Business Studies 0450/23 May/June 2022: question paper and mark scheme

Mark scheme

1(a) Explain two leadership styles that the Managing Director of BB may use. 8 Award 1 mark for each correct leadership style identified (maximum 2). Award a maximum of 3 additional marks for each leadership style identified – one of which must be applied to this context. Leadership styles identified could be: Autocratic Democratic Laissez-faire For example: Laissez-faire (1) The broad objectives are provided by the Managing Director, but the store managers (app) are left to make the individual decisions in the running of each store. (1) This could mean that each store is managed differently and there is not a consistent approach (1). Application could include: sandwich shops; ready-made/made-to-order sandwiches; low motivation; store manager; 21 store employees; drive- through; shop managers overworked; limited promotion opportunities; expansion/takeover; minimum wage; business customers pay at end of month; 40% business customers; cash paid for food ingredients. 1(b) Explain the advantages and disadvantages to BB of using the following 12 three methods to motivate the shop employees. Recommend which method BB should use. Justify your answer. Introduce job rotation Provide opportunities for promotion Increase wages Level Description Marks 3 Sound application of knowledge and understanding of 9–12 relevant business concepts using appropriate terminology. Detailed discussion of two or more methods. Well-justified recommendation. Candidates discussing all three methods in detail, in context and with a well-justified recommendation including why the alternative methods are rejected should be rewarded with the top marks in the band. 2 Sound application of knowledge and understanding of 5–8 relevant business concepts using appropriate terminology. Detailed discussion of at least one method. Judgement with some justification / some evaluation of choices made. Candidates discussing two or more methods in detail and applying them to the case should be rewarded with the top marks in the band. 1 Limited application of knowledge and understanding of 1–4 relevant business concepts. Limited ability to discuss methods with little/no explanation. Simple judgement with limited justification / limited evaluation of choices made. Candidates outlining all three methods in context should be rewarded with top marks in the band. 0 No creditable response. 0 1(b) Relevant points might include: Advantages Disadvantages Introduce job Increases variation of Tasks are still low rotation task for employees. skill level and do not They can move increase levels of between making responsibility sandwiches and All tasks are repetitive taking orders and so employees Easier for shop may still become managers to move bored employees between It may not reduce the tasks if an employee labour turnover in is absent BB if low pay is the Helps managers to main factor to low identify which tasks motivation employees are best at It could take time to Allows employees an move the employees opportunity to move between tasks up Maslow’s reducing efficiency hierarchy and offers The organisation access to higher structure does not levels of motivation allow for promotion opportunities. Expensive and difficult to change the current organisational structure Provide Employee feels It would be expensive opportunities for valued and to provide training to promotion recognised by the shop employees to shop managers and become newly so will work harder appointed deputy Employee knows how managers the sandwich shop It may be works and so can use demotivating to the their knowledge to shop employees who improve the business do not receive the promotion so may increase absenteeism/labour turnover 1(b) Advantages Disadvantages Increase wages Shop employees feel Increases the costs of that they could be the sandwich shop better rewarded for Higher wages could their work as they are make the poor cash paid above the flow position of the minimum wage business worse It is an easy system Some employees to implement, may think it is unfair if everyone will receive they do more work the pay increase than others, the employees who do not work as hard should not get the pay increase Recommendation Job rotation is best because it is easy to implement and would reduce the level of boredom which could reduce labour turnover. It would offer some variety. This is simpler for BB to introduce than changing the organisational structure as new deputy manager positions may need to be created to provide opportunities for promotion and would cost less than increasing wages as wages would remain the same. Providing opportunities for promotion is best because if the new deputy managers are promoted from within the business this would increase shop employees’ responsibilities and it would help reduce the workload of the shop managers and make the business more efficient. It would lengthen the chain of command, but this would only cause minor problems with communication. Increasing wages is best because it may reduce the high labour turnover as employees would feel that they are paid in line with competitor shops. This would reduce the recruitment costs incurred by BB and in the longer term possibly save costs as recruitment is expensive.

Mark scheme

2(a) Explain four business objectives that BB might have. 8 Award 1 mark for each relevant objective (maximum of four objectives). Award a maximum of 1 additional mark for each explanation of the objective which must be applied to this context. Relevant objectives might include: Growth/increase sales revenue – BB is planning to grow by possibly opening a new store Increased market share/customer loyalty – as BB wants to expand in one of the cities Profit – to help convince the bank to give the long-term loan Survival – as it operates in a competitive environment Return for shareholders – as it is a private limited company Provide a service to the community – unused sandwiches could be donated to those on low incomes at the end of the day For example: Growth (1) BB is planning to expand by taking over a competitor store (app). Application could include: sandwich shops; ready-made/made-to-order sandwiches; low motivation; store manager; 21 store employees; drive- through; shop managers overworked; limited promotion opportunities; expansion/takeover; minimum wage; business customers pay at end of month; 40% business customers; cash paid for food ingredients. 2(b) Using Appendix 2, consider the two locations for the replacement shop. 12 Recommend which location would be most suitable for BB’s replacement shop. Justify your answer. Level Description Marks 3 Sound application of knowledge and understanding of 9–12 relevant business concepts using appropriate terminology. Detailed discussion of both locations. Well-justified recommendation. Candidates discussing both locations in detail, in context and with a well-justified recommendation including why the alternative location is rejected should be rewarded with the top marks in the band. 2 Sound application of knowledge and understanding of 5–8 relevant business concepts using appropriate terminology. Detailed discussion of at least one location. Judgement with some justification / some evaluation of choices made. Candidates discussing one location in detail and applying it to the case should be rewarded with the top marks in the band. 1 Limited application of knowledge and understanding of 1–4 relevant business concepts. Limited ability to discuss locations with little/no explanation. Simple judgement with limited justification / limited evaluation of choices made. Candidates outlining both locations in context should be rewarded with top marks in the band. 0 No creditable response. 0 2(b) Relevant points might include: Location A Near to the cinema/bus station – this will mean a potential increase of people passing the sandwich shop and therefore more customers Located in the city centre – has a high number of business customers from the offices in this location so more revenue as increased number of customers Competitor businesses located nearby – may lose customers to cafe/supermarket located nearby therefore fewer sales as sandwiches may be better City centre location will have higher business taxes. Rent is also higher – overall it is $10 000 more expensive than location B each year Location B Parking available – better if wanting to have a drive-through service as cars have easy access Close to customers using the shopping centre Annual rent is $8000 less than location A Shopping centre has lower taxes $200 – this will reduce the fixed costs of BB Recommendation I think location A is most suitable because it is likely to have a high number of business customers from the offices behind location A and also has the benefit of being opposite the bus station. Even though the annual rent is higher it has the potential to generate greater revenue than location B which in the long-term could lead to higher profit. I think location B is most suitable because it costs less than location A by $10 000. The current difference between BB and its competitors is a drive-through service, location B would be more likely to allow this model to be used in the new shop than location A which has no parking nearby.

Mark scheme

3(a) Explain four ways to measure the size of a business. 8 Award 1 mark for each relevant way (maximum of four ways). Award a maximum of 1 additional mark for each explanation of a relevant way to measure the size of a business. Relevant ways might include: Number of people employed Value of output/sales Number of outlets/shops Value of capital employed Market share For example: By the number of people employed in the business (1) which will be high if it is a labour-intensive business. (1) 3(b) Using Appendix 3 and other information, consider the two options for 12 growth. Which option should BB choose? Justify your answer using suitable calculations. Open a new shop Take over a competitor’s shop Level Description Marks 3 Sound application of knowledge and understanding of 9–12 relevant business concepts using appropriate terminology. Detailed discussion of both options. Well-justified recommendation. Candidates discussing both options in detail, in context and with a well-justified recommendation including why the alternative option is rejected should be rewarded with the top marks in the band. 2 Sound application of knowledge and understanding of 5–8 relevant business concepts using appropriate terminology. Detailed discussion of at least one option. Judgement with some justification / some evaluation of choices made. Candidates discussing one option in detail and applying it to the case should be rewarded with the top marks in the band. 1 Limited application of knowledge and understanding of 1–4 relevant business concepts. Limited ability to discuss options with little/no explanation. Simple judgement with limited justification / limited evaluation of choices made. Candidates outlining both options in context should be rewarded with top marks in the band. 0 No creditable response. 0 3(b) Relevant points might include: Advantages Disadvantages Option 1 – Open Break-even output is Profit of $12 000 is a new shop 10 000 units per lower than option 2 month which is 4000 Can be a slower units lower than method of growth – it option 2 can take a while for Margin of safety is the sandwich shop 12 000 sandwiches to be known and build which is the same as a reputation in the option 2 area Internal growth is Starting a new easier to manage – business in a new the business will be area has a higher risk set up with existing of failure structure Marketing costs might The organisational be higher to promote structure - would be the new shop relatively easy to add Lower contribution another shop per unit because of manager lower price Fixed costs are $11 000 per month lower – reduces expenses – may help to improve the monthly cash flow position Option 2 – Take Makes a profit of Break-even output is over a $18 000 higher than option 1 competitor’s shop Revenue is $78 000 at 14 000 units per per month which is month $34 000 higher than May not allow for option 1 differentiation as no Horizontal integration drive-through – reduces the number service so this will of competitors in the need to be added and area incur costs if BB is to An established maintain its customer base advantage over Average price per competitors sandwich is $1 Taking over another higher than option 1 business may be a problem if the way it operates is very different to how BB operates 3(b) Recommendation Buying a new shop is the better option as it would allow BB to continue to offer a drive-through service which is different to its competitors. There is less risk as the break-even output is 4000 units lower than option 2. Internal growth would allow the new shop to be run and managed using the existing organisational structure which would avoid potential conflict. Taking over a competing sandwich shop would be better as it is forecast to make $6000 higher profit with lower risk as the business is well known and has an established customer base.

Mark scheme

4(a) Explain two possible reasons why BB might have cash-flow problems. 8 Award 1 mark for each relevant reason (maximum 2 reasons). Award a maximum of 3 additional marks for each explanation of the reasons why BB might have cash-flow problems – one of which must be applied to this context. Relevant reasons might include: High levels of credit sales – 40% of sales are on credit. This means cash has left the business to pay for raw materials but there is a delay in receiving cash in from business customers No trade credit – cash leaves the business immediately when food ingredients are delivered from the suppliers If the costs of expansion are higher than forecast this will lead to higher cash outflows/repayment of the interest on the loan – expansion may take a long time to increase cash inflows Poor management decisions as store managers are overworked – they don’t have time to look for the best deal to try and reduce the cash outflows / mistakes are made when preparing an order which means that sandwiches have to be made again For example: BB has high levels of credit sales (1) the company currently allows business customers to pay at the end of the month (app). The business has to buy all the ingredients for the sandwiches in advance but does not receive any income for up to one month later (1). This means that there is a delay between cash paid out to suppliers and cash being received from the customers (1). Application could include: sandwich shops; ready-made/made-to-order sandwiches; low motivation; store manager; 21 store employees; drive- through; shop managers overworked; limited promotion opportunities; expansion/takeover; minimum wage; business customers pay at end of month; 40% business customers; cash paid for food ingredients. 4(b) Consider how the following two changes could affect BB’s marketing. 12 Which change is likely to have the most effect on BB’s marketing? Justify your answer. Customers are becoming more health conscious More people are working from home instead of in offices Level Description Marks 3 Sound application of knowledge and understanding of 9–12 relevant business concepts using appropriate terminology. Detailed discussion of both changes. Well-justified conclusion. Candidates discussing both changes in detail, in context and with a well-justified conclusion including why the alternative change is rejected, should be rewarded with the top marks in the band. 2 Sound application of knowledge and understanding of 5–8 relevant business concepts using appropriate terminology. Detailed discussion of at least one change. Judgement with some justification / some evaluation of choices made. Candidates discussing at least one change in detail and applying it to the case should be rewarded with the top marks in the band. 1 Limited application of knowledge and understanding of 1–4 relevant business concepts. Limited ability to discuss changes with little/no explanation. Simple judgement with limited justification / limited evaluation of choices made. Candidates outlining both changes in context should be rewarded with top marks in the band. 0 No creditable response. 0 4(b) Relevant points might include: Customers May need to change the menu – include healthier are becoming sandwiches and salad bowls – takes time to develop more health a new menu – increases costs to print new menus for conscious the store Change of menu may result in needing to change suppliers – may need new sandwich fillings that current supplier can’t provide – these could be more expensive – increase variable costs If BB charges higher prices for the healthy options – this could increase revenue May need to promote new healthier sandwich range – increases marketing costs More people More people are working from home – so promotion working from method for the sandwiches could be leaflets to local home instead houses of in offices Creates new opportunities – BB could start home delivery service as well as office delivery service – this increases the methods of distribution Improving packaging for safe delivery of sandwiches to customers’ homes Increased orders from customers working from home so may have to increase price to cover the cost of delivery Conclusion Consumers becoming more health conscious will have the most effect on BB’s marketing. Changing the menu and method of promotion will be essential. BB may also have to increase prices to cover the cost of healthier ingredients. However, customers may be willing to pay higher prices and the new menu could attract new customers. Whereas the increased number of people working from home will not need any change to the menu or method of promotion, and BB already has a delivery service. BB already deliver to business customers so they are already set up for delivery they will need to change the method of promotion and improve the packaging as well as extending the delivery service to a wider range of customers so the impact on marketing would be greater.