Business Studies 0450/13 October/November 2021: question paper and mark scheme

Mark scheme

1(a) Define ‘private limited company’ 2 Award 2 marks for a full definition. Award 1 mark for a partial definition. A business owned by shareholders, but they cannot sell shares to the public. [2] OR A business owned by shareholders, but they can only sell shares to friends or family. [2] OR Often a small to medium-sized business owned by shareholders who have limited liability. The company cannot sell its shares to the general public. [2] Partial definition e.g. have limited liability [1] OR can sell shares [1] 1(b) Define ‘average cost’. 2 Award 2 marks for a full definition. Award 1 mark for a partial definition. Total cost of production divided by total output [2] OR The cost of producing a single unit of output [2] Partial definition e.g. cost per unit [1] 1(c) Outline two ways VDN could be ethical when producing its products. 4 Note: To use words from the stem as application, the reference must be Award 1 mark for each relevant way. 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: • Pay fair wages [k] to its 380 employees [app] • Factory • Source environmentally friendly products / buy local / recycle / reduce • Office equipment or examples such waste [k] in its factory [app] as pens/paperclips • Not use child labour / not buy from producers using child labour [k] • Import all its raw materials when importing materials [app] • 380 employees • Pay suppliers a fair price [k] for pens/paper clips [app] • Kaizen • Pay suppliers on time [k] • Average cost Other appropriate responses should also be credited. Other appropriate examples in context can still be credited. Do not award answers which outline legal factors such as pay minimum wage. 1(d) Explain one advantage and one disadvantage to VDN of introducing 6 Note: To use words from the stem as Kaizen. application, the reference must be appropriate (i.e. make sense) in relation Award 1 mark for identification of each relevant advantage/disadvantage to the point being made. (max 2). The following words are likely to be Award 1 mark for each relevant reference made to this business (max 2). appropriate for this question: • Factory Award 1 mark for each relevant explanation (max 2). • Office equipment or examples such as pens/ paperclips Points might include: • 380 employees • Reduce average costs Advantages: • Ethical (objective) • Increase productivity [k] which helps lower average costs [app] and could improve its profit margin [an] Other appropriate examples in context • Work in progress is reduced [k] reducing inventory costs [an] can still be credited. • Can reduce amount of space needed for production [k] decreasing rent costs [an] • Improved layout / combining of jobs [k] in the factory [app] can release some employees to do other jobs [an] • Help motivate employees (as involved in change) [k] leading to less absenteeism / higher productivity [an] of its 380 employees [app] Disadvantages: • Only designed to produce small changes / no radical changes [k] so will not gain any significant increase in output [an] of office equipment [app] • Over time it is difficult to identify (extra) improvements [k] which can demotivate employees [an] • Workers may need training [k] which increases costs [an] • Not all employees may want/able to implement Kaizen [k] • Meetings take time [k] which could decrease output [an] Other appropriate responses should also be credited. 1(e) Do you think off-the-job training is the best method for a large 6 This is a general question so there are business to use when introducing new machinery? Justify your no marks for application. answer. To gain both evaluation marks response Award up to 2 marks for identification of relevant points. must clearly relate to a large business. Award up to 2 marks for relevant development of points. Award 2 marks for a justified decision as to whether off-the-job training is the best method of training for a large business to use when introducing new machinery. Points might include: Off-the-job • Can focus on training [k] so less likely to make mistakes [an] • Access to up-to-date knowledge [k] • May have to pay more / high cost of specialists [k] • Business may not have the skills to train its workers [k] On-the-job [k] • Still work while training so output / production does not stop [an] • Cheaper than off-the-job [an] • Workers might not have the skills to train others (as its new machinery) [an] • Employees learn way the business want them to / can control what is taught [an] so standards are easier to maintain [an] • Slows down work of experienced worker [an] 1(e) Other appropriate responses should also be credited. Justification might include: Off-the-job is helpful as workers can focus on training [k] so less likely to make mistakes [an]. This is likely to be better than on-the-job training [k] even though some output is still produced [an]. This is because existing employees may not have any knowledge of the new equipment so off-the- job training is worth the extra cost [eval] to make sure workers use machinery correctly and as a result avoid costly mistakes. [eval]

Mark scheme

2(a) Define ‘unemployment’ 2 Award 2 marks for a full definition. Award 1 mark for a partial definition. When people want to work but cannot find a job [2] OR The proportion or percentage of the population that are capable of working but are unable to find a job [2] Partial definition e.g. people have no job [1] 2(b) Identify one cash inflow and one cash outflow a business might have. 2 Only award the first response given for cash inflow/outflow. Award 1 mark per cash inflow/outflow. Cash inflows might include: • Money from cash/credit sales, sale of fixed assets, money received from bank loan / overdraft / other sources of finance Cash outflows might include: • Payments to employees, rent paid, interest payments, payments to suppliers, tax payments, dividend payments Other appropriate responses should also be credited. 2(c) Outline one advantage and one disadvantage to Asmaa of using a 4 Note: To use words from the stem as government grant as a source of finance application, the reference must be appropriate (i.e. make sense) in relation Award 1 mark for each relevant advantage/disadvantage. to the point being 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 repair • Small (business) Advantages • New/start-up (business) / when • No need to repay [k] by the car repair business [app] started 4 years ago • No finance cost / no interest to pay [k] which could help the cash-flow • Cash-flow forecast / cash inflow forecast [app] Other appropriate examples in context Disadvantages: can still be credited. • May not provide full amount needed [k] when she started 4 years ago [app] • May be restrictions about how it is used / cannot use the money how you want to [k] • Can take time to apply/obtain [k] Other appropriate responses should also be credited. 2(d) Explain how the following changes might affect Asmaa’s cash-flow 6 Note: To use words from the stem as forecast application, the reference must be appropriate (i.e. make sense) in relation Award 1 mark for identification of each relevant effect [max 2]. 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 appropriate for this question: Award 1 mark for each relevant explanation [max 2]. • Car repair (business) • 3/full-time employees Points might include: • Well-motivated / motivated employees Closure of competitors: • Correct use of information in table • Could increase customers/demand [k] for the car repair business [app] 2.1 increasing cash inflows [an] • Could increase prices [k] which may lead to higher cash inflow [an] than Other appropriate examples in context $40 000 in March [app] can still be credited. Increase in minimum wage: • May increase costs [k] to her 3 employees [app] which will increase cash outflow [an] • No effect [k] as may already pay them a higher amount [an] as she wants to keep them well-motivated [app] Other appropriate responses should also be credited. 2(e) Explain two non-financial methods a small tertiary sector business 6 This is a general question so there are could use to keep its employees well-motivated. Justify which method no marks for application. should be chosen. 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 which is the best method for a small tertiary sector business to use to keep its employees well-motivated. Points might include: • Job rotation [k] as switching tasks can make work more interesting [an] • Job enrichment [k] as workers feel they have been given more responsibility / more important [an] • Delegation/empowerment [k] so workers feel more important/valued [an] • Praise [k] helps employees meet their esteem needs [an] • Employee of the month awards [k] recognition of hard work / outstanding service [an] • Provide opportunities for promotion [k] • Team working [k] Other appropriate responses should also be credited. Justification might include: Praise [k] helps employees meet their esteem needs. [an] Another method is job rotation [k]. Switching between tasks can help keep the work interesting. [an] I think praise is the better option as the problem with job rotation is whether a small tertiary business may not have sufficient tasks to be able to rotate everyone [eval] whereas praise can easily be offered to everyone which can help keep everyone motivated rather than just a few. [eval]

Mark scheme

3(a) Define ‘economic growth’ 2 Award 2 marks for a full definition. Award 1 mark for a partial definition. When a country’s GDP increases more goods and services are produced than in the previous year [2] Partial definition e.g. an increase in a country’s spending [1] OR Increase in GDP [1] 3(b) Define ‘secondary market research’. 2 Do not award desk research as this is an alternative name. Award 2 marks for a full definition. Award 1 mark for a partial definition. Do not award examples as this does not Uses information that has already been collected and is available for use by define the term. others [2] Do not award answers that simply define OR The collection of data from secondhand sources / data collected by market research e.g. information about other agencies / businesses [2] the market / customer needs [0] Partial definition e.g. information already collected [1] 3(c) Outline how providing a good quality service could help Samuel’s 4 Note: To use words from the stem as business increase added value. application, the reference must be appropriate (i.e. make sense) in relation Award 1 mark for identification of each relevant point (max 2). 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 appropriate for this question: Points might include: • Plumbing or related words such as • Quality service can mean customers are willing to pay higher price [k] bathrooms for a good plumber [app] which increases the gap between price and • Used all his savings / $500 the cost of inputs [k] which can help him choose an appropriate pricing • New business method [app] • Sole trader • Good quality can help boost reputation / brand image [k] which is • Pricing method important as it is a new business [app] so customers may be willing to • Economic growth pay a higher price for his services [k] and allow Samuel to take advantage of economic growth [app] Other appropriate examples in context can still be credited. Other appropriate responses should also be credited. 3(d) Explain two possible disadvantages to Samuel of operating as a sole 6 Note: To use words from the stem as trader business. application, the reference must be appropriate (i.e. make sense) in relation Award 1 mark for identification of each relevant disadvantage (max 2). 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 appropriate for this question: Award 1 mark for each relevant explanation (max 2). • Plumbing or related words such as bathrooms Points might include: • Used all his savings / $500 • Unlimited liability [k] so could lose his house as well as the $500 [app] • New business as his personal assets can be used to repay business debts [an] • Quality service • Limited sources of finance [k] for his plumbing business [app] which • Pricing method could create cash flow problems / difficult to fund expansion [an] • Economic growth • Few / only has own skills [k] so may not be able to do all jobs on time / • Added value properly [an] so difficult to offer a good quality service [app] • Has all the responsibility / make decisions on own [k] Other appropriate examples in context • Business does not have a separate legal identity [k] so he would be can still be credited. personally liable for the debts of the business [an] • Has to work long hours / difficult to take holidays [k] • No one to share risks/losses with [k] Other appropriate responses should also be credited. 3(e) Do you think penetration pricing is a better method for a new business 6 This is a general question so there are to use than cost-plus pricing? Justify your answer. no marks for application. Award up to 2 marks for identification of relevant points. To gain both evaluation marks, response must clearly relate to a new business. Award up to 2 marks for relevant development of points. Award 2 marks for a justified decision as to whether it is always better for a new business to use penetration pricing rather than cost-plus pricing. Answers might include: Penetration pricing • Setting a lower price than competitors should attract customers [k] leading to higher number of sales [an] • Help build up market share quickly / enter new market quickly [k] • Customers may get used to low prices and may not buy if prices increase [k] leading to fewer sales / damage reputation [an] • Might not be appropriate for a product which is being promoted as having high quality [k] which can damage image/reputation [an] Cost-plus pricing • Easy to apply [k] which could allow time for new business to focus on other issues [an] • Ensure costs are covered [k] so will make a profit per item [an] • Price may be (much) higher than competitors [k] making the business uncompetitive / leading to fewer sales [an] less revenue [an] • Little/no incentive to reduce costs [k] Other appropriate responses should also be credited. 3(e) Justification might include: Setting a lower price than competitors using penetration pricing should attract customers [k] leading to more sales [an]. Cost-plus pricing could mean the price may be higher than competitors [k] could make the business uncompetitive [an]. Therefore, penetration pricing is better because a new business needs to gain customers - and by setting such a low price, more people might be able to afford it, improving the chances of the new business being successful. [eval] [eval]

Mark scheme

4(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] OR The production of very large quantities of (identical) goods using a continuously moving process [2] Partial definition e.g. large quantities of a (standardised) product [1] OR large-scale production / large volumes / continuous production [1] 4(b) Calculate output per worker per week in 2020. Show your working. 2 If correct answer given with no working shown award 2 marks. Award 2 marks for a correct answer. Award 1 mark for a correct method but incorrect answer. Correct answer: 1240 [2] Method e.g. total output/number of employees OR 310 000 / 250 [1] 4(c) State four factors a business should consider when selecting an 4 Award only the first four responses given. appropriate method of internal communication. Do not award methods of internal Award 1 mark per factor. communication as this does not answer the question. Four from: • Who the message is to be sent to • Where/location of the sender/receiver • How many people does the message need to be sent to? • Mediums available • Amount of information to be sent • How important / urgent is the message / when the message needs to be sent / received • How sensitive/confidential is the information? • Whether feedback required • Whether a written record is required Other appropriate responses should also be credited. 4(d) Explain one reason why the following factors might be important to 6 Note: To use words from the stem as BEF when deciding whether to export to country Y. application, the reference must be appropriate (i.e. make sense) in relation Award 1 mark for identification of each relevant reason (max 2). 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 appropriate for this question: Award 1 mark for each relevant explanation (max 2). • Toothpaste/shampoo • Wide range of products Points might include: • 310 000 units • Flow production Import tariffs: • Correct use of data from Table 4.1 • Higher import prices / products become more expensive [k] leading to • Large business lower demand / so less competitive [an] when selling its toothpaste / shampoo [app] Other appropriate examples in context • Business may decide to maintain prices / not pass on price increase to can still be credited. customers [k] reducing profit margin [an] Language: • May need to translate/change wording on the packaging (so customers understand) [k] on some of its 310 000 units [app] which increases costs [an] • Communication problems with retailer / agent in other country [k] leading to wrong orders / decisions being taken [an] especially as have a wide range [app] • Potentially fewer sales as customers may not understand what is written on the packaging [k] leading to less revenue [an] Other appropriate responses should also be credited. 4(e) Do you think it is better for a large business to produce a wide range 6 This is a general question so there are of products than a small range of products? Justify your answer. no marks 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. Award 2 marks for a justified decision as to whether producing a wide range of products is likely to be better for a large business. Points might include: • Attracts new customers / increase sales / wider customer base [k] increasing revenue [an] • Enhances brand image/reputation [k] leading to customer loyalty [an] • Spread risk [k] as do not have to rely on only one/few products to generate sales [an] • May need high levels of inventory [k] which can increase variable costs [an] • May need more storage space [k] which can increase fixed costs [an] • May have many competitors [k] so difficult to manage / respond to actions of other competitors [an] so may lose customers to rivals / market share (rather than gain) [an] • May have limited / not enough production capacity [k] so may have difficulty in meeting demand for all its products [an] • High cost of research and development [k] which increases cash outflows [an] Other appropriate responses should also be credited. 4(e) Justification might include: Having a wide range of products can help spread risk [k] as do not have to rely on only one/few products to generate sales [an]. However, a wide range may mean it has many competitors [k] so so may lose customers to other businesses [an]. Therefore, while having a wide range can help increase revenue more easily than having fewer products, it may only be successful if the business is able to manage a wide range of products effectively to be able to sell them. [eval] [eval]