Business Studies 0450/11 October/November 2020: question paper and mark scheme

Mark scheme

1(a) Define ‘trade union’. 2 Do not award pressure group as this does not answer the question. Award 2 marks for a full definition. Award 1 mark for a partial definition. Group of workers who join together to ensure their interests are protected [2] Organisation that represents the workers and fights for improvements to pay and conditions [2] An organisation that exists to provide workplace support for its members [2] Partial definition – e.g. Group of workers who join together [1] Group of people who act together to protect their rights [1] 1(b) Define ‘level of hierarchy’ 2 Note: To gain 2 marks the answers should show that workers are on a similar level and are within Award 2 marks for a full definition. Award 1 mark for a partial one organisation. definition. Managers/supervisors/other employees who are given a similar level of responsibility in an organisation [2] A level of authority in a business structure [2] Partial definition e.g. People all at the same rank [1] 1(c) Outline two advantages of SRB using delegation. 4 Points can relate to employees or the business. Award 1 mark for each relevant advantage. Note: To use words from the stem as application, the reference must be appropriate (i.e. make Award 1 mark for each relevant reference to this business. sense) in relation to the point being made. Points might include: The following words are likely to be appropriate for • Workload spread more evenly/reduced workload for managers [k] this question: in its 80 branches [app] • Management can focus on more important matters [k] such as • Business customers responding to increased competition [app] • 100 managers • Motivates employees/gives sense of responsibility [k] so less • 80 branches problems with trade unions [app] • Removing one level of the hierarchy • Improved efficiency/better quality of work (because workers are • Saving $1m in costs specialised) • Increased competition • Career opportunities [k] as able to do similar work to the 100 • Bank (services) or related words such as managers [app] loans • Management can measure the success of staff more easily [k] • Develop new products and services • Can assist with training [k] • Trade union Other appropriate responses should also be credited. Other appropriate examples in context can still be credited. 1(d) Explain two factors SRB should consider when deciding which 6 Note: To use words from the stem as application, managers to make redundant. the reference must be appropriate (i.e. Make sense) in relation to the point being made. Award 1 mark for identification of each relevant factor (max 2). The following words are likely to be appropriate for Award 1 mark for each relevant reference to this business (max 2). this question: Award 1 mark for each relevant explanation (max 2). • Business customers • 100 managers Points might include: • 80 branches • Importance of the role being performed [k] to maintain contact • Removing one level of the hierarchy with business customers [app] to ensure good customer service • Saving $1m in costs [an] • Increased competition • Performance/experience/skills/flexibility [k] such as not able to use • Bank (services) / give loans delegation [app] so not able to do the job required [an] • Delegation. • Length of time worked/redundancy costs [k] may be cheaper to choose people who have not been there for a long time [an] Other appropriate examples in context can still be • Attitude/attendance/disciplinary record [k] will want to lose poor/ credited. bad workers [an] from the 80 branches [app] • Wages/salary [k] as removing higher paid employees would help Do not accept reduced costs alone as [k] or [an] reduce costs long term [an] helping to reach the cost reduction of as this is [tv]. $1m [app] • Which departments need to lose/retain workers [k] • Number of customers [k] at the branch [app] • The number of subordinates under each manager [k] as workers may become inefficient if poorly supervised [an] • Those who volunteer [k] Other appropriate responses should also be credited. 1(e) Do you think that more advertising is a better way for a business 6 This is a general question so there are no marks to respond to increased competition than introducing new for application. products? Justify your answer. Some points could be awarded for different Award up to 2 marks for identification of relevant issues. options, but do not award the same point twice. Award up to 2 marks for relevant development of points. For evaluation to be awarded justification will usually follow on from relevant analysis of points. Award 2 marks for justified decision as to whether more advertising is a better way for a business to respond to increased competition than For the second evaluation mark the candidate introducing new products. must address that there is increased competition. Points might include: Advertising: • To raise awareness of its products [k] to increase revenue [an] but products might not be what customers want which will limit effectiveness [an] • No guarantee that target customers may see it [k] so sales may not rise [an] • More advertising will increase costs [k] • Widen target market/appeal to more potential customers [k] Introducing new products: • Widen target market/appeal to more potential customers [k] • May not appeal to customers [k] • High cost of development [k] which will add to expenses [an] • Allows access to new markets [k] which helps spread risk [an] and increases potential sales [an]. Other appropriate responses should also be credited. 1(e) Justification might include: Increased advertising will raise awareness of products [k] potentially increasing revenue. [an] Introducing new products might appeal to a wider target market [k] so helping to spread risk. [an] It depends on reason for increased competition, if customers dislike your products then advertising may not be effective. [eval] Developing products may be more expensive but the business could have little choice if it wants to remain competitive. [eval]

Mark scheme

2(a) Define ‘flow production’. 2 Award 2 marks for a full definition. Award 1 mark for a partial definition. Where large quantities of a product are produced in a continuous process [2] Mass production using a production line [2] Partial definition e.g. ‘Makes lots of the same thing’ [1] Large quantities of a standardized product [1] Large-scale production/large volumes, continuous production [1] 2(b) Identify two methods (other than technology) a business can use 2 Only award the first two responses given. to improve efficiency. Accept practical examples such as examples of Award 1 mark per method. performance related pay as motivation methods. Points might include: Do not accept employ more workers as this will • Reorganise layout/reduce waste/Kaizen/JIT/lean production not improve efficiency. • Training/improve employee skills/employ more skilled workers • Improve motivation/communication • Specialisation Other appropriate responses should also be credited. 2(c) Outline two sources of finance YMG could use for the new 4 Long term sources are required for this technology. investment. Award 1 mark for each relevant source of finance. Note: To use words from the stem as application, the reference must be appropriate (i.e. make Award 1 mark for each relevant reference to this business. sense) in relation to the point being made. Points might include: The following words are likely to be appropriate for this question: • Sell shares/owners capital [k] as a private limited company [app] • Bank loan [k] as need $60m [app] • Private limited company/sell shares to family • (Retained) profits [k] as likely to have funds as it is the largest and friends manufacturer [app] • Flow production • Leasing [k] as move into new markets overseas may not be • $60m. successful [app] • New markets • Hire purchase [k] • The largest manufacturer • Owners savings [k] • 3 billion litres • Sell unwanted assets [k] • Soft drinks • Crowdfunding [k] Other appropriate examples in context can still be Other appropriate responses should also be credited. credited. 2(d) Explain how each of the following problems might affect YMG 6 Note: To use words from the stem as application, when entering new markets in other countries. the reference must be appropriate (i.e. make sense) in relation to the point being made. Award 1 mark for identification of each relevant problem (max 2). The following words are likely to be appropriate for Award 1 mark for each relevant reference made to this business this question: (max 2). • Private limited company • Flow production Award 1 mark for each relevant explanation (max 2). • $60m. • The largest manufacturer Points may include: • 3 billion litres • New technology Lack of local knowledge: • Soft drinks • May not be aware of competitors actions [k] leading to fewer sales • Expanding production /lower revenue [an] of soft drinks [app] • May not understand customer buying habits [k] so must spend Other appropriate examples in context can still be more money developing new products [an] rather than investing credited. $60m in new technology [app] • Customers may not like [K] the soft drinks [App] Do not accept answers which clearly refer to tariffs. Import quotas: • This limits the number of items that can be brought into the Do not accept the same analysis point for both country [k] so fewer litres needed [app] which could lead to higher problems. prices[an] Other appropriate responses should also be credited. 2(e) Do you think a joint venture is the best way for a business to 6 This is a general question so there are no marks enter a new market in another country? Justify your answer. for application. Award up to 2 marks for identification of relevant points. For evaluation to be awarded justification will usually follow on from relevant analysis of points. Award up to 2 marks for relevant development of points. Answers which only discuss alternative options Award 2 marks for justified decision as to whether a joint venture is cannot be awarded evaluation marks. the best way for a business to enter a new market in another country. Joint venture • Allows the business to gain important local information about customers [k] so better able to meet customer requirements [an] ensuring sales [an] • Wider range of contacts/better access to resources [k] so may be able to obtain cheaper resources [an] reducing production costs [an] • Less competition [k] as working with local business [an] helping to increase its market share [an] • Can provide access to other specialist staff and technology [k] • Clash of management styles [k] lead to conflict/problems with decision making [an] • Must share profits [k] Other options may include: • Franchising [k] which will reduce the problem of a lack of local knowledge [an] may negatively affect reputation [an] • Licensing [k] losing control over the production [an] • Expand themselves [k] allowing them to retain all the profits [an] Other appropriate responses should also be credited. 2(e) Justification might include: • A joint venture allows the business to gain important local information about customers [k] so they are better able to meet customer requirements [an] ensuring sales [an]. Expanding on their own would require them to raise more capital [k]. If they are happy to share control a joint venture is the best way as it helps reduce the risks of setting up in a new country[eval]. Since expanding on their own maybe too expensive. [eval]

Mark scheme

3(a) Define ‘sole trader’. 2 Do not accept features such as unlimited liability as this is NAQ. Award 2 marks for a full definition. Award 1 mark for a partial definition. Ownership of business in the hands of one individual/person [2] Unincorporated business owned by one person [2] Partial definition e.g. Run/operated by one person [1] 3(b) Calculate X and Y. 2 $ not required. Award 1 mark for each correct calculation. X = 8400 Y = 7000 3(c) State four factors that can influence the amount of inventory a 4 Only award the first four responses given. business might hold. Award 1 mark per factor. Points might include: • Demand from customers/amount of sales • Perishability of the items • Storage space available • Cost of storage • Delivery charges • Seasons/celebrations/festivals • Amount of money available (to buy inventory) • Lead time/reliability of supplier • Method of production (mass may require high inventory) • Stock control system – JIT/lean production Other appropriate responses should also be credited. 3(d) Explain one advantage and one disadvantage to Elton of 6 Note: To use words from the stem as application, operating in a niche market. the reference must be appropriate (i.e. make sense) in relation to the point being made. Award 1 mark for identification of each relevant advantage and disadvantage (max 1 for each). The following words are likely to be appropriate for this question: Award 1 mark for each relevant reference made to this business • Sole trader (max 2). • 5 years • Clothing and equipment for sports Award 1 mark for each relevant explanation (max 2). • shop • Remained small Points might include: • Wide range of inventory needed • Profit margin was 35% Advantages: • Use of figures from Table 3.1 • Less competition [k] so easier to attract/retain customers [an] to his shop [app] Other appropriate examples in context can still be • Clear focus/easier to target customers [k] interested in certain credited. sports [app] reducing costs of advertising [an] • Builds up specialist skills and knowledge [k] Candidates may gain credit for changes to profit • Can often charge a higher price [k] helps improve profit margin margin only once in either the advantage OR the [an] disadvantage. • Customers are prepared to pay for expertise [k] • Customers tend to be more loyal [k] so may remain in business for another 5 years [app] Disadvantages: • Lack of economies of scale [k] leading to higher unit costs [an] so not able to lower cost of sales of $7000 [app] • Risk of over dependence on a single product or market [k] • Likely to attract competition if successful [k] • Vulnerable to market changes [k] Other appropriate responses should also be credited. 3(e) Do you think Elton should be pleased with the financial 6 Relevant calculations for analysis: performance of his business? Justify your answer using appropriate ratios. Profit margin: 32% in 2019 Award up to 2 marks for identification of relevant issues. Fallen by 3% in 2019 Award up to 2 marks for relevant development of points. Gross profit margin: 70% in 2018 Award 2 marks for justified decision as to whether Elton should be 72% in 2019 pleased with his financial performance. Risen by 2% [an][an] Answers might include: OFR applies if candidates have incorrectly calculated profit in question 3(b). • Gross profit margin has improved [k] from 70% [an] to 72% [an] showing better control of its variable costs [an]. For evaluation to be awarded justification will • Profit margin has decreased [k] showing less control of expenses follow on from relevant analysis of points and must [an] include ratio analysis. • Revenue improved [k] by $1000 [an] • Gross profit increased [k] by $1200 [an] • Profit decreased [k] by $400 [an] Other appropriate responses should also be credited. Justification might include: • Gross profit margin has improved [k] from 70 % [an] to 72% [an] However profit margin has decreased. [k] He should be pleased as sales and gross profit are rising [eval] but he must be concerned about expenses. [eval]

Mark scheme

4(a) Define ‘business cycle’. 2 Do not award alternative names such as trade cycle. Award 2 marks for a full definition. Award 1 mark for a partial definition. Fluctuations in economic activity that an economy experiences over time [2] Changes in level of economic growth/GDP/economic activity over time [2] A period during which a country or economy goes from growth to recession and back again [2] Partial definition e.g. Shows changes in GDP [1] Fluctuations in economic activity [1] 4(b) Identify two reasons why a business might change its objectives. 2 Only award the first two responses given. Award 1 mark per reason. Points might include: • Achieved current objective(s) • Changing economic conditions • Changes in legal controls/rules • Changes in the market e.g. competitors join/leave market/ changes in demand • New owners • Growth of business • Change in capital available to the business. Other appropriate responses should also be credited. 4(c) Outline one advantage and one disadvantage to KTF of taking 4 Note: To use words from the stem as application, over the other business. the reference must be appropriate (i.e. make sense) in relation to the point being made. Award 1 mark for each advantage/disadvantage. The following words are likely to be appropriate for Award 1 mark for each relevant reference to this business. this question: • Building materials/cement and bricks Points might include: • $25bn • Started 60years ago Advantages: • Main competitors • Reduces competition/increased market share [k] as this is one of • Combined sales of $40bn/raise of $15bn its main competitors [app] • Business cycle • Possible economies of scale [k] reducing the unit costs of bricks • Interest rates [app] • Legal controls • Possible cost savings [k] which could be one of its objectives • Protecting the environment [app] • Stakeholder groups • Buying an existing brand can be cheaper than internal growth [k] • Access to new skills or expertise [k]. Other appropriate examples in context can still be credited. Disadvantages: • Clash of culture and leadership styles/objectives [k] for a business started 60 years ago [app] • Possible legal action (as gain too much market power) [k] so could face the risk of new legal controls to protect environment [app] • Possible diseconomies of scale or examples e.g. control/ communication problems [k] • Over reliant on one market [k] especially when enter different stages of business cycle [app] • Pressure groups could oppose [k] • Cost of redundancies [k] • Expensive to buy the firm [k]. Other appropriate responses should also be credited. 4(d) Explain how two external stakeholder groups might be affected 6 Note: To use words from the stem as application, by the takeover. the reference must be appropriate (i.e. make sense) in relation to the point being made. Award 1 mark for each relevant stakeholder group. The following words are likely to be appropriate for Award 1 mark for each relevant reference to this business. this question: • Building materials/cement and bricks Award 1 mark for each relevant explanation. • manufacturing • $25bn Points might include: • Started 60years ago • Main competitors • Banks [k] may have increased demand for loans [an] to pay for • Combined sales of $40bn taking over its main competitor [app] • Business cycle • Government [k] as may receive more tax revenue [an] if KTF can • Interest rates increase its $40bn sales [app] • Legal controls • [Local] community [k] may be concerned about possible job • Protecting the environment losses [an] • Suppliers [k] could lead to fewer / increased orders [an] for Other appropriate examples in context can still be building materials [app] credited. • Pressure groups [k] • Consumers [k] as may lead to less choice [an] Do not award answers which refer to internal • Competitors [k] as they will be concerned about possible price stakeholders such as: owners (shareholders), drops due to the economies of scale gained [an] employees. Other appropriate responses should also be credited. 4(e) Do you think businesses will be more affected by new legal 6 For evaluation to be awarded justification will controls to protect the environment than an increase in interest follow on from relevant analysis of points. rates? Justify your answer. Answers which only discuss one option cannot be Award up to 2 marks for identification of relevant issues. awarded both evaluation marks. Award up to 2 marks for relevant development of points. Award 2 marks for justified decision as to which factor likely to have the biggest effect on businesses. Points might include: New legal controls to protect environment: • May have to buy pollution permits/pay fines [k] increasing costs [an] which could increase prices [an] • Introduce new techniques/change how they make things [k] so need to spend more to train employees [an] • Might have to buy new machinery[k] • May be forced to change location [k] • May have to change raw materials [k] Increase in Interest rates: • Bank loans more expensive for business/increased cost of borrowing [k] less likely to invest in capital [an] • Consumers less likely to borrow to buy expensive items [k] leading to lower sales [an] • Demand for higher wages [k] as workers might face lower disposable income [an] Other appropriate responses should also be credited. 4(e) Justification might include: • The business may have to buy pollution permits [k] increasing their costs [an]. Interest rates may mean consumers may not borrow [k] and demand could fall [an]. Legal controls will have more effect because a business cannot avoid them [eval] whereas interest rates may have no effect if the business does not have to borrow money. [eval]