Business Studies 0450/23 October/November 2021: question paper and mark scheme

Mark scheme

1(a) Explain how the following four users of MA’s accounts might use the 8 financial data in Appendix 1 to help make decisions: • Shareholders • Suppliers • Employees • Banks Award 1 mark for each relevant way the data in Appendix 1 might help make decisions (maximum of four marks). Award a maximum of 1 additional mark for each explanation of how the data in Appendix 1 helps makes decisions. • Shareholders – to decide whether to keep or sell existing shares – sufficient ROCE of 5% for return on investment • Suppliers – to decide whether to keep supplying to MA – current ratio of 2 means MA is not likely to default on payments • Employees – to decide whether to remain working for MA or leave / whether to ask for a pay rise – $20 million profit so may receive a wage increase • Banks – to decide whether to give loan to MA / decide if likely a loan will be repaid – revenue $100 million is likely to be sufficient to repay a loan For example: Employees will have to decide whether they are likely to receive a wage increase and therefore not leave (1) the profit of $20 million makes this likely (App) Application might include: revenue $100 million; profit $20 million; profit margin 20%; ROCE 5%; current ratio 2. 1(b) Consider the following three characteristics that may be required for 12 entrepreneurs opening a shop located at the airport. Which is the most important characteristic for an entrepreneur to be successful? Justify your answer. • Risk taker • Creative • Optimistic Level Description Marks 3 Sound application of knowledge and understanding 9–12 of relevant business concepts using appropriate terminology. Detailed discussion of at least two characteristics. Well-justified conclusion. Candidates discussing all three characteristics in detail, in context and with a well-justified conclusion including why the alternative characteristics were rejected should be rewarded with the top marks in the band. 2 Sound application of knowledge and understanding 5–8 of relevant business concepts using appropriate terminology. Detailed discussion of at least one characteristic. Judgement with some justification / some evaluation of choices made. Candidates discussing two or more characteristics in detail and applying them to the case should be rewarded with the top marks in the band. 1 Limited application of knowledge and understanding 1–4 of relevant business concepts. Limited ability to discuss the characteristics with little/no explanation. Simple judgement with limited justification / limited evaluation of choices made. Candidates outlining all three characteristics in context should be rewarded with the top marks in the band. 0 No creditable response. 0 1(b) Relevant points might include: Characteristic How it helps an entrepreneur be successful Risk taker • Make decisions about which locally produced products might sell well in the airport • Make decisions about which food to serve if setting up a restaurant in the airport • Willing to risk losing their investment in the business • If the wrong decisions are made, then the capital they invested in the shop may be lost Creative • Has new ideas about which products to sell and how to attract customers to the shop • Makes food dishes attractive to appeal to customers • Makes the shop appear different to competitor’s shops in the airport Optimistic • Will need a positive attitude to overcome difficulties when opening a new shop to sell to passengers at the airport – if revenue is low when first starting up then they will need to keep positive and keep trading • Important for your employees to see you are hopeful about the future success of the shop – keep a positive approach with passengers to increase sales and make the shop successful Conclusion • Risk taking is most important because there are existing competitors in the airport which risks the failure of the new business selling food if their customers go to other food shops. Being creative is less important as the new business can still be successful selling existing products. Being optimistic is only important if the new business goes through difficult times with lower sales. • Being creative is most important as there will be more competitors/shops at the airport and therefore there is more competition. Entrepreneurs will need to find creative ways to attract customers to their gift shops rather than going to competing shops. • Being optimistic is most important because if the entrepreneur is not optimistic then employees may not be optimistic either and this may put off passengers from shopping at their store.

Mark scheme

2(a) Explain two methods that could be used to measure the size of MA’s 8 airport business. Award 1 mark for each relevant method of measuring the size of airports (maximum 2). Award a maximum of 3 additional marks for each explanation of the method of measuring the size of an airport – one of which must be applied to this context. Relevant answers might include: Methods of Relevant points might include: measuring size • Easy to calculate and compare with other Number of people airports employed • Workers may be full-time or part-time and this may distort the comparison • Easy to calculate the value of the assets in the business • However, may be similar to number of Capital employed employees, it may be capital or labour intensive and therefore difficult to compare the size of the airports • Often used when comparing the sales of different retail outlets Value of sales • Can be misleading when comparing businesses that provide/sell very different services/products • Easy way to compare manufacturing industries but more difficult with service sector businesses • Can be measured by the number of flights but this may not be accurate as there may be many small aeroplanes carrying few passengers and other airports may have a few large aeroplanes carrying many Value of output passengers • However, may have many different types of services – difficult to compare an airport with shipments of goods and others with only passengers • Value of output may be high, but the number of flights could be low and therefore not an accurate measure 2(a) For example: Number of employees (1) as it’s easy to calculate how many people work at an airport (1). However, 50% of the employees at MA are part-time (App). This may not be true at other airports where employees may be full-time and therefore these airports appear to be smaller because they have fewer employees (1) Application might include: 50% full-time; 50% part-time; retail outlets; sell gifts and food; cleaning airport and cleaning aeroplanes; revenue $100 million; passengers; tourists or business passengers; security equipment as airport assets. 2(b) Consider how the motivation theories of Taylor and Herzberg could 12 help MA to improve the motivation of the cleaners who work at the airport. Which theory is likely to be more useful to MA? Justify your answer. Level Description Marks Sound application of knowledge and understanding of relevant business concepts using appropriate terminology. Detailed discussion of both theories. 3 9–12 Well-justified recommendation. Candidates discussing both theories in detail, in context and with a well-justified recommendation including why the alternative theory was rejected should be rewarded with the top marks in the band. Sound application of knowledge and understanding of relevant business concepts using appropriate terminology. Detailed discussion of at least one theory. 2 5–8 Judgement with some justification / some evaluation of choices made. Candidates discussing of at least one theory in detail and applying it to the case should be rewarded with the top marks in the band. Limited application of knowledge and understanding of relevant business concepts. Limited ability to discuss theories with little/no explanation. 1 1–4 Simple judgement with limited justification / limited evaluation of choices made. Candidates outlining both theories in context should be rewarded with the top marks in the band. 0 No creditable response. 0 2(b) Relevant points might include: Motivation theory How it could help managers motivate airport cleaners Taylor ‘Money is the main motivator for employees’ – based on workers in factories – manual workers – therefore increase wage rates and motivation will increase – as cleaners at the airport are manual staff cleaning aeroplanes in between flights – these employees may therefore respond well to an increase in wage rates Herzberg Hygiene factors include good working conditions – needed to stop demotivation but they will not motivate employees – need to have achievement recognised, encourage personal growth, promotional opportunities – the work itself needs to be interesting – some airport cleaners of aeroplanes may like to have recognition of achievement by managers and opportunities for promotion encouraged Recommendation • As cleaning employees are low skilled jobs then Taylor’s theory might be the best one to use. It suggests that increasing the pay of cleaners should increase motivation and encourage them to clean each aeroplane faster. This will increase efficiency, as more aeroplanes would be cleaned in the same amount of time. Herzberg is less suitable as these employees are less likely to gain promotion because they are low-skilled, and it will be difficult to make the job more interesting. • Herzberg may be more important as working conditions for cleaners are poor and may be acting as a demotivator. Herzberg’s theory suggests that if working conditions are improved then other factors may then act as motivators. Factors such as praising the cleaners and giving them more responsibility may then act to increase their motivation.

Mark scheme

3(a) Explain two benefits to MA of using the new technology outlined in 8 Appendix 2. Award 1 mark for each relevant benefit to MA of using the new technology (maximum of 2 marks). Award a maximum of 3 additional marks for each explanation of how technology has benefited MA – one of which must be applied to this context. Relevant benefits might include: • Quicker to update information more easily / improved communication – mobile phone app allows employees to respond to problems in a specific area more quickly – improved efficiency of airport employees • Security scanning is quicker – improved customer satisfaction – improved reputation of the airport • Reduces labour costs – as reduces the number of employees required – new scanners at airport security requires fewer security employees – reduce cash outflow – less working capital required • Improved tracking of aeroplanes / increase in the number of flights / increased number of passengers – allows more flights to take off and land – increased amount of fees – leading to higher revenue For example: Reduces labour costs (1) – by having new scanners at airport security means there will be fewer security employees required (App). This can reduce cash outflow for MA (1) and mean less working capital is required (1). Application might include: mobile phone technology; automated security scanning technology; air traffic control technology; tracking of aeroplanes take-off and landing; check-in of passengers; 50% full-time; 50% part-time; retail outlets in airport; cleaning airport and cleaning aeroplanes; revenue $100 million; passengers; tourists or business passengers. 3(b) Consider the advantages and disadvantages of the following three 12 methods of market research. Which would be the best method for MA to use to find out which shops passengers would use at the airport? Justify your answer. • Online survey • Sales data from existing shops at the airport • Interviews at the airport Level Description Marks Sound application of knowledge and understanding of relevant business concepts using appropriate terminology. Detailed discussion of two or more methods of market research. 3 9–12 Well-justified recommendation. Candidates discussing all three methods of market research in detail, in context and with a well-justified recommendation including why the alternative methods of market research were rejected should be rewarded with the top marks in the band. Sound application of knowledge and understanding of relevant business concepts using appropriate terminology. Detailed discussion of at least one method of market research. 2 5–8 Judgement with some justification / some evaluation of choices made. Candidates discussing two or more methods of market research in detail and applying them to the case should be rewarded with the top marks in the band. Limited application of knowledge and understanding of relevant business concepts. Limited ability to discuss methods of market research with little/no explanation. 1 1–4 Simple judgement with limited justification / limited evaluation of choices made. Candidates outlining the three methods of market research in context should be rewarded with the top marks in the band. 0 No creditable response. 0 3(b) Relevant points might include: Advantages Disadvantages • Faster with quicker replies than other • No interviewer to forms of survey explain questions if about food not understood purchased at the • No interviewer to airport ask follow-up • Cheaper than questions Online survey interviews • May have inaccurate • Convenient for answers if participants making participant didn’t them more likely to take the survey complete the survey about purchases • Data can be quickly seriously when analysed using IT waiting for flights tools • Much cheaper way • May be out-of-date of gathering as it refers to past information about data sales of gifts shops • No guarantee that than primary market trends of past food research as it sales will continue in Sales data from already exists the future existing shops at • Sales data are likely • Not qualitative data the airport to be accurate data – so does not gain as it has been information on gathered from the customer wants in gift shops the future for shops themselves in the airport • Quicker to gather the information • Interviewer can • Interviewer bias – explain the they can influence questions so results the tourists in their may be more answers accurate • Expensive to carry Interviews at the • Interviewer can ask out – in terms of airport further questions to time and money gain more in-depth • Limited number of answers from people questioned at business the airport compared passengers to online surveys 3(b) Recommendation • As MA wants to find out specific information about passenger wants it might be better to conduct an online survey. This will allow a larger sample of passengers to be asked than interviews and a broader range of answers from business passengers and tourists may be gathered. Sales data will be out-of-date, and interviews are too expensive. • Sales data is best if the cost of gathering market research is most important. This will be much cheaper than the two alternative methods as the data already exists and the gift shops in the airport simply need to be asked for the information. • In depth detailed opinions will be gained from interviews and this may be the best method as only information on the main types of shops business passengers and tourists want is required and will be gathered.

Mark scheme

4(a) Explain four factors that might affect the source of finance a business 8 decides to use. Award 1 mark for each relevant factor (maximum of four factors). Award a maximum of 1 additional mark for each explanation of the factor that will affect the choice of the source of finance for a business. Relevant factors might include: Relevant Ways the factor will affect the choice of source of factors finance • An incorporated business can issue new shares Size and legal whereas an unincorporated business cannot form of • Large businesses can access sources of finance business that small businesses cannot such as some specialist banks Amount • A large amount may only be available as a bank required loan rather than as an overdraft • If the finance required is for the short-term then Length of time only short-term sources should be considered such as trade credit or overdraft • If the business already has loans, then it may be difficult to take out further loans – may need to find Existing loans alternative sources of finance such as selling assets • If the purpose is for expansion so long-term Purpose for sources should be used as the business has a using the longer time to earn the revenue to repay the finance amount borrowed • The original owners may not want to lose control of the business. If shares are sold to other people or Control partners are added to a partnership, then more people will be investing in the business and the original owners may lose control. For example: The purpose for using the finance. (1) If the finance is required for expansion then a long-term source, such as a bank loan should be chosen (1). 4(b) Consider the opportunities and threats to MA due to increased 12 globalisation. Do you think globalisation will help MA to increase profits? Justify your answer. Level Description Marks Sound application of knowledge and understanding of relevant business concepts using appropriate terminology. Detailed discussion of both opportunities and threats. 3 9–12 Well-justified conclusion. Candidates discussing both opportunities and threats in detail, in context and with a well-justified conclusion including why the alternative position was rejected should be rewarded with the top marks in the band. Sound application of knowledge and understanding of relevant business concepts using appropriate terminology. Detailed discussion of opportunities or threats. 2 5–8 Judgement with some justification / some evaluation of choices made. Candidates discussing opportunities or threats in detail and applying them to the case should be rewarded with the top marks in the band. Limited application of knowledge and understanding of relevant business concepts. Limited ability to discuss opportunities and threats with little/no explanation. 1 1–4 Simple judgement with limited justification / limited evaluation of choices made. Candidates outlining both opportunities and threats in context should be rewarded with the top marks in the band. 0 No creditable response. 0 4(b) Relevant points might include: • More tourists may come through the airport leading to increased revenue for MA • MA could increase cargo flights which may also increase revenue as there will be increased Opportunities shipment of goods due to increased globalisation • Imports will increase leading to higher number of cargo flights • More business passengers might pass through the airport if more trade is carried out in country Z • Some airlines may start to use other airports if easier and cheaper to use • If foreign products are cheaper than those from country Z, then the amount of cargo flights might decrease Threats • Large international airlines could put pressure on MA to lower its charges and hence it would reduce its revenue • Employees are not well motivated at MA and may be attracted to work at other airports in country Z or abroad • More choice and lower prices are generally the result of globalisation and will help MA to increase its profit. If the products produced in country Z are more competitive with products from other countries, then revenue from cargo flights will increase and possibly lead to higher profit. The threats will have less effect on profit as there are Conclusion probably fewer airports that passengers may use as an alternative to MA. • The threats of globalisation will have the largest effect on MA as tourists from abroad may travel to other countries rather than country Z. Therefore, passenger numbers will fall resulting in MA having reduced income from sales and profit.