Business Studies 0450/23 October/November 2025: question paper and mark scheme

Mark scheme

1(a) Explain two reasons why customers might buy from ES rather than from 8 one of its competitors. Award 1 mark for each reason why customers may be more willing to buy from ES rather than one of its competitors (max 2). Award a maximum of 3 additional marks for each explanation of thereason - one of which must be applied to this context. Reasons might include: • ES has a brand name that is well-known so makes it easy to identify – its brand name makes the business stand out from competitors – customers more likely to choose the branded boats over less well-known ones • Customers are assured of the quality they expect to receive – so may attract more customers – as boat is less likely to have faults or errors in the manufacture • Customers may think the quality is higher than unbranded products – may be more willing to pay a higher price – feel confident that the boats have been manufactured by skilled employees • ES has a good reputation – giving customers confidence that ES is a reliable business to buy from – feel reassured that ES will meet their needs • ES’s products may be cheaper than its competitors For example: ES has a brand name that is well-known so makes it easy for customers to identify it (1) as its brand name make the business stand out from competitors (1) so customers more likely to choose ES over a less well- known competitors (1) when they are buying a new boat (app). Application might include: boats; 20 years’ experience; started own business 4 years ago; sailing; 12 skilled employees; may use social media to promote the business; 4 new employees; high quality; well-established brand; voted 3rd best in the country; promotion in sailing magazines; information from Appendix 2 or Appendix 3. 1(b) Consider the advantages and disadvantages of the following two types 12 of business organisation that Tim could use when his brothers join the business. Which would be the best type for Tim to choose? Justify your answer. • Partnership • Private limited company Level Description Marks 3 Sound application of knowledge and understanding of 9–12 relevant business concepts using appropriate terminology. Detailed discussion of both types of business organisation. Well-justified recommendation. Candidates discussing both types of business organisation, in context and with a well-justified recommendation, including why the alternative type of business organisation 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 one type of business organisation. Judgement with some justification / some evaluation of choice made. Candidates discussing in detail one or more types of business organisation 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 types of business organisation with little/no explanation. Simple judgement with limited justification / limited evaluation of choice made. Candidates outlining the two types of business organisation 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 Partnership • It is easy to set-up – • Unlimited liability / no as there are few legal limited liability – requirements – which means all their reducing the costs of personal possessions setting up, such as are at risk – not just accountancy costs the money they • More capital can be invested in the invested – as three business partners investing • No continuity as the their own money into business and the the business owners do not have a • More owners to share separate legal responsibilities with identity – if one of the and discuss business partners leaves, decisions – each because the partners partner can specialise are ‘the business’ it in different aspects of will end the business, such as • Partners may one brother has disagree on business experience of decisions, and this financial may make decision- management – more making slower efficient as each • If one of the partners partner uses their doesn’t work hard or expertise is dishonest then the • More new ideas as other two partners there are three will also have partners – so may responsibility for their make better decisions actions • Complete privacy – they do not have to share any financial details with anyone else outside the business – as has been the case for the last 4 years - apart from the tax office, as they will still have to pay tax • All three owners are motivated to work hard as it is their business and no one else benefits from their efforts 1(b) Advantages Disadvantages Private limited • The three brothers • Accounts for the boat company and the business manufacturer are have a separate legal not private – identity – company competitors may can be sued instead access the accounts of the owners • Not easy to transfer • The business can sell shares so may make shares to family and it more difficult for the friends to raise more business to sell capital for the boat shares to family and business – larger friends amounts of capital • Legal formalities to may be raised than if operate the company a partnership – needs to have • Limited liability – will accounts audited and not lose personal registered with the possessions if government takes business fails time and increases • Cannot be taken over costs for ES without the consent • Legal formalities of the shareholders setting up the company – have to complete paperwork to register the company which takes time and money - may take more time for ES than setting up as a partnership Recommendation Justification might include: • The business should be set up as a partnership because the brothers will have complete control of which boats to produce and will be able to keep all the profit from their hard work without having to share it if they had other shareholders. They should not become a private limited company as this would mean that competitors may be able to see some of their accounts and they could not keep the financial data private. They will also have to pay to have the accounts audited each year which will increase costs. • The business should be set up as a private limited company because the three brothers will have the protection of limited liability which means if ES goes bankrupt, they will not lose their personal possessions only the money they invested in the business at the start.

Mark scheme

2(a) Explain two benefits of ES having a short chain of command. 8 Award 1 mark for each benefit (max 2). Award a maximum of 3 additional marks for each explanation of the benefit of having a short chain of command – one of which must be in context. Relevant benefits might include: • Communication is quick – as there are few levels for messages to be passed through – queries can be answered straight away • The owners are not remote from the employees – therefore they will be more in touch with the opinions of the employees if there is a problem – making it easier to solve the problem and maintain motivation • Span of control may be wider – leading to more delegation and less control of each worker – making them feel motivated as trusted to get on with the job • Decision-making may be faster • Messages are less likely to get distorted For example: Communication in the business is quick (1) as there are few levels of hierarchy for messages to pass through (1). Therefore, queries can be answered straight away (1) as they passed on from the one owner of ES (app). Application might include: boats; 20 years’ experience; sole trader; sailing; 12 skilled employees; 4 new employees; high quality; well-established brand; voted 3rd best in the country; flat organisational structure; information from Appendix 2 or Appendix 3. 2(b) Using Appendix 2 and other information, consider the two new products 12 ES could produce. Which product should Tim choose? Justify your answer using break-even calculations. • Product A • Product B Level Description Marks 3 Sound application of knowledge and understanding of 9–12 relevant business concepts using appropriate terminology. Detailed discussion of both products. Well-justified recommendation. Candidates discussing both products, in context and with a well-justified recommendation, including why the alternative product 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 product. Judgement with some justification / some evaluation of choice made. Candidates discussing both products 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 products with little/no explanation. Simple judgement with limited justification / limited evaluation of choice made. Candidates outlining the two products in context should be rewarded with the top marks in the band. 0 No creditable response. 0 2(b) Relevant points might include: Product A • Has potential to export this product in the future – may lead to higher revenue if sales are high in other countries • Price is $300 000 higher than for Product B at a price of $500 000 per boat • Break even number of boats is 8 in the first year • Margin of safety is 1 boat in the first year • Contribution is $50 000 per boat • Total revenue for 9 boats is $4 500 000 • Total cost for 9 boats is $4 450 000 • Profit for the first year from this product is $50 000 • Fixed costs are the same for both products at $400 000 Product B • Sales are forecast to grow in country X and ES familiar with this market – may better meet the needs of this target market • Price for Product B is price of $200 000 per boat which is lower than Product A • Break even number of boats is 20 in the first year • Margin of safety is 4 boats in the first year • Contribution is $20 000 per boat • Total revenue for 24 boats is $4 800 000 • Total cost for 24 boats is $4 720 000 • Profit for the first year from this product is $80 000 • Profit is higher by $30 000 in the first year Recommendation Justification might include: • ES should choose to start producing Product A which is a larger boat with a higher price. The contribution per boat is higher than Product B by $30 000 so if in the future ES can successfully export more of these boats to customers in other countries and is forecast to break even with a fewer number of boats sold at 8 in the first year. • ES should choose to start producing Product B which is a small boat and makes a higher profit by $30 000 in the first year and has a higher margin of safety by 3 boats than Product A.

Mark scheme

3(a) Explain four benefits to a business of using social media as its method 8 of promotion. Award 1 mark for each benefit (max 4). Award a maximum of 1 additional mark for each explanation of the benefit of using social media for promotion. There are no application marks available for this question. Benefits could include: • Can target specific demographic groups who can then share the information on social media with friends – at no cost to the business • Can target customers who will see the advert when they log on to social media – reaches existing customers to encourage repeat sales • Information can be updated quickly – so can change quickly in response to market changes • Low or no cost to advertise on social media – if not paying to have the advert on specific sites • It can be used to reach groups that are difficult to reach in any other way – particularly if they live in other countries • It can be interactive which can be attractive – possibly leading to higher sales • Can provide more information in adverts than some other forms of advertising • Links can be attached to adverts to take customers to other products the customer may be interest in • May link to a website where the product can be easily ordered For example: Can target specific demographic groups who may be interested in your products (1). They can then share the information on social media with friends at no cost to the business (1). 3(b) Consider the advantages and disadvantages of ES using on -the-job or 12 off-the-job training for its new employees. Which method should Tim use? Justify your answer. • On-the-job training • Off-the-job training Level Description Marks 3 Sound application of knowledge and understanding of 9–12 relevant business concepts using appropriate terminology. Detailed discussion of both training methods. Well-justified recommendation. Candidates discussing both training methods in detail, in context and a with well-justified recommendation, including why the alternative training 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 training method. Judgement with some justification / some evaluation of choices made. Candidates discussing one or more training 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 training methods with little/no explanation. Simple judgement with limited justification / limited evaluation of choices made. Candidates outlining both training methods 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 On-the-job • Individual tuition is • Trainer may pass on training given – tailored to the bad habits – leading specific needs of the to more errors when tasks of carrying out the tasks manufacturing required to boats in the exact manufacture boats – way ES wants the damaging its well- tasks to be carried known brand image out • Trainer will not be as • Ensures some productive whilst production takes training – slows down place – helps to output of tasks supply more high- toward making the quality boats when boats from the ordered experienced worker • It is relatively cheap doing the training compared to off-the- • Employees might not job training – as no learn the most up-to- need to pay date methods – hence expenses - such as may be less efficient course fees for the – making ES less two days a week of competitive against training large boat companies • Employees may make mistakes whilst learning – creating faulty products – increases costs from part-finished boats as component parts are being thrown away • If mistakes are made, then its reputation is likely to be damaged 3(b) Advantages Disadvantages Off-the-job • A broad range of skills • May be no output of training can be taught for boat boats whilst training - production so wages may be • Often uses expert paid but no work trainers – gives better done whilst training training to the 4 new • May make it easier employees – may be for employee to find more efficient at alternative carrying out tasks for employment as may boat manufacturing have a recognised • Most up-to-date qualification – techniques are learnt employee leaves and – makes ES more increases cost to competitive than other recruit and train a large boat new employee manufacturers • Costs are usually higher than on-the-job training Recommendation Justification may include: • On-the-job training may be better to choose as it will allow workers to keep working at the same time as being trained and therefore will still be producing some output of boats. This will save ES training costs as it uses some of its existing 12 skilled workers to carry out the training. It may not be able to afford to send all 4 workers on training courses as it is likely to be expensive and may not be specific to ES’s needs. • Off-the-job training may be better to choose as it may lead to higher quality training being given to the 4 new employees. These are skilled jobs, and the employees need to maintain the brand image of high-quality workmanship of ES.

Mark scheme

4(a) Explain one way each of the following ES stakeholder groups might find 8 the financial information in Appendix 3 useful. • Owners • Employees • Suppliers • Bank Award 1 mark for each way the financial information may be useful to the stakeholder group (max 4). Award a maximum of 1 additional mark for each explanation of the way the stakeholder group might find the information useful which must be in context. Relevant ways might include: Owners • To be reassured that they would be likely to receive a share of the profit – as ES made a $100 000 profit last year • To measure the success of the business against previous years • To see the liquidity of the business and if they need to make any changes Employees • To see if they can ask for a wage increase - from last years’ 50% increase in revenue • To see how secure their job is Suppliers • They will want to see if ES will have enough liquidity to pay for the materials – has a safe current ratio of 2 • To decide whether to allow trade credit for ES Bank • To see if the business would be able to pay back a loan - if ES has enough liquidity with an acid test ratio of 0.5 to reassure the bank • To see whether it should offer an overdraft facility if ES needs one For example: To see how much profit is likely to be paid to them (1) out of the $100 000 profit from last year (app). Application might include: boats; 20 years’ experience; started own business 4 years ago; sole trader; sailing; 12 skilled employees; 2 brothers; 4 new employees; high quality; well-established brand; voted 3 rd best in the country; expand by selling in other countries; promotion in sailing magazines; information from Appendix 2 or Appendix 3. 4(b) Consider the opportunities and threats of globalisation for ES. Are the 12 threats likely to be greater than the opportunities for ES? Justify your answer. Level Description Marks 3 Sound application of knowledge and understanding of 9–12 relevant business concepts using appropriate terminology. Detailed discussion of both opportunities and threats. Well-justified conclusion. Candidates discussing both opportunities and threats in detail, in context and with a well-justified conclusion, including why the alternative 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 either opportunities or threats. Judgement with some justification / some evaluation of choice made. Candidates discussing opportunities and/or threats 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 opportunities and threats with little/no explanation. Simple judgement with limited justification / limited evaluation of choice made. Candidates outlining both the opportunities and threats in context should be rewarded with the top marks in the band. 0 No creditable response. 0 4(b) Relevant points might include: Opportunities • Can increase the number of markets ES operates in as Tim wants to start selling to customers in other countries - as now easier to communicate with buyers in other countries using social media - increases sales and revenue • Easier to export to other countries where tariffs and quotas have been removed – making ES boats more competitive with boat manufacturers in other countries • Easier to import products, such as component parts for boats, into country X – as likely to be no trade restrictions between countries - and may lead to lower unit costs – ES may become more competitive in country X and in other countries • May become cheaper to produce boats in another country in the future – where costs, such as labour, are lower than country X • Spreads risk • Economies of scale • Access to resources that it might not have otherwise • Access to new technologies Threats • Increasing imports of competitors’ boats into the home market from multinational companies – increases competition – sales from businesses based in other countries may reduce market share in country X • Lack of knowledge of new markets, competition and local tastes – may make it more difficult to successfully export into global markets • Increased investment from multinational companies in country X’s market - setting up factories making boats for the domestic market – may also lead to increased competition in country X • Employees may leave to go and work for the multinational companies setting up in the home market – increased wages and more opportunities may be attractive – higher labour turnover for ES - increased costs of recruitment and training for ES • Supply chain problems e.g. transport problems • Exchange rate fluctuations • Differences in legal controls e.g. labour laws, consumer laws 4(b) Conclusion Justification might include: • As ES will be new to selling to other countries, then it may find it difficult to compete with multinational businesses. Hence the threats from multinational businesses may be greater than the opportunities to sell boats in other countries for ES to increase revenue. This could lead to lower market share for ES overall and it may no longer be voted number 3 for being the best boat builder in country X. • There are more opportunities for ES from globalisation as it may benefit from lower unit costs for its boats if it uses cheaper imported components as there are now no tariffs, making it more competitive than many other businesses both in the home country and in markets in other countries as prices can be reduced. Therefore, the opportunities to expand and increase revenue are greater than the threats of increased competition.