Business Studies 0450/22 October/November 2019: question paper and mark scheme

Mark scheme

1(a) Identify and explain two ways QC can create added value for its new 8 service. Knowledge [2 × 1] – award one mark for each way Analysis [2 × 1] – award one mark for a relevant explanation for each way Application [2 × 2] – award two application marks for each way Answers are likely to include: • Reward ways of how to set higher prices such as – Improve quality – Provide extra services – Improve brand image • Reward ways of how to reduce input costs such as – Buy cheaper ingredients by changing supplier/buying in bulk to gain a discount/negotiating cheaper price – Source cheaper ingredients from home country instead of importing ingredients Indicative response: Set a higher price (1) so that there is a larger difference between the input costs and price. (1) QC could add additional services to the catering such as silver service (ap) so that it provides a USP that makes the catering service better than competitors and therefore clients will be willing to pay a higher price. (ap) Possible application marks: Catering services; 100 employees; rising incomes; well trained and experienced employees; good reputation; provides catering for businesses such as for conferences; imports food ingredients; birthday parties; wedding services; buy locally produced ingredients; increased spending on luxury goods. There may be other examples in context that have not been included here. 1(b) Consider the advantages and disadvantages of the following three 12 ways QC could research the market for wedding catering. Which way will give the most accurate results about the market? Justify your answer. Relevant points might include: • Questionnaire • Primary research • QC is a small about the wedding so original business and catering market research therefore could carried out by QC • Gathered for QC not afford a large specific purpose sample • Not experienced in carrying out primary research so may be less accurate • Questionnaire • Large size sample • Not specifically about the wedding size about QC target catering market • Carried out by market carried out by a experts in market • The whole market market research research might be very agency • May include different to QC information not specific target thought about by market Neil and Jin • Expensive for QC to use • Government • Cheap and quick • May be out of date statistics on the to carry out • May not be helpful number of • Easily accessible as not specific weddings in • Gain an idea of about wedding country Z overall trends in catering and may the market for only gain numbers weddings etc. Conclusion might include: • Up to date information • Expertise used/skill of researchers • Sample size • Effective questions on questionnaire • Specific to QC target market 1(b) Knowledge/Analysis/Evaluation – award up to 10 marks using the levels- based mark scheme below. Level 3 At least 2 × Level 2 + 9–10 marks for well justified conclusion of which way will give the most accurate results for the wedding catering market and why the other ways will be less accurate. 7–8 marks for some limited judgement shown in conclusion of which way will give the most accurate results for the wedding catering market. Level 2 4–6 marks Detailed discussion of the advantages and/or disadvantages of each method of research. Level 1 1–3 marks Outline of the advantages and/or disadvantages of each method of research. Level 1 – 1 mark for each L1 statement (max of 3 marks) e.g. Questionnaire research is first-hand information gathered for the specific purposes of QC. Level 2 – 1 × L2 explanation can gain 4 marks and a further mark can be awarded for each additional L2 explanation (max 6 marks) e.g. Questionnaire research is first-hand information gathered for the specific purposes of QC. This makes the information gathered about food requirements for weddings more useful as the questions set will be to find out exactly the information required by QC. However, Jin and Neil are not skilled in carrying out research and they may not phrase the questions very well leading to less accurate information. (L2) Level 3 – For L3 to be awarded there needs to be at least two L2 marks awarded and then a justified conclusion of which way will give the most accurate results for the wedding catering market. Award up to 2 additional marks for relevant application. Possible application marks: Established 10 years ago; two shareholders; wants to expand; caterers; birthday parties; events; provides catering for businesses such as for conferences; 90 part-time employees; 10 full-time employees; has a cash flow problem; young couples getting married. There may be other examples in context that have not been included here.

Mark scheme

2(a) Neil and the part-time employees are both stakeholders in QC. Identify 8 and explain: • one objective that will be the same for both these stakeholders • one objective for Neil that will conflict with an objective of the part- time employees. Knowledge [2 × 1] – award one mark for stakeholder objectives that are the same/are conflicting Analysis [2 × 1] – award one mark for a relevant explanation of why the objective is the same/why it is conflicting Application [2 × 2] – award two application marks for explanation of each stakeholder objective in context Answers are likely to include: • Owners and employees both want the business to make profits – to pay higher wages and higher dividends/ more likely to survive and employees more likely to keep their jobs. • Owner wants to keep costs lower and may reduce wages but employees want higher wages that will put costs up. Likely shareholder/Owner objectives: • To increase profit/make a profit • To expand/grow the business • To increase sales • To maintain brand image/high reputation/customer satisfaction • To reduce costs • To increase productivity/efficiency • To survive Likely employee objectives: • To receive higher wages • To have job security • To have improved working conditions • To work sociable hours • To be motivated and happy at work Indicative response: Owner wants to make a high profit (1) but this could keep down the wages of the employees. (1) There are 90 part-time employees and they may feel unhappy about this. (ap) These employees may be less willing to work additional catering jobs when QC is busy. (ap) Possible application marks: Catering services; two shareholders; wants to expand; Weddings; Birthday parties; events; provides catering for businesses such as for conferences; 90 part-time employees; 10 full-time employees; maintain good reputation. There may be other examples in context that have not been included here. 2(b) Consider the advantages and disadvantages of the following three 12 leadership styles Jin and Neil could use. Recommend which one they should use as QC expands further. Justify your answer. Advantages Disadvantages Autocratic • Clear direction given to • Communication is employees only one way • Employees know what • Cannot know the is expected from them views or suggestions • Decisions can be made of employees quickly • May be demotivating as employees are not included in any decision making Democratic • May be motivating as • May take a long time employees may be to consult employees asked before decisions • Decisions may need made to be made quickly • Feel as though can and this leadership contribute to the style is too slow business – feel valued Laissez-faire • Give decision making to • Employees may make employees bad decisions • Motivating as • May lead to lower employees feel they productivity or lower have control over their profit from bad work decisions • Managers have more • Difficult to have a time for other tasks as clear direction for the can delegate more business • Employers feel more • Managers may lose trusted day to day control of decision making 2(b) Knowledge/Analysis/Evaluation – award up to 10 marks using the levels- based mark scheme below. Knowledge/Analysis/Evaluation Level 3 At least 2 × Level 2 + 9–10 marks for well justified recommendation of which leadership style should be used for the new service and why not the alternative leadership styles. 7–8 marks for limited recommendation of which leadership style should be used for new service. Level 2 4–6 marks Detailed discussion of the advantages and/or disadvantages of each leadership style. Level 1 1–3 marks Outline of the advantages and/or disadvantages of each leadership style. Level 1 – 1 mark for each L1 statement (max of 3 marks) e.g. Laissez-faire leaves decision making to the employees. Level 2 – 1 × L2 explanation can gain 4 marks and a further mark can be awarded for each additional L2 explanation (max 6 marks) e.g. Laissez- faire leaves decision making to the employees. This will make the employees feel more important and valued and they will work harder as they are more motivated. However, Jin and Neil only give them broad objectives and the employees may not carry out these objectives as the owners want. Leading to the service not being delivered as required due to lack of experience of the part-time employees. (L2) Level 3 – For L3 to be awarded there needs to be at least two L2 marks awarded and then a recommendation of which leadership style should be used for the new service. Award up to 2 additional marks for relevant application Possible application marks: Catering services; two shareholders; weddings; birthday parties; events; provides catering for businesses such as for conferences; 90 part-time employees; 10 full-time employees; noticeboard; food. There may be other examples in context that have not been included here.

Mark scheme

3(a) Neil and Jin need to tell employees about the new service. 8 Identify and explain one advantage and one disadvantage of using email for this communication. Knowledge [2 × 1] – award one mark for each advantage / disadvantage Analysis [2 × 1] – award one mark for a relevant explanation for each advantage/ disadvantage Application [2 × 2] – award two application marks for each advantage/disadvantage Answers are likely to include: Advantage: • Written record – can refer back to the details • Cheap to send to all employees • Quicker to send to large number of people at once • Able to provide detailed information Disadvantage: • Message may not have been understood/language barriers • No chance for clarification by employees • No internet access • No body language/cannot see the reaction • Not sure if the message has been received Indicative response: Emails are cheap to send (1) and can easily be sent to all employees. (1) They can be told about the new catering service (ap) and the email can include all the details about offering catering for weddings or birthday parties. (ap) Possible application marks: Catering services; two shareholders; weddings; birthday parties; events; provides catering for businesses such as for conferences; 90 part-time employees; 10 full-time employees; noticeboard; food. There may be other examples in context that have not been included here. 3(b) Using Appendix 3 and other information provided, consider the 12 costs, revenue and profit of the two options. Which is the best option for QC to choose? Justify your answer. Level 1 Level 2 Option 1 – Growing market as TR per event = $25 000 (Weddings) increased spending on weddings Variable costs per event = $10 000 Price is higher for Option 1 events Gross profit per event = $15 000 Variable costs are higher for weddings than TC per event = $11 000 birthday parties Profit per event = $14 000 Price per event is $30 higher for weddings TR per month = $250 000 250 more people Gross profit per month = attending each event $150 000 than birthday parties TC per month = $110 000 Profit per month = $140 000 Option 2 - Spending on birthday TR per event = $5000 (Birthday parties) parties has remained the same Variable cost per event = $2500 90 more birthday parties per month than Gross profit per event = weddings $2500 Fixed costs lower by TC per event = $3000 $500 for birthday parties Profit per event = $2000 Variable cost $10 cheaper than weddings TR per month = $500 000 per person Gross profit per month = $250 000 TC per month = $300 000 Profit per month $200 000 per month 3(b) Note: Do not reward an answer that is just copied from the table in Appendix 3 without any comment Recommendations might have points that include: • Total cost of Option 2 is $8000 per event less than Option 1 so Option 2 is easier to finance • Option 2 – the profit for birthday parties per month is $60 000 higher than Option 1 – weddings • Option 2 has the highest profit per month • Option 1 has the highest profit per event • Birthday parties have the highest profit per month but the market appears to be not increasing • Option 1 has the higher growth in sales and the highest profit per event 3(b) Knowledge/Analysis/Evaluation – award up to 10 marks using the levels- based mark scheme below. Knowledge/Analysis/Evaluation Level 3 There must be at least 2 × L2 correct calculations of profit before L3 awarded 9–10 marks for well justified conclusion of which option to choose compared to the other option. 7–8 marks for some limited judgement shown in conclusions as to the best option to choose. Level 2 4–6 marks Calculations of costs, revenue and/or profit for each option. Level 1 1–3 marks Limited statements comparing the costs, revenue and/or profit for each option. Level 1 – 1 mark for each L1 statement (max of 3 marks) e.g. Weddings are $30 higher per person. Level 2 – 1 × L2 explanation can gain 4 marks and a further mark can be awarded for each additional L2 explanation (max 6 marks) e.g. Weddings will give a profit per event of $14 000. (L2) Level 3 – For level 3 to be awarded there must be 2 × L2 correct calculations of profit then a well justified conclusion of which option to choose. Award up to 2 additional marks for relevant application Possible application marks: Catering services; two shareholders; wants to expand; weddings; birthday parties; events; provides catering for businesses such as for conferences; 90 part-time employees; 10 full-time employees; has a cash flow problem; imports food ingredients. There may be other examples in context that have not been included here.

Mark scheme

4(a) Identify and explain two ways Neil and Jin could improve QC’s cash 8 flow. Knowledge [2 × 1] – award one mark for each way Analysis [2 × 1] – award one mark for a relevant explanation for each way Application [2 × 2] – award two application marks for each way Answers are likely to include: • Arrange trade credit for ingredients – delay outflows of cash for payments of ingredients so improves cash flow as money held in account for longer. • Reduce trade credit for clients – speeds up inflow of money as payment for catering services are made more quickly so increases speed at which cash flows into account. • Arrange an overdraft facility / short term bank loan • Change to local supplier as ingredients are cheaper • Get deposits from customers before the events • Sell off unwanted non-current assets/Sell unused capital asset • Increase cash inflows • Reduce cash outflows Note: Do not reward advertising unless part of an explanation Note: Bank loan is TV - should be short-term bank loan Indicative response: Neil can arrange trade credit (1) for ingredients purchased from abroad. (ap) This will delay outflow of cash for payments of ingredients so improves cash flow as money held in account for longer. (1) So QC will keep money in its account for longer and make it easier to pay the wages of the 90 part-time employees. (ap) Possible application marks: Catering services; wants to expand; weddings; birthday parties; events; provides catering for businesses such as for conferences; 90 part-time employees;10 full-time employees; imports food ingredients; offers trade credit; pays cash for ingredients; plans to expand; two shareholders; may run out of working capital. There may be other examples in context that have not been included here. 4(b) Consider the possible effects on QC of the following three changes. 12 Which change is likely to have the biggest effect on QC’s profit? Justify your answer. Relevant points might include: • Increase in • Increase tax – lower disposable income – reduce income tax amount spent on weddings and birthday parties – lower demand for catering services • May need to reduce prices to attract customers • Employees may ask for an increase in wages as disposable income has gone down • Appreciatio • Local ingredients may still be cheaper than n of country imported ingredients – difference is narrowed Z’s currency • Imported ingredients are cheaper – effect is lower prices of services or improved profit margins • Country Z’s • Boom leads to increased economic growth – business increased incomes from higher employment levels cycle enters – increased demand for catering services – easier the boom for employees to find alternative jobs – may stage. experience increased competition 4(b) Knowledge/Analysis/Evaluation – award up to 10 marks using the levels- based mark scheme below. Knowledge/Analysis/Evaluation Level 3 At least 2 × Level 2 + 9–10 marks for well justified conclusion which change is likely to have the biggest effect on QC profit and why the other changes will have less effect. 7–8 marks for some limited judgement shown in conclusion which change is likely to have the biggest effect on QC profit. Level 2 4–6 marks Detailed discussion of the effect of the change on QC. Level 1 1–3 marks Outline of the effect of the change on QC. Level 1 – 1 mark for each L1 statement (max of 3 marks) e.g. Increased income tax will lower disposable income and reduce spending. Level 2 – 1 × L2 explanation can gain 4 marks and a further mark can be awarded for each additional L2 explanation (max 6 marks) e.g. Increased income tax will lower disposable income and reduce spending. This is because people will have less money to spend on essential items and will reduce the amount they spend on luxury items such as birthday parties. Hence QC will probably have a reduction in sales. (L2 plus application for referring to luxury items such as birthday parties) Level 3 – For L3 to be awarded there needs to be at least two L2 marks awarded and then a conclusion of which change is likely to have the biggest effect on QC‘s profit Award up to 2 additional marks for relevant application. Possible application marks: Catering services; established 10 years ago; two shareholders; wants to expand; weddings; birthday parties; events; provides catering for businesses such as for conferences; 90 part-time employees; 10 full-time employees; has a cash flow problem; imports food ingredients; increased spending on luxury goods; competitors paying higher wages. There may be other examples in context that have not been included here.