Business Studies 0450/12 October/November 2019: question paper and mark scheme

Mark scheme

1(a) What is meant by ‘public corporation’? 2 Do not award answers that refer to public companies Clear understanding [2]: A business that is owned and controlled by the government/state Some understanding [1]: E.g. run by government/state 1(b) Identify two economic objectives of country X’s government. 2 Do not award answers which refer to other government objectives such as increase Knowledge [2 × 1] award 1 mark per economic objective investment, protect the environment/reduce greenhouse gases Points include: Do not award examples of methods to improve • Low(er) unemployment/full employment/create jobs balance of payments, e.g. reduce imports • Economic growth OR increase in GDP OR improve standards of living • Low inflation/price stability • Improve balance of payments 1(c) Identify and explain two ways a pressure group might try to influence the 4 Application marks may be awarded for actions of GOP. appropriate use of the following: Knowledge [2 × 1] – award 1 mark for each way identified • public corporation • oil Application [2 × 1] – award 1 mark for each explanation in context • 200 km OR pipeline • planning permission Points might include: • 2000 OR skilled/construction jobs • less need for businesses to import • create negative publicity OR publish information OR write to • private sector newspaper [k] about the pipeline [app] • organise customer boycotts [k] of its oil [app] Note: can award responses which refer to • demonstrations or protests OR rally opposition [k] against this public trade unions asking for higher pay or better corporation [app] conditions • lobby OR petition OR send letters to government [k] to prevent planning permission [app] Do not award references to strikes unless in • demand interview with company [k] context of trade unions • take legal actions [k] 1(d) Identify and explain two ways in which the objectives of GOP might be 6 Application marks may be awarded for different if it was in the private sector. appropriate use of the following: Knowledge [2 × 1] – award 1 mark for each relevant way • public corporation • oil Application [2 × 1] – award 1 mark for each relevant reference made to this • 200 km OR pipeline business • planning permission • 2000 OR skilled/construction jobs Analysis [2 × 1] – award 1 mark for each relevant explanation • less need for businesses to import • pressure group Relevant points might include: • economic objectives of country X’s government • May look to maximise profit [k] from its pipeline [app] whereas in public sector the objective may be social/to provide social welfare/to offer Note: Analysis can be awarded either for services/products for free or at a low price [an] comparing the difference in objectives between • May look to increase market share [k] making it difficult for other the two sectors OR relevant development of a businesses to survive [an] which could conflict with government private sector objective economic objectives [app] • May look to increase revenue [k] for its oil [app] whereas the public Note: Due to the wording of the question, sector may offer subsidised prices [an] private sector objectives on own can be • Protecting jobs may be more important in the public sector [k] whereas accepted as [k] private sector firms may look to reduce costs [an] 1(e) Do you think the Government should allow GOP to build the pipeline? 6 Application marks may be awarded for Justify your answer. appropriate use of the following: Knowledge [1] – award max 1 mark for identification of relevant point(s) • public corporation • oil Application [1] – award 1 mark for a relevant reference made to this business • 200 km • planning permission Analysis [2] – award up to 2 marks for relevant development of point(s) • 2000 OR skilled/construction jobs • less need for businesses to import Evaluation [2] – justified decision made as to whether the Government • pressure group should allow GOP to build the pipeline Do not award pipeline as application as • Creates jobs [k] as 2000 jobs created [app] helping reduce stated in question unemployment [an] but jobs may disappear after work finished [an] • Protect vital industry [k] reducing the number of imports [app] helping Note: the answer should be focused on the country become self-sufficient [an] impact to the country, not GOP • Could help develop infrastructure/build new roads [k] • Pollution [k] which is why pressure groups are concerned [app] • Uses up natural resources [k] as produce oil [app] meaning fewer resources available for future generations [an] • Could conflict or help Government with other objectives [k] as this is a public corporation [app] • Reduce the need for oil imports [k] so a positive balance of payments [an]

Mark scheme

2(a) What is meant by ‘franchise’? 2 For both marks must have idea of payment and using the name/products of existing business Clear understanding [2]: A business based upon the use of the brand names, promotional logos and trading methods of an existing successful business. Do not award examples The franchisee buys the licence to operate this business from the franchisor. A business system where entrepreneurs buy the right to use the name, logo and product of an existing business. Some understanding [1]: Using the name or logo of another business 2(b) Calculate Samira’s forecast weekly revenue if she lowered the price of 2 her products. Good application [2]: 900 Some application [1]: 300 × 3 OR price times number of customers 2(c) Identify and explain two reasons why revenue is important for Samira’s 4 Application marks may be awarded for business. appropriate use of the following: Knowledge [2 × 1] – award 1 mark for each reason identified • franchise • takeaway Application [2 × 1] – award 1 mark for each explanation in context • successful business • (fried) food Points might include: • delivery service • increased competition • Pay its day to day expenses [k] of producing/selling (fried) food [app] • lower prices • Measure of success/size of business [k] against increased competition • revenue fell [app] • 2 OR part time workers • Need it to generate profit OR breakeven [k] for her takeaway [app] • market research OR secondary research • Steady amount can help gain credit/support loan application [k] OR focus group • correct use of data from table, e.g. 200 OR 300 customers 2(d) Identify and explain two factors Samira should consider before starting a 6 Application marks may be awarded for delivery service. appropriate use of the following: Knowledge [2 × 1] – award 1 mark for each relevant factor • franchise • takeaway Application [2 × 1] – award 1 mark for each relevant reference made to this • (fried) food business • 2 OR part time workers • increased competition Analysis [2 × 1] – award 1 mark for each relevant explanation • revenue fell • successful business Relevant points might include: • lower prices • market research OR secondary research • Cost OR finance OR examples, e.g. have to buy/hire vehicle for OR focus group deliveries [k] of takeaways [app] as may not be able to afford it [an] • correct use of data from table, e.g. 200 • Labour issues, e.g. access to workers [k] as she only has 2 part time OR 300 customers employees [app] would they be willing or able to do the extra work [an] • Demand issues, e.g. as are there enough customers interested in the Note: can accept two different costs if they are service [k] from her market research [app] otherwise may not generate clearly different and explained sufficient extra revenue [an] • Does she have capacity/space/equipment to provide for the new service [k] • Actions of competitors, e.g. how many competitors offer this service [k] as already facing increased competition from the franchise [app] 2(e) Do you think Samira should use secondary research or a focus group 6 Application marks may be awarded for to gather market research information? Justify your answer. appropriate use of the following: Knowledge [1] – award max 1 mark for identification of relevant point(s) • franchise • takeaway Application [1] – award 1 mark for a relevant reference made to this business • (fried) food • delivery service Analysis [2] – award up to 2 marks for relevant development of point(s) • 2 OR part time workers • revenue fell Evaluation [2] – justified decision made as to which of the two methods of • increased competition market research Samira should use. • lower prices Points might include: • correct use of data from table, e.g. 200 OR 300 customers Secondary market research: • Low cost way to gain information [k] so money saved can be used for other purposes [an] • Readily available [k] so decisions can be made quickly [an] about whether to increase prices [app] • May be out of date [k] which means the information may not be relevant [an] Focus group • Highly detailed responses OR chance to ask for explanations/follow up questions [k] which could allow her to make more informed decisions [an] such as whether to offer the delivery service [app] • Competitors do not have access to this information [k] • Some group members can influence what others say [k] leading to unreliable results [an] • High cost [k] which is not helpful at a time when revenue has fallen [app] • Time consuming to set up/carry out [k]

Mark scheme

3(a) What is meant by ‘induction training’? 2 Do not accept answers which refer to training in general Clear understanding [2]: Introduction given to new employees explaining the businesses activities, customs and procedures and introducing them to other workers A training programme to help new recruits become familiar with their workplace, the people they work with and the procedures they need to follow Some understanding [1]: Training for new employees OR give introduction about the business to employees OR training given to employees before they are employed so they know what to do 3(b) Identify two reasons why it is important for LBM to satisfy customer 2 needs. Application [2 × 1] – award 1 mark per reason Points might include: • increase sales OR increase revenue OR increase customers OR increase market share • build customer relations OR way to build customer loyalty OR maintain sales • help it remain competitive • reduce complaints • improve brand image OR reputation 3(c) Identify and explain two problems for LBM of having a wide range of 4 Application marks may be awarded for products available to customers. appropriate use of the following: Knowledge [2 × 1] – award 1 mark for each problem identified • online retailer OR (no) shops • clothing OR examples Application [2 × 1] – award 1 mark for each explanation in context • revenue increased OR 25% OR $600 m • customer service Points might include: • induction training • 3500 OR new styles (a week) • Lack expertise OR unable to focus on single product OR less specialised • 18–35 years OR target market [k] which could damage customer service [app] • social media networks • Increased warehouse space OR increased cost of storage [k] for the new styles [app] Do not award answers related to production • Lots of competitors [k] as others may focus on specific age groups as this is a retail business between 18–35 [app] • Additional cost of purchasing items [k] Answers must be linked to the business and • Increased risk of obsolescence [k] especially as trends in clothing can not customers change quickly [app] 3(d) Identify and explain one advantage and one disadvantage to LBM of 6 Application marks may be awarded for opening its own shops. appropriate use of the following: Knowledge [2 × 1] – award 1 mark for each relevant advantage/disadvantage • online retailer • clothing OR examples Application [2 × 1] – award 1 mark for each relevant reference made to this • revenue increased OR 25% OR $600 m business • customer service • induction training Analysis [2 × 1] – award 1 mark for each relevant explanation • wide range of products OR additional inventory Relevant points might include: • 3500 OR new styles (a week) • 18–35 years OR target market Advantages • social media networks • Able to attract passing trade OR increase sales [k] for its clothing [app] to increase revenue [an] Do not award shops as application as stated in • Can help advertise/promote [k] its new styles [app] increasing question awareness OR interest in the business [an] • Able to have personal contact with customers [k] so able to provide a Do not award answers which refer to better customer service [app] which can help maintain customer loyalty advantages and disadvantages to customers [an] Disadvantages • Increase costs OR requires additional finance [k] for this online retailer [app] as need to pay rent [an] • No guarantee of additional sales [k] as promotion is through social media [app] • Increased number of employees needed [k] to provide the customer service [app] increasing labour costs [an] 3(e) Explain two suitable sources of finance that LBM could use to purchase 6 Application marks may be awarded for additional inventory. Recommend which source of finance LBM should appropriate use of the following: use. Justify your answer. • online retailer OR (no) shops Knowledge [1] – award max 1 mark for identification of relevant point(s) • clothing OR examples • revenue increased OR 25% OR $600 m Application [1] – award 1 mark for a relevant reference made to this business • customer service • induction training Analysis [2] – award up to 2 marks for relevant development of point(s) • wide range of products • 3500 OR new styles (a week) Evaluation [2] – justified decision made as to which source of finance LBM • 18–35 years OR target market should use for the additional inventory. • social media networks Points might include: Retained profit can be accepted as [k] in this • Overdraft or short-term loan [k] which will have to pay interest on [an] instance as the question does not specifically increasing its expenses or cash outflows [an] refer to short-term sources of finance • Ask suppliers for trade credit [k] for the 3500 styles [app] which will allow them time to sell its products before need to repay [an] Do not award answers such as sale of assets, • Cash reserves [k] bank loan (on own), mortgage, share issue or owners savings as these are not appropriate as short-term finance Do not award sources such as factoring, asking customers to pay quicker as not appropriate

Mark scheme

4(a) What is meant by ‘exchange rate’? 2 Clear understanding [2]: Value/price of one currency in terms of another Accept textbook definition [2]: The rate at which one country’s currency can be exchanged for that of another Some understanding [1]: The change OR buying of one country’s currency with another country’s currency 4(b) What is meant by ‘capital employed’? 2 Clear understanding [2]: Value of shareholders’ funds OR equity + non- current liabilities Accept textbook definitions [2]: Total value of capital used in the business OR value of all long term finance invested in a business Some understanding [1]: Money invested in the business 4(c) Identify and explain two ways NBV’s managers could use its financial 4 Application marks may be awarded for accounts to help make decisions. appropriate use of the following: Knowledge [2 × 1] – award 1 mark for each relevant way • multinational company • capital employed OR $144 bn Application [2 × 1] – award 1 mark for each explanation in context • 18 countries • 400 000 (workers) Possible points might include: • diseconomies of scale • building products OR bricks • Help measure financial performance OR profit over time [k] to see how • raw materials (are bought in country of business achieved $144 bn [app] operation) • Help compare its performance with its competitors [k] who also make • factory bricks [app] • Help decide which source of finance to use OR whether to borrow money Note: candidates can be credited for both or able to afford to borrow [k] profitability and liquidity as separate points as • Help make investment decisions [k] such as the new factory [app] they relate to different financial statements • Decide how much dividend to pay [k] Do not award answers which refer to operational decisions, whether to stop production, increase price, etc. 4(d) Identify and explain two diseconomies of scale that NBV might 6 Application marks may be awarded for experience. appropriate use of the following: Knowledge [2 × 1] – award 1 mark for each diseconomy of scale identified • multinational company • capital employed OR $144 bn Application [2 × 1] – award 1 mark for each relevant reference made to this • 18 countries business • 400 000 (workers) • building products OR bricks Analysis [2 × 1] – award 1 mark for each relevant explanation • raw materials (are bought in country of operation) Points might include: • factory • Low morale/motivation/lack of commitment [k] for its 400 000 Accept slow decision making as [k] as stated in employees [app] leading to higher labour turnover/more workers textbook leaving [an] • poor communication [k] in factory [app] leading to the wrong products being made [an] • lack of/weak co-ordination/control [k] 4(e) Do you think NBV’s decision to set up a factory will only bring 6 Application marks may be awarded for drawbacks to other businesses in country B? Justify your answer. appropriate use of the following: Knowledge [1] – award max 1 mark for identification of relevant point(s) • multinational company • capital employed OR $144 bn Application [1] – award 1 mark for a relevant reference made to this business • 18 countries • 400 000 (workers) Analysis [2] – award up to 2 marks for relevant development of point(s) • diseconomies of scale • building products OR bricks Evaluation [2] – justified decision made as to whether NBV’s decision to set • raw materials (are bought in country of up a factory will only drawbacks for other businesses in country B operation) Points might include: Note: answers should refer to the impact on other businesses, not the country or NBV Drawbacks • Use up scarce resources [k] to make bricks [app] so fewer resources Note: increased competition [k] can also create available for other uses [an] benefits to other businesses so relevant • Increased competition [k] so local businesses may make a loss OR be development of advantages of this for other forced out of business [an] as local businesses cannot compete against businesses can be credited (possible) lower prices [an] • Could lead to a potential shortage of suitable applicants for other businesses [k] as people may prefer to work for a multinational company [app] reducing the competitiveness of local businesses [an] Benefits • Lead to improvements in infrastructure/better transport links [k] which can also speed up delivery times for other businesses [an] • Increased sales for local suppliers [k] as all raw materials are purchased from the country [app] leading to higher revenue [an] • Access to wider range of materials for other local businesses [k]