Business Studies 0450/12 October/November 2021: question paper and mark scheme

Mark scheme

1(a) Define ‘secondary sector’. 2 Do not award examples. Award 2 marks for a full definition. Award 1 mark for a partial definition. Firms that process and manufacture goods from natural resources [2] OR Manufacture goods using the raw materials provided by the primary sector [2] OR Uses manufacturing to transform the raw materials generated in the primary sector into a product [2] Partial definition e.g. makes products [1] 1(b) Identify two factors a business should consider when deciding 2 Only award the first two responses given. whether to introduce just-in-time inventory control. Award 1 mark for each factor identified. Points might include: • Reliability of suppliers / time / speed of delivery / availability of inventory at suppliers / distance from suppliers • Whether there is steady production / predictable demand • Efficient system of ordering materials / good communication systems • Whether discounts are available for bulk purchases • Cost/availability of storage space Other appropriate responses should also be credited. 1(c) Outline one advantage and one disadvantage to SWB of using 4 Note: To use words from the stem as application, quality control. the reference must be appropriate (i.e. make sense) in relation to the point being made. Award 1 mark for each relevant advantage/disadvantage. The following words may be appropriate for this Award 1 mark for each relevant reference to this business. question: • 150 000 / bookcases or related words such as Points might include: wood • Batch production Advantages: • 240 employees / 100 or part-time employees / • Tries to eliminate faults before customer receives products / 140 full time reduces likelihood that customers get faulty products [k] as only • Factory has one customer [app] • One customer • Not all workers need to be trained (as inspectors employed to • Just-in-time inventory control check quality) [k] which is important as has 240 employees [app] • Objective is to reduce waste Disadvantages: Other appropriate examples in context can still be • Cost/need to recruit inspectors/employees to check [k] the credited. bookcases [app] • Does not find out how/where fault occurred [k] in each batch [app] • High cost if products must be scrapped / reworked / service repeated [k] which clashes with its objective to reduce waste [app] Other appropriate responses should also be credited. 1(d) Explain two possible communication barriers that might exist at 6 Note: To use words from the stem as application, SWB. the reference must be appropriate (i.e. make sense) in relation to the point being made. Award 1 mark for identification of each relevant communication barrier (max 2). The following words may be appropriate for this question: Award 1 mark for each relevant reference made to this business • 150 000 / bookcases or related words such as (max 2). wood • Batch production Award 1 mark for each relevant explanation (max 2). • 240 employees / 100 or part-time employees / 140 full-time Points might include: • Factory • Technical language / jargon / different language spoken [k] so • Reducing waste workers do not understand [an] so make wrong number of • Meetings (every month) bookcases [app] • Noticeboards • Lack of feedback / no opportunity for feedback [k] so do not know • Just-in-time inventory control / cannot check if message received / understood (correctly) [an] so not able to help reduce waste [app] Other appropriate examples in context can still be • Noise [k] so employees may not hear / mishear orders [an] in the credited. factory [app] • Employees may not be at work [k] as 100 work part-time [app] so not able to obtain the information [an] • Too much information / detail [k] so not possible to absorb / take it all in [an] • Employees may not see/read message [k] on the noticeboard [app] • Not listening / not paying attention [k] in the meeting [app] • Wrong communication method/medium used [k] • Receiver may not trust the sender [k] Other appropriate responses should also be credited. 1(e) Do you think it is a good idea for a business to have only one 6 This is a general question so there are no marks customer? Justify your answer. for application. Award up to 2 marks for identification of relevant points. Award up to 2 marks for relevant development of points. Award 2 marks for a justified decision as to whether it is a good idea for a business to have only one customer. Points might include: • Only one source of revenue / sales [k] so if the customer does not buy, the business could fail / experience cash flow issues [an] • Can focus / specialise on the needs of that customer [k] increasing customer loyalty [an] • Can help planning / know what need to order [k] reduces amount of wastage [an] • No need to advertise [k] leading to lower marketing costs [an] • Can give customer too much power to influence prices [k] • Less administration (compared to several customers) [k] Other appropriate responses should also be credited. Justification might include: Having a single customer can make it easier to focus on the needs of that customer [k] so more likely to build customer loyalty [an.] However, can spread the risk if more than one customer [k] so if one stops buying they can rely on the other customers [an]. I think having a single customer is too high a risk as the business is totally dependent on one other business for its own success [eval] as it ties its success to the other business over which it has little control. [eval]

Mark scheme

2(a) Define ‘variable costs’. 2 Do not accept examples. Award 2 marks for a full definition. Award 1 mark for a partial definition. Costs that change with the level of output produced / sales made [2] Costs which vary directly with the number of items sold or produced [2] Costs that change in direct proportion to output [2] Partial definition e.g. costs that change [1] 2(b) Identify two limitations of break-even analysis. 2 Only award the first two responses given. Award 1 mark per limitation. Two from: • Assumes all costs can remain constant / be represented with straight lines • Not easy to separate some costs into fixed or variable. • Assumes all output is sold / does not allow for inventory being held • Assumes selling price will remain same for all products sold • Assumes only one type of product is sold Other appropriate responses should also be credited. 2(c) Outline two possible advantages to ALB of using retailers to 4 Note: To use words from the stem as application, distribute its products. the reference must be appropriate (i.e. make sense) in relation to the point being made. Award 1 mark for each relevant advantage. The following words may be appropriate for this Award 1 mark for each relevant reference to this business. question: • Trainers/sneakers Points might include: • Wool / sustainable materials or related words • Access to many customers / able to attract people passing by / • Protecting the environment high footfall / wide distribution is possible [k] which can help • 50% (retailers costs) increase revenue for its trainers [app] • Lower storage costs / does not need large storage space / cost of Other appropriate examples in context can still be holding inventories is paid (in part) by retailer [k] so has more credited. space / funds for its wool [app] • Can act as promotion / retailer will pay for advertising and other promotion [k] which could help raise awareness about protecting the environment [app] • Can sell in large quantities to retailers [k] Other appropriate responses should also be credited. 2(d) Explain one advantage and one disadvantage to ALB of trying to 6 Note: To use words from the stem as application, protect the environment. 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 / disadvantage (max 2). The following words may be appropriate for this question: Award 1 mark for each relevant reference made to this business • Trainers/sneakers or related words (max 2). • Wool / sustainable materials or related words • 5% profit margin Award 1 mark for each relevant explanation (max 2). • Retailers (for distribution) • 30% (variable costs) Advantages might include: • 15% (fixed costs) • Better brand image / reputation [k] leading to higher sales [an] of its trainers/sneakers [app] Other appropriate examples in context can still be • Can help attract customers [k] which may be important as does credited. use retailers [app] could lead to an increase in revenue / increase market share [an] • May be able to set higher price [k] • Less likely for pressure group action / no consumer boycott / support from pressure groups [k] maintain sales [an] Disadvantages might include: • Higher / increase in costs [k] leading to lower profit margin / higher prices [an] • High variable costs [k] as suppliers who protect environment may charge higher prices [an] • Can be difficult to find materials [k] such as wool [app] leading to lower output [an] • Higher fixed costs [k] as may need to buy specialist equipment which produces less emissions [an] Other appropriate responses should also be credited. 2(e) Do you think a successful entrepreneur has to be a good 6 This is a general question so there are no marks manager? Justify your answer. for application. Award up to 2 marks for identification of relevant points. Award up to 2 marks for relevant development of points. Award 2 marks for justified decision as to whether a successful entrepreneur has to be a good manager. Points might include: Entrepreneur: • Must be creative / innovate / provide new / unique ideas [k] to help gain sales / attract customers [an] • Need to be willing to take risks [k] to benefit from the reward / profit generated from the business [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] • Can hire someone to manage the business (if you don’t possess these skills) [k] but this will cost money [an] Manager: • Need to be able to organise operations [k] so able to get supplies / deliver on time to get repeat orders [an] • Must be able to plan [k] so production runs efficiently [an] • Ability to control employees [k] so they are all on task [an] • Help motivate employees [k] to maintain efficiency / reduce absenteeism / ensure retain employees [an] • Activities must be coordinated [k] so time is not wasted [an] • An ineffective manager can make the wrong decisions [k] which will cost money / damage reputation [an] Other appropriate responses should also be credited. 2(e) Justification might include: An entrepreneur is someone willing to take risks [k] to benefit from the profit made by the business. [an] Being a good manager is important as planning is needed [k] so that production runs efficiently [an]. However, I think a successful entrepreneur does not have to be a good manager because they can always recruit someone if they cannot do this role [eval], and without taking the initial risk there is no business to manage. [eval]

Mark scheme

3(a) Identify two ways a government can support new business start- 2 Only award the first two responses given. ups. Award 1 mark per way. Points might include: • Offer grants • Loans for small businesses • Low tax rates / tax relief / tax breaks • Offer advice / support / information / mentors • Provide (free / low-cost) training • Low cost / rent-free premises • Organise business fairs Other appropriate responses should also be credited. 3(b) Calculate X and Y. 2 No $ sign required. Award 1 mark for each correct calculation. X $3800 or 3800 Y $1400 or 1400 3(c) State four financial ratios a business can use. 4 Only award the first four answers given. Award 1 mark per financial ratio. Four from: • Profit margin • Gross profit margin • Return on capital employed / ROCE • Current (ratio) • Acid test (ratio) Other appropriate responses should also be credited. 3(d) Explain two ways that the introduction of a new tourist tax might 6 Note: To use words from the stem as application, affect Aurelie’s business. the reference must be appropriate (i.e. make sense) in relation to the point being made. Award 1 mark for identification of each relevant way (max 2). The following words may be appropriate for this Award 1 mark for each relevant reference made to this business question: (max 2). • (Small) hotel or related words such as room • $1 / (price) per night Award 1 mark for each relevant explanation (max 2). • Sole trader • $5600 (revenue) Points might include: • $2400 (expenses) • Increase price [k] at her hotel [app] leading to lower demand [an] • Lower demand/sales [k] leading to less revenue [an] than $5600 Other appropriate examples in context can still be [app] credited. • Increase administration costs [k] for this sole trader [app] reduce her profit margin [an] • May have to lower prices [k] Other appropriate responses should also be credited. 3(e) Do you think offering good customer service is the best way for a 6 This is a general question so there are no marks small business to build customer relationships? Justify your for application. answer. Award up to 2 marks for identification of relevant points. Award up to 2 marks for relevant development of points. Award 2 marks for a justified decision as to whether offering good customer service is the best way for a small business to build customer relationships. Points might include: Offer good customer service: • Makes customers feel valued / builds trust [k] so improves customer loyalty [an] which can help maintain / increase revenue [an] • Can help build reputation / brand image [k] • May need to train/recruit employees [k] which increases costs [an] Other options include: • Loyalty (reward) scheme [k] which can encourage customers to keep returning [an] but there is time / cost of setting up / monitoring scheme [an] • Market research [k] • Maintain good communications [k] • Respond to complaints / offer refunds quickly [k] Other appropriate responses should also be credited. 3(e) Justification might include: Good customer service can make customers feel valued [k] so customers may be willing to buy additional products [an]. However, it may mean the business has to train its employees [k] which increases costs [an]. But I think it is still the best way as it can also help attract additional customers to the business increasing revenue [eval] which can offset / cover the additional cost of training. [eval].

Mark scheme

4(a) Identify two features of a public limited company. 2 Only award the first two responses given. Award 1 mark for each feature identified. Points might include: • Limited liability • Can sell shares to the general public / shares quoted on stock exchange • Must publish its accounts / more regulations • Separate legal identity / business survives death of owners • Minimum of two owners • Must hold an Annual General Meeting (AGM) 4(b) Identify the level of Maslow’s Hierarchy of Needs each of the 2 Do not award self-esteem as alternative to esteem following methods belongs to. (as this is not a level). Award 1 mark per correct answer. ‘Employee of the month award’: Level 4 OR esteem Organises team building courses: Level 3 OR social/belonging 4(c) Outline two advantages to GCF of having well-motivated 4 Note: To use words from the stem as application, employees. the reference must be appropriate (i.e. make sense) in relation to the point being made. Award 1 mark for each relevant advantage. The following words may be appropriate for this Award 1 mark for each relevant reference to this business. question: • Computer services or examples such as Points might include: designing apps / websites • High / higher productivity / efficiency / output / work quick or • 250 (employees) quicker [k] when working for its business customers [app] • Business customers • Less likely to leave / low labour turnover [k] of its 250 employees • Takeover (a competitor) / plans to expand [app] • Less absenteeism [k] so easier to offer computer services [app] Other appropriate examples in context can still be • Willing to accept change / new methods of working [k] which could credited. be important when its looking to take over a competitor [app] • Good / better (quality) service / fewer mistakes / less errors [k] Other appropriate responses should also be credited. 4(d) Explain one advantage and one disadvantage to GCF of issuing 6 Note: To use words from the stem as application, new shares as a source of finance. 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 / disadvantage (max 2). The following words may be appropriate for this question: Award 1 mark for each relevant reference made to this business • Computer services or examples such as (max 2). designing apps / websites • $50m Award 1 mark for each relevant explanation (max 2). • Takeover (a competitor) / plans to expand • Well-motivated employees Points might include: • Public limited company Advantages: Other appropriate examples in context can still be • Access to large amounts of capital [k] so able to fund expansion credited. [an] as need to raise $50m [app] • No interest / finance costs to pay [k] so fixed costs do not increase [an] so can invest in its computer services / designing websites [app] • Permanent source of capital [k] so no need to repay [an] • Avoid increasing debt [k] Disadvantages: • Cost/time to arrange [k] so not able to focus on other issues [an] such keeping its employees well-motivated [app] • Increased risk of takeover / original owners may lose control [k] which could change the direction / objectives of the business [an] • Shares might not be bought / no guarantee can raise planned amount [k] Other appropriate responses should also be credited. 4(e) Do you think the number of employees is the best way to 6 This is a general question so there are no marks measure the size of a tertiary sector business? Justify your for application. answer. Do not award profit as a measure of size. Award up to 2 marks for identification of relevant points. Award up to 2 marks for relevant development of points. Award 2 marks for a justified decision as to whether the number of employees is the best way to measure the size of a tertiary sector business. Points might include: Employees: • Some businesses make use of a lot of technology/equipment [k] so it does not need as many workers [an] • Some businesses may have a lot of part-time workers [k] which can be difficult to compare businesses [an] • Simple/easy to calculate [k] Other points might include: • Value of sales / revenue / output [k] as high value can suggest many customers [an] resulting in higher revenue [an] • Capital employed [k] but some types of business may have a high level of non-current assets / technology / shops whereas others do not [an] • Number of outlets/branches [k] but could be (in area of) low demand [an] • Market share [k] • Number of customers/services [k] Other appropriate responses should also be credited. 4(e) Justification might include: Using employees may not be a good measure as some businesses make use of a lot of technology [k] so it does not need as many workers. [an] A better way is value of sales [k] which can suggest a business has many customers [an]. I think value of sales is the better measure, as all businesses will have sales revenue [eval] whereas the number of employees can depend on the type of tertiary sector business. [eval]