate if it did not get a loan [eval] [eval].

Mark scheme

4(a) Define ‘break-even output’. 2 Award 2 marks for a full definition. Award 1 mark for a partial definition. The quantity that must be produced/sold for total revenue to equal total cost. [2] OR Where total revenue equals total cost. [2] Partial definition e.g. the business is making neither a profit or a loss. [1] OR Where revenue equals cost. [1] 4(b) Calculate the margin of safety. Show your working. 2 Award a maximum of one mark if 50 units is calculated, but it is not written as the final Award 2 marks for correct calculation. Award 1 mark for correct method answer. but wrong answer. Correct answer: 50 units [2] Method: e.g. current sales – break-even output [1] OR 550 – 500 [1] If correct answer given and no workings shown award 2 marks. 4(c) Outline two methods of sales promotion Suliman could use for the 6 To use words from the stem as application, the new shop. reference must be appropriate (i.e. make sense) in relation to the point being made. Award 1 mark for each relevant method (max 2). The following words are likely to be appropriate Award 1 mark for each relevant reference to this business (max 2). for this question: • T-shirts Points might include: • Sole trader • Point of sale displays [k] by the sole trader [app] • Small (business) • Price reductions/discounts/coupons [k] below $3.99 [app] • $3.99 (selling price) • Buy one get one free (BOGOF) [k] for the t-shirts [app] • 550 (units / current level of sales) • Gifts/gift cards [k] which may help to increase sales above 550 • Margin of safety/ 50 [app] • $2194.50 (revenue) • Loyalty reward schemes/cards [k] • Competitions [k] Other appropriate examples can be credited. • Free samples [k] Other appropriate responses should be credited. 4(d) Explain two factors Suliman should consider when deciding on a 6 To use words from the stem as application, the suitable location for the new shop. reference must be appropriate (i.e. make sense) in relation to the point being made. Award 1 mark for each relevant factor (max 2). The following words are likely to be appropriate Award 1 mark for each relevant reference to this business (max 2). for this question: • T-shirts Award 1 mark for each relevant explanation (max 2). • Sole trader • Small (business) Points might include: • $3.99 (selling price) • Number of customers/demand/sales [k] which could increase • $1.99 (variable cost) potential revenue [an] from t-shirts [app] • 550/500 units • Competition [k] as many competitors may mean high footfall / less • Margin of safety/ 50 competition could mean higher market share [an] for this sole trader • $2194.50 (revenue) [app] • Rent/taxes/cost of site [k] which the business could not afford / Other appropriate examples can be credited. could increase costs [an] for this small business [app] • Availability of labour [k] as if there is a low supply of labour then Some analysis can be used for different points, wage demands may be higher / if no suitable employees could be but do not award the same analysis point twice. unable to operate [an] • Space/size [k] as may need a large space to display products [an] • Parking available [k] otherwise may miss out on customers/sales [an] • Distance/access to supplier [k] to reduce transport costs [an] • Access government support/grants [k] which could lower costs [an] • Legal controls [k] • Infrastructure / access to electricity / water [k] • Security/safety/level of crime [k] Other appropriate responses should be credited. 4(e) Do you think operating as a sole trader is the best type of 6 This is a general question so there are no marks organisation for a small business? Justify your answer. for application. Award up to 2 marks for identification of relevant points. Advantages of one type of an organisation can be disadvantages of another type, but do not Award up to 2 marks for relevant development of points. award twice as mirror arguments are not Award up to 2 marks for justified decision as to whether operating as a accepted. sole trader is the best type of organisation for a small business. Do not award: Points might include: • Public limited company • Own boss/complete control [k] so may lead to quicker decision- • Limited company making [an] • Keep all profits [k] increase motivation of owner [an] • Do not have to publish financial information [k] so competitors cannot access this information [an] • Has freedom to choose own holidays/work hours [k] • Unlimited liability [k] so the owners’ personal possessions are at risk (if the business cannot pay its debts) [an] • Limited sources of finance [k] so may be difficult to expand [an] • No-one to cover if owner is ill [k] so business may lose sales [an] Alternative forms of ownership include: • Partnership [k] so can share workload [an] • Private limited company [k] to benefit from limited liability [an] Other appropriate responses should be credited. Justification may include: A sole trader has complete control [k] which may lead to quicker decision-making [an]. However, there is unlimited liability [k] so if the business cannot pay its debts the owner’s personal possessions are at risk [an]. A sole trader is best for a small business because quicker decision-making could allow them to respond more quickly to opportunities which could help to increase sales [eval] which may reduce the chances of the business not being able to pay its debts [eval].