Business Studies 0450/22 October/November 2025: question paper and mark scheme

Mark scheme

1(a) Explain four ways a business plan could help Kathryn. 8 Award 1 mark for each relevant way (max 4). Award 1 additional mark for each explanation of the way applied to this context. Relevant ways might include: • To help gain a bank loan/overdraft – to open the new shop • To help give the business a sense of purpose and direction – selling wedding flowers • To calculate the costs of setting up the business – in this niche market • To predict cash flow problems – when deciding the source of finance for working capital • To help identify if there is sufficient demand for the product • To help set prices – for the high-quality products • To help identify the skills / type of employees needed – to prepare the flowers • To help choose the promotional methods to use • To help allocate resources For example: To help with an application for a bank loan (1) in order to open the new flower shop (app). Application could include: new shop/third shop; 2 shops; flowers; source of finance required for working capital; weddings; bride/groom; ribbons; reputation for high quality; contribute to sustainable development; targets a niche market; 4/8 employees at each shop; bride; average price paid is $2000; supplies purchased each day; supplies are fresh; uses job production; small business; marketing mix for the new shop. 1(b) Consider the following two methods Kathryn could use to communicate 12 with her suppliers. Which method should Kathryn use if an order is needed quickly? Justify your answer. • Telephone calls • Emails 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 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 Telephone calls • Speaks directly to each • Suppliers may not supplier of ribbons – answer – delay in gets immediate order being taken – feedback – so knows the delivery of flowers message has been may be delayed – received which slows • Can verify if the production and may message for the order be late being of fresh flowers is delivered to a understood – answer wedding questions about the • Poor connection orders – to ensure the over the network correct flowers are used – may distort delivered – possibly the message and meeting customer make it difficult to orders more quickly understand – • Know the message has resulting in wrong been received – with order being made – having a good which may lead to relationship with the under or over supplier which means ordered flowers they will answer and • Could take a long take the order time to call suppliers – may not answer straight away and may need to call several times taking time that could be used for something else • No permanent record of the conversation – if an incorrect order is made there is no proof the supplier made a mistake 1(b) Advantages Disadvantages Emails • Provides a written • Some suppliers record for FF to refer to may not have – if the suppliers do not access to a reliable meet the order correctly internet connection and the wrong flowers – so FF may not are delivered know the order for • Can be referred to at ribbons has not different times to check been received on the amount of • The order may not perishable supplies be seen if there are ordered to ensure the too many emails to correct order is delivered read and get lost or on the correct date missed • Kathryn does not have • May go into junk – to be in the office to so supplier of send the order – can be packaging is sent out of usual office unaware there is an hours – may be more order convenient especially as FF is a small business Recommendation Justification might include: • A telephone call should be made if the order for ribbons is needed quickly to ensure the message is received. Feedback can clarify that the correct order has been made. An email may get lost amongst many emails and the urgency may not be realised, therefore making the order late being processed and delivery of the flower arrangements for the wedding being delayed. • An email should be used as it is sent straight away, and the supplier of fresh flowers can reply letting FF know that the order has been received and if it can be dispatched straight away.

Mark scheme

2(a) Explain two benefits and two limitations of a business operating in a 8 niche market. Award 1 mark for each benefit/limitation (max 2 benefits/2 max limitations). Award a maximum of 1 additional mark for each explanation of the benefit/limitation. There are no application marks for this question. Relevant benefits might include: • Fewer businesses may be competitors in this part of the market – less need to spend on marketing the product • The needs of the consumer can be more closely focused on – therefore their needs will be met giving high consumer satisfaction • Increased sales and revenue as product meets customer needs • Higher price can be charged – as product may be seen as high-status or exclusive • Increased customer loyalty Relevant limitations might include: • Niche markets are usually relatively small – therefore sales are likely to be smaller than in a mass market • Limits potential growth in the market – profits may be limited in the future • May mean the business specialises in one product – increased risk if the product has a fall in demand • Small size of the market means that economies of scale are unlikely – resulting in higher unit costs • High profits may attract competitors into the market – prices may have to be reduced For example: The business can focus more closely on customer needs (1) therefore their needs will be met giving high consumer satisfaction (1). 2(b) Using Appendix 2 and other information, consider the following three 12 elements of the possible marketing mix for FF’s new shop. Which element is likely to be the most important? Justify your answer. • Price – cost-plus pricing • Place – selling some flowers through wedding planners • Promotion – television advertising 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 elements. Well-justified conclusion. Candidates discussing all three elements, in context and with a well-justified conclusion, including why the alternative elements 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 element. Judgement with some justification / some evaluation of choice made. Candidates discussing two or more elements in detail and applying these 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 elements with little/no explanation. Simple judgement with limited justification / limited evaluation of choice made. Candidates outlining the three elements 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 – cost- • Method is relatively easy • Need to calculate total plus pricing to apply costs to be able to • Different mark-ups can be calculate the price to applied for different brides charge for wedding depending on the type of flowers – may take flowers used in the time to collect the arrangement figures and may not • Each product sold can be accurate if difficult earn a higher profit for the to calculate the business – as it can proportion of fixed closely meet the costs per product requirements of the • Price may be higher individual customer in this than price of niche market – and competitors’ – charge a higher price for reducing sales and the flower arrangement revenue • Profit overall is only made if sufficient sales are made to cover fixed costs as well as the variable costs • There is no incentive to reduce costs – as any increase in costs will be passed on to the customer 2(b) Advantages Disadvantages Place – • May have a larger market • Part of the profit kept selling some as now also sell to by the wedding flowers businesses that plan planner – as through weddings for customers – discounts will be wedding may have higher revenue required by the planners from sales of wedding wedding planner – flowers lower return for • All storage costs paid by Kathryn on her the wedding planner – investment in her may reduce costs for FF – small business flowers are perishable • Slower way to get the and may need specialist flower arrangements equipment to keep the to the customer – high quality of the flowers wedding flowers may • Promotional activities are lose quality as not as carried out and paid for by fresh when stored for the wedding planner longer periods of time • Does not have complete control over the way the business is marketed – cannot display flower arrangements in the way chosen by Kathryn • May be higher price as includes the wedding planner’s profit – may be less competitive 2(b) Advantages Disadvantages Promotion – • The advert will be seen by • Can be very television a large audience – expensive – advertising potentially increases the increasing costs for target market – increasing FF sales and revenue • FF may not be able to • The wedding flowers and afford many adverts – arrangements can be so reducing their shown in a very effectiveness as not favourable way – with on television very happy brides holding their often flowers – moving images • Young consumers can convey the mood of who are getting high-quality products and married may not enjoyable celebrations – watch television very increasing sales often as more likely to • May encourage customers use social media – to visit the shop when they reducing effectiveness might not otherwise be of advertising and aware of the shop reducing potential • Can target adverts to be sales shown during TV shows that the target market may be watching – such as bridal/wedding programmes Conclusion Justification might include: • Cost-plus pricing will be the most important element of the marketing mix as it will allow different mark-ups for different flower arrangements for high income customers who are getting married leading to higher revenue and possibly more profit. Selling to wedding planners may reduce the high-quality of the flowers as it may take longer to get to the customer, reducing customer satisfaction and television advertising may be limited given the large budget needed to have a television campaign. • Selling to wedding planners will allow Kathryn to increase the number of customers for her flowers to use in arrangements and flower arrangements for weddings – this may give word-of-mouth advertising – leading to higher sales from the shop. • Advertising on television may mean that customers from across the city are likely to see the adverts and visit the shop – leading to higher sales of wedding flowers.

Mark scheme

3(a) Explain two reasons why FF uses job production. 8 Award 1 mark for reason why FF uses job production (max 2). Award a maximum of 3 additional marks for each explanation of why FF uses job production – one of which must be applied to this context. Reasons might include: • Is suitable for individual/unique products – makes them more competitive – leading to higher revenue/sales • Meets the exact needs of customers – so increases customer satisfaction – increases reputation and word of mouth advertising • The employees have more varied jobs – as may carry out all the tasks to produce the product – increasing employee motivation • A higher price can be charged – as the product is a ‘one-off’ for the customer – willing to pay a higher price for a product that is exactly what they want • Production can be of a higher quality – because each product is individually made For example: The flower shop will produce wedding flower arrangements (app) that are specially designed for customers (1) and more closely meets the exact needs of these customers (1) so is more likely to increase customer recommendations (1). Application could include: new shop/third shop; 2 shops; flowers; source of finance required for working capital; weddings; bride/groom; ribbons; reputation for high quality; contribute to sustainable development; targets a niche market; 4/8 employees at each shop; bride; average price paid is $2000; supplies purchased each day; supplies are fresh; small business; marketing mix for the new shop; social media reviews. 3(b) Consider the following two sources of finance which could be used for 12 working capital when FF’s new shop opens. Which would be the best source for Kathryn to use? Justify your answer. • Bank overdraft • Trade credit Level Description Marks 3 Sound application of knowledge and understanding of 9–12 relevant business concepts using appropriate terminology. Detailed discussion of both sources of finance. Well-justified recommendation. Candidates discussing in detail both sources of finance, in context and with a well-justified recommendation, including why the alternative source is 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 one or more sources of finance. Judgement with some justification / some evaluation of choice made. Candidates discussing both sources of finance 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 sources of finance with little/no explanation. Simple judgement with limited justification / limited evaluation of choice made. Candidates outlining both sources of finance 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 Bank overdraft • Can be quick to • Amount overdrawn will arrange – so finance have to be repaid with available straight interest – increases away expenses – may lead • May be arranged for to higher prices for varying lengths of flower arrangements time for repayment – charged or reduced longer time to pay it profits back from the sale of • May need to provide wedding flowers – collateral – may lose helping to avoid a assets if overdraft cash flow problem cannot be repaid • May have to pay a high interest rate due to it being a small business and may be seen as high risk – raises costs further • Interest rate may be variable so if interest rates increase later FF will be affected – increased risks for FF 3(b) Advantages Disadvantages Trade credit • Is effectively an • Supplier may refuse to interest-free loan – supply if payment is unless penalties for not made as agreed – late payment are may damage the made relationship with • May be able to supplier – unable to receive revenue from meet orders spoiling sales of flowers FF’s good reputation before paying • Supplier may refuse to supplier as has a offer discounts for the good relationship flowers at all if with her supplier – payment is not made improves cash flow as agreed – may increase costs – which could lead to higher prices as FF may use cost-plus pricing Recommendation Justification might include: • A bank overdraft is the best source of finance to use as a sufficient amount of capital may be arranged which will pay for all the operating costs for the new flower shop. Some suppliers may not be willing to provide FF with trade credit leaving them short of working capital. • Trade credit is the best source of finance to use as FF can use it to purchase the flowers and then sell them to receive the revenue before payment is due. This is an interest free source of finance for the day-to-day running of the third shop.

Mark scheme

4(a) Explain two reasons why high quality is important for FF 8 Award 1 mark for each reason (max 2). Award a maximum of 3 additional marks for each explanation of the reason why high quality is important – one of which must be applied to this context. Reasons might include: • To establish a brand image – so that customers are encouraged to buy the product – new customers are attracted • To maintain a good reputation / to not gain a bad reputation – friends and family tell others about the goods/service which may lead to a good/bad reputation – increasing/decreasing sales • To increase sales / attract more customers – due to customer needs being satisfied by the products supplied • So that faulty products do not have to be replaced – which would reduce waste / ensures customer safety / avoids legal action • Able to charge a high price – may lead to higher profit margin / as may increase added value For example: To maintain a good reputation (1) because if quality is not good then friends and family will tell others about the product which may lead to a bad reputation (1) and sales will be lower (1) for the new flower shop (app). Application could include: new shop/third shop; 2 shops; flowers; source of finance required for working capital; weddings; bride/groom; ribbons; contribute to sustainable development; targets a niche market; 4/8 employees at each shop; bride; average price paid is $2000; supplies purchased each day; supplies are fresh; uses job production; small business; marketing mix for the new shop; social media reviews. 4(b) Using Appendix 3 and other information, consider the following two 12 ways FF could contribute to sustainable development. Which way should Kathryn choose? Justify your answer. • Buying all flowers from sustainable sources • Using electricity from renewable sources Level Description Marks 3 Sound application of knowledge and understanding of 9–12 relevant business concepts using appropriate terminology. Detailed discussion of both ways. Well-justified recommendation. Candidates discussing two ways in detail, in context and with a well-justified recommendation, including why the alternative way 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 way. Judgement with some justification / some evaluation of choices made. Candidates discussing one way 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 ways with little/no explanation. Simple judgement with limited justification / limited evaluation of choices made. Candidates outlining the two ways in context should be rewarded with the top marks in the band. 0 No creditable response. 0 4(b) Relevant points might include: Advantages Disadvantages Buying all flowers • Attract customers who • The average price from sustainable are concerned about on wedding flowers sources the environment if it is is $2000 and included in the customers may not advertising – be willing to pay increasing sales more for sustainably • In the future produced flowers – sustainable sources so prices remain the will still be supplying same and profit flowers – more secure margins may need source of supply to be lower • Sustainable sources • Costs increase by are nearby in Main City 25% for flowers for which is good for the each average environment – as wedding flowers – if transport costs are prices are raised lower and less then may make FF polluting less competitive – losing sales 4(b) Advantages Disadvantages Using electricity • Savings of electricity • High cost to install from renewable after solar panels the solar panels – sources bought – $100 per costs $6000 for week saving on each shop electricity for each • $18 000 if all 3 shop shops have solar • $5200 per year panels savings for each shop / • May need to take $15 600 per year for all out a loan – interest 3 shops costs will increase – • These cost savings will will increase cash continue into the future outflow – after the installation • Relies on amount of costs are repaid sunlight each day – • May be able to reduce may be lower at prices as costs of different times of power are reduced – the year / difficult to become more store the electricity competitive • Maintenance cost for the solar panels Recommendation Justification may include: • Kathryn should buy all FF’s flowers from sustainable sources as FF may attract many more customers who are concerned about the environment, and they may be willing to pay a higher price if 25% increased cost of the flowers is passed on to customers. Purchasing solar panels may require taking out a bank loan and this will increase expenses which FF may not be able to afford given FF is opening a new shop and already has to find ways to finance its working capital. • Kathryn should use renewable energy to provide electricity for FF’s shops. This is an investment that will continue to save $300 each week for the 3 shops in the future and may help to make FF more competitive