Business Studies 0450/13 May/June 2019: question paper and mark scheme

Mark scheme

1(a) What is meant by ‘economies of scale’? 2 Do not award examples as this does not answer the question Clear understanding [2]: factors that lead to a reduction in average or unit Do not award answers such as 'benefit of being cost as a business increases in size big' as this does not explain the term Some understanding [1]: benefit of increasing in size 1(b) What is meant by ‘quality control’? 2 Do not accept answers that confuse the term with quality assurance e.g. checking throughout Clear understanding [2]: checking that a product meets the required production standard OR checking of goods at the end of the production process [2] OR Checking the standard of goods through inspection [2] OR process of reviewing accuracy of work bought in or completed [2] Some understanding [1]: e.g. checking the work 1(c) Identify and explain two reasons why EGT uses batch production. 4 Application marks may be awarded for appropriate use of the following: Knowledge [2 × 1] Award 1 mark for each reason identified • tea or leaves Application [2 × 1] Award 1 mark for each explanation in context • factory • space limited Points might include: • (leaves) grown locally • Size of output OR level of demand [k] as there may not be sufficient • machines old OR often break down demand to use flow production for its tea [app] • no economies of scale • Easier / quicker to respond to changes in demand [k] so if one • 80 employees flavour is more popular it is quick to adapt to that flavour [app] • Quality control • Not enough capital to use capital-intensive methods [k] as machines • Automated line/ flow used are old and often break down [app] • Various styles/ products produced [k] in the factory [app] • Nature of demand/ seasonal or continuous [k] • Size of business [k] especially as space is limited [app] 1(d) Identify and explain two ways in which the Human Resources 6 Application marks may be awarded for appropriate manager could use her knowledge of Maslow’s hierarchy of needs use of the following: to motivate employees. • Tea or tea leaves • Factory Knowledge [2 × 1] Award 1 mark for each relevant way • space limited Application [2 × 1] Award 1 mark for each relevant reference made to this • grown locally business • machines old OR often break down Analysis [2 × 1] Award 1 mark for each relevant explanation • no economies of scale • 80 employees Points might include: • Quality control • Ways to address physiological needs e.g. wages high enough to meet • Automated line/ flow weekly bills [k] of its 80 employees [app] so have enough money to provide basic needs such as shelter, rest or food [an] • Ways to address safety and security e.g. offer job security/ better working conditions [k] which is important as machines are old [app] so employees feel safe from risk of injury [an] • Ways to address social needs e.g. introduce team working [k] into the factory [app] so that they have a sense of belonging to a team [an] • Ways to address esteem needs e.g. praise [k] which allows them to feel that their hard work is recognised / valued [an] • Ways to address self-actualisation e.g. promotion/ given more responsibility [k] to allow them to reach their full potential [an] 1(e) Recommend the best way, other than by improving motivation, EGT 6 Application marks may be awarded for could use to increase its level of output. Justify your answer. appropriate use of the following: • Tea or tea leaves Knowledge [1] Award max 1 mark for identification of relevant issue(s) • Factory Application [1] Award 1 mark for a relevant reference made to this • space limited business • grown locally Analysis [2] Award up to 2 marks for relevant development of point(s) • machines old OR often break down Evaluation [2] Justified decision made as to which is the best way for EGT • no economies of scale to increase its level of output. • 80 employees • Cannot afford to move to new location Points might include: • Quality control • Introduce new technology [k] as old machines often break down • Automated line/ flow [app] which is likely to lower the possible output as cannot work when machines are being repaired [an]. However would need to ensure Do not award move location / new factory or flow they can afford it [an] but this is only suitable if machines are not too production as [ k ] because these are excluded in big as factory space is limited [eval] the scenario. • Employ additional workers [k] so able to produce more in same Do not award ‘buy cheaper materials’ as this amount of time [an] but would need to pay to recruit [an] increasing its does not answer the question expenses [eval] Do not award lean production or examples such • Training workers [k] to make the different stages of tea [app] so less as just-in-time or kaizen likely to make mistakes/ produce more in same amount of time [an] but it would add to business costs [an] • Buy partial processed materials [k] especially as space is limited [app] • Improve layout / design of building [k]

Mark scheme

2(a) What is meant by ‘wholesaler’? 2 Do not award ‘middleman’ on its own as this does explain the term Good understanding [2]: Someone (or organisation) that buys and stores large quantities of several producers’ goods and then breaks into bulk deliveries to supply retailers with smaller quantities OR An intermediary that buys in bulk [1] and sells to other businesses/ retailers (rather than to consumers) [1] Some understanding [1]: e.g. middleman from whom retailers buy products OR someone who breaks bulk [1] 2(b) Calculate the revenue from selling direct to retailers in 2018. 2 Good application [2] correct answer = $495 000 Some application [1] e.g. correct method but incorrect answer OR 900000 × 55% 2(c) Identify and explain how each of the following might affect CYN’s 4 Application marks may be awarded for exports. appropriate use of the following: • family owned Knowledge [2 × 1] Award 1 mark for each effect identified • children OR toys Application [2 × 1] Award 1 mark for each explanation in context • revenue increased by 15% for last 10 years • competitive market Points might include: • stop promotion for 6 months Quotas: • correct use of data from Figure 1 • (physical) limits on the number of imports [k] which may become a problem as CYN exports 10% [app] Tariff: • increase the price [k] so toys become more expensive [app] 2(d) Identify and explain one advantage and one disadvantage 6 Application marks may be awarded for to CYN of developing new products. appropriate use of the following: • family owned Knowledge [2 × 1] Award 1 mark for each relevant advantage / • children OR toys disadvantage • revenue increased by 15% (for last 10 years) Application [2 × 1] Award 1 mark for each relevant reference made to this • competitive market business • stop promotion for 6 months Analysis [2 × 1] Award 1 mark for each relevant explanation • wholesalers or 35% • sell direct to retailers or 55% Points might include: • exports or 10% Advantages: • cannot meet demand • Enter new markets / segments OR attract new customers [k] helping to increase revenue [an] by more than 15% [app] • Keep / retain customers [k] which is important in a competitive market [app] to maintain market share [an] • Spread risk [k] when selling toys [app] as they have other products to rely on for sales [an] • Can increase or charge higher price [k] to breakeven quicker [an] • Need to replace products at end of product life cycle [k] Disadvantages: • No guarantee that customers will like new products [k] so could waste time / resources [an] • Reaction of competitors e.g. can gain market share whilst develop OR might introduce rival products [k] • Labour issues e.g. additional training for workers [k] • May need to invest in new machinery [k] but it might be difficult to arrange additional finance [an] for this family owned business [app] • Marketing issues e.g. additional cost of market research OR advertising costs [k] • production issues e.g. sufficient capacity OR technical problems when developing or manufacturing could delay launch OR availability of suitable materials [k] 2(e) CYN has decided to stop all marketing promotion for 6 months. Do 6 Application marks may be awarded for you agree with this decision? Justify your answer. appropriate use of the following: • family owned Knowledge [1] Award 1 mark for identification of relevant issue(s) • children OR toys [max 1] • revenue increased by 15% for last 10 years Application [1] Award 1 mark for a relevant reference made to this • competitive market business • wholesalers or 35% Analysis [2] Award up to 2 marks for relevant development of point(s) • sell direct to retailers or 55% Evaluation [2] Justified decision made as to whether CYN should stop all • exports or 10% marketing promotion for 6 months • cannot meet demand • developing new products Points might include: • Saves costs / can use money for other purposes [k] such as Do not award answers which discuss alternative developing new products [app] methods of promotion or other elements of the • Fewer sales [k] as customer awareness / loyalty might fall [an] of its marketing mix as this does not answer the toys [app] leading to a loss of revenue [an] question • Customers may buy from competitors [k] which is important in a Do not award answers which discuss ways to competitive market [app] leading a lower market share [k] increase output as this does not answer the • Allows time to focus on other activities [k] as cannot meet demand question [app]

Mark scheme

3(a) Identify two features of a sole trader business. 2 Do not accept in private sector as this applies to all types of organisation in the private sector. Knowledge [2 × 1] award 1 mark for each feature Do not award features of an entrepreneur Do not award answers such as Independent fast Points might include: decision making OR no one to help run/ manage • Keeps all the profit or make decisions as too vague • unlimited liability • (one person has) all the risk • takes all the decisions OR own boss / works for him/herself • unincorporated OR no separate legal identity • few legal requirements • Has total ownership OR full control 3(b) Calculate values for X and Y 2 X must be shown as negative value to be awarded Application: [2 × 1] award 1 mark for each correct answer • X: (220) • Y: 0 or zero 3(c) Identify and explain two factors that Hashim’s suppliers might 4 Application marks may be awarded for consider before deciding to offer him trade credit. appropriate use of the following: • sole trader Knowledge [2 × 1] Award 1 mark for each factor identified • gift shop Application [2 × 1] Award 1 mark for each explanation in context • city centre • popular tourist site Points might include: • business plan or cash flow statement • Amount required/ how much stock he wants [k] for his gift shop [app] • correct use of data from Table 1 • Length of credit terms [k] especially when October – June is the busy • first business failed (within 6 months) OR time [app] poor financial planning • Credit history / chances of being repaid [k] as his first business failed • Parents OR interest free loan for rent [app] • October – June is the busy time • Whether he has done any planning [k] such as his business plan [app] 3(d) Identify and explain two ways in which a business plan might help 6 Application marks may be awarded for Hashim’s new business to be successful. appropriate use of the following: • sole trader Knowledge [2 × 1] Award 1 mark for each relevant way • gift shop Application [2 × 1 ] Award 1 mark for each relevant reference made to this • city centre business • popular tourist site Analysis [2 × 1] Award 1 mark for each relevant explanation • correct use of data from Table 1 • poor financial planning Points might include: • Parents OR interest free loan for rent • Help get a bank loan / finance [k] such as asking for trade credit • first business failed (within 6 months) [app] as lender is able to see that the business is able to repay [an] • October – June is the busy time • Helps set targets / clear aims / future planning [k] as can see what • Parents need to do to achieve aims [an] of his small gift shop [app] • Cash flow forecast • Helps understand OR reduce possible risks [k] as have time think • Trade credit about possible solutions to problems [an] especially as first business failed within 6 months [app] Do not award answers which identify sections of • Help decision making [k] so will not waste time / money on buying the a business plan as NAQ wrong products [an] to ensure this business does not fail within 6 months [app] • Act as a checklist / track progress [k] especially when October–June is likely to be busy time [app] • Provide an estimate of costs/ help set budgets [k] 3(e) Do you think Hashim should start the new business? Justify your 6 Application marks may be awarded for answer using the information in Table 1. appropriate use of the following: • sole trader Knowledge [1] Award max 1 mark for identification of relevant issue(s) • gift shop Application [1] Award 1 mark for a relevant reference made to this • city centre business • popular tourist site Analysis [2] Award up to 2 marks for relevant development of point(s) • business plan or cash flow statement Evaluation [2] Justified decision made as to whether Hashim should start • correct use of data from Table 1 the new business • poor financial planning • Parents OR interest free loan for rent Points might include: • first business failed (within 6 months) • Has predicted cash flow problems [k] as has negative closing • October – June is the busy time balance after 4 months [app] • Trade credit • Cash inflows are increasing each month [k] • Cash flow forecast does not cover period of higher demand [k] as October and June is the busy time [app] • The data may not be accurate as it is only a forecast [k] Other points could include: • Does not have a good business record [k] as first business failed within 6 months [app] which could indicate he lacks the necessary skills [an] • Has learned from past mistakes [k] as this time has produced a cash flow forecast [app] • Risk is part of setting up a business [k] • Has support of his family [k] who provided interest free loan for shop rent [app] which will reduce cash outflows [an] • Level of competition [k] as may be other businesses near the popular tourist site [app] leading to fewer sales [an]

Mark scheme

4(a) What is meant by ‘pressure group’? 2 Do not accept examples Clear understanding [2]: people who have a common interest who take action to change OR influence business (or government) decisions Some understanding [1]: e.g. group formed by people with a common interest 4(b) Identify two advantages to a business of selling to a mass market. 2 Knowledge [2 × 1] award one mark for each advantage Points might include: • High or large number of sales • Could benefit from economies of scale OR lower average costs • No need to develop specialist products • Help build brand awareness OR reputation OR status 4(c) Identify two stakeholder groups of SWQ. Explain one possible 4 Application marks may be awarded for objective for each stakeholder group. appropriate use of the following: • public limited company Knowledge [2 × 1] Award 1 mark for each stakeholder group identified • 200 or shops Application [2 × 1] Award 1 mark for each explanation in context • Clothing or related words such as sewing • 3 or local (suppliers) Points might include: • information from news article • Employees [k] as want job security in its 200 shops [app] • pressure groups • Owners OR shareholders [k] maximise profits OR dividends from this • mass market public limited company [app] • (customers) want low prices • Suppliers [k] may want prompt payment or increased orders to the 3 • 15-hour days local suppliers [app] • $2 • Government [k] who may have to respond to pressure group action • 8-year-olds or children or child labour [app] . • Customers [k] want access to a wider range of clothes [app] • Lenders [k] • Local community [k] 4(d) Identify and explain two suitable methods of communication SWQ 6 Application marks may be awarded for might use with manufacturers in country C if it decided to purchase appropriate use of the following: supplies from them. • public limited company • 200 or shops Knowledge [2 × 1] Award 1 mark for each relevant way • Clothing or related words such as sewing Application [2 × 1] Award 1 mark for each relevant reference made to this • 3 (local suppliers) business • pressure groups Analysis [2 × 1] Award 1 mark for each relevant explanation • mass market • (customers) want low prices Points might include: • 15-hour days • Phone call [k] so able to obtain instant feedback to its questions [an] • $2 about the possible use of child labour to sew buttons [app] • 8-year-olds or children or child labour • Email [k] as able to include attachments OR additional information [an] about the clothing required [app] Do not award answers such as verbal, written, • Letter [k] as have hard copy to refer to in future [an] electronic, one way or two-way as knowledge as • (Face to face) meeting [k] need to identify the method. • Video conference or FaceTime or skype [k] Do not award answers such as quicker / cheaper • Text or messaging system such as WhatsApp [k] as analysis unless explained, otherwise. Do not award examples of social media as not appropriate methods 4(e) Do you think SWQ should start buying its products from country C? 6 Application marks may be awarded for Justify your answer. appropriate use of the following: • public limited company Knowledge [1] Award max 1 mark for identification of relevant issue(s) • Clothing or related words such as sewing Application [1] Award 1 mark for a relevant reference made to this • 200 or shops business • 3 or local (suppliers) Analysis [2] Award up to 2 marks for relevant development of point(s) • 15-hour days Evaluation [2] Justified decision made as to whether SWQ should start • $2 buying its products from country C • 8-year-olds or children • Could lower inventory costs [k] which is important as customers want • pressure groups lower prices [app] allowing SWQ to remain competitive [an] • mass market • Could lower sales [k] as customers do not want to be associated with • (customers) want low prices unethical businesses [an] that use 8-year olds to sew buttons [app] • Different quality standards [k] so may have to spend time OR money Candidates can discuss either / both the practical to check quality [an] of the clothes [app] issues when importing or the ethical • Transport or distribution problems [k] as did use 3 local manufacturers considerations in relation to country C. [app] it may take too long for stock to arrive in its shops lowering possible sales [an] Do not award lower quality as knowledge unless • Could lose some employees may not want to work for an unethical explained business [k] • Some shareholders may not want to invest in an unethical business [k] leading to less capital to invest [an]