Business Studies 0450/23 October/November 2019: question paper and mark scheme

Mark scheme

1(a) Identify and explain two possible reasons why Richard wants to expand 8 RR. Knowledge [2 × 1] – award one mark for each relevant reason Analysis [2 × 1] – award one mark for a relevant explanation of each reason Application [2 × 2] – award two application marks for each reason Answers are likely to include: • To possibly increase profit/Increase revenue • Higher status and prestige for owner • Lower average costs/Benefit from economies of scale • Larger share of the market/Increase market share • Spread risk Indicative response: To possibly increase profit (1) because if the restaurant is bigger it will have more customers and more revenue (ap). With higher revenue, if costs can be kept lower, then profit should increase (1). If customers are interested in the new delivery service then sales should increase and so will profit (ap). Possible application marks: Sole trader business; set up 5 years ago; restaurant; good reputation for quality food; reputation for excellent service; main objectives to increase profit and increase market share; opening new restaurant offering a delivery service; food; meals; customer loyalty. There may be other examples in context that have not been included here. 1(b) Consider the advantages and disadvantages of the following three types 12 of business organisation. Recommend which type of business organisation Richard should choose for RR as it expands. Justify your answer. Sole trader • Owner in complete • Unlimited liability control • No continuity • No sharing of profit • No one to help share • Incentive to work decision making hard as everything kept for himself Partnership • Partners can • Unlimited liability specialise in • Each partner responsible different tasks for the actions of other • Share decision partners making • No continuity • More ideas/experience • Able to raise more capital from partners Private limited • Raise capital from • Can only sell shares to company sale of shares family and friends • Limited liability • Accounts not private • Separate legal • Legal formalities when identity setting up and running • Continuity the company. 1(b) Knowledge/Analysis/Evaluation – award up to 10 marks using the levels-based mark scheme below. Knowledge/Analysis/Evaluation At least 2 × Level 2 + 9–10 marks for well justified recommendation of which type of business organisation to choose and why not the other types. Level 3 7–8 marks for limited recommendation of which type of business organisation to choose. 4–6 marks Level 2 Detailed discussion of the advantages and/or disadvantages of each type of business organisation. 1–3 marks Level 1 Outline of the advantages and/or disadvantages of each type of business organisation. Level 1 – 1 mark for each L1 statement (max of 3 marks) e.g. Sole trader has unlimited liability. 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. Sole trader has unlimited liability and this means that the owners personal possession are at risk if the business goes bankrupt and Richard is personally liable for all debts of the restaurant. However, he is his own boss and makes all the decisions (L2 + application for reference to the restaurant). Level 3 – For L3 to be awarded there needs to be at least two L2 marks awarded and then a recommendation of which type of business organisation to choose. Award up to 2 additional marks for relevant application. Possible application marks: Set up 5 years ago; restaurant; good reputation for quality food; good reputation for excellent service; main objectives to increase profit and increase market share; opening new restaurant offering a delivery service; customer loyalty; meals. There may be other examples in context that have not been included here.

Mark scheme

2(a) Identify and explain two possible reasons why Richard needs a well- 8 motivated workforce. Knowledge [2 × 1] – award one mark for each relevant reason Analysis [2 × 1] – award one mark for a relevant explanation of each reason Application [2 × 2] – award two application marks for each reason Answers are likely to include: • Encourages workers to work more efficiently/higher productivity/lower unit costs for the business/Increased output • Lower labour turnover – saves recruitment and training costs/lower absenteeism • Happier employees give better customer service/good quality meals/improved reputation • Employees feel valued – willing to contribute to ideas Indicative response: Motivated employees give better customer service (1) that leads to food deliveries arriving on time (ap). The customers feel cared for by the business and so maintain customer loyalty (ap). These satisfied customers may also tell friends about the service and so sales increase for RR (1). Possible application marks: Restaurant; good reputation for quality food; good reputation for excellent service; new multinational restaurant chain set up; 20 part-time employees; 10 skilled full-time employees; waiters; chefs; customer loyalty; meals; plates. There may be other examples in context that have not been included here. 2(b) Consider the following three ways Richard could use to make sure he 12 has enough workers for the new restaurant. Recommend which would be the best way. Justify your answer. Benefits Drawbacks Move some part- • Cheap to • Need to replace the time employees arrange existing employees – still from the existing • Saves time have recruitment costs restaurant recruiting – • Not enough employees to quick to fill the fill all jobs at the new vacancies at the restaurant new restaurant • No training required Ask part-time • Already trained • May not want to work employees to work – no training longer hours full time so they can costs • Might have to pay higher work at both • Already know wages restaurants what is required at the new restaurant – quicker to open it Recruit additional • Workers trained • Training costs unskilled employees in the way • Costs of recruitment that Richard can Richard wants • Takes time to recruit and train for RR train workers • More likely to stay at the new restaurant 2(b) Knowledge/Analysis/Evaluation – award up to 10 marks using the levels-based mark scheme below. Knowledge/Analysis/Evaluation At least 2 × Level 2 + 9–10 marks for well justified recommendation of the best way to choose and why the other ways will be less effective. Level 3 7–8 marks for some limited judgement shown in the recommendation of the best way to choose. 4–6 marks Level 2 Detailed discussion of the benefits and/or drawbacks of each way. 1–3 marks Level 1 Outline of the benefits and/or drawbacks of each way. Level 1 – 1 mark for each L1 statement (max of 3 marks) e.g. It is cheap to arrange moving some employees over to the new restaurant. 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. It is cheap to move existing employees over to the new restaurant and they will already know the quality requirements of RR service. It will maintain the quality of service at the new restaurant and build up a reputation there. However, Richard will still need to recruit employees for the existing restaurant so unlikely to save recruitment costs (L2). Level 3 – For L3 to be awarded there needs to be at least two L2 marks awarded and then a justified recommendation of which way to choose. Award up to 2 additional marks for relevant application. Possible application marks: Sole trader business; good reputation for quality food; good reputation for excellent service; new multinational restaurant chain set up; 20 part-time employees; 10 skilled full-time employees; opening new restaurant offering a delivery service; customer loyalty; meals; chefs; waiters; expansion. There may be other examples in context that have not been included here.

Mark scheme

3(a) Identify and explain two ways Richard could promote the new 8 restaurant. Knowledge [2 × 1] – award one mark for each way Analysis [2 × 1] – award one mark for a relevant explanation of each way Application [2 × 2] – award two application marks for each way Answers are likely to include: • Posters • Billboards • Leaflets • Discount coupons • Local newspapers • Social media • Special appearance of celebrity Note: Internet/online on its own is too vague and television is not suitable for a small business. Indicative response: Advertise by handing out leaflets (1) this can be done outside the new restaurant to highlight the food served as well as the new delivery service (ap). Potential customers can keep a copy of the leaflet to remind them of the contact details and opening times (1) which may encourage them to try the new service next time they have a party at home (ap). Possible application marks: Good reputation for quality food; good reputation for excellent service; new multinational restaurant chain set up; main objectives to increase profit and increase market share; offering a delivery service; customer loyalty; garden parties; appeal to high income customers; meals. There may be other examples in context that have not been included here. 3(b) Consider the following three factors that will affect Richard’s decision 12 on the location of the new restaurant. Which factor is the most important to Richard? Justify your answer. Near to • If near to existing restaurant then it is easier to move existing employees between the two restaurant • Easier for Richard to manage the two restaurants • Existing restaurant fully booked so not a problem for the new restaurant • May not increase sales as customers already go to the existing restaurant The level of • The level of income will affect the potential demand income of local for the new restaurant and the new delivery service restaurant • High income residents in Location 2 might have houses with gardens which mean they are more likely to have parties in the garden • Lower income residents are less likely to spend money on takeaways/eating at restaurants as they would cook food themselves • High unemployment in location 1 so lower demand Cost of • If lower cost then may be more affordable for Richard building • Leaves more working capital especially as cash flow may not be good to start with • High cost may mean Richard has to borrow large amount of capital • As a sole trader Richard may have only a limited amount of capital 3(b) Knowledge/Analysis/Evaluation – award up to 10 marks using the levels-based mark scheme below. Knowledge/Analysis/Evaluation At least 2 × Level 2 + 9–10 marks for well justified conclusion as to which factor is most Level 3 important relative to the other factors. 7–8 marks for some limited judgement shown in the conclusion as to which factor is most important. Level 2 4–6 marks Detailed discussion of the benefits and/or drawbacks of each factor. Level 1 1–3 marks Outline of the benefits and/or drawbacks of each factor. Level 1 – 1 mark for each L1 statement (max of 3 marks) e.g. If near to existing restaurant then it is easier to move employees between the two. 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. If near to existing restaurant then it is easier to move employees between the two restaurants and it is easier for Richard to move between the two businesses and manage them. If Richard had to keep travelling a long way then this will take time and he will find it harder to keep an eye on the employees to make sure everything is going well (L2). Level 3 – For L3 to be awarded there needs to be at least two L2 marks awarded and then a conclusion as to which factor is most important. Award up to 2 additional marks for relevant application Possible application marks: Good reputation for quality food; good reputation for excellent service; new multinational restaurant chain set up; opening new restaurant offering a delivery service; customer loyalty; meals; food; eat out; information from Appendix 1; new restaurant is aimed at high income customers. There may be other examples in context that have not been included here.

Mark scheme

4(a) Identify and explain one opportunity and one threat to RR from a 8 multinational company opening a restaurant nearby. Knowledge [2 × 1] – award one mark for each opportunity/threat Analysis [2 × 1] – award one mark for a relevant explanation of each opportunity/threat Application [2 × 2] – award two application marks for each opportunity/threat Answers are likely to include: Opportunities • TV advertising increases demand for restaurant meals – increases demand for all restaurants so RR benefits • Learn new techniques from seeing how multinational operates – improves efficiency at RR – copy idea of online booking App Threats • Lower costs for multinational as benefit from economies of scale – RR will find it harder to compete on price • May lose employees – as multinational may pay higher wages • Increased competition – lower RR sales/lose customers Indicative response: May lose employees (1) as multinational may pay higher wages and is more attractive to work for (1). This could cause a lot of problems for the restaurant if it becomes short of staff such as chefs (ap). This will make it hard to continue to provide an excellent service and maintain a good reputation (ap). Possible application marks: Sole trader business; good reputation for quality food; good reputation for excellent service; 20 part-time employees; 10 skilled full-time employees; main objectives to increase profit and increase market share; offering a delivery service; chefs; kitchen staff; customer loyalty; expansion; meals; 2 kitchen employees have been offered jobs by the multinational business. There may be other examples in context that have not been included here. 4(b) Appendix 3 shows the cash-flow forecast for RR’s business before the 12 location decision for the new restaurant is made. Assume Richard chooses location 1. Consider how the decision to choose location 1 could affect RR’s cash- flow forecast. Recommend to Richard how he could try to make sure that RR does not have a cash-flow problem. Justify your answer. Relevant points might include: Examples of L1 Examples of L2 statements • Cash inflows will • Closing negative balance in January increase from July ($37 000) • Cash outflows will • Positive closing balance of $1000 achieved increase from the by July purchase of the • By December positive closing balance of at building least $18 000 but also inflows and outflows • Additional cash from the new restaurant that will now be outflow of $25 000 trading • Large cash outflows • Large cash outflow initially from the at the start of the purchase, decoration and equipping of the year new restaurant and delay in cash inflows for • Negative effect on 6 months until new restaurant starts trading net cash flow causing negative effect on closing balance for the first 6 months Possible recommendation to avoid a cash flow problem: • Capital financed by long term sources such as bank loan or take on a partner so avoid large cash outflow at the start of the year • Working capital financed by trade credit or overdraft to avoid a cash flow problem caused from the delay in the revenue from the new restaurant Note: No mention of cash flow no marks. Reference to location 2 or profit is not valid. 4(b) Knowledge/Analysis/Evaluation – award up to 10 marks using the levels-based mark scheme below. Knowledge/Analysis/Evaluation At least 2 × Level 2 + 9–10 marks for well justified recommendation as to the best way for Richard to ensure the cash flow does not become a problem as RR expands. Level 3 7–8 marks for some limited judgement shown in the recommendation as to the best way for Richard to ensure the cash flow does not become a problem as RR expands. 4–6 marks Level 2 Detailed discussion of how cash flow forecast may be affected. 1–3 marks Level 1 Outline of how cash flow forecast may be affected. Level 1 – 1 mark for each L1 statement (max of 3 marks) e.g. Cash inflows will increase from restaurant customers after June. 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. Cash inflows will increase from restaurant customers but these may be delayed inflows as location 1 has been chosen. This may cause cash flow problems if the outflows from expenditure on purchasing the new restaurant building go out straight away (1 × L2). Level 3 – For L3 to be awarded there needs to be at least two L2 marks awarded and a recommendation as to the best way for Richard to ensure the cash flow does not become a problem as RR expands. Award up to 2 additional marks for relevant application. Possible application marks: Sole trader business; good reputation for quality food; good reputation for excellent service; new multinational restaurant chain set up; 20 unskilled part-time employees; 10 skilled full-time employees; main objectives to increase profit and increase market share; opening new restaurant offering a delivery service; customer loyalty; take 6 months to prepare building; meals, figures from Appendix 3; new restaurant aimed at high income customers. There may be other examples in context that have not been included here.