Business Studies 0450/23 May/June 2024: question paper and mark scheme

Mark scheme

1(a) Explain four characteristics of a successful entrepreneur. 8 Award 1 mark for each characteristic (max 4). Award 1 additional mark for explanation of each characteristic (max 4). Characteristics might include: Self-confident – to convince investors to provide finance Creative – to develop a new idea which is different to existing products/services Hard-working – many entrepreneurs need to work long hours to make their business successful Risk taker – prepared to lose all their capital invested to make the business a success Innovative Effective communicator Independent Determined/perseverance For example: Hard-working (1) many entrepreneurs need to work long hours so that they can make their business successful (1). 1(b) Using Appendix 1 and other information, consider the advantages and 12 disadvantages to RF of the following two methods of promotion. Which method should Santhosh use to attract customers to RF? Justify your answer. 10% discount on a customer’s first purchase Free delivery on all products purchased Level Description Marks Sound application of knowledge and understanding of relevant business concepts using appropriate terminology. Detailed discussion of both methods of promotion. Well-justified recommendation. 3 9–12 Candidates discussing both methods of promotion in detail, in context and a with well-justified recommendation, including why the alternative method of promotion was rejected, should be rewarded with the top marks in the band. Sound application of knowledge and understanding of relevant business concepts using appropriate terminology. Detailed discussion of at least one of the methods of promotion. 2 5–8 Judgement with some justification/some evaluation of choices made. Candidates discussing one or more methods in detail and applying it to the case should be rewarded with the top marks in the band. Limited application of knowledge and understanding of relevant business concepts. Limited ability to discuss the methods of promotion with little/no explanation. 1 1–4 Simple judgement with limited justification/limited evaluation of choices made. Candidates outlining both methods of promotion in context should be rewarded with the top marks in the band. 0 No creditable response. 0 1(b) Relevant points might include: Advantages Disadvantages 10% discount on Reduces the price of The revenue from a customer's first the furniture, this each item of purchase could increase furniture sold is demand from low- reduced. This would income families reduce RF's profit which is the target margins market leading to an Less revenue per increase in sales item would mean revenue that RF need to sell Customers could more than 10 items afford to buy more of furniture before than one item of they could break furniture. This could even and start to increase the make a profit turnover of inventory/make it easier to achieve their break-even output/improve working capital Free delivery on Customers may buy RF may have to pay all products bigger/more items of for the fuel to deliver purchased furniture which the furniture – would increase the increases costs to sales revenue as RF – reduces profit they would not need margins to worry how they RF may have to were going to get purchase/lease a the furniture home vehicle – increases Builds customer cash outflows loyalty/repeat sales. Will have to recruit Customers are more delivery drivers – so likely to become increasing wage loyal if they receive costs – may lead to a good after sales increased prices – service making it more Helps RF to stand expensive for low- out from their income families competitors. It can be an incentive to customers to buy from RF 1(b) Recommendation: Justification might include: Offering a 10% discount is likely to attract more customers. As the target market is low-income families, price is likely to be the most important element of the marketing mix. The discount will in effect make the price cheaper and more affordable for these families and may therefore increase sales. The free delivery service could increase costs significantly for the small/new business as they will have to buy a van and employ more people. The deliveries could also be over a wide area and so increase fuel costs. Offering free delivery is the best way to attract new customers as furniture can be big and heavy and this means that it is likely customers will need to have it delivered. As the customers are looking for cheaper products, the total purchase price would be reduced if they did not have to pay a delivery charge.

Mark scheme

2(a) Explain two business objectives Santhosh might have for RF. 8 Award one mark for each business objective (max 2). Award a maximum of 3 additional marks for explanation of each business objective – one of which must be applied to this context. Relevant business objectives might include: Business survival – greater risk of failing – lose personal possessions Profit – provide funds for reinvestment – interest does not need to be paid so cheaper than loans Service to the community/social/ethical – wants to provide jobs and support for disadvantaged groups in society Increase market share For example: Business survival (1) as RF is a new business (app) it is at a greater risk of failing (1) and Santhosh would lose his future source of income/all his personal possessions (1). Application could include: new/start-up business, carpenter, school leavers, small business, sole trader, $5000 start-up capital, furniture, low-income families, 10% discount, free delivery, figures from Appendix 2, recession. 2(b) Consider the advantages and disadvantages of the following three 12 sources of finance Santhosh could use when starting up RF. Which source should Santhosh use? Justify your answer. Owner’s savings Microfinance Crowdfunding Level Description Marks Sound application of knowledge and understanding of relevant business concepts using appropriate terminology. Detailed discussion of two or more sources. 3 Well-justified recommendation. 9–12 Candidates discussing all three sources in detail, in context and with a well-justified recommendation, including why the alternative sources were rejected, should be rewarded with the top marks in the band. Sound application of knowledge and understanding of relevant business concepts using appropriate terminology. Detailed discussion of at least one source. 2 Judgement with some justification/some evaluation of 5–8 choices made. Candidates discussing two or more sources in detail and applying them to the case should be rewarded with the top marks in the band. Limited application of knowledge and understanding of relevant business concepts. Limited ability to discuss the sources with little/no explanation. 1 1–4 Simple judgement with limited justification/limited evaluation of choices made. Candidates outlining the three sources in context should be rewarded with top marks in the band. 0 No creditable response. 0 2(b) Justification might include: Advantages Disadvantages Owner's savings It should be The owner may not immediately have enough savings available to the to pay the $5000 owner – allowing start-up costs Santhosh to set up There may be an his new start-up opportunity cost – he business quickly would lose any No interest is paid, interest that his this will allow costs savings could make to be kept low if he left them in the Does not have to be bank repaid Risks losing all his own money – as his business is a sole trader Microfinance Small amounts available as he only Only provides small needs $5000 to buy amounts of finance – tools and pay for may not be sufficient rent to meet RF's No security requirements needed/collateral May have an free loan. As a increased risk of small business it harsh/short is unlikely that he repayment terms would have many Will have restrictive assets to offer as terms attached – this security means that RF may Access to finance have to fulfil certain that would not be criteria or commit to available from other following certain more traditional rules before the sources/banks – as finance is received a new business RF would be seen as high risk 2(b) Advantages Disadvantages Crowdfunding No initial fees to be If the total amount of paid – meets his $5000 required is not objective of raised, RF will need keeping the costs to repay money low It publicises his idea Public reaction can and this may allow be tested – competitors to steal Santhosh can judge the idea the demand for Platform can reject recycled furniture the idea – it may Can raise substantial delay starting the sums – he can raise business sufficient money to invest in his tools and pay rent Available to entrepreneurs when other sources have turned them down Recommendation Justification might include: Owner's savings is the best source for his new business as it does not require any interest to be paid. This will reduce the monthly repayments and meet the objective of keeping costs low which could lead to increased profits. If microfinance was used he might find it difficult to make the repayments in the time set by the lender. If $5000 was not raised using crowdfunding, he would have to return all the capital back to the investors and might not be able to start his business. Microfinance may be the best option as Santhosh only requires a small amount and as he is a sole trader this reduces the risk of using all of his savings. Crowdfunding would not require an initial fee or interest to be paid, therefore less cash outflow in the short term. As the business is going to train school leavers there is a good chance the community might want to invest money.

Mark scheme

3(a) Using Appendix 2 and other information, explain two benefits and two 8 limitations to Santhosh of using break-even analysis. Award one mark for each benefit/limitation identified (max 4). Award a maximum of 1 additional mark for each explanation in context (max 4). Benefits might include: Provides a target output RF needs to sell before a profit is made – at the break-even output of 10 items The impact of business decisions can be shown by redrawing the chart – if the variable costs increase from $4 per month It can be used to show a margin of safety to protect against losses if a fall in sales occurs – from the current margin of safety of 10 Limitations might include: The break-even chart is drawn assuming all goods produced are sold - forecast sales are 20 items of furniture per month Fixed costs will only remain fixed if the scale of production does not change – at $50 per month Revenue may not be the same – RF may decide to offer a 10% discount Can only be used for a single product – RF sells a range of furniture and not a single item priced the at the same price It assumes that variable/total costs can be drawn as straight lines For example: It will provide a target of how much RF needs to sell each month before they make a profit (1). RF needs to sell 10 items of furniture before a profit is made (app). Application could include: new/start-up business, carpenter, school leavers, small business, sole trader, $5000 start-up capital, furniture, low-income families, 10% discount, free delivery, recession, break-even output 10, fixed costs $50, total revenue $180, total cost $130. 3(b) Using Appendix 3 and other information, consider how the recession 12 might affect RF’s forecast sales and the availability of potential employees. Which is likely to have the most effect on RF? Justify your answer. Level Description Marks Sound application of knowledge and understanding of relevant business concepts using appropriate terminology. Detailed discussion of both ways. 3 Well-justified conclusion. 9–12 Candidates discussing both ways in detail, in context and with a well-justified conclusion, including why the alternative way has less effect, should be rewarded with the top marks in the band. Sound application of knowledge and understanding of relevant business concepts using appropriate terminology. Detailed discussion of at least one way. 2 Judgement with some justification/some evaluation of 5–8 choices made. Candidates discussing at least one way in detail and applying it to the case should be rewarded with the top marks in the band. Limited application of knowledge and understanding of relevant business concepts. Limited ability to discuss the ways with little/no explanation. 1 1–4 Simple judgement with limited justification/limited evaluation of choices made. Candidates outlining both ways in context should be rewarded with top marks in the band. 0 No creditable response. 0 3(b) Relevant points might include: RF's Potential increase in the number of low-income forecast sales families which leads to an increased demand for recycled furniture – amount of sales revenue might increase Reduced supply of old furniture – as people delay purchasing new furniture from retailers Recession will result in higher unemployment – reduced income for families – reduced demand for furniture Availability of Greater availability of employees – lower potential employment levels lead to more people looking employees for for work – making it easier for RF to recruit its RF 10 workers Potential employees may be more willing to accept a lower wage – especially school leavers as they may find it more difficult to find a job Availability of skilled workers for RF may not change – as other businesses may retain their skilled workers such as carpenters Conclusion Justification might include: Forecast sales are likely to have the most effect on RF because it is important for there to be an inflow of cash from sales to cover the high start- up expenses. The recession may lead to higher revenue as the target market of low-income families is likely to increase due to rising unemployment. RF's ability to recruit skilled employees may not change as RF only requires 3 skilled carpenters and the recession may not affect their availability. The availability of employees for RF will have the greatest effect as the new business requires a combination of skilled and unskilled workers. The recession may make it easier to recruit skilled workers and with these workers RF will be able to supply recycled furniture.

Mark scheme

4(a) Explain two benefits to RF of having a well-motivated workforce. 8 Award 1 mark for each benefit of having a well-motivated workforce (max 2). Award a maximum of 3 additional marks for each explanation of the benefit of having a well-motivated workforce is important – one of which must be applied to this context. Benefits might include: Low labour turnover – a loyal workforce – reduces costs of recruitment Low rate of absenteeism – reduces disruption caused by an employee absent from work – more able to meet demand Low rates of industrial action – avoiding damage to customer relations - maintaining reputation Increases productivity – fewer employees are needed to achieve the same level of output Higher quality goods and services – increased customer loyalty – increases revenue More competitive – which may increase market share For example: Increases productivity (1) RF will have 10 employees (app) so they can each produce more which reduces the need for additional employees (1) which helps to reduce labour costs (1). Application could include: new/start-up business, carpenter, school leavers, small business, sole trader, $5000 start-up capital, furniture, low-income families, 10% discount, free delivery, figures from Appendix 2, recession. 4(b) Consider the following three methods Santhosh could use to 12 communicate the daily work tasks to his employees. Which method should he use? Justify your answer. Telephone calls Face-to-face meetings Text messages Level Description Marks Sound application of knowledge and understanding of relevant business concepts using appropriate terminology. Detailed discussion of two or more methods of communication. 3 9–12 Well-justified recommendation. Candidates discussing all three methods of communication in detail, in context and with a well-justified recommendation, including why the alternative methods were rejected, should be rewarded with the top marks in the band. Sound application of knowledge and understanding of relevant business concepts using appropriate terminology. Detailed discussion of at least one method of communication. 2 5–8 Judgement with some justification/some evaluation of choices made. Candidates discussing two or more methods of communication in detail and applying them to the case should be rewarded with the top marks in the band. Limited application of knowledge and understanding of relevant business concepts. Limited ability to discuss the methods of communication with little/no explanation. 1 1–4 Simple judgement with limited justification/limited evaluation of choices made. Candidates outlining all three methods of communication in context should be rewarded with top marks in the band. 0 No creditable response. 0 4(b) Relevant points might include: Advantages Disadvantages Telephone calls Speaks directly to Employees may not each employee – answer – delay in makes them feel Santhosh being able valued and included allocate tasks at the in the business start of each day Immediate feedback Poor connection – is possible – may distort the Santhosh will know message and make straight away if any it difficult to of the 10 understand employees do not Could take a long understand which time to call all 10 tasks need to be employees everyday finished and need to No permanent be done first record of the conversation, if a carpenter does the wrong job there is no proof that they were asked to do a different task Face-to-face Gives all 10 Time consuming – meetings employees a chance employees could be to meet, which can training school help to make them leavers rather than feel part of the team in a meeting It is a small business School leavers may so this would give not have the everyone a chance confidence to to directly contribute contribute ideas and collaborate as feedback is immediate Points can be clarified if not understood immediately 4(b) Advantages Disadvantages Text messages Provides a written Some employees record for Santhosh may not have to refer to if the 10 access to their employees do not mobile phones – it meet their targets relies on an Can be referred to internet/phone at different times of connection the day if tasks The daily work tasks forgotten may not be seen if Do not have to be in there are too many the workplace to text messages sent read the message – It can become a buyers may be out distraction as finding furniture employees may use it to send social messages and just chat Conclusion Justification might include: Telephone calls are a good method because you can get immediate feedback and employees can clarify their work tasks so that mistakes are not made. Daily face-to-face meetings may take too much time and not all employees may be able to attend, and not all employees may have access to text messages on their phones. Face-to-face meetings would be the best way to communicate as RF is a small business and so all employees would have the opportunity to contribute. They could be informal which might help build motivation. Text messages could be the best way for Santhosh to communicate with his volunteers. He can include details so the Marketing Manager can refer back to the tasks set. It is a direct form of communication that goes straight to the employees themselves so it cannot be missed.