Business Studies 0450/11 May/June 2022: question paper and mark scheme

Mark scheme

1(a) Define ‘competitive pricing’. 2 Award 2 marks for a full definition. Award 1 mark for a partial definition. When a product is priced in line or just below competitors’ prices (to try to capture more of the market) [2] OR Setting a price similar to that of competitors products which are already established in the market. [2] OR When the price of a good is set at the same level as other products in the market and at a level customers expect or are willing to pay [2] Partial definition e.g. have similar prices to other businesses [1] OR bases their prices on the competitors pricing [1] 1(b) Define ‘marketing budget’. 2 Award 2 marks for a full definition. Award 1 mark for a partial definition. A financial plan for the marketing of a product or product range (for a specified period of time) [2] OR The amount of money made available by a business for its marketing activities during a particular period of time [2] Partial definition e.g. money to be spent on marketing [1] 1(c) Outline two possible threats to Pamela’s business of using e-commerce. 4 To use words from the stem as application, the reference must be Award 1 mark for each relevant threat (max 2). appropriate (i.e. make sense) 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 Points might include: appropriate for this question: Increased competition [k] which makes it harder to calculate a competitive Gift shop price [app] (celebration) Cards/toys/candy Unfamiliarity / customers are less likely to buy from a business they don’t Entrepreneur/the owner know [k] leading to fewer sales of toys [app] 30 years ago No face-to-face contact which could make it difficult to establish a relationship 5 employees [k] so difficult to gain customer loyalty [app] Customer loyalty Website design must be clear / attractive / easy to use, or customers will not Competitive pricing visit [k] Marketing budget Limited/no access to the internet [k] Sales promotion Increasing costs as a specialist may need to be employed / website design / maintenance of sites [k] Other appropriate examples in context May need a larger space to store products increasing costs [k] can still be credited. Packaging/delivery of each item will increase costs per product [k] Larger number of returns could lead to higher business costs [k] Can outline two separate costs if both All customers can see negative reviews [k] clearly related to Pamela/business. Other appropriate responses can also be credited. 1(d) Explain two methods Pamela’s business can use to maintain customer 6 To use words from the stem as loyalty. application, the reference must be appropriate (i.e. make sense) in Award 1 mark for identification of each relevant method (max 2). 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). Gift shop (celebration) Cards/toys/candy Points might include: 5 employees Communicate with customers e.g. newsletters, social media [k] so that they Entrepreneur remember your business [an] when they next need candy (sweets) / toys / 30 years ago cards [app] Competitive pricing Offer rewards to existing customers / introduce a loyalty scheme [k] using Marketing budget money from the marketing budget [app] so consumers have an incentive to Sales promotion return [an] Train staff / offer good quality service [k] from all 5 employees [app] Other appropriate examples in context Extra services or examples such as delivery / credit facilities [k] can still be credited. Ask for feedback / carry out market research [k] so the items you are selling match customer needs [an] Resolve complaints quickly [k] so that customers don’t go to other businesses [an] Introduce new products / high quality products [k] satisfying the customers’ needs [an] Brand loyalty [k] Other appropriate responses should also be credited. 1(e) Do you think being a risk-taker is a more important characteristic of a 6 This is a general question so there are successful entrepreneur than being creative? Justify your answer. no marks for application. Award up to 2 marks for identification of relevant points. For evaluation to be awarded justification will usually follow on from Award up to 2 marks for relevant development of points. relevant analysis of points. Award 2 marks for a justified decision as to whether being a risk-taker is a more important characteristic of a successful entrepreneur than being creative. Points might include: Risk-taker: A successful entrepreneur must take risks otherwise there is no business [k] Entrepreneurs take the risk of investing their own money [k] this may bring high rewards [an] however they may fail and lose their personal possessions [an] Taking risks is a way to learn [k] if an idea is good or not [an] Creative: New ideas [k] leading to increased sales/revenue [an] Creativity adds value [k] so higher prices can be charged [an]. Creativity alone does not guarantee success [k] if customers do not purchase [an] Other appropriate responses should also be credited. Justification might include: Entrepreneurs take the risk of investing their own money [k] this may bring high rewards [an]. Being creative maybe a more important characteristic as making a business different to its competitors [k] can lead to increased sales [an]. In a competitive market creativity is especially important because it helps the business stand out from competitors. [eval] An entrepreneur can take risks, but if customers will not buy, they will not be successful. [eval]

Mark scheme

2(a) Define ‘public limited company’. 2 Award 2 marks for a full definition. Award 1 mark for a partial definition. Businesses owned by shareholders, but they can sell shares to the public and their shares are tradeable on the stock exchange [2] OR Often a large company, owned by shareholders who have limited liability. The company can sell its shares to the general public [2] OR A company that sells its shares to the general public through a stock exchange (because the company can sell shares to anyone, it can raise massive amounts of money) [2] OR A business whose shares can be freely bought and sold to the general public [2] Partial definition e.g. a business that can sell shares [1] 2(b) Calculate the margin of safety for CTF’s children’s beds. Show your 2 working. Correct answer: 4000 [2] Correct method but incorrect answer e.g. Current output−break-even output [1] OR 18 000 – 14 000 [1] = 4000 [1] If correct answer given with no working shown, award 2 marks. Award only 1 mark if 4000 is written as part of the answer but is not given as the final answer. 2(c) Outline two ways an increase in inflation might affect CTF. 4 To use words from the stem as application, the reference must be Award 1 mark for each relevant way (max 2). appropriate (i.e. make sense) 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 Points might include: appropriate for this question: Employees might ask for pay rise [k] reducing its margin of safety [app] Public limited company (PLC) Increase in raw material costs[k] for manufacturing (beds) [app] (children’s) Beds Prices may have to increase [k] Factory/manufacturer Fewer sales / customers cannot afford to buy [k] the beds [app] Margin of safety / 4000 Batch production Other appropriate responses should also be credited. Environmental pressures 14 000 (break-even output) 18 000 (current output) 25 000 (capacity) Other appropriate examples in context can still be credited. 2(d) Explain two possible advantages to CTF of using batch production. 6 To use words from the stem as application, the reference must be Award 1 mark for identification of each relevant advantage (max 2). appropriate (i.e., make sense) 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 Award 1 mark for each relevant explanation (max 2) appropriate for this question: Public limited company (PLC) Points might include: (children’s) Beds Flexible [k] easy to change the type of beds [app] to adapt to customer Factory/manufacturer demands [an] Margin of safety / 4000 Economies of scale / materials can be bought in bulk [k] which can help Environmental pressures reduce average costs [an] improving the margin of safety [app] 14 000 (break-even output) Production may not be affected to any great extent if machinery breaks down 18 000 (current output) [k] so some output made [an] so help reach its break-even output of 14 000 25 000 (capacity) [app] Variety of products [k] which could lead to increased sales [an] Other appropriate examples in context Variety of tasks can motivate workers [k] leading to less absenteeism / lower can still be credited. labour turnover [an] at the factory [app] Spread risk (as can make more than one type of product) [k] Advantages should focus on advantages to the business not Other appropriate responses should also be credited. employees. Answers such as variety of work on own are too vague [tv]. 2(e) Do you think manufacturing businesses should always respond to 6 This is a general question so there are environmental pressures? Justify your answer. no marks for application. Award up to 2 marks for identification of relevant points. For evaluation to be awarded justification will usually follow on from Award up to 2 marks for relevant development of points. relevant analysis of points. Award 2 marks for a justified decision as to whether manufacturing businesses should always respond to environmental pressures. Points might include: Reduces the risk of a customer boycott [k] Enhance brand image / reputation [k] leading to more potential customers / revenue [an] Help recruit / retain employees [k] Help attract investors [k] so raise more capital [an] Reduces risk of legal action/fines [k] avoiding bad publicity[an] May need to buy new equipment [k] which increases costs [an] leading to higher prices [an] Reduce productivity [k] which could lower profit margin [an] May need to find new suppliers of raw materials [k] leading to higher unit costs [an] Other appropriate responses should also be credited. Justification might include: Yes, although this could mean the business has to find new suppliers of raw materials [k] increasing unit costs [an]. However, responding to environmental pressures can improve the reputation of the business [k] leading to an increase in revenue [an]. The additional revenue gained could offset the costs of responding to environmental pressures. So, if they can find the resources they need at a competitive price, they should. [eval] [eval]

Mark scheme

3(a) Define ‘shareholders’ equity’. 2 Award 2 marks for a full definition. Award 1 mark for a partial definition. (Total sum of) money invested into the business by the owners of the company [2] OR Share capital plus reserves [2] OR Total assets minus total liabilities [2] Partial definition e.g. money raised from selling shares [1] 3(b) Identify two financial statements a public limited company is legally 2 Only award the first two responses required to publish each year. given. Award 1 mark for each financial statement. Do not award cash-flow forecast. Two from: Income statement (Profit and loss) Statement of financial position (Balance sheet) Cash-flow statement/statement of cash flows Statement of changes in equity 3(c) State whether each of the following are classified as a current asset or a 4 current liability. Award 1 mark for each correct answer. Overdraft−current liability Trade receivables−current asset Trade payables−current liability Cash in bank−current asset 3(d) Explain one way each of the following stakeholder groups might use VCG’s 6 To use words from the stem as accounts: application, the reference must be appropriate (i.e., make sense) in Award 1 mark for identification of each relevant way (max 2). 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). Bags or examples such as briefcase / travel bag Points might include: (second) Factory Shareholders: $2m (revenue) Help assess business performance / profits [k] to see whether they will $800 000 (equity) receive a dividend / return on their investment [an] from this bag manufacturer $300 000 (current assets) [app] $250 000 (current liabilities) Help decide whether to continue to invest [k] as the business is looking to 1.2 (current ratio) open a second factory [app] which could mean less dividends paid [an] High−quality Assess the liquidity [k] they do not want to invest in a business with serious 50 / Skilled workers cash or liquidity problems [an] To compare performance over time [k] and how much the $800 000 in equity Other appropriate examples in context increases [app] to decide whether they should take their money and invest can still be credited. elsewhere [an] Compare performance between different businesses [k] to decide whether it Candidates must quote the numbers to is a good investment [an] be awarded application for use of Table 3.1 information. Suppliers: Can see the total value / level of debt [k] current liabilities $250 000 [app] to Calculation of current ratio is not [an] help decide whether they should offer (more) credit [an] as it does not answer the question. Assess whether the business has sufficient cash [k] within current assets of $300 000 [app] for the business to be able to repay them when debts become due [an] Assess profitability / level of sales [k] successful business may need more materials so maintains or increase revenue for the supplier [an] especially as make high-quality products [app] Other appropriate responses should also be credited. 3(e) Do you think access to labour is the most important factor for a 6 This is a general question so there are manufacturing business to consider when deciding where to locate a new no marks for application. factory? Justify your answer. For evaluation to be awarded Award up to 2 marks for identification of relevant points. justification will usually follow on from relevant analysis of points. Award up to 2 marks for relevant development of points. Award 2 marks for a justified decision as to whether access to labour is the most important factor for a manufacturing business to consider when deciding where to locate a new factory. Points might include: Access to labour: Skilled labour may be difficult to find/recruit [k] which could increase recruitment/labour costs [an] but can use machinery to reduce the need for labour [an] Labour intensive production requires access to labour [k] without labour they cannot operate[an] Can depend on type of workers required (k) unskilled workers may be easy to find [an] Other factors might include: Good transport links [k] to ensure products arrive / sent when needed [an] Proximity to market [k] to ensure sales / revenue can be made [an] Type of product [k] a fragile / heavy product may need to be closer to customers to reduce risk of damage / cost [an] Access to raw materials / components [k] so production is not delayed[an] Availability/cost of suitable land [k] which could restrict size of factory / limit output / increases fixed costs [an] Government influence or examples e.g. government grants [k] can help reduce costs [an] whereas legal controls could prevent the business from locating in certain areas [an] 3(e) Other appropriate responses should also be credited. Justification might include: Skilled labour may be difficult to find [k] which could increase recruitment costs [an] Factory machinery can replace some labour [k] reducing the importance of labour in the location decision [an]. Labour is the most important factor if the business is labour intensive because without labour the new factory cannot produce output [eval] however, other factors would be of greater importance in a new capital-intensive factory. [eval]

Mark scheme

4(a) Identify two objectives for a business organisation in the public sector. 2 Only award the first two responses given. Award 1 mark per objective. Points might include: Financial or examples e.g. meet targets set by government, improve efficiency/reduce costs Make product/service affordable to all Provide a service to everyone Protect or create jobs in certain areas (social objectives) Other appropriate responses should also be credited. 4(b) Define ‘chain of command’. 2 Award 2 marks for a full definition. Award 1 mark for a partial definition. The structure in an organisation which allows instructions to be passed down from senior management to lower levels of management [2] OR The route through which authority is passed down through an organisation [2] OR Shows how communication and tasks are passed down the business from the top to the bottom [2] Partial definition e.g. shows who gives orders [1] 4(c) Outline two ways MBH can use ideas from Herzberg’s theory to motivate its 4 To use words from the stem as employees. application, the reference must be appropriate (i.e. make sense) in Award 1 mark for each relevant point. relation to 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: 440 / doctors Could give employees more responsibility [k] in the hospital [app] (5) Hospitals / or related words Offer more interesting work [k] as many are skilled employees [app] 5600 employees Offer more praise for good work [k] Public sector Give chances for promotion [k] as there is a tall organisational structure [app] Communication barriers Phone/email Other appropriate responses should also be credited. Long chain of command Tall organisational structure Skilled employees Other appropriate examples in context can still be credited. Do not award examples of hygiene factors on their own e.g., Pay, improve working conditions as these are not motivators 4(d) Explain how MBH might reduce or remove each of the following 6 To use words from the stem as communication barriers: application, the reference must be appropriate (i.e. make sense) in Award 1 mark for identification of each relevant way (max 2). 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). 440 / doctors (5) Hospitals / or related words Points might include: 5600 employees Messages lost: Public sector Ask for feedback [k] to ensure that the message is received [an] by all 5 Phone/email hospitals [app] Long chain of command Make sure the medium of communication is suitable/works [k] Tall organisational structure Delayering/ flattening the structure [k] because it is a long chain of command Externally recruited [app] Other appropriate examples in context Use of jargon: can still be credited. Use simple language [k] on the phone/email [app] so easy for everyone / receiver to understand [an] Make sure language is appropriate to the receiver [k] to make sure there is no misunderstanding [an] Providing opportunities for the receiver to ask questions [k] Other appropriate responses should also be credited. 4(e) Do you think an organisation should always use external recruitment when 6 This is a general question so there are recruiting skilled employees? Justify your answer. no marks for application. Award up to 2 marks for identification of relevant points For evaluation to be awarded justification will usually follow on from Award up to 2 marks for relevant development of points. relevant analysis of points. Award 2 marks for a justified decision as to whether an organisation should Advantages of external recruitment always use external recruitment when recruiting skilled employees. can be disadvantages of internal but do not award the same point twice as Points might include: mirror answers are not accepted. External recruitment: Bring in new skills / ideas [k] which could help improve productivity / effectiveness / efficiency of business [an] Can bring in valuable knowledge and experience of competition [k] gaining a competitive edge [an] Wider choice of applicants [k] increases possibility of finding best person for job [an] No knowledge of how business works / current operations [k] so might need induction training [an] Avoids risk of upsetting employees when someone internal is promoted [k] Higher recruitment costs [k] More time spent / takes longer to fill vacancy [k] Required if no suitable candidates in the business [k] Internal recruitment : Can help motivate other employees [k] which could lead to fewer people leaving / reduce absenteeism [an] Internal promotion can create another vacancy that then needs to be filled [k] Other appropriate responses should also be credited. 4(e) Justification might include: External recruitment can bring in new skills and ideas [k] helping improve productivity [an]. Whereas using internal recruitment can help motivate other employees [k] which could lead to fewer people leaving [an]. Overall, it depends on the skills within the business because if there are no suitable workers external recruitment would be the only choice. [eval] [eval]