Business Studies 0450/11 October/November 2021: question paper and mark scheme

Mark scheme

1(a) Identify two features of a sole trader. 2 Do not credit in private sector as this applies to many forms of business organisation. Award 1 mark per feature. Points might include: • Keeps all the profit • Unlimited liability • Unincorporated / no separate legal identity • Takes all decisions / own boss • Has total ownership of business / owned by one person • Few legal requirements Other appropriate responses should also be credited. 1(b) Define ‘working capital’. 2 Do not credit examples. Award 2 marks for a full definition. Award 1 mark for a partial definition. Amount of capital available to a business to pay its day-to-day expenses/costs [2] OR The capital needed to finance the day to day running expenses (and pay the short-term debts of the business) [2] OR Current assets – current liabilities [2] Partial definition e.g. funds used to buy inventory [1] 1(c) Outline two ways that break-even information can help Jerome’s 4 Note: To use words from the stem as business. application, the reference must be appropriate (i.e. make sense) in relation to the point being Award 1 mark for each relevant way. made. Award 1 mark for each relevant reference to this business. The following words are likely to be appropriate for this question: Points might include: • (low sugar) drinks • He knows the level of output needed to make a profit / cover costs • 200 units above break-even [k] for his (low sugar) drink [app] • 10 000 / 9800 units sold • Helps planning/forecasting/decision-making [k] such as how best to • Added value increase added value [app] • Family and friends • Help apply for finance [k] as so far only borrowed from friends and family [app] Other appropriate examples in context can still • Can see what will happen if costs/prices change [k] be credited. • Helps identify the expected level of profit/loss at different levels of output [k] Do not award points such as shows • Help identify the margin of safety [k] based on the 10 000 units sold costs/sales/revenue/profit on own as this is too [app] vague. Other appropriate responses should also be credited. 1(d) Explain how each of the following can help Jerome increase added 6 Note: To use words from the stem as value: application, the reference must be appropriate • Change the packaging (i.e. make sense) in relation to the point being • Use cheaper materials made. The following words are likely to be appropriate Award 1 mark for identification of each relevant point (max 2). for this question: • (low sugar) drinks Award 1 mark for each relevant reference made to this business (max 2). • 200 units above break-even • 10 000 units sold Award 1 mark for each relevant explanation (max 2). • 9800 (break-even) Points might include: Other appropriate examples in context can still be credited. Change the packaging: • This will allow Jerome to be able to increase the price [k] of his drink [app] increasing the gap between price and costs [an] • Customers can perceive the product to be worth more [k] so may be prepared to pay more for the same product [an] Use cheaper materials: • This will help lower input costs [k] when making 10 000 units [app] increasing the gap between cost and price [an] • Lower costs [k] can lead to higher profit per unit sold [an] Other appropriate responses should also be credited. 1(e) Do you think giving out free samples is the best method of sales 6 This is a general question so there are no marks promotion for a business to use when promoting a new food for application. product? Justify your answer. Candidates can discuss other options, but Award up to 2 marks for identification of relevant points. evaluation must focus on whether free samples is the best method of sales promotion to use. Award up to 2 marks for relevant development of points. Award 2 marks for a justified decision as to whether free samples are the best method of sales promotion for a business to use when promoting a new (food) product. Points might include: Free samples: • Encourages potential customers to try something [k] which can persuade them to buy [an] • Trying is likely to be more effective than just telling someone about it [k] as the taste is an important part of the buying process [an] • Tempts existing customers to buy more [k] which can increase revenue [an] • Cost of providing samples [k] can decrease profit margin [an] • Way to use up inventory [k] • No guarantee people will buy [k] Other options could include: • Buy one get one free [k] would generate some income [an] • Point of sale displays [k] raise awareness of the product [an] Other appropriate responses should also be credited. Justification might include: • Encourages potential customers to try something new [k] which can persuade them to buy [an]. However, the cost of providing samples [k] can decrease the profit margin. [an] Free samples are the best method despite the cost [eval] as taste is important when buying food [eval].

Mark scheme

2(a) Define ‘multinational company’. 2 Do not award ‘sells in other countries’ as this could equally apply to an exporter. Award 2 marks for a full definition. Award 1 mark for a partial definition. A business with factories, production, or service operations in more than one country [2] OR A business with production or service operation in another country outside its normal area of operation [2] Partial definition e.g. has businesses everywhere [1] OR works/operates in more than one country [1] 2(b) Identify two reasons why a government might support business 2 Only award the first two responses given. activity. Award 1 mark per reason. Points might include: • Create jobs • Increase competition / develop a market • Increase output / economic growth/GDP • Benefit society (small) businesses can grow into large/ important ones in the future • Generate new ideas • Can produce (a future source of) tax revenue Other appropriate responses should also be credited. 2(c) Outline one advantage and one disadvantage to NSN of using just- 4 Note: To use words from the stem as in-time inventory control. application, the reference must be appropriate (i.e. make sense) in relation to the point being Award 1 mark for each relevant advantage/disadvantage. made. Award 1 mark for each relevant reference to this business. The following words are likely to be appropriate for this question: Points might include: • Car • Factory Advantages: • Multinational company • Less warehouse space [k] needed to store parts for cars [app] • Technology changed production • Less inventory held [k] in its factories [app] • Lower storage costs [k] for the multinational company [App] Other appropriate examples in context can still • Improve working capital [k] be credited. • Improve cash flow [k] • Lower risk of obsolete/damaged stock [k] Disadvantages: • Very reliant on suppliers to deliver stock when needed / if parts not available / late it will have a major impact on production [k] as technology has changed how production is carried out [app] • May not be able to meet sudden/unexpected order [k] • Little room for mistakes (as minimal stock available for rework) [k] • Less (purchasing) economies of scale [k] Other appropriate responses should also be credited. 2(d) Explain two ways in which an increase in economic growth might 6 Note: To use words from the stem as affect NSN’s decision to build a new factory in country Z. application, the reference must be appropriate (i.e. make sense) in relation to the point being Award 1 mark for identification of each relevant way (max 2). made. Award 1 mark for each relevant reference 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). • Car • $80m (grant) Points might include: • 7000 jobs • Just-in-time inventory control • Could lead to increased demand [k] for cars [app] increasing revenue • Multinational company [an] • Shortage of skilled workers [k] may make it more difficult to recruit Other appropriate examples in context can still workers [an] for the 7000 jobs[app] be credited. • Employees may ask for higher wages [k] increasing costs [an] • Increased rent costs / less choice of location [k] increasing fixed costs [an] for the factory[app] • Increased competition [k] so may gain few customers / low market share [an] Other appropriate responses should also be credited. 2(e) Do you think the ways technology has changed production 6 This is a general question so there are no marks methods benefits all employees? Justify your answer. for application. Award up to 2 marks for identification of relevant points. Note: Answer must focus on the benefit or not to the workers so do not accept points such as ‘more Award up to 2 marks for relevant development of points. efficient’ or ‘better quality/ less mistakes’ unless clearly link issue to employees. Award 2 marks for a justified decision as to whether the way technology has changed production methods has benefited all employees. Do not award work is easier/less work as this is too vague. Points might include: • Need for retraining / learn new skills [k] leading to opportunities for promotion [an] • Safer conditions [k] so less risk of injury [an] • The job is more repetitive [k] so lower job satisfaction [an] • Fewer workers needed / workers may lose their jobs / redundancy [k] so lower standard of living [an] • More job insecurity / fear of change [k] so could reduce motivation [an] • More skilled workers may be needed [k] leading to higher pay [an] Other appropriate responses should also be credited. Justification might include: • Less job security [k] could reduce workers motivation [an]. However, more skilled workers may be needed [k] leading to higher pay. [an] No, it will not benefit all employees as it depends on the individual worker. Those who lose their jobs will not see the benefit from technology [eval] whereas those who keep their job can benefit from learning new skills. [eval]

Mark scheme

3(a) Define ‘externalities’. 2 Award 2 marks for a full definition. Award 1 mark for a partial definition. Third party effects arising from production or consumption of goods and services for which no appropriate compensation is paid [2] OR Advantages or disadvantages that fall on third parties that are not directly involved in the production process [2] OR The effect of business activities on unrelated parties [2] Partial definition e.g. effect on third party or society [1] 3(b) Define ‘stakeholder groups’. 2 Award 2 marks for a full definition. Award 1 mark for a partial definition. Any person or group with a (direct) interest in the performance/activities of a business [2] Partial definition e.g. An individual or group which has an interest in a business [1] OR Someone affected by what a business does [1] OR Anybody inside or outside the business who cares about its operations [1] 3(c) Outline two reasons why profit might be important to SBG. 4 Note: To use words from the stem as application, the reference must be appropriate Award 1 mark for each relevant reason. (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 appropriate Points might include: for this question: • Source of finance [k] as its objective is to grow [app] • Paint • To ensure survival of the business / avoid closure [K] protecting jobs • 6 factories of its 700 employees [app] • 700 employees • Measure/indicator of success of the business [k] in each of the 16 • 16 countries countries [app] • Growth (is the objective) • Measures the performance of managers [k] in the paint business • Employees are encouraged to be involved [app] in decision-making. • Reward for risk-taking [k] • Decide whether to continue making or selling a product [k] Other appropriate examples in context can still • Attract investors [k] be credited. Other appropriate responses should also be credited. Do not credit payment of day-to-day expenses. 3(d) Explain two ways SBG can involve its employees in decision- 6 Note: To use words from the stem as making. application, the reference must be appropriate (i.e. make sense) in relation to the point being Award 1 mark for identification of each relevant way (max 2). made. Award 1 mark for each relevant reference 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). • Paint • 6 factories Points might include: • 16 countries • Delegation [k] as workers in the 6 factories [app] will make the • 700 employees decisions themselves [an] • Developing new products • Democratic leadership [k] encourages employees to offer ideas [an] • Channel of distribution about developing new products [app] • Encourage team working / kaizen [k] for its 700 employees [app] Other appropriate examples in context can still • Meet with employees/surveys [k] be credited. Other appropriate responses should also be credited. 3(e) Do you think using wholesalers is the best way for a large business 6 This is a general question so there are no marks to distribute its products? Justify your answer. for application. Award up to 2 marks for identification of relevant points. To gain both evaluation marks, response must clearly relate to a large business. Award up to 2 marks for relevant development of points. Candidates can discuss other options, but Award 2 marks for a justified decision as to whether wholesalers are the evaluation must focus on whether wholesalers best channel of distribution for a large business to use. are the best way for a large business to distribute its products. Points might include: • Transport costs to the retailer is paid for by the wholesaler [k] so reduces costs to manufacturer [an] • Can help sell goods to a larger market [k] leading to higher revenue [an] • Wholesalers buy in large quantities [k] reducing distribution costs [an] • Wholesalers will advertise and promote products [k] • Another middleman will take some of the profit [k] • Producer loses some control over the marketing [k] Other options could include: • Selling direct to customers [k] ensures more control over the marketing mix [an] • Using a retailer [k] Justification might include: • Wholesalers will pay slightly lower prices [k] which will reduce the businesses profit margin. [an] By selling direct to customers [k] this will give the firm more control over marketing. [an] Selling directly to customers maybe the best way to protect its brand image. [eval] For a large business image is likely to have a big impact on in their sales. [eval]

Mark scheme

4(a) Define ‘cost of sales’. 2 Do not award examples or answers which include references to expenses. Award 2 marks for a full definition. Award 1 mark for a partial definition. Cost of producing or buying in the goods sold by the business during a period of time [2] OR Cost of purchasing the goods used to make the products sold [2] OR Variable cost of making the goods sold [2] OR Cost per unit x number of output sold [2] OR Opening inventory + purchases – closing inventory [2] Partial definition e.g. money spent on materials [1] 4(b) Calculate X and Y. 2 Award 1 mark for each correct calculation. X 900 000 or 900 Y 320 000 or 320 4(c) Identify four stages of the recruitment process. 4 Only award the first four responses given. Award 1 mark per stage. Note: Answer must be from the business viewpoint not the applicants e.g. CV or letter of Four from: application. • Job analysis / identify vacancy • Job description • Person/job specification • Advertising (the vacancy) • Application forms sent out/received • Short listing/screening • Interview/testing • Selection / job offer / hire Other appropriate responses should also be credited. 4(d) Explain two reasons why effective communication might be 6 Note: To use words from the stem as important to BGR. application, the reference must be appropriate (i.e. make sense) in relation to the point being Award 1 mark for identification of each relevant reason (max 2). made. Award 1 mark for each relevant reference 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). • Cinemas (or cinema related words such as movies, suppliers of popcorn) Points might include: • New location • To ensure employees / suppliers carry out the instructions correctly / • $320 000 expenses understand what to do [k] to make sure the right thing is done / there is • Recruit 10 more employees no wastage [an] • Speed up decision-making [k] at the new location [app] so able to Other appropriate examples in context can still quickly react to changing customer tastes [an] be credited. • To ensure customers are given correct information [k] which can help improve customer loyalty [an] • Find customer preferences [k] so can use the information to help improve its services / make it more competitive [an] • Motivates employees [k] increasing efficiency [an] Other appropriate responses should also be credited. 4(e) Do you think issuing new shares is a better way for a limited 6 This is a general question so there are no marks company to finance expansion than using a bank loan? for application. Justify your answer. Candidates can discuss other options, but Award up to 2 marks for identification of relevant points. evaluation must focus on whether new shares is better than a bank loan to finance expansion. Award up to 2 marks for relevant development of points. Award 2 marks for a justified decision as to whether issuing new shares is a better way for a limited company to finance expansion than using a bank loan. Points might include: Issue new shares: • Permanent source of capital [k] so no need to repay [an] • Access to greater amounts of capital [k] as no restriction on number of shares [an] • No interest to pay [k] so fixed costs do not increase [an] so can avoid increasing debt [an] • Possible loss of control / risk of takeover [k] making it difficult to manage or take decisions [an] • Cost/time to arrange [k] so not able to focus on other issues [an] • Shareholders might expect dividends [k] 4(e) Bank loan: • Increase debt [k] which can increase gearing ratio [an] • Need to repay [k] • Must pay interest [k] which increases expenses [an] • Have long time to repay [k] allows time to gain extra revenue to meet repayments [an] • Can keep profits for future/emergency [k] • Can borrow large amount / all the money [k] Other appropriate responses should also be credited. Justification might include: Issuing new shares give access to large amounts of capital [k] as there is no restriction on the number of shares. [an] Bank loans require interest payments [k] which will increase costs. [an] It can depend on the current level of debt as a bank loan will increase financial risk[eval] so it may be safer to issue shares as a limited company will not be required to repay the funds. [eval]