Business Studies 0450/22 October/November 2023: question paper and mark scheme

Mark scheme

1(a) Explain two advantages of using specialisation when producing SSE’s 8 products. Award 1 mark for each relevant advantage (max 2). Award a maximum of 3 additional marks for each explanation of the advantage of using specialisation when producing SSE’s products – one of which must be applied to this context. Relevant advantages might include: • Increases efficiency/productivity – it allows the use of more machinery and technology in the production process – increases output per production employee • Time is saved during the production process – as workers do not need to move around between tasks on the production line – improves the use of space in the factory so can fit in more production lines into the limited space • Helps keep (unit) costs low – only performing one task makes workers quicker – allowing lower prices to be charged • Cheaper to train each employee – as production employees are trained in only one task • Increased total output produced – potentially increasing sales and revenue • Less waste – as keep repeating the same task which may lead to fewer mistakes being made • Higher quality – as workers become more skilled at one particular task For example: Increases efficiency (1) as it allows the increased use of machinery and technology in the production process (1) so the output of safety helmets can be increased (app). This increases output per production employee (1). Application might include: sport helmets; bicycle riding; cricket; skateboarding; flow production; operated successfully for 30 years; one large factory; production workers are specialised in one task; sports safety industry; different sports. 1(b) Consider the advantages and disadvantages of the following two 12 methods of market research SSE could use when entering new markets in other countries. Which method of market research should SSE use? Justify your answer. • Primary market research • Secondary market research Level Description Marks 3 Sound application of knowledge and understanding of 9–12 relevant business concepts using appropriate terminology. Detailed discussion of both methods. Well-justified recommendation. Candidates discussing both methods in detail, in context and with a well-justified recommendation, including why the alternative method was rejected, should be rewarded with the top marks in the band. 2 Sound application of knowledge and understanding of 5–8 relevant business concepts using appropriate terminology. Detailed discussion of at least one method. Judgement with some justification / some evaluation of choice made. Candidates discussing at least one method in detail and applying it to the case should be rewarded with the top marks in the band. 1 Limited application of knowledge and understanding of 1–4 relevant business concepts. Limited ability to discuss the methods with little/no explanation. Simple judgement with limited justification / limited evaluation of choice made. Candidates outlining both methods in context should be rewarded with the top marks in the band. 0 No creditable response. 0 1(b) Relevant points might include: Advantages Disadvantages • It is up to date about • May be biased – the different sports particularly if that may be popular in interviewers are not other countries – for objective when example cricket carrying out the helmets may need to interviews – could ask be adapted to local leading questions that styles influence the answers • Aware of current given specific customer • It can be expensive – needs in different especially if using countries – it is focus groups or planned and carried interviews – as out to gather specific specialist market Primary market information relevant to research staff will research sports helmets – will need to be employed gather the opinions of to carry out the potential customers research and more likely to • It may take time to meet their needs carry out as • It will be focused on questionnaires the specific trends in amongst bicycle sports played in riders will take time to these countries give out as they may • It will not be available be spread out across to competitors a country – the results will need to be gathered and then the results analysed 1(b) Advantages Disadvantages • Often much cheaper • The data collected on than primary research skateboarding may – because the data on be out of date people riding – therefore it will be of bicycles in that little use to SSE when country is already entering a new market collected as the data is likely to • Can be used to help have changed assess the total size • The data is available of the market for to competitors – so cricket helmets in a SSE will not gain any country – and would advantage over not be available using existing competitors in primary research – so the new markets SSE could estimate • The data will have the likely total demand been gathered for for their helmets another purpose – it Secondary across the new may not fit the needs market research markets in another of SSE research – so country it will be of less use • Secondary sources and not answer their such as newspapers research needs about could help SSE the new markets assess the economic state of the potential new markets – to see if demand is likely to grow or be static – whether it is worth entering the new market if the economy is not growing • It is usually quicker to gather than primary research 1(b) Justification could include: • SSE should use primary market research as the data gathered will be specific to the new sports helmets in the different countries so SSE will have more accurate data on the potential for sales in the new market and whether it is worth entering that market. Secondary market research is likely to provide data that is out of date and hence will be of little use to SSE in deciding if there is a sufficiently Recommendation high demand for its products to be worth entering this market. • SSE should use secondary market research as it cheaper than primary market research. SSE are considering entering several new markets selling cricket helmets in other countries so the expense of the research in each country will need to be kept low. Secondary market research will provide data much quicker for SSE to decide if the market is worth entering.

Mark scheme

2(a) Explain four factors a business should consider when choosing which 8 source of finance to use for expansion. Award 1 mark for each relevant factor to consider when choosing which source of finance to use for expansion (max 4). Award a maximum of one additional mark for each explanation of the factor. There are no application marks available for this question. Relevant answers might include: • Legal form of business – if the business is a company, then share issue is an option/if the business is unincorporated then owner’s savings may have to be used as it cannot issue shares to raise finance • Amount required – as the finance is for expansion then a large amount is likely to be required so sources such as bank loans or share issue may be chosen • Purpose – as the finance is needed for expansion it is likely to be a large amount and so should be able to be repaid over a long period to make the repayments manageable • Existing loans – if the business already has a high number of bank loans, then this may not be an option due to the already high expenses of paying the interest on loans • Control of the business – if the business is a company, then issuing additional shares may lead to the original shareholders losing control of the business so may need to decide which is more important, expansion or control • Cost of finance – the interest rate charged on the borrowing • Length of time needed to repay • Size of business For example: Legal form of business (1) if the business is unincorporated then owner’s capital or borrowing may have to be used as the business cannot issue shares to raise finance for expansion (1). 2(b) Consider the advantages and disadvantages of the following two 12 options for SSE to distribute its products in the new markets in other countries. Which option should SSE choose? Justify your answer. • Sell direct to customers using SSE’s website • Sell to large sports retailers in other countries Level Description Marks 3 Sound application of knowledge and understanding of 9–12 relevant business concepts using appropriate terminology. Detailed discussion of both options. Well-justified recommendation. Candidates discussing both options in detail, in context and with a well-justified recommendation, including why the alternative option was rejected, should be rewarded with the top marks in the band. 2 Sound application of knowledge and understanding of 5–8 relevant business concepts using appropriate terminology. Detailed discussion of at least one option. Judgement with some justification / some evaluation of choice made. Candidates discussing at least one option in detail and applying it to the case should be rewarded with the top marks in the band. 1 Limited application of knowledge and understanding of 1–4 relevant business concepts. Limited ability to discuss the options with little/no explanation. Simple judgement with limited justification / limited evaluation of choices made. Candidates outlining both options in context should be rewarded with the top marks in the band. 0 No creditable response. 0 2(b) Relevant points might include: Advantages Disadvantages • Price may be lower as • Increased costs of profit margins are only processing returned for SSE and do not goods – as not able to include a retail profit try on sport helmets margin – so sales before buying – may may be higher – lead to higher costs if hence profit gained safety helmets are from selling cricket returned if do not fit helmets may be well higher • Increased costs of • Direct relationship distribution due to with customers who postage to each ride bicycles – individual customer – possibly better fewer journeys made knowledge of in larger orders if customer needs as supply retailers can gain direct • Increased feedback from administration costs Sell direct to customers – may lead as processing large customers using to improved customer number of individual SSE's website loyalty – increased orders for bicycle repeat sales/improved safety helmets rather reputation and word- than fewer bulk of-mouth advertising purchases from large • Reaches a wider retailers market for sport • May require increased safety helmets in storage for sport other countries – helmets before being website can be dispatched to accessed all over the customers – world for customers to increased warehouse view and order sports costs helmets • Increased advertising • SSE controls all of the costs and costs of marketing mix maintaining and upgrading the website • Not all customers have access to the internet 2(b) Advantages Disadvantages • Bulk orders from large • Sold with sports retail chains in other helmets of countries – shipped competitors – may be as large bulk orders more difficult to abroad – reducing compete as products distribution costs directly next to each • Retailers are more other in the sports familiar with the shops – harder to markets in other increase sales countries – may only • No direct contact with order sports helmets customers – less such as cricket likely to gain feedback safety helmets for about customers’ children that are thoughts on the sport likely to sell well in helmets other countries – • Prices may be higher increases if markup is added- sales/revenue reduced demand or • May carry out some profit margin reduced advertising for SSE – for SSE as discount reduces marketing required by retailer – Sell to large costs lower profit sports retailers in • Large sports retailers other countries attract customers who are likely to be interested in SSE's products – easier to reach its target customers in other countries than selling direct through a website • Improved reputation/higher sales/revenue – customers can try on the sport helmets – buy a better fitting product – better meets their needs for protection whilst playing sports • Costs of storage are all or at least partly paid for by the retailer 2(b) Justification could include: • SSE should choose to sell directly to customers in other countries using its own website as it will have complete control over the marketing of its sports safety helmets. It can gain feedback directly from its customers so it can adapt to market changes and better meet customer needs leading to increased demand and sales. Sports retailers should not be chosen as they sell many other brands of sports safety helmets and SSE Recommendation cannot control the advice given to customers when they make a purchase which could lead to the wrong products being purchased and SSE's reputation being ruined. • SSE should choose to distribute through large sports retailers in other countries as it will reduce both administration and transport costs. Warehouse space will also be reduced. Customers can try on the sports safety helmets in shops making it more likely that they will make a purchase and increase sales for SSE.

Mark scheme

3(a) Explain one advantage and one disadvantage to SSE of using internal 8 recruitment for its new managers. Award 1 mark for each advantage/disadvantage (max 2). Award a maximum of 3 additional marks for each explanation of the advantage/disadvantage to SSE of using internal recruitment for its new managers – one of which must be applied to this context. Relevant advantages might include: • Quicker – fewer applicants will apply so quicker to process application forms • Cheaper than external recruitment – as no expensive advertising is required • Applicant is already known to the business – so already know their skills, abilities, and reliability – know if able to do the job • Applicant already knows the organisation and how it works – so no induction training required – reduces training costs / quicker to get started in the new job and be productive • Motivating for other employees – as can see progression routes for themselves – may make them work harder for the business and produce more output Relevant disadvantages might include: • No new ideas come into the business – not become aware of different methods used by other companies – so more efficient working practices may not be introduced • There may be rivalry and jealousy amongst existing employees as they did not gain promotion – may have an unhappy atmosphere in the workplace – less productive • There may not be suitable candidates internally – more qualified/skilled people may be outside the business – these will not be employed if only internal recruitment is used • There will still be a vacancy to fill For example: No new ideas will come into the business (1) and SSE will not become aware of different methods used by other companies (1) that make sports helmets for bicycle riding (app) so more efficient working practices may not be introduced into the factory (1). Application might include: bicycle riding; cricket; skateboarding; flow production; operated successfully for 30 years; build its own factories in its most important foreign markets; need to communicate between its head office and its new factories in other countries; production workers are specialised in one task. 3(b) Consider how the following three barriers could make communication 12 less effective between SSE’s head office in country Z and its new factories in other countries. Which barrier would be the easiest to overcome? Justify your choice. • Problem with the medium used • Problem with the sender • Problem with the receiver Level Description Marks 3 Sound application of knowledge and understanding of 9–12 relevant business concepts using appropriate terminology. Detailed discussion of two or more barriers to communication. Well-justified conclusion. Candidates discussing the three barriers to communication in detail, in context and with a well-justified conclusion, including why the alternative barriers to communication were rejected, should be rewarded with the top marks in the band. 2 Sound application of knowledge and understanding of 5–8 relevant business concepts using appropriate terminology. Detailed discussion of at least one barrier to communication. Judgement with some justification / some evaluation of choices made. Candidates discussing two or more barriers to communication 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 of 1–4 relevant business concepts. Limited ability to discuss the barriers to communication with little/no explanation. Simple judgement with limited justification / limited evaluation of choices made. Candidates outlining all three barriers to communication in context should be rewarded with the top marks in the band. 0 No creditable response. 0 3(b) Relevant points might include: • Too many people for the message to pass between – as at each stage the message can be distorted – hence reaches the receiver in a different form than when it started off so not effective in communicating the intended message • Message may be lost – so receiver never sees it – hence message is not acted upon – for example if a message Problem about an order for bicycle riding helmets to be with the manufactured is emailed to the factory and it goes into medium junk mail and is not seen – the order will not be made used • Wrong channel used – if the communication is urgent but the communication channel chosen is slow – such as letter used when telephone call would have been more appropriate • Technical breakdown – internet goes down/mobile phone loses connection/battery is flat – message is not passed on and sender may not be aware of this • Unclear message – language used is too difficult to understand/jargon used/speaks too quickly • Message too long – includes too much information about Problem children's cricket helmets so the key message is lost with the amongst the rest – important points not grasped and sender acted upon • Sent to the wrong person/wrong message sent – message not appropriate and may not be passed on so is lost • Not listening – when message is being given by phone about orders for components to make bicycle riding safety helmets • Lack of trust – receiver may not like or trust the sender Problem and therefore the message may not be fully trusted and with the acted upon immediately receiver • Poor attitude – casual approach to the message and no urgency to act upon it • Speaks a different language and does not clearly understand the message sent 3(b) Justification could include: • Problems with the medium used to send a message about the sport safety helmets is the easiest to overcome as they can insist that feedback is given and hence any problems with the message can be corrected. If no feedback is received, then the message has probably been lost. Problems with the sender and receiver are more difficult to correct as there are many senders and receivers in the different factories and it is more difficult to adjust their behaviour when communicating between factories to correct problems Conclusion that arise. • Problems with the sender of a message about sport safety helmets is the easiest to overcome as instructions to keep messages short and use clear simple language to avoid problems of messages being misunderstood can be communicated to all employees. • Problems with the receiver of messages in the new factories in other countries about sport safety helmets is the easiest to overcome by indicating the level of importance of the message so important messages will be read straight away and not be ignored until too late.

Mark scheme

4(a) Explain four ways the break-even chart in Appendix 3 might be helpful to 8 SSE. Award 1 mark for each relevant use of the breakeven chart in Appendix 3. Award a maximum of 1 additional mark for each applied explanation of the use of the break-even chart to SSE. Relevant uses might include: • Shows the total costs – is $45 000 per week / shows the total revenue – is $50 000 per week / shows fixed costs – is $15 000 per week • Shows the break-even output – that SSE needs to sell 750 helmets per week • Shows the margin of safety – shows that 250 helmets are predicted to be sold above the break-even output • Helps in decision-making – whether to increase or decrease price from $50 • Show the impact of changes in costs – if fixed cost increased from $15 000 • Shows the areas of profit or loss – managers at SSE can read off the expected profit at maximum output of 1000 helmets per week • Shows they make a profit at maximum output – of $5000 per week • Whether or not to go ahead and produce the new product For example: It shows the break-even output per week for SSE’s new product (1) at 750 helmets (app). Application could include: public limited company; playing cricket; new factory abroad; children’s cricket helmets; figures from chart e.g. total costs of $45 000; total revenue of $50 000; fixed costs are $15 000; margin of safety is 250 units; break-even output is 750 units. 4(b) Consider how each of the following three changes may affect SSE. 12 Which change is likely to have the greatest effect on SSE’s profit? Justify your answer. • A depreciation in the currency of country Z • An import tariff introduced on sports helmets imported into country Z • Quotas introduced on sports helmets in countries where SSE sells its products Level Description Marks 3 Sound application of knowledge and understanding of 9–12 relevant business concepts using appropriate terminology. Detailed discussion of two or more changes. Well-justified conclusion. Candidates discussing all three changes in detail, in context and with a well-justified conclusion, including why the alternative changes were rejected, should be rewarded with the top marks in the band. 2 Sound application of knowledge and understanding of 5–8 relevant business concepts using appropriate terminology. Detailed discussion of at least one change. Judgement with some justification / some evaluation of choices made. Candidates discussing two or more changes 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 of 1–4 relevant business concepts. Limited ability to discuss the changes with little/no explanation. Simple judgement with limited justification / limited evaluation of choices made. Candidates outlining three changes in context should be rewarded with the top marks in the band. 0 No creditable response. 0 4(b) Relevant points might include: • Export of children's cricket helmets will appear to be cheaper in foreign countries – increases competitiveness – increases sales/revenue A depreciation • Imports of raw materials to produce bicycle riding in the safety helmets will be more expensive – increases currency of costs for SSE – may need to raise prices – reduced country Z sales • Imported helmets will be more expensive in country Z so less competitive with SSE’s products – increases sales of SSE’s products in country Z An import • Tax placed on imported cricket helmets may raise the tariff price of competitor’s products – SSE products more introduced on competitive so demand increases – sales/revenue sports increases helmets • Higher price of competitor’s products may allow SSE imported into to raise its prices – if demand remains the same – then country Z sales/revenue will increase – profit increases • A limit is placed on the quantity of sport safety helmets Quotas that can be imported into export markets – limits the introduced on sales of SSE sports helmets – so SSE has decided to sports set up its own factories in these markets helmets in • Prices of sports safety helmets may rise in export countries markets as limited supply – may keep revenue the where SSE sells its same/increase revenue – depends on elasticity of demand – if price elastic demand, then revenue will fall products as the price rises 4(b) Justification could include: • Depreciation of the currency will have the greatest effect on SSE’s profit as the reduced price in foreign markets is likely to cause a large increase in demand leading to much higher sales of products such as the children's cricket safety helmets and hence revenue. The higher revenue will lead to an increase in profit as costs are unlikely to increase if raw materials can be sourced locally. A quota is unlikely to have much effect as long as the quantity is not too restricted, and a tariff is unlikely to have much effect on profit if there are few competitors from abroad in country Z. Conclusion • A tariff on products such as skateboarding safety helmets will have the greatest effect on SSE’s profit as competitors may raise prices in response to the tariff and customers in country Z are more likely to now buy SSE's sports helmets. Demand for SSE's sports helmets will therefore increase leading to an increase in sales and revenue which will lead to much higher profit. • A quota on products such as cricket safety helmets will have the greatest effect on SSE’s profit as the number of exports of SSE’s products will be restricted and so sales and hence revenue will fall leading to much lower profit.