Business Studies 0450/12 October/November 2023: question paper and mark scheme

Mark scheme

1(a) Define ‘working capital’. 2 Unless state formula: Award 2 marks for a full definition. Award 1 mark for a partial definition. 1st mark for idea of finance/funds/money/capital to pay costs. Finance needed by a business to pay day-to-day costs [2] OR For 2nd mark, need reference to day-to- The capital needed to finance the day-to-day running costs/expenses [2] day/daily costs. OR Current assets less/minus current liabilities [2] Partial definition e.g. funds to buy inventory/materials/pay wages [1] OR finance to pay short-term debts [1] 1(b) Calculate the average revenue per day. Show your working. 2 Award only 1 mark if $300 is written as part of the answer but not shown as final Award 2 marks for a correct answer. Award 1 mark for correct method but answer incorrect answer. $ sign not required. Correct answer: $300 [2] Method e.g. Price × number of units sold [1] $6 × 50 [1] 1(c) Outline two reasons why packaging will be important for Paolo’s 4 To use words from the stem as application, business. the reference must be appropriate (i.e. make sense) in relation to the point being Award 1 mark for 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: Points might include: • Cakes or related words such as • Protect the product/keep product safe/helps ensure quality [k] ingredients especially as selling cakes [app] • 50 (units per day) • Promote brand image/differentiate it from other products [k] for this new • Start-up/new business business [app] • $6 (price) • Add value/higher price [k] than $6 [app] • Wholesaler • Help advertise/attract customers/increase sales [k] • $300 (revenue) OFR can apply • Ease of storage/display [k] at the wholesaler [app] • $4 (cost per cake) • Ease of transport [k] for the 50 products [app] • Provide information/meet legal requirements [k] Other appropriate examples can be • Make the product easy/convenient to open [k] credited. Other appropriate responses should be credited. 1(d) Explain one advantage and one disadvantage to Paolo’s business of 6 To use words from the stem as application, using crowdfunding as a source of finance. the reference must be appropriate (i.e. make sense) in relation to the point being Award 1 mark for each relevant advantage/disadvantage (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). • Cake or related words such as ingredients Advantages: • Start-up/new business • No/low interest [k] so does not increase cash outflows [an] for his start- • Packaging up [app] • $300 (revenue) – OFR can apply • Allows for the public reaction to be tested [k] the cakes [app] which • $6 (price) could lead to more customers [an] • 50 (units per day) • No need to repay/permanent [k] so does not add to its liabilities/debt • $4 (unit cost) [an] • Working capital • No collateral needed [k] • Wholesaler Disadvantages: Other appropriate examples can be • No guarantee can raise full amount / may not raise enough / sufficient credited. funds / must repay everyone if cannot raise full amount [k] so must find another source [an] Some points can be [k] or [an] but award • Competitors may learn more about your business before launch [k] only once. such as ideas for packaging [app] leading to less revenue [an] • Not a reliable/stable source of finance [k] • A lot of paperwork [k] Other appropriate responses should be credited. 1(e) Do you think selling to a wholesaler is the best channel of distribution 6 This is a general question so there are no for a start-up business to use? Justify your answer. marks for application. Award up to 2 marks for identification of relevant points. Points must be from viewpoint of the start- up business. Award up to 2 marks for relevant development of points. Some point can be written as [k] or [an] but Award up to 2 marks for a justified decision as to whether selling to a only award once e.g. lower storage costs. wholesaler is the best channel of distribution for a start-up business. Some points can be presented as Points might include: advantages/ disadvantages of different Wholesaler: channels but only award point once. • Likely to buy in large quantities [k] increasing sales [an] • Can hold less inventory [k] less storage space/costs [an] • Only deliver to one location [k] lowering transport costs [an] • No direct contact/feedback with customer [k] so difficult to build customer relationship/loyalty [an] • Price may be higher [k] leading to fewer sales [an] • Lose (some) control over marketing/advertising [k] • Wholesaler takes part of the profit [k] which lowers profit margin [an] 1(e) Other channels might include: • Sell direct (to customers)/ecommerce/online [k] so has more control over its marketing/build rapport [an] • Retailers [k] so can reach wider range of customers [an] • Agents [k] as will have local knowledge [an] so higher sales [an] Other appropriate responses should be credited. Justification might include: A wholesaler will help save storage space [k] which reduces storage costs [an]. They could sell online [k] which would increase its access to customers [an]. A wholesaler is the best channel to use because being able to lower costs is important especially as a start-up business will have limited capital [eval]. Whereas selling online is likely to increase delivery costs increasing their total costs [eval].

Mark scheme

2(a) Identify two ways business activity could have an impact on the 2 Only award the first two responses given. environment. Award 1 mark per way (max 2). Points might include: • Pollution (or examples e.g. noise, air)/global warming/emission of greenhouse gases • Energy use/use fossil fuels • Congestion/transport of goods • Land use/use up natural resources/deforestation • Waste (disposal)/use single use/non-renewable/non-recyclable materials Other appropriate responses should be credited. 2(b) Identify two ways a business could contribute to sustainable 2 Only award the first two responses given. development. Award 1 mark per way (max 2). Points might include: • Reduce amount/number of resources used • Reduce number of products made/level of output • Reduce waste • Reuse products/materials • Recycle products/materials • Use renewable energy • Develop environmentally friendly products • Use environmentally friendly production methods/sustainable materials • Use environmentally friendly/sustainable packaging • Replant trees • Use electric vehicles Other appropriate responses should be credited. 2(c) Outline two possible economies of scale TBX might benefit from. 4 To use words from the stem as application, the reference must be appropriate (i.e. Award 1 mark for each relevant economy of scale (max 2). make sense) in relation to the point being made. Award 1 mark for each relevant reference to this business (max 2). The following words are likely to be Points might include: appropriate for this question: • Purchasing (economy) [k] for the iron ore [app] • Steel • Technical (economy) [k] to manufacture steel [app] • Railways • Managerial (economy) [k] helping contribute to sustainable • Iron (ore) development [app] • High level of inventory • Financial (economy) [k] so can have a high level of inventory [app] • Sustainable development/impact on • Marketing (economy) [k] environment • High-quality Other appropriate responses should be credited. Other appropriate examples can be credited. 2(d) Explain two possible problems for TBX of holding a high level of 6 To use words from the stem as application, inventory. the reference must be appropriate (i.e. make sense) in relation to the point being Award 1 mark for each relevant problem (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). • Steel • Railways Points might include: • Iron (ore) • Rent/storage space/large space needed [k] for the steel [app] which • High-quality can increase fixed costs/expenses [an] • Sustainable development/impact on • Ties up working capital [k] such as iron ore [app] which could lead to environment liquidity/cash flow problems/difficult to pay suppliers [an] • Insurance costs [k] which increase cash outflows [an] so less funds to Other appropriate examples can be contribute to sustainable development [app] credited. • Opportunity cost/funds could be used for other purposes [k] • Risk of damage/theft/wastage/product could rust [k] leading to higher Some points can be [k] or [an] but only costs [an] award once. Other appropriate responses should be credited. 2(e) Do you think quality control is the best method for a manufacturing 6 This is a general question so there are no business to use to achieve quality production? Justify your answer. marks for application. Award up to 2 marks for identification of relevant points. Advantages of one method can be presented as a disadvantage of the other, Award up to 2 marks for relevant development of points. but do not award the same point twice. Award up to 2 marks for a justified decision as to whether quality control is Only award reference to which stage of the best way for a manufacturing business to use to achieve quality production products are checked once – so production. either [k] of QC or as [an] of QA Points might include: Some points can be [k] or [an] but only Quality control (QC): award once. • Tries to eliminate/lower chance of faults before products reaches customer [k] to help maintain reputation [an] • Does not stop production while checking [k] so some output is available [an] • Need to recruit inspectors [k] which increases labour costs [an] • Spots errors at end/does not show where error happened in process [k] which could increase wastage [an] 2(e) Other method is: Quality assurance (QA) [k] • Errors stopped before happen/spotted earlier in process/products checked throughout [an] so less funds/time spent on rework [an] • Increase employee motivation [an] leading to higher output [an] • Need to train all employees [an] which increases (fixed) costs [an] • Not all workers interested/able to spot problems [an] Other appropriate responses should be credited. Justification might include: With quality control, production workers do not need extra training [k] so no increase in costs [an]. Another method is quality assurance [k] which means mistakes are spotted sooner in the process [an]. Quality assurance is the best way because fewer mistakes is likely to mean fewer resources are wasted [eval] and the funds saved should hopefully cover the additional cost of training [eval].

Mark scheme

3(a) Define ‘public sector’. 2 Award 2 marks for a full definition. Award 1 mark for a partial definition. Government/state owned businesses [2] Partial definition e.g. run/operated/controlled by government [1] 3(b) Define ‘gross domestic product’ (GDP). 2 First mark for idea of value of goods and services in the country. Award 2 marks for a full definition. Award 1 mark for a partial definition. Second mark for the time period (one The total value of output of goods and services in a country in one year [2] year/period of time). OR The monetary value of all goods and services produced by an economy during a specific period (of time) [2] Partial definition e.g. value of goods produced by a country [1] 3(c) Identify four types of business organisation in the private sector. 4 Only award the first four responses given. Award 1 mark per type (max 4). Only award unincorporated company if no specific examples given (e.g. sole Answers might include: trader/partnership). • Sole trader • Partnership Only award limited company if no specific • Private limited company examples given (e.g. private limited • Public limited company company/public limited company). • Joint venture • Franchise • Social enterprise Other appropriate responses should be credited. 3(d) Using the data from Table 3.1, explain two possible reasons for the 6 To access application must refer to the changing importance of the primary sector in country X. data in Table 3. Award 1 mark for each relevant reason (max 2). The following data is likely to be appropriate for this question: Award 1 mark for each relevant reference to this business (max 2). • Primary sector is 60% in 2000 • Primary sector is 20% in 2020 Award 1 mark for each relevant explanation (max 2). • Primary sector decreased by 40% • Secondary sector is 15% in 2000 Points might include: • Secondary sector is 30% in 2020 • Fewer/depletion of natural resources [k] leading to a decrease in • Secondary sector has increased by primary sector of 40% [app] so workers must find jobs in other 15% sectors/may need to import resources [an] • Tertiary sector is 25% in 2000 • Increased use of machinery/technology in primary sector [k] reduces • Tertiary sector is 50% in 2020 the need for employees [an] which is why primary sector is only 20% in • Tertiary sector has increased by 25% 2020 [app] • Industrialisation/setting up of factories [k] which creates jobs in the Other appropriate examples from the table secondary sector [an] which has increased by 15% [app] can be credited. • Better/increased education [k] so workers seek higher paid jobs [an] which is why tertiary sector has increased to 50% [app] Analysis can either be a development of • Fewer grants/less government support for primary sector OR more point or reason why it would lead to a fall in grants for secondary/tertiary sector businesses [k] primary sector. • Import (more)/cheaper raw materials [k] Some points can be [k] or [an] but only Other appropriate responses should be credited. award once. Do not award: • Deindustrialisation 3(e) Do you think the benefits to a country of having a multinational 6 This is a general question so there are no company located there are always greater than the drawbacks? marks for application. Justify your answer. Some points can be [k] or [an] but only Award up to 2 marks for identification of relevant points. award once e.g. lower sales for local businesses Award up to 2 marks for relevant development of points. Can award the following as [an] only: Award up to 2 marks for a justified decision as to whether the benefits to a • Force local businesses to close down country where a multinational company is located are always greater than • Increase GDP the drawbacks. • Reduce unemployment Points might include: Do not award: • Definition of multinational company Benefits: (MNC) • Increase number/availability of jobs [k] reduces unemployment [an] • Advantages/disadvantages to • Increase taxes [k] which can be used to improve public services [an] business • Increase reputation of country [k] could encourage other businesses to set up/invest in the country [an] • Increasing orders for local suppliers [k] increasing income for local businesses/GDP [an] • Wider choice/quality of goods [k] • Improve infrastructure/new investment/new technology [k] • Knowledge-sharing/new ideas [k] 3(e) Drawbacks: • Increased competition [k] reducing sales for local businesses [an] which can force them out of business/reducing revenue [an] • Use up scarce resources [k] so less resources for other uses [an] • Repatriation of profits/send profits back to home country [k] so country does not receive expected amount of tax revenue [an] • Often only unskilled jobs created / may offer low wages/ poor working conditions / exploitation of labour [k] • Often try to avoid/reduce amount of tax paid (in host country) [k] • Power to influence government decisions/local economy [k] Other appropriate responses should be credited. Justification might include: Multinational companies create employment opportunities [k] which reduces unemployment [an]. However, they can try to avoid taxes [k] so less funds to provide public services [an]. Countries do benefit from multinationals operating there even if the full amount of tax is not paid, the amount paid can be used to develop the country [eval] which could improve living standards [eval].

Mark scheme

4(a) Identify two advantages to a business of maintaining customer 2 Only award the first two responses given. loyalty. Award 1 mark per advantage (max 2). Points might include: • Maintain/increase sales / repeat customers / customers return / not go to competitors (to buy the product) • Improve reputation/brand image • Current customers recommend / tell others about the products / less marketing/advertising needed / lower cost of marketing • Remain competitive • Easier to introduce new products • Easier to gain feedback/learn about trends • May be able to increase prices/become price inelastic Other appropriate responses should be credited. 4(b) Identify two hygiene factors from Herzberg’s two-factor theory. 2 Only award first two responses given. Award 1 mark per hygiene factor (max 2). Two from: • Working conditions/safe environment • Salary/wages/pay • (Job) security • Relationships with other workers • Relationships with supervisor Other appropriate responses should be credited. 4(c) Outline two reasons why profit might be important to TFN. 4 To use words from the stem as application the reference must be appropriate (i.e. Award 1 mark for each relevant reason (max 2). make sense) in relation to the point being made. Award 1 mark for each relevant reference to this business (max 2). The following words are likely to be Points might include: appropriate for this question: • Source of finance / reinvest in the business / finance the purchase of • Travel business non-current assets / pay back debts/loans [k] for its 37 shops [app] • Sells holidays • Measure of success of business [k] as shown by profit of • (37) shops/stores $46 million/increase in profit [app] • 1000 employees • Reward for risk-taking [k] of this travel business [app] • $46 million/increase in profit • Provides a return to shareholders / helps attract investors / pay dividends [k] Other appropriate examples should be • Support loan applications [k] credited. Other appropriate responses should be credited. 4(d) Explain one advantage and one disadvantage to TFN of its managers 6 To use words from the stem as application, having a wide span of control. the reference must be appropriate (i.e. make sense) in relation to the point being Award 1 mark for identification of each relevant advantage/ disadvantage made. (max 2). The following words are likely to be Award 1 mark for each relevant reference to this business (max 2). appropriate for this question: • Travel business Award 1 mark for each relevant explanation (max 2). • Sells holidays • (37) shops/stores Points might include: • 1000 employees • $46 million (profit)/increase in profit Advantage: • (Good) customer service • Fewer supervisors/managers needed [k] helping reduce labour • Maintain customer loyalty costs/expenses [an] so may help increase its profit of $46 million [app] • Herzberg’s two-factor theory • Faster communication [k] leading to quicker/better decision-making [an] • Training in its 37 shops [app] • Encourages delegation [k] which can increase motivation [an] of its Other appropriate examples should be 1000 employees [app] credited. Disadvantage: Some points can be presented as [k] or • Less control [k] so less work done/lower productivity [an] at the travel [an] but only award once. business [app] • Workers might not have skills to cope with extra responsibility [k] leading to mistakes [an] • Effective communication may be difficult/communication problems [k] as large number of subordinates/ employees to inform/ask [an] • Managers might not have the necessary skills (to manage so many people) [k] Other appropriate responses should be credited. 4(e) Do you think off-the-job training is the best method of training for a 6 This is a general question so there are no service sector business to use? Justify your answer. marks for application. Award up to 2 marks for identification of relevant points. Some points can be awarded as knowledge or analysis but do not award Award up to 2 marks for relevant development of points. the same point twice. Award up to 2 marks for justified decision as to whether off-the-job training The advantage of one method can be is the best method of training for a service sector business to use. written as a disadvantage of another method but only award once. Points might include: Off-the-job: • Allows for mistakes to be made when learning [k] lower risk of damaging reputation [an] • Up to date/new skills can be gained [k] • Skills might not be available in the business [k] so benefit from new techniques/ideas [an] • Use specialists/expert trainers [k] is expensive/ increases costs [an] • Travel costs [k] increasing cash outflows [an] Other options include: On-the-job training [k] • Employees can carry on working [an] so some work is done [an] • Control what is taught/employees learn exact way business wants things done [an] so workers only learn skills needed [an] • Cheaper (than off-the-job) [an] reducing (training) costs [an] • Reinforce errors/bad habits of trainer [an] reducing sales/damaging reputation [an] • Trainer is less productive when training others [an] 4(e) Induction training [k] • Only suitable for new employees [an] • Help learn culture [an] Other appropriate responses should be credited. Justification might include: Off-the-job training allows employees to make mistakes when learning [k] so less likely to waste resources when working [an]. Another method is on- the-job training [k] which is cheaper [an]. Off-the-job training is better especially for a service sector business because fewer mistakes can help protect the business reputation [eval] leading to extra customers helping cover the additional costs of the training [eval].