Business Studies 0450/12 October/November 2020: question paper and mark scheme

Mark scheme

1(a) Identify two features of an economic boom. 2 Only award the first two responses given. Award 1 mark per feature. Do not award ‘high GDP’ as this is associated with economic growth. Points might include: • Rapid/fast increase in GDP/highest GDP • Increase in prices/high prices/inflation • High levels of demand • (Very) low unemployment/shortage of skilled workers • Increase in wages/high income/standard of living at highest • Increase in/high business profits/profit at its highest • Increase in/rising business costs • Significant/high levels of business investment • High capacity utilisation/increase in business output • Increase in number of business start-ups Other appropriate responses should also be credited. 1(b) Identify two stages of the recruitment process. 2 Only award the first two responses given. Award 1 mark per stage. Note: Answer must be from the business viewpoint not the applicant e.g. CV or letter Two from: of application [tv] • Job analysis/identify a vacancy • Job description • Person/job specification • Advertising (the vacancy) • Application forms sent out/ received • Shortlisting/screening • Interview/ testing • Selection/job offer 1(c) Outline two possible advantages to Kolo of recruiting a manager. 4 Note: To use words from the stem as application, the reference must be Award 1 mark for each relevant advantage. appropriate (i.e. make sense) in relation to the point being made. Award 1 mark for each relevant reference to this business. The following words are likely to be Points might include: appropriate for this question: • Reduce Kolo’s workload/ can delegate tasks/ share responsibility [k] as would need to manage two businesses [app] • Hairdressing or examples such as • Can provide new ideas / experience / skills [k] about hairstyles [app] hairstyles, shampoo • Can motivate / inspire others [k] such as the 4 employees [app] • (2) salons / second /new business • 4 (employees) Other appropriate responses should also be credited. • City (centre) • Make a profit in each of the last 3 years • Economic boom Other appropriate examples in context can still be credited. 1(d) Explain two reasons why choosing the right location for the new salon 6 Note: To use words from the stem as is important for Kolo. application, the reference must be appropriate (i.e. make sense) in relation to Award 1 mark for identification of each relevant reason (max 2). the point being made. Award 1 mark for each relevant reference made to this business (max 2). The following words are likely to be appropriate for this question: Award 1 mark for each relevant explanation (max 2). • Hairdressing or examples such as hairstyles, shampoo Points might include: • City (centre) • Help attract customers/number of potential customers/close to • 4 (employees) customers/level of income/target market [k] who want their haircut [app] • 2 businesses / second business increasing revenue/allowing it to break-even [an] • Make a profit in each of the last 3 years • Proximity to competition/may be loyal to another business [k] so may • Economic boom have to lower prices [an] • Have good access/easy to find/space for parking [k] leading to more Other appropriate examples in context can sales [an] still be credited. • Rent [k] as likely to be expensive in the city centre [app] will increase his fixed/total costs [an] Do not award ‘salon’ as application as • Distance to other salon [k] as if far away, will increase transport cost [an] stated in question. • Help attract employees/close to employees [k] as it is economic boom [app] it might be difficult to find (suitably) skilled people [an] Some points can be awarded as either [k] or • Provide safe/low crime environment/security [k] as otherwise customers [an] but only allow once. may not wish to visit [an] • Location has to match its brand image [k] • Meet legal controls/government influence [k] otherwise could create a bad reputation [an] Other appropriate responses should also be credited. 1(e) Do you think experience is the most important factor for a business to 6 This is a general question so there are no consider when recruiting a new manager? Justify your answer. marks for application. Award up to 2 marks for identification of relevant issues. Some points could be awarded for different options, but do not award the same point Award up to 2 marks for relevant development of points. twice. Award 2 marks for justified decision as to whether experience is the most For evaluation to be awarded justification important factor for a business to consider when recruiting a new manager. will usually follow on from relevant analysis of points Points might include: Experience • Experienced person may expect higher wages [k] increasing labour costs [an] • Experienced person is likely to make fewer mistakes [k] so business may be able to provide better service/more efficient [an] increasing brand loyalty [an] • Business know they have shown they have ability to do the job [k] lower cost/time of training [an] • May not be willing to listen to ideas of owner/other employees [k] which could demotivate other employees [an] Other factors could include: • Personality/leadership style [k] as a manager must be able to lead/ work with subordinates [an] • Qualifications/skills [k] show that the person has the technical ability to do the job [an] • Requirements of the job [k] because if it’s a new role, there might not be anyone with the necessary experience to do it anyway [an] Other appropriate responses should also be credited. 1(e) Justification might include: Experienced managers are likely to make fewer mistakes [k] reducing amount of waste [an]. Qualifications [k] are also necessary as it shows they have the relevant technical ability [an]. However, experience is likely to be the most important factor as it clearly shows the person has shown ability to do the job whereas qualifications only indicate they have the knowledge to do so and therefore may add value to the business more quickly. [eval] [eval]

Mark scheme

2(a) Define ‘pressure group’. 2 For 2 marks must have the idea of a group with a common interest and influence on Award 2 marks for a full definition. Award 1 mark for a partial definition. business or government Group formed by people with a common interest who take action to change/ influence business decisions or government policies. [2] Organisations of like-minded people who put pressure on businesses and the government to change their policies to reach a predetermined objective [2] Partial definition e.g. group formed by people with a common interest [1] Do something to change business decisions/government policies [1] Other appropriate responses should also be credited. 2(b) Define ‘brand image’. 2 Award 2 marks for a full definition. Award 1 mark for a partial definition. Identity/logo/unique name of a product that distinguishes it from other brands [2] The general impression/perception/reputation of a product held by consumers [2] Partial definition e.g. identity given to a product (which gives it a personality of its own) [1] Something that distinguishes a product from its competitors [1] How the product is seen/perceived by others [1] Other appropriate responses should also be credited. 2(c) Outline two advantages to DSY of being a private limited company. 4 Note: To use words from the stem as application, the reference must be Award 1 mark for each relevant advantage. appropriate (i.e. make sense) in relation to the point being made. Award 1 mark for each relevant reference to this business. The following words are likely to be Points might include: appropriate for this question: Advantage: • (electric) cars • Access to more capital (than unlimited company)/can raise capital by • Lot of competition selling shares [k] to start making cars [app] • $2bn • Control over who buys shares/less risk of takeover (than public limited • Market is growing rapidly company) [k] which may be important as there is a lot of competition • Different market [app] • Washing machines/ cleaning equipment • Continuity of existence [k] • Separate legal identity [k] Other appropriate examples in context can • (Its shareholders benefit from) limited liability/incorporated [k] still be credited. Other appropriate responses should also be credited. 2(d) Explain two factors DSY should consider when deciding on a suitable 6 Note: To use words from the stem as method of production for the new product. application, the reference must be appropriate (i.e. make sense) in relation to Award 1 mark for identification of each relevant factor (max 2). the point being made. Award 1 mark for each relevant reference made to this business (max 2). The following words are likely to be appropriate for this question: Award 1 mark for each relevant explanation (max 2). • (electric) cars • Washing machines/ cleaning equipment Points might include: • Lot of competition • Access to/amount of capital available/cost of machinery [k] as may not • $2bn be able to afford to set up flow production [an] when already planning to • Market is growing rapidly spend $2bn [app] • Pressure groups • Level of demand/size of market/volume needed [k] as there is a lot of competition [app] may not be able to sell/need to produce a large Other appropriate examples in context can number [an] still be credited. • Nature/type of product [k] as cars [app] are more likely to be mass produced to be more cost-efficient/if luxury then job production might be suitable [an] • Access to/amount of suitable space (inside the factory) [k] • Access to (suitable/skilled) employees [k] • Possible environmental damage/impact/pollution [k] which leads to protests by pressure groups [app] which could damage its reputation/ potential sales [an] • How efficient is the method of production/amount of waste [k] Other appropriate responses should also be credited. 2(e) Do you think entering a growing market where there is a lot of 6 This is a general question so there are no competition is the best way for a business to expand? Justify your marks for application. answer. Some points can be awarded as either [k] or Award up to 2 marks for identification of relevant issues. [an] but only allow once. Award up to 2 marks for relevant development of points. For evaluation to be awarded justification will usually follow on from relevant analysis Award 2 marks for justified decision as to whether entering a market where of points. there is a lot of competition is the best way for a business to expand. Points might include: • Shows high potential demand/many potential customers [k] could lead to an increase in revenue [an] • Have to do something different to make your product ‘stand out’/ customers may be brand loyal to other businesses/ more choice [k] leading to higher/lower sales [an] leading to higher/lower revenue [an] • Allow the business to spread risk [k] • Difficult to charge high prices/may have to set lower prices (than competitors) [k] lowering the profit margin/so difficult to break-even [an] • (Additional) costs of promotion/market research [k] leading to higher expenses [an] • Makes the business be more efficient [k] to reduce average costs [an] Other options might include: • Develop new products [k] • Expand in existing market [k] • Find new market with low/no competition [k] provides chance for monopoly (as no competition) [an] • Take over a competitor [k] so gain their market share [an] Other appropriate responses should also be credited. 2(e) Justification might include: A growing market shows high potential demand [k] so possible to earn enough revenue to recover costs [an]. However, if there is a lot of competition then it might be difficult to charge high prices [k] and this might lower the profit margin [an] which could make it difficult to recover the cost of developing new products [an]. It will depend on how good its product is because if customers are interested in what the business is offering, they may be prepared to buy it despite the competition so in this situation it is worth the risk as they would be able to gain market share to justify the costs of expansion.[eval] [eval]

Mark scheme

3(a) Define ‘micro-finance’. 2 Award 2 marks for a full definition. Award 1 mark for a partial definition. Provides financial services/small loans to poor people not served by traditional banks [2] Partial definition e.g. not given by big banks [1] Help people who can’t afford a (bank) loan [1] Small loans to poor people [1] 3(b) Veronique now thinks that the cash inflow in month 3 will be $1500. 2 New closing balance must be shown as a negative value to be credited. Award 1 mark for each correct calculation. OFR rule will apply for new closing balance. New net cash flow in month 3: 300 [1] New closing balance in month 3: (900) or –900 [1] 3(c) State four reasons why a business might have cash flow problems. 4 Only award the first four responses given. Award 1 mark per reason. Points might include: • Lack of demand/economic downturn/seasonal demand • Poor cash flow management/not prepared a cash flow forecast • Unable to get a bank loan/overdraft • High level of trade receivables/allowing customers (too much) credit • Not able to purchase materials on credit/pay suppliers too soon • Increase in/higher fixed costs or examples such as rent costs too high • Increase in/higher variable costs or examples such as cost of wages too high • High level of inventory/holding too much stock/buy too much stock • Overtrading/expanding too quickly • Unexpected changes e.g. machine breakdown/loss of key employees/ loss of key customer (allow only once) • Inaccurate financial information Other appropriate responses should also be credited. 3(d) Explain one method of primary market research and one method of 6 Note: To use words from the stem as secondary market research Veronique could have used. application, the reference must be appropriate (i.e. make sense) in relation to Award 1 mark for identification of each relevant method (max 2). the point being made. Award 1 mark for each relevant reference made to this business (max 2). The following words are likely to be appropriate for this question: Award 1 mark for each relevant explanation (max 2). • Flower (shop) • Festivals Points might include: • Start-up /new business Primary market research: Other appropriate examples in context can • Questionnaire [k] as provides up-to-date information/specific to her still be credited. business [an] about trends for festivals [app] • Interviews [k] to obtain in depth details/opinions [an] about different type of flowers [app] • Online survey [k] as more likely to get responses/can reach out to more people [an] • Focus group [k] as provides detailed information about consumer tastes/as allows for follow-up questions [an] • Observation [k] as avoids interviewer bias [an] • Test marketing [k] so the cost of any problem is limited to a smaller number of products [an] Secondary market research: • Government statistics [k] as being official would provide more accurate data [an] to help her improve her cash flow forecast [app] • Online sources/internet research [k] which is low cost/readily available [an] which can be helpful for a new business [app] • Market research agency reports [k] • Trade associations/data from similar businesses/commercial data [k] Other appropriate responses should also be credited. 3(e) Do you think being creative is the most important characteristic of 6 This is a general question so there are no being a successful entrepreneur? Justify your answer. marks for application. Award up to 2 marks for identification of relevant issues. For evaluation to be awarded justification will usually follow on from relevant analysis Award up to 2 marks for relevant development of points. of points. Award 2 marks for justified decision as to whether being creative is the most An answer that only discusses other important characteristic of being a successful entrepreneur. entrepreneurial skills cannot access the evaluation marks as they have not directly Points might include: answered the question. Creative: • New/unique ideas [k] to help gain sales/attract customers/maintain customer loyalty [an] • Can open up new opportunities [k] • Customers may not like the products [k] Other characteristics include: • Risk taker [k] as needs to be able to make decisions that might fail [an] otherwise will not know whether an idea is good or not [an] • Perseverance/determination [k] as will need to be prepared to keep going when faced with problems/issues that any new business is likely to have [an] • Effective communicator [k] as will need to convince to supplies/finance providers/customers to provide supplies/finance/buy goods otherwise business will not succeed [an] • Good decision-maker/management skills [k] as increases in costs/or reduction prices charged by rivals will require a response from the business [an] otherwise sales/profits may fall [an] • Hard-working [k] as must be ready to do everything themselves [an] • Optimistic [k] • Self-confident [k] • Independent [k] 3(e) Other appropriate responses should also be credited. Justification might include: Being creative can result in ideas that make a business stand out from its competitors [k] leading to increased sales [an]. But it is also important to be a risk taker [k] as they need to be willing to make decisions that might fail [an]. Creativity is important but not the most important characteristic. A creative but risk averse entrepreneur may miss the opportunity to be first to market [eval] so losing the chance to gain a competitive advantage so reducing their chances of success. [eval]

Mark scheme

4(a) Define ‘break-even’. 2 Award 2 marks for a full definition. Award 1 mark for a partial definition. When total costs is the same as total revenue [2] Total revenue (TR) = Total cost (TC) [2] The level of output at which Total revenue = Total Cost [2] Fixed costs/contribution per unit [2] Partial definition e.g. no profit or loss [1] or revenue covers costs [1]; revenue equals total cost [1]; total revenue equals costs [1]; point where start making profit [1] 4(b) Define ‘Return on Capital Employed’. 2 Do not award answers which simply reorder the words as this does not define the term. Award 2 marks for a full definition. Award 1 mark for a partial definition. Profit as a percentage of capital employed [2] Correct formula: (Profit/Capital employed) *100 [2] Profit made on each dollar/pound invested in the business [2] Partial definition e.g. Money made on investment/capital [1] (It is a profitability ratio which) shows how effectively a business uses it capital [1] 4(c) Outline two problems inflation might cause Gino’s business. 4 Note: To use words from the stem as application, the reference must be Award 1 mark for each relevant problem. appropriate (i.e. make sense) in relation to the point being made. Award 1 mark for each relevant reference to this business. The following words are likely to be Points might include: appropriate for this question: • Fewer customers/lower demand/lower sales/less revenue [k] at the • Fast-food or examples such as fried restaurant [app] chicken, potato fries, food • Supplier prices may increase [k] for its chicken/fries [app] • Restaurant • Employees might demand higher wages [k] from its 17 employees [app] • 17 or 5 (full-time) or 12 (part-time) or • May have to increase its prices [k] chefs • Businesses unlikely to want to/will not expand [k] • menu Other appropriate responses should also be credited. Other appropriate examples in context can still be credited. 4(d) Explain two ways Gino could increase the number of customers. 6 Note: To use words from the stem as application, the reference must be Award 1 mark for identification of each relevant way (max 2). appropriate (i.e. make sense) in relation to the point being made. Award 1 mark for each relevant reference made to this business (max 2). The following words are likely to be Award 1 mark for each relevant explanation (max 2). appropriate for this question: • Fast-food or examples such as fried Points might include: chicken, potato fries • Advertise or examples such as promote on social media [k] to inform/ • Restaurant raise awareness/attract [an] about his restaurant [app] • 17 or 5 (full-time) or 12 (part-time) or • Promotional pricing/discounts/lower prices [k] to compensate for the chefs effect of inflation [app] as people might be willing to buy as more • Menu affordable [an] • Loyalty schemes [k] as this can encourage customers to return again Other appropriate examples in context can and again [an] still be credited. • Introduce new products [k] other than chicken/fries [app] to target different/new market segments [an] • Offer better customer service/better quality [k] to improve brand image/ reputation [an] • Open additional outlet/increase size of existing place/extend opening hours/offer home delivery [k] as would be able to cater for more people at same time [an] • Free samples [k] so people can try the food, and if liked, might buy [an] • Sponsorship [k] • Competition [k] Other appropriate responses should also be credited. 4(e) Do you think having regular meetings is a better way for a business to 6 This is a general question so there are no communicate with part-time employees than using text messages? marks for application. Justify your answer. Advantages of one method can be Award up to 2 marks for identification of relevant issues. presented as disadvantages of the other method but do not award the same point Award up to 2 marks for relevant development of points. twice as mirror answers are not accepted. Award 2 marks for justified decision as to whether having regular meetings is For evaluation to be awarded justification the best way for a business to communicate with part-time employees rather will usually follow on from relevant analysis than using text messages. of points. Points might include: To access the evaluation marks candidates must refer to part-time workers. Meetings: • Allow two-way communication/immediate feedback/allows ideas to be discussed [k] so can explain if instructions/information is not understood (straightaway) [an] • Information can be given out quickly/more detailed [k] • Message can be reinforced by being able to see the speaker/body language of attendees [k] • May take time/be difficult to arrange [k] as part-time employees do not work all the time [an] • Will take people away from work [k] leading to lower output/ lower efficiency/missed sales [an] Text messages: • No guarantee read/may not have a phone [k] leading to mistakes/wasting resources [an] • Have a hard copy/record [k] which can be referred to later [an] • Can send at any time [k] allowing people to read it when it is convenient for them to do so [an] Other appropriate responses should also be credited. 4(e) Justification might include: Meetings allow two-way communication [k] which can help speed up decision-making [an]. A text message is good because it can be sent and received at any time [k] ensuring that all part-time staff receive the same message at the same time [an] but people may not be able to read/respond to it immediately. So while a meeting can be difficult to arrange it is the best option for part-time employees as slow decision making could result in missed opportunities which might result in fewer sales [eval] which can more than offset the cost of the time spent in arranging the meeting. [eval]