Business Studies 0450/12 October/November 2024: question paper and mark scheme

Mark scheme

1(a) Identify two features of a private sector business. 2 Only award the first two responses given. Award 1 mark per feature (max 2). Points might include: • Owned by individuals / not owned by government • Profit motive/objective • Financed by banks/individuals Other appropriate responses should be credited. 1(b) Identify two reasons why a business might remain 2 Only award the first two responses given. small. Award 1 mark per reason (max 2). Points might include: • Owner’s objectives • Limited access to finance/capital • Market size • Market domination / a few large businesses control the market • Lack of knowledge/skills/experience • Wants to maintain close relationship with its customers • To remain flexible / able to respond quickly to changes in consumer tastes • Type/nature of industry/market/product/service Other appropriate responses should be credited. 1(c) Outline one reason why Avtar might need each of the 4 To use words from the stem as application, the reference following types of finance: must be appropriate (i.e. make sense) in relation to the point being made. Award 1 mark for each relevant reason for needing short- term/long-term finance (max 1 for each). The following words are likely to be appropriate for this Award 1 mark for each relevant reference to this business question: (max 1 for each). • (Car) repair / garage or examples • 2 workers Points might include: • Full-time (employees) Short-term finance: • Private sector business • Pay day-to-day expenses/provide working capital [k] for • Economic recession this private sector business [app] • Small business • Pay wages/salary [k] of his 2 employees [app] • Added value • Purchase inventory [k] • To prevent cash-flow problem/improve the cash position Other appropriate examples can be credited. [k] Long-term finance: • Purchase non-current assets or examples [k] for the repair business [app] • Fund expansion/growth [k] in case he decides not to keep the business small [app] • Fund takeover of another business [k] • Develop new products/services [k] Other appropriate responses should be credited. 1(d) Explain two ways an economic recession might affect 6 To use words from the stem as application, the reference Avtar’s business. 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). Award 1 mark for each relevant reference to this business The following words are likely to be appropriate for this (max 2). question: Award 1 mark for each relevant explanation (max 2). • (Car) repair / garage or examples • 2 workers Points might include: • Full-time (employees) • Less/lower demand/sales [k] for car repairs [app] • Private sector business reducing revenue / need to make redundancies [an] • Small business • Less/lower competition (as other businesses fail) [k] • Added value which could increase potential customer base [an] • Short-term/long-term finance/needs finance (for many • Widen pool of potential employees [k] if he wants more reasons) than 2 employees [app] which may lower recruitment costs [an] Other appropriate examples can be credited. • Reduce number of employees [k] so lower break-even / cash outflows / lower costs [an] so does not need Some points such as lower costs can be [k] or [an] but only finance [app] award once. • May lower prices [k] which reduces added value [app] increase demand [an] Points about repay loans/interest/need to borrow from bank • Material costs may be lower [k] which may increase is [an] only. profit margin/lower variable costs [an] • May delay any expansion plans [k] as not able to afford it [an] so business must remain small [app] • Hard to survive / may close down / objective may switch to survival [k] so may lose his investment/difficult to attract investment [an] • May have cash flow problems [k] so need overdraft/loan/cannot repay loans/day-to-day costs [an] • Customers may delay payment / more bad debts [k] • More difficult to raise finance/banks may not lend [k] Other appropriate responses should also be credited. 1(e) Explain two ways a business can increase added value. 6 This is a general question so there are no marks for Which is likely to be the best way for a business to use? application. Justify your answer. To access [eval], must discuss two valid ways. The second Award up to 2 marks for identification of relevant points. [eval] mark must be awarded for a comparison between two Award up to 2 marks for relevant development of points. valid ways. Award up to 2 marks for a justified decision as to which is the best way for a business to increase added value. Some points could be [k] or [an] but do not award the same point twice. Points might include: Ways to increase price: Some analysis can be used for more than one point, but only • (Improve) quality of product/service [k] so customers may award once. be prepared to pay higher prices [an] • (Build a) brand image/marketing/packaging [k] so Analysis can be awarded for explaining: customers think the product is worth more [an] • The reason why price /cost may be higher/lower • (Improve) product features / change/create a unique • How way increases added value design [k] making the product more desirable than similar products so willing to pay more [an] • Convenience [k] customers may pay more for a product they can have straightaway [an] Ways to lower (input/raw material) costs: • Buy cheaper raw materials / find cheaper suppliers [k] reduces material/input costs [an] widening the gap between cost and price [an] • Reduce the number of materials used [k] Other appropriate responses should also be credited. Justification might include: One way is improving the quality [k] as customers may be willing to pay a higher price [an]. It could buy cheaper raw materials [k] which may reduce material costs [an]. Improving quality is better because cheaper materials could damage the reputation leading to fewer sales [eval] while improving quality could even help attract new customers [eval].

Mark scheme

2(a) Define ‘licensing’. 2 For two marks need the idea of permission/rights given by one business to another business and idea of what i.e. Award 2 marks for a full definition. Award 1 mark for a partial produce/sell/operate for its products. definition. Do not need to refer to other countries/new markets to gain Business gives permission for another company (in the new two marks. market being entered) to produce the branded/patented products (under licence) [2] OR A business in one country permits a firm (in a foreign country) to produce its branded products (under licence) [2] OR When a business gives the right to others to produce/sell its products (in another country) [2] Partial definition e.g. allow someone else to make/sell your products [1] 2(b) Identify two factors which might affect how much 2 Only award the first two responses given. inventory a business should hold. Award 1 mark per factor (max 2). Points might include: • Demand for product/amount of sales • Perishability/nature/type of product/durability • (Storage) space available • Cost of storage/warehouse • Delivery charges • Seasons/celebrations/festivals • Amount of money available (to buy inventory) / cost of inventory / finance • Lead time/reliability of supplier • Method of production / rate/quantity of output • Stock control system / JIT • Forecast/expected shortages Other appropriate responses should be credited. 2(c) Outline two benefits to SNT of using batch production. 4 To use words from the stem as application, the reference must be appropriate (i.e. make sense) in relation to the point Award 1 mark for each relevant benefit (max 2). being 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: • Soft drinks • Flexible [k] helping the business adapt to the new • 300 000 (bottles per week) markets in other countries [app] • New markets (in other countries)/planning to expand • Production may not be affected to any great extent if • (How much) inventory is important machinery breaks down [k] so can continue to make • Ethical (business) some soft drinks [app] • Range/variety of products [k] when making 300 000 Other appropriate examples can be credited. (bottles per week) [app] • Can motivate workers [k] Comparative statements such as ‘More/ less’ can only be accepted when referring to an alternative method e.g. Other appropriate responses should be credited. quicker than job production. 2(d) Explain one advantage and one disadvantage to SNT of 6 To use words from the stem as application, the reference forming a joint venture when entering new markets in must be appropriate (i.e. make sense) in relation to the point other countries. being made. Award 1 mark for identification of each relevant The following words are likely to be appropriate for this advantage/disadvantage (max 2). question: Award 1 mark for each relevant reference to this business • Soft drinks (max 2). • 300 000 (bottles per week) Award 1 mark for each relevant explanation (max 2). • Ethical business • Licensing Points might include: • Batch production Advantages: • Increase capital / share costs / share resources [k] when Other appropriate examples can be credited. making its soft drinks [app] which can help the business reduce borrowing [an] Some points can be awarded as [k] or [an] but do not award • Access to shared knowledge/expertise [k] increasing the same point twice e.g. share risk. productivity/efficiency [an] above 300 000 (bottles per week) [app] • Less need for market research [k] lowers (marketing) costs [an] • Avoid/reduce competition [k] increasing market share [an] • Share/lower (financial) risk [k] which reduces possible losses [an] • May be a legal requirement (in some countries) [k] Disadvantages: • Possible (management) conflict/disagreements/different ways of working [k] as other business may be less concerned about being ethical [app] which can slow down decision-making [an] • Mistakes will reflect on all parties [k] which can damage its reputation [an] reducing its ability to offer licensing [app] 2(d) • Must share profit [k] which may reduce motivation of each party [an] • It will take time/effort to find the right partner [k] which may delay the expansion [an] Other appropriate responses should be credited. 2(e) Do you think the advantages to a business of being 6 This is a general question so there are no marks for ethical are greater than the disadvantages? Justify your application. answer. Some points could be awarded as either [k] or [an] but do not Award up to 2 marks for identification of relevant points. award the same point twice e.g. customer loyalty, increase Award up to 2 marks for relevant development of points. prices. Award up to 2 marks for a justified decision as to whether the advantages to a business of being ethical are greater than To access [eval], must discuss a valid advantage and a valid the disadvantages. disadvantage. Points might include: Accept problems of not being ethical e.g. damage reputation Advantages: • Good image/reputation [k] so can charge high(er) prices [an] • Good relations with customers [k] which can develop customer loyalty [an] • Increase demand/sales/customers / enter new market [k] increasing revenue [an] • Help motivate workers [k] leading to lower absenteeism / lower labour turnover / increased productivity [an] • Help recruit/attract employees [k] • Investors more likely to invest [k] which may make it easier to expand/grow the business [an] • Can help create better supplier relations [k] Disadvantages: • Limited/fewer materials available [k] leading to less output [an] • High(er) costs [k] could lead to higher prices [an] • May take time to source suitable/ethical supplies [k] which could delay production [an] • May have to pay more to suppliers / for materials [k] leading to higher variable costs/cost of goods sold / lower gross profit margin [an] 2(e) Other appropriate responses should be credited. Justification might include: One disadvantage is the business may have higher cost of materials [k] leading to a lower gross profit margin [an]. The business may have a better reputation [k] so able to charge higher prices [an]. Being ethical is better because higher prices could increase its profit margin [eval] which could cover the additional costs of materials [eval].

Mark scheme

3(a) Define ‘non-current assets’. 2 For both marks must have idea of 'owned by a business' and held for 'more than 1 year'. Award 2 marks for a full definition. Award 1 mark for a partial definition. Resources owned by a business which will be used for a period longer than one year [2] OR Items owned by a business for more than one year [2] Partial definition e.g. items owned/bought/possessed by the business [1] OR Items in the business for more than one year [1] 3(b) Calculate HRO’s current ratio. Show your working. 2 Award only 1 mark if 1.25 is written as part of the answer but is not given as the final answer. Award 2 marks for a correct answer. Award 1 mark for correct method but incorrect answer. If answer incorrect, check for the correct working. Correct answer 1.25:1 [2] OR 1.25 [2] Correct method but incorrect answer e.g. Current assets ÷ current liabilities [1] OR 250/200 [1] If correct answer given with no working shown, award 2 marks. 3(c) State whether each of the following would be classified 4 Only award the first response given for each answer. as a current asset or as a current liability. Award 1 mark per correct answer (max 2). • Trade receivables: Current asset • Trade payables: Current liability • Overdraft: Current liability • Inventory: Current asset 3(d) Explain one way the objective of HRO’s shareholders to 6 To use words from the stem as application, the reference increase profit might conflict with the objectives of each must be appropriate (i.e. make sense) in relation to the point of the following stakeholder groups: being made. Award 1 mark for identification of each relevant way (max 2). The following words are likely to be appropriate for this Award 1 mark for each relevant reference to this business question: (max 2). • (Children’s) toys Award 1 mark for each relevant explanation (max 2). • Private limited company • Market research Points might include: • 30 (suppliers) Customers: • $200 000 (current liabilities) • Value for money/lower prices [k] but HRO might want to increase prices [an] of its toys [app] Other appropriate examples can be credited. • HRO might want to increase the prices [k] of its toys [app] whereas customers want value for money/lower Knowledge can be awarded for identifying an objective of prices/refuse to buy / go to competitor [an] either the business (other than profit) or stakeholder. • Customers want good/better quality of products [k] which may increase (material) costs [an] of this private Analysis mark for explaining how this might conflict with the limited company [app] other party. • Wider range of products [k] but this could increase HRO’s costs [an] • Reliable products/services [k] Suppliers: • Might want to increase prices [k] whereas HRO might want to lower prices [an], so HRO has more funds for market research [app] • HRO wants to pay lower prices [k] which lowers revenue/profit for suppliers [an] • Increased/regular number of orders [k] but HRO might want to place fewer orders [an] to reduce its $200 000 current liabilities [app] • To be treated fairly [k] Other appropriate responses should also be credited. 3(e) Do you think the advantages to a business of using 6 This is a general question so there are no marks for primary market research are greater than the application. disadvantages? Justify your answer. To access [eval], must discuss a valid advantage and a valid Award up to 2 marks for identification of relevant points. disadvantage. Award up to 2 marks for relevant development of points. Award up to 2 marks for a justified decision as to whether the For analysis: advantages to a business of using primary market research Can explain the effect of the advantage/disadvantage are greater than the disadvantages. Reason why the advantage/disadvantage arises Points might include: Advantages: • Up to date/new (data) [k] which can help make better/informed decisions/able to satisfy customer demand [an] increasing sales [an] • Business specific/relevant data can be gathered [k] so should help the business find out only what it needs to know [an] • Only available to own business / not available to the competition [k] Disadvantages: • Expensive [k] as need to recruit experts to assist [an] which increase cash outflows/increase costs [an] • Time to collect [k] which could mean opportunities are missed [an] Other appropriate points should also be credited. Justification might include: It allows for business specific data to be gathered [k] helping the business find out exactly what it wants to know [an]. However, it does take time to collect [k] which may mean opportunities are missed [an]. 3(e) The advantages are greater because the time spent now to gather specific information is likely to help the business make better decisions [eval] which could save the business from wasting resources in the future [eval].

Mark scheme

4(a) Identify one advantage and one disadvantage to 2 Only award the first response given for each answer. employees of being members of a trade union. Award 1 mark per advantage/disadvantage (max 2). Points might include: Advantages: • Strength in numbers/more power when negotiating with employers / collective bargaining • Offer (legal) advice to employees • Protect job security / protect against possible redundancy / protect against unfair dismissal • Improve health and safety / better/good working environment / protect against unfair work practices • Help obtain a pay rise/extra holiday entitlement/change in hours • Improved benefits for members who are not working because they are sick, retired or made redundant • Protect employee rights / ensure workers are not exploited / protect interests Disadvantages: • Must pay (membership fee) / expensive • Decisions of majority is binding on all members, even if do not agree with the decision Other appropriate responses should be credited. 4(b) Identify one benefit and one limitation of a business 2 Only award the first response given for each answer. using induction training. Do not award: Award 1 mark for each benefit/limitation of induction training Answers about on-the-job/off-the-job training (max 2). Points might include: Benefits: • Familiarise with work/settle quickly into the job • Helps to be made aware of workplace/ important health and safety issues before starting the job • Helps to understand job role/who the main personnel in the organisation are • May be a legal requirement for health and safety (at start of job) • Workers are less likely to make mistakes Limitations: • Increases costs/expensive • (Wages are paid but) there is no output • Time-consuming • Delay when employee starts working Other appropriate responses should be credited. 4(c) Outline one reason why each of the following stages of 4 To use words from the stem as application, the reference recruitment might be important for TLA: must be appropriate (i.e. make sense) in relation to the point being made. Award 1 mark for each relevant reason (max 2). Award 1 mark for each relevant reference to this business The following words are likely to be appropriate for this (max 2). question: • Large business Points might include: • Hotel Job description: • 200 rooms • Provides a clear idea of what job involves / sets out • 3000 (employees) clearly the roles and responsibilities of the position [k] for • (2/new) managers the 3000 employees [app] • Induction training • Provides basis for drawing up a contract [k] for the new • Trade union managers [app] • Planning to expand/grow • Helps decide basis for pay [k] • Helps create person specification [k] Other appropriate examples can be credited. • Helps create appropriate job advert/help decide where to advertise [k] • Helps resolve disputes [k] Job advertisement: • Makes (potential) applicants aware of / know about the job [k] at the hotel [app] • Helps attract a range of applicants [k] as planning to expand [app] Other appropriate responses should be credited. 4(d) Explain two possible diseconomies of scale as TLA 6 To use words from the stem as application, the reference grows. must be appropriate (i.e. make sense) in relation to the point being made. Award 1 mark for identification of each relevant diseconomy of scale (max 2). The following words are likely to be appropriate for this Award 1 mark for each relevant reference to this business question: (max 2). • Large business Award 1 mark for each relevant explanation (max 2). • Hotel • 200 rooms Points might include: • 3000 (employees) • Low morale/motivation / lack of loyalty/commitment [k] • 2/new managers from its 3000 employees [app] leading to higher labour • Induction training turnover / more workers leaving [an] • Trade union • Poor communication [k] as more levels for messages to pass through / more mistakes [an] in the hotel [app] Other appropriate examples can be credited. • Weak/lack of co-ordination [k] leading to the wrong decisions [an] by the 2 managers [app] Increase in average/unit cost [an] only. • Lack of control [k] which may lead to some employees working less efficiently [an] at this large business [app] Analysis can be awarded for either: Explaining the effect of the diseconomy. Other appropriate responses should also be credited. Reasons why the diseconomy arises. 4(e) Do you think the advantages of managers using a 6 This is a general question so there are no marks for democratic leadership style are greater than the application. disadvantages for a business? Justify your answer. To access [eval], must discuss a valid advantage and a valid Award up to 2 marks for identification of relevant points. disadvantage. Award up to 2 marks for relevant development of points. Award up to 2 marks for a justified decision as to whether the Some points can be [k] or [an] but only award once e.g. help advantages of managers using a democratic leadership keep worker loyalty. style are greater than the disadvantages for a business. Points about motivation could be an advantage or Points might include: disadvantage but only award once. Advantages: • Gain (more) ideas/suggestions [k] which may increase Do not award: sales [an] Reference to delegation. • Can increase motivation/more committed [k] leading to less absenteeism/(lower) labour turnover / improve efficiency/output [an] • Better decisions could be made [k] as can use employees’ experience and skills [an] • Positive work environment [k] Disadvantages: • Employees may not have the necessary experience / want to be involved in decisions [k] leading to mistakes [an] • Takes time to consult employees [k] which can slow down decision-making [an] Other appropriate answers should also be credited. 4(e) Justification might include: One advantage is that it can lead to new ideas [k] which can increase sales [an]. However, it can take time to consult all employees [k] which delays decision-making [an]. The advantage is greater because if the employees’ ideas are successful, they could increase revenue [eval] so the extra time to obtain these ideas would be worthwhile [eval].