Business Studies 0450/13 May/June 2023: question paper and mark scheme

Mark scheme

1(a) Define ‘mass market’. 2 Do not award: Alternative words for mass e.g. big/large Award 2 marks for a full definition. Award 1 mark for a partial definition. market. Lots of sellers, lots of competitors, lots of Where there is a very large number of sales of a product [2] products as this simply describes a market. OR Selling the same product to the whole market [2] OR A large market containing lots of customers buying similar products [2] Partial definition e.g. lots of customers / lots of sales / lots of buyers [1] 1(b) Calculate X and Y. 2 $ sign is not required. Award 1 mark for each correct calculation. X: $60 000 or 60 Y: $80 000 or 80 or (80) 1(c) Outline two reasons why managing cash flow might be important 4 To use words from the stem as application, the for TDG. reference must be appropriate (i.e. make sense) in relation to the point being made. Award 1 mark for identification of 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: Bicycles/bikes Points might include: Retailer To be able to pay wages [k] to its 3 employees [app] ($10 000) closing balance / cashflow Pay suppliers/trade payables [k] for the bikes [app] problem in September Pay expenses/heating/rent/advertising [k] to avoid cash flow problem Customer loyalty in September [app] Mass market Repay (short-term) debts [k] of the retailer [app] 3 employees Predict/plan/prevent cash flow problems [k] such as the $80 000 $80 000 (cash outflow in September) – shortfall [app] OFR Ensure business survival/continue [k] $40 000(cash inflow in September) Cash available for emergency [k] Other appropriate examples can be credited. Other appropriate responses should also be credited. Do not award: Invest/expand References to profit Know how to improve on own [tv] Support request for loan/finance 1(d) Explain two ways TDG could overcome its short-term cash-flow 6 To use words from the stem as application, the problem in September. reference must be appropriate (i.e. make sense) in relation to the point being made. Award 1 mark for identification of 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: Bicycles / bikes Award 1 mark for each relevant explanation (max 2). Retailer –$10 000 (closing balance) Points might include: Customer loyalty Delay payments to suppliers [k] for its bicycles [app] keeping cash in Mass market the business for longer [an] 3 employees Ask/offer discounts so customers to pay quicker / insist on cash $80 000 (cash outflow – OFR will apply) sales [k] so business receives cash sooner [an] but may not help $40 000 maintain customer loyalty [app] Overdraft [k] allows the business to have a negative cash balance Other appropriate examples can be credited. [an] to cover the – $10 000 [app] Bank loan [k] to increase cash inflow [an] above $40 000 [app] Analysis must show impact on cash flow. Delay/not purchase / buy cheaper equipment [k] which prevents cash outflows [an] Do not award: Sell (non-current) assets [k] generates cash inflows [an] Long-term solutions such as 'introduce more capital / sell shares', retained profit Other appropriate examples in context can be credited. Decrease price / advertise on own References to raw materials / production 1(e) Explain two methods a retailer could use to maintain customer 6 This is a general question so there are no loyalty. Which would be the best method to use? Justify your marks for application. answer. For evaluation to be awarded justification will Award up to 2 marks for identification of relevant points. usually follow on from relevant analysis of points. Award up to 2 marks for relevant development of points. Analysis can be awarded for: Award up to 2 marks for justified decision as to which is the best method Explaining how method works for a retailer to use to maintain customer loyalty. Negatives of each method Points might include: Do not award: Offer loyalty cards / offer points for every purchase / discount for Develop / make new products as retailer. regular/loyal customers [k] so incentive / reward to return [an] Explanation of customer loyalty for AN. Train staff / offer good service/friendly conversations with customer e.g. 'so will keep coming back'. Needs to [k] which would make them feel welcome [an] say why makes customers keep coming Communicate with customers or examples such as through back. newsletters / social media [k] so they remember your business [an] Ways to increase sales in general e.g. Ask for feedback / carry out market research [k] so know what is advertise / lower prices. being sold matches customer needs [an] Customer loyalty as [an] as in question. Introduce new / sell high-quality products [k] Resolve complaints quickly [k] Offer extra services or examples e.g. offer delivery / credit facilities [k] Other appropriate responses should also be credited. Justification might include: One method is a loyalty card [k] so there is an incentive to return [an]. It could offer good service [k] so customers feel more welcome [an]. A good service is better because this may not include any costs which a loyalty card would [eval] which could help increase profit margin as well as customer loyalty. [eval]

Mark scheme

2(a) Define ‘quality control’. 2 At end of production is +1 only. Award 2 marks for a full definition. Award 1 mark for a partial definition. Do not award: Reasons why quality control is carried out. Checking of goods at the end of the production process (whether it is the Vague comments such as ensuring quality is production of the product or a service) [2] good / whether product good enough, meeting OR customers expectation/standards. Checking the standard of goods through inspection [2] Partial definition e.g. Checking the work [1] Making sure goods are up to standard [1] 2(b) Identify two ways a pressure group might try to influence business 2 Only award the first two responses given. decisions. Do not award: Award 1 mark per way (max 2). Change laws Spread awareness on own – need how. Points might include: Create negative publicity / publish information about business / write to newspaper Organise customer boycotts Organise demonstrations / protests / rally opposition Lobby/petition / send letters to government Demand interview with company Take legal action Other appropriate responses should also be credited. 2(c) State four benefits to a business of increasing efficiency. 4 Only award the first two responses given. Award 1 mark for each relevant benefit (max 4). Do not award: Lower labour turnover/less absenteeism Points might include: More revenue/sales/profit. Reduce average/unit costs Fewer mistakes/errors Less waste Fewer materials needed Increase output Quicker/faster production Reduced inputs needed for the same level of output Other appropriate responses should also be credited. 2(d) Explain one external cost and one external benefit that may be 6 To use words from the stem as application, the created by KCL’s business. reference must be appropriate (i.e. make sense) in relation to the point being made. Award 1 mark for identification of each relevant external cost/benefit (max 2). The following words are likely to be appropriate for this question: Award 1 mark for each relevant reference to this business (max 2). Paper/newspapers/books Wood (or other appropriate examples of Award 1 mark for each relevant explanation (max 2). raw materials) Factory Points might include: Increase efficiency (Raw materials from) local suppliers External cost: Pressure groups Pollution/smoke/fumes created [k] from making paper [app] could High level of inventory damage health of people in the community [an] Congestion [k] caused by deliveries to the factory [app] so longer to Other appropriate examples in context can still move about / slow down deliveries to other businesses [an] be credited. Use up natural resources [k] to obtain the wood [app] meaning fewer resources available for other uses/future generations [an] Some points can be [k] or [an] but only award Destruction/spoil landscape [k] reducing tourism [an] once. External benefit: Do not award: Provide jobs [k] as it uses local suppliers [app] so low(er) rates of Costs/benefit to business unemployment [an] Uses of paper e.g. books/newspapers Help economic growth [k] which can result in additional taxes [an] Improved infrastructure/better road links [k] improving access for local community/businesses [an] New production techniques may be introduced [k] Other appropriate responses should also be credited. 2(e) Explain two factors a manufacturing business should consider 6 This is a general question so there are no when deciding how much inventory to hold. Which factor is likely to marks for application. be the most important? Justify your answer. For evaluation to be awarded justification will Award up to 2 marks for identification of relevant points. usually follow on from relevant analysis of points. 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 justified decision as to which is the most once. important factor for a manufacturing business to consider when deciding how much inventory to hold. Watch for repetition e.g. high demand, low demand so high/low inventory. Points might include: Whether product is perishable or not / shelf life [k] to reduce the amount of wastage [an] Level of demand / sales [k] as if high demand needs to hold high inventory [an] Seasons / celebrations/festivals/predictability of demand [k] Storage space available [k] could increase storage costs [an] Cost of holding inventory [k] as high levels could increase cash outflows [an] Method of production / level of output [k] as flow production may require high levels of inventory [an] Amount of finance available (to buy inventory) [k] as this could cause cash flow problems / cannot afford to hold large amount [an] Delivery / lead time / where products come from / reliability of supplier [k] so production can continue / meet orders on time [an] Other appropriate responses should also be credited. 2(e) Justification might include: The amount of space available [k] as a larger warehouse may increase storage costs [an]. Another factor is delivery time [k] as may need higher levels of inventory to ensure production can continue [an]. Overall delivery time is more important because if production stops, any costs saved on storage may be lost as the business still have to pay its workers [eval] and the lack of available products could lead to fewer sales. [eval]

Mark scheme

3(a) Define ‘span of control’. 2 Award 2 marks for a full definition. Award 1 mark for a partial definition. Number of subordinates reporting to each supervisor / manager [2] OR Number of subordinates / employees working (directly) under a manager [2] Partial definition e.g. whom you are responsible for [1] OR who reports to one manager [1] 3(b) Identify two leadership styles. 2 Only award the first two responses. Award 1 mark per leadership style (max 2). Do not award: Descriptions of styles. Points might include: Autocratic Democratic Laissez-faire Other appropriate responses should also be credited. 3(c) Outline two benefits to PCY of encouraging its managers to use 4 To use words from the stem as application, the delegation. reference must be appropriate (i.e. make sense) in relation to the point being made. Award 1 mark for each relevant benefit (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: (4) offices Points might include: 500 (employees) Reduce managers’ workload / managers have time to focus on other Insurance (services) (important) tasks [k] such as how the business is Business customers / farms / factories organised/managed [app] Leadership style Quality of managers’ work improves / managers likely to make fewer Being ethical mistakes [k] in the 4 offices [app] Communication barriers Increase employee motivation [k] of its 500 employees [app] Span of control Builds trust / better working relationship between managers and Planning to change how business is employees [k] which could influence its leadership style [app] managed / organised Way to develop employee skills / increase employee flexibility / employees may have better knowledge of issue [k] at the insurance Other appropriate examples can be credited. business [app] To access [k] – must indicate who the point refers to e.g. reduce workload of manager. Other appropriate responses should also be credited. Communication barriers is [app] only. Do not award: Benefits to employees e.g. feel trusted. 3(d) Explain two possible reasons why being ethical is important to PCY. 6 To use words from the stem as application, the reference must be appropriate (i.e. make Award 1 mark for identification of each relevant reason (max 2). 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 appropriate for this question: Award 1 mark for each relevant explanation (max 2). 4 offices 500 employees Points might include: Insurance (services) Increased/retain sales / demand / customers [k] from farms / Business customers / farms / factories factories [app] leading to higher revenue [an] Leadership style Build / better reputation / brand image [k] leading to better customer Communication barriers loyalty / sales / competitive advantage [an] for its insurance [app] Span of control Help attract / motivate / retain employees [k] improving efficiency / Delegation better quality of service / less labour turnover [an] from its 500 employees [an] Other appropriate examples can be credited. Investors may be more likely / willing to invest [k] increasing the amount of capital / funds [an] Some points can be [k] or [an] but only once e.g. customer loyalty Other appropriate responses should also be credited. Do not award: Comply with laws/less risk of legal as being ethical is different to legal. Examples of being unethical Ways to be ethical. 3(e) Do you think lack of feedback is the main barrier to effective 6 This is a general question so there are no communication in a business? Justify your answer. marks for application. For evaluation to be awarded justification will Award up to 2 marks for identification of relevant points. usually follow on from relevant analysis of Award up to 2 marks for relevant development of points. points. Award up to 2 marks for justified decision as to whether the lack of feedback is the main barrier to effective communication in a business. Knowledge can be awarded for: Problems caused by lack of feedback e.g. Points might include: mistakes, lower efficiency Identify other communication barriers. Lack of feedback: Do not know whether message has been understood [k] which could Analysis is for: lead to errors / wrong actions taken [an] Development / impact of barrier on the Do not know whether recipient has received [k] which can lead to business. delays [an] Points can be written as either advantages / Other barriers could include: disadvantages of different barrier but only Technical problems e.g. no signal/equipment breakdown [k] so award once e.g. not understood. message cannot be sent / received [an] Too much information sent in message [k] which can lead to Some points can be [k] or [an] but only award mistakes / slow down decision-making [an] once e.g. Understood, mistakes Jargon used / language [k] so receiver cannot understand [an] Lower quality is [an] only. Noise / distractions [k] so not able to hear the message [an] (Wrong) communication method used [k] so people are unable to Do not award: access / read message [an] Reasons why communicate. General issues of poor communication e.g. not Message has to pass through too many levels / employees [k] so know what to do / what doing. message gets distorted / lost [an] Focus on why feedback is important or Send wrong message / send message to the wrong person [k] so the problems of giving feedback e.g. demotivated. actual message is never sent / received [an] Problems with receiver or examples e.g. receiver may not listen [k] 3(e) Other appropriate responses should also be credited. Justification might include: Without feedback it is difficult to know whether the message has been understood [k] which could lead to the wrong actions being taken [an]. There may be no internet signal [k] so the message cannot be sent [an]. Overall, the lack of feedback is the most important barrier because they are more likely to know whether a technical problem has happened, whereas with a lack of feedback they may not know until an error is made [eval] damaging the business's reputation. [eval]

Mark scheme

4(a) Identify two ways a government might support business start-ups. 2 Only award the first two responses given. Award 1 mark per way (max 2). Do not award: Vague answers such as cover costs, provide Points might include: cash / money / invest / sponsor / incentives Offer financial support or examples such as grants / (low-cost) loans Provide training Provide information / advice / support/mentors Provide low-cost / rent-free property / location Offer lower tax rates / tax breaks / tax relief Encourage universities to make research facilities available Organise business fairs. Other appropriate responses should also be credited. 4(b) Identify two ways a market can be segmented. 2 Only award the first two responses given. Award 1 mark per way (max 2). Can award: Demographic if age / gender / socio- Points might include: economic group / social status/ethnic Age group not awarded Gender Psychographic if lifestyle, personality or Socio-economic group / social status / class attitudes not awarded. Location / region / geographic Interests / lifestyle Family characteristics Education Occupation Use of product Ethnic group Other appropriate responses should also be credited. 4(c) Outline two characteristics Meena will need to become a successful 4 To use words from the stem as application, the entrepreneur. reference must be appropriate (i.e. make sense) in relation to the point being made. Award 1 mark for each relevant characteristic (max 2). Award 1 mark for each relevant reference to this business (max 2). The following words are likely to be appropriate for this question: Points might include: Handmade Risk-taking [k] as leaving her job [app] Jewellery Self-motivated / determination / resilience / perseverance [k] for her Leaving her job /teacher start-up [app] Start-up/new business Hard-working [k] especially if she decides to be a sole trader [app] Brother Creative [k] as products will be handmade [app] Sole trader Effective communicator [k] as may need to discuss matter with Partner partner [app] Government support Self-confident [k] Market research Optimistic/positive [k] Market segment Independent [k] Innovator [k] Other appropriate examples can be credited. Other appropriate responses should also be credited. 4(d) Explain one advantage and one disadvantage to Meena of operating 6 To use words from the stem as application, the as a sole trader rather than being in a partnership. reference must be appropriate (i.e. make sense) in relation to the point being made. Award 1 mark for identification of each relevant advantage/disadvantage (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: Award 1 mark for each relevant explanation (max 2). Handmade Jewellery Points might include: Leaving her job /teacher Entrepreneur Advantages: Government support Keep all the profit [k] from the new business [app] so she has an Market research incentive to work harder / so she can decide how to invest it [an] Market segment Can make all/quick decision-making [k] even if it's her brother [app] Brother so may be more responsive to changes in demand [an] Business start-up / new business Complete control / own boss [k] less chance for disagreement / no need to consult anyone before making decisions [an] Other appropriate examples can be credited. Has freedom to choose own holidays/work hours [k] to gain a better work/life balance [an] Conflict/disagreements is [an] only. Disadvantages: Do not award: No one to share workload/responsibility/control with [k] so less time Features of unincorporated businesses to specialise on certain activities [an] such as making jewellery [app] such as unlimited liability, no continuity. Access to less finance / partner may provide extra finance [k] so as need to borrow more/less money [an] or may need more government support [app] Fewer ideas/ less knowledge/experience [k] so less able to compete [an] No one to share any risks / potential loss / costs with [k] Other appropriate responses should also be credited. 4(e) Do you think accessing government sources, such as statistics, is 6 This is a general question so there are no the best method of market research for a start-up business to use? marks for application. Justify your answer. For evaluation to be awarded justification will Award up to 2 marks for identification of relevant points. Award up to 2 usually follow on from relevant analysis of marks for relevant development of points. points. Award up to 2 marks for justified decision as to whether accessing government sources, such as statistics, is the best method of market Some points can be written as either research for a start-up business to use. advantage/disadvantage of different methods but only award once. Points might include: For other methods, must identify it, and Government sources: not simply describe it. Free/cheap to collect [k] which can help keep fixed cost low [an] Out of date ONLY valid for govt. sources. Readily available [k] so can make decisions more quickly [an] Provides data on a range of topics/shows trends across whole Do not award: country/market [k] so can make more informed decisions [an] General comparisons between primary May be out-of-date [k] so information may not be relevant to what the and secondary market research e.g. up-to- business needs to know now [an] date Data may not be relevant /not specific to the business [k] leading to Reasons for carrying out market research wrong decisions [an] e.g. find out demand/customer needs and wants. Other methods might include: Vague references to more/less accurate. Reports from market research agencies [k] but will have to pay for information [an] Questionnaires/surveys [k] as large amounts of information can be collected [an] Focus groups [k] as can provide highly detailed responses [an] Interviews [k] but time consuming to carry out [an] Online survey [k] Observation [k] Other appropriate responses should also be credited. 4(e) Justification might include: Government statistics are cheap to collect [k] which can help keep fixed cost low [an]. Another option is questionnaires [k] which would allow the business to collect large amounts of information [an]. However, government statistics are better because a new business may not be able to afford the cost of having the questionnaire designed properly [eval] so it may be better to use government statistics are likely to be accurate enough so can still prove helpful [eval].