Business Studies 0450/11 May/June 2021: question paper and mark scheme

Mark scheme

1(a) Define ‘public sector’. 2 Award 2 marks for a full definition. Award 1 mark for a partial definition. Government or state-owned businesses/organisations [2] OR Part of the economy controlled by state/government [2] Partial definition e.g. not owned by individuals [1] OR Provided/run by government [1] 1(b) Define ‘profit’ 2 Do not credit answers such as money made by business. [TV] Award 2 marks for a full definition. Award 1 mark for a partial definition. Amount of money left after all costs have been subtracted from revenue. [2] OR Surplus after total costs deducted from sales revenue [2] OR (Total) revenue – total cost [2] OR Gross profit minus expenses [2] Partial definition e.g. revenue minus costs [1] 1(c) Identify four ways to measure the size of a business 4 Only award the first four responses given. Award 1 mark per way. Do not credit measures of success such as profit. Points could include: • Sales value / value of output / revenue • Volume of output / amount of services / amount of sales / number of customers • (Value of) capital employed / value of statement of financial position / market capitalisation • Market share • Number of employees • Number of outlets Other appropriate responses should also be credited. 1(d) Explain one way each stakeholder’s objectives might conflict with 6 Note: To use words from the stem as BKH’s objective to increase profit. application, the reference must be appropriate (i.e. make sense) in relation to Award 1 mark for identification of each relevant way (max 2). the point being made. Award 1 mark for each relevant reference made 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). • Insurance (of house or car) Points might include: • 18 (locations) • 2000 (employees) Customers • Public limited company • Shareholders • May want low prices / value for money [k] when buying insurance • Takeover or expand. [app] which could reduce revenue [an] • Desire high-quality customer service [k] which requires more than Other appropriate examples in context can 2000 staff [app] increasing costs/expenses [an] be credited. • May want offices in more locations [k] than 18 [app] which could increase costs [an] Employees • May want high/regular pay [k] for its 2000 employees [app] which could lead to higher costs [an] • May require job security / contract [k] after the takeover [app] • Job satisfaction / motivation / training / promotion [k] Other appropriate responses should also be credited. 1(e) Do you think economies of scale are the most important reason for 6 This is a general question so there are no taking over another business? Justify your answer. marks for application. Award up to 2 marks for identification of relevant issues. Two knowledge marks are available for examples of economies of scale. Award up to 2 marks for relevant development of points. Lower average unit costs may be [k] or [an] Award up to 2 marks for justified decision as to whether economies of scale but do not credit the same point twice. are the most important reason for taking over another business. Points might include: • Possible purchasing economies of scale / bulk buying [k] leading to lower average costs [an] which could allow for lower prices [an] • Reduces competition [k] which could increase market share / sales [an] and therefore increase revenue [an] • Economies of scale may not be possible to achieve [k] • A business can become too large and may experience diseconomies of scale [k] Other appropriate responses should also be credited. Justification might include: Possible purchasing economies of scale / bulk buying [k] leading to lower costs [an] which could allow for lower prices [an]. Removing a competitor maybe an alternative reason for the takeover [k]. It depends on the business’ objectives [eval] if it is a direct competitor increased market share maybe more important than possible economies of scale. [eval]

Mark scheme

2(a) Define ‘import quota’. 2 Award 2 marks for a full definition. Award 1 mark for a partial definition. Limit on the number of goods into a country [2] Partial definition e.g. limit on number of imports [1] 2(b) Calculate PJA’s gross profit margin. Show your working. 2 0.45 alone = 0 Correct answer 45(%) [2] Correct method but incorrect answer [1] e.g. gross profit / revenue ×100 OR 3330 / 7400 *100 2(c) Outline one benefit and one limitation to PJA of developing new 4 Note: To use words from the stem as products. application, the reference must be appropriate (i.e. make sense) in relation to Award 1 mark for each relevant benefit/limitation. the point being made. Award 1 mark for each relevant reference to this business. The following words are likely to be appropriate for this question: Points might include: • Correct use of data from table 2.1 Benefit: • Clothes • Fashion • Attract new customers / sales / growth [k] for its clothes [app] • 16–25-year-olds / young customers • Need to replace products in decline / keep up with changing customer • Local tastes [k] of 16–25-year-olds [app] • Factory • Retain customers / to maintain market share [k] • Multinational companies • Spread risk / attract new markets / have other products to rely on for • 3 weeks / 21 days. sales [k] • Charge a higher price [k] Other appropriate examples in context can • Improve reputation [k] still be credited. • Can create a unique selling point [k] Limitations: • No guarantee customers will like the new product [k] as fashion changes [app] • Competitors might introduce rival products / reduce prices [k] as most of competitors are multinational companies [app] • High cost [k] • Production issues, e.g. is there sufficient capacity [k] within factory [app] • Having access to suitable materials [k] as trying to avoid import quotas [app] Other appropriate responses should also be credited. 2(d) Explain two ways PJA’s managers can use ratio analysis. 6 Note: To use words from the stem as application, the reference must be Award 1 mark for identification of each relevant way (max 2). appropriate (i.e. make sense) in relation to the point being made. Award 1 mark for each relevant reference made to this business (max 2). The following words are likely to be Award 1 mark for each relevant explanation (max 2). appropriate for this question: Points might include: • Correct use of data from table 2.1 • Clothes • Able to see trends over time [k] for its clothing [app] to see where / • Fashion whether performance has improved or not [an] • 16-25-year-olds / young customers • See trends between competitors [k] such as whether revenue is higher • Local or factory than $7400m [app] to assess how / whether they are as competitive as • Multinational companies they think [an] • Develop new products. • Able to measure financial performance / profitability / success [k] as if last year ROCE was lower than 8% [app] profitability has improved [an] Other appropriate examples in context can • Help make investment/expansion decisions [k] such as developing new be credited. products [app] • Check / manage liquidity OR working capital [k] as if last year the current ratio was higher than 1.5 [app] then they know liquidity has got worse [an] Other appropriate responses should also be credited. 2(e) Do you think multinational companies always benefit the countries 6 This is a general question so there are no they operate in? Justify your answer. marks for application. Award up to 2 marks for identification of relevant issues. Analysis should focus on the impact on the Award up to 2 marks for relevant development of points. country. Award up to 2 marks for justified decision as to whether multinational companies always benefit the countries, they operate in. Points might include: • Creates jobs / provides income [k] so improving living standards [an] • Technical knowhow increased [k] which could help improve production methods / efficiency / output [an] • Orders for local suppliers [k] increasing local incomes / GDP [an] • Improve international reputation of country [k] • Increased investment / infrastructure development in country [k] • Companies pay taxes [k] which increases government income [an] • Competition for local businesses [k] leading to lower demand / lower prices [an] which could lead to the closure of local businesses [an] • Profits are often repatriated [k] limiting the countries growth [an] • Offer higher wages [k] reducing supply of workers for local business [an] • Use up limited resources [k] so there is less available for other local businesses [an] • Jobs created may be unskilled [k] Other appropriate responses should also be credited. Justification might include: Companies pay taxes [k] which increases government income [an]. However, reduced sales for local businesses [k] may lead to lower revenue [an]. A multinational always benefits a country to some extent, because of the money invested. [eval] The overall impact depends upon the effect on local businesses. [eval]

Mark scheme

3(a) Define ‘job rotation’. 2 Award 2 marks for a full definition. Award 1 mark for a partial definition. Employees swapping around and doing each specific task for only a limited time [2] OR Process of switching an employee between jobs over a period of time [2] OR Increasing variety in the workplace by allowing workers to switch from one task to another [2] Partial definition e.g. workers do a variety of tasks [1] 3(b) State two factors that a service sector business should consider when 2 Only award the first two responses given. deciding where to locate. Do not award access to raw materials, as Award 1 mark per factor. this is not appropriate for a service sector business. Points might include: Do not award answers such as cost alone - • Customers / level of demand must be explained. • Cost of rent/taxes • Availability of land/space/parking • Government assistance • Cost/availability of labour • Legal controls • Competitors / near to other business • Transport / accessibility / technology / infrastructure or examples such as electricity, water, gas • Personal preference of owners • Climate Other appropriate responses should also be credited. 3(c) Outline one advantage and one disadvantage to APB of using on-the- 4 Note: To use words from the stem as job training. application, the reference must be appropriate (i.e. make sense) in relation to Award 1 mark for each relevant advantage/disadvantage. the point being made. Award 1 mark for each relevant reference to this business. The following words are likely to be appropriate for this question: Points might include: • Sole trader Advantage: • Printing services / leaflets / brochures • Printing / new machine • Some output produced while training [k] so able to still print some • 6 employees brochures [app] • Costs less than off-the-job [k] and cost might be important issue as he Other appropriate examples in context can is a sole trader [app] still be credited. • Specific to business / control what is taught [k] using the printing machines [app]. Disadvantage: • Trainer may not produce as much output / potential disruption [k] when teaching the 6 employees [app] • Trainer may not have the necessary skills / may not know up-to- date methods [k] for the new machine [app] • Trainer may pass on bad habits / may be a poor-quality trainer [k] • Employees make more mistakes when learning which increases waste [k] Other appropriate responses should also be credited. 3(d) Explain one advantage and one disadvantage of Alex having a 6 Note: To use words from the stem as democratic leadership style. application, the reference must be appropriate (i.e. make sense) in relation to Award 1 mark for identification of each relevant advantage/disadvantage the point being made. (max 2). Award 1 mark for each relevant reference made to this business (max 2). The following words are likely to be Award 1 mark for each relevant explanation (max 2). appropriate for this question: Points might include: • Sole trader • Printing services / leaflets / brochures Advantage: • 6 (employees) • Improves motivation / sense of belonging [k] of his 6 employees [app] • Employees are motivated leading to increased output / productivity [an] • Increased demand • Help keep worker loyalty [k] employees are motivated [app], so less • Printing / new machine time/money spent on recruiting new employees [an] • Creates time for managers to do other work [k] leading to fewer Other appropriate examples in context can mistakes [an] still be credited. • Better decisions could be made as can use employees experience and skills [k] such as deciding which is the best machine to buy [app] Award productivity changes only once as • Positive work environment / better relations between manager and either an advantage or a disadvantage workers [k] e.g. Improved motivation [k] increases • More ideas / advice provided / better communication / encourages productivity [an] and feedback [k]. Decision-making takes time [k]which reduces productivity [an] Disadvantages: • Some employees may not want / be able to cope with being consulted [k] slowing down the decision-making process [an] about what to print [app] • Unpopular decisions less likely to be made [k] • Mistakes can be made if workers are not skilled / lack experience [k] which can damage reputation [an] of this sole trader business [app] • Time-consuming / disagreements may arise [k] Other appropriate responses should also be credited. 3(e) Do you think the amount of money needed is the most important factor 6 This is a general question so there are no for a sole trader to consider when deciding on an appropriate source marks for application. of finance? Justify your answer. To gain both evaluation marks response Award up to 2 marks for identification of relevant points. must clearly relate to a sole trader. Award up to 2 marks for relevant development of points. Award 2 marks for justified decision as to whether the amount of money Do not award answers which only identify needed is the most important factor for a sole trader to consider when sources of finance. deciding on an appropriate source of finance. Points might include: • The business might not have sufficient funds [k] so would need to borrow [an] • A sole trader is likely to have access to fewer sources of finance [k] • Cost of finance / interest [k] would change expenses [an] altering profit margin [an] • Unlimited liability for sole traders [k] means that if the business cannot pay its debts the owner’s personal assets would be at risk [an] • Amount of debt [k] if a business already has a high level of borrowing banks may not lend any more money [an] • Purpose (why money is needed) [k] if buying a non-current asset then a long-term source would be used [an] allowing sufficient time to repay [an] Other appropriate responses should also be credited. Justification might include: The amount is important because a business might not have sufficient funds [k] so would need to borrow money [an]. This would involve interest [k] which would increase business expenses [an]. Unlimited liability is probably the most important factor for a sole trader because this reduces the finance options available [eval]. They are probably also seen as higher risk so whatever the amount finance is it is likely to be more expensive [eval].

Mark scheme

4(a) Define ‘economic growth’. 2 For 2 marks the answer must relate to a country not individual business. Award 2 marks for a full definition. Award 1 mark for a partial definition. High GDP [0] When a country’s GDP increases / more goods and services are produced than in the previous year [2] Partial definition e.g. increases in a country’s spending/income/output [1] OR Increase in GDP [1] 4(b) Define ‘quality assurance’. 2 Do not credit answers such as check at end or check final product as this defines quality Award 2 marks for a full definition. Award 1 mark for a partial definition. control. Checking for quality standards throughout production process / at every Do not credit explanations of why it is done stage [2] e.g. manufacturer wants product to be perfect. Partial definition e.g. checking work done [1] 4(c) Outline two reasons why building customer relationships might be 4 Note: To use words from the stem as important to TGH. application, the reference must be appropriate (i.e. make sense) in relation to Award 1 mark for each relevant reason. the point being made. Award 1 mark for each relevant reference to this business. The following words are likely to be appropriate for this question: Points might include: • Personalised • Increase sales [k] of phone cases [app] • (Mobile/phone) cases • Customer loyalty/retention [k] when using e-commerce [app] • New business/start-up • Help build reputation / brand image / act as free advertising [k] for this • Economic growth new business [app] • Niche market • Opportunity for feedback / help identify customer needs [k] as operate • E-commerce in a niche market [app] • 8 employees • Provide a competitive advantage [k] as other businesses may also set up because of economic growth [app] Other appropriate examples in context can still be credited. Other appropriate responses should also be credited. Do not award phones as application as business does not make them only the covers. 4(d) Explain one advantage and one disadvantage to TGH of using job 6 Note: To use words from the stem as production. application, the reference must be appropriate (i.e. make sense) in relation to Award 1 mark for identification of each relevant advantage/disadvantage the point being made. (max 2). The following words are likely to be Award 1 mark for each relevant reference made to this business (max 2). appropriate for this question: Award 1 mark for each relevant explanation (max 2). • Personalised • (Mobile/phone) cases Points might include: • E-commerce • New business Advantages: • Niche market • 8 employees • Unique / meet exact customer needs [k] for its phone cases [app] can • Quality assurance help brand loyalty [an] • Workers likely to make fewer mistakes [k] which helps ensure quality Other appropriate examples in context can assurance [app] so less need for rework [an] still be credited. • More varied work (leads to higher motivation) [k] helping retention / lower absenteeism [an] in this new business [app] Do not award phones as application as • Can charge a higher price [k] in a niche market [app] business does not them only the covers. • High quality products [k] which are personalised [app] • Flexible [k] Disadvantages: • Skilled labour can cost more [k] for the 8 employees [app] which increases labour costs [an] • No economies of scale (likely) [k] leading to higher average cost [an] • Production can take a long time [k] causing lower output / efficiency / productivity [an] • Costs are higher as it is labour intensive [k] • Mistakes can be expensive to correct [k] Other appropriate responses should also be credited. 4(e) Do you think cost-plus is the best pricing method for a new business 6 This is a general question so there are no to use when selling products to a niche market? Justify your answer. marks for application. Award up to 2 marks for identification of relevant points. To gain both evaluation marks response Award up to 2 marks for relevant development of points. must clearly relate to a new business Award 2 marks for justified decision as to whether cost-plus pricing is the operating in a niche market. best pricing method for a new business to use when selling products in a niche market. Points might include: Cost-plus • Know cost can be covered [k] and can make a profit per item [an] • Simple and easy to calculate [k] so saves time when setting prices [an] • Prices may be higher than competitors [k] leading to a fewer sales [an] • Little incentive to control costs [k] Other pricing methods might include: • Penetration pricing [k] as setting a lower price than competitors should attract customers [an] • Competitive pricing [k] but the business will have limited or no control over the price [an] so may not be able to recover its costs [an] • Price skimming [k] customers may expect / be willing to pay more in a niche market [an] • Promotional pricing [k] Other appropriate responses should also be credited. Justification might include: Cost plus pricing is simple and easy to calculate [k] so saves time when setting prices [an]. Although penetration pricing [k] setting a lower price than competitors should attract customers [an]. Cost plus pricing is the best pricing method as covering costs is important for a new business [eval]. Although the price maybe slightly higher this is less important in a niche market where there are likely to be fewer alternatives [eval].