Business 9609/12 February/March 2021: question paper and mark scheme

Mark scheme

1(a) Define the term ‘opportunity cost’. 2 • The benefit/value/potential gain of the next best option/thing given up/not chosen. (2) • Correct example. (2) • Occurs whenever a choice/decision is made/alternative chosen. (1) Full definition given (2 marks) Partial definition (1 mark) No creditable content (0 mark) 1(b) Explain two qualities an entrepreneur is likely to need for success. 3 Answers could include: • Innovative. • Passionate. • Committed. • Self-motivated. • Hard working. • Multiskilled. • Leadership/managerial skills. • Ability to motivate others. • Self-confidence. • Ability to bounce back. • Risk taker. Accept any other valid response. Developed explanation of two qualities an entrepreneur is likely to need for success. (3 marks) Developed explanation of one quality or partial explanation of two qualities an entrepreneur is likely to need for success. (2 marks) Partial explanation of one quality an entrepreneur is likely to need for success or a list of two qualities. (1 mark) No creditable content. (0 marks)

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2(a) Define the term ‘demand’. 2 • Quantity/amount of a product which customers are willing/able to buy (2) • Quantity/amount of a product bought from a business (1) • Quantity/amount of a product wanted by the market/customers/ consumers (1) • At a given price/in a specific time period (1) Full definition given (2 marks) Partial definition (1 mark) No creditable content (0 mark) 2(b) Explain two factors which might influence supply of a product. 3 Answers could include: • Price customers are willing to pay for the product. • Increase/decrease in profit margin. • Level of demand from customers. • Cost of production. • Taxes imposed on suppliers. • Subsidies paid by government to suppliers. • Level/efficiency of productivity. • Advances in technology/R&D. • Number of businesses in the market. • Availability of resources. • Weather/seasons/holidays/natural factors. • Ease of transport. • Amount of imports or exports of the product. Accept any other valid response. Developed explanation of two factors which might influence supply of a product. (3 marks) Developed explanation of one factor or partial explanation of two factors which might influence supply of a product. (2 marks) Partial explanation of one factor or a list of two factors which might influence supply of a product. (1 mark) No creditable content. (0 marks)

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3 Explain the effects on a business of having a high level of working 5 capital. Answers could include: • Working capital is current assets minus current liabilities. • Also called net current assets. • Capital needed to pay for raw materials, day-to-day running costs. • Ability to offer credit offered to customers. • Ability to offer more prompt payment to suppliers. • Is the lifeblood of the business, needed day-to-day. • Without enough working capital, the business will be illiquid/unable to pay debts. • Less reliance on overdrafts/short-term borrowing. • High level of working capital can be a disadvantage due to opportunity cost. • Too much capital tied up in inventories, payments receivable (goods sold on credit), idle cash. • Results in opportunity cost decisions. • (Money) could be used to make more money for the business. • Money could be used elsewhere e.g. invested on fixed assets. • There may be advantages and disadvantages for a business having a high level of working capital – it may not be high enough or it may be too high. Accept any other valid response. Effective explanation of the effects on a business of having a high level of working capital. (4–5 marks) Explanation of the effects on a business of having a high level of working capital. (2–3 marks) Descriptive information about working capital. (1 mark) No creditable content. (0 marks)

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4(a) Define the term ‘transformation process’. 2 • Changing/converting inputs/factors of production into outputs (2) • Changing/converting inputs/factors of production (1) • Producing outputs (1) • Process of adding value (1) Full definition given. (2 marks) Partial definition. (1 mark) No creditable content. (0 mark) 4(b) Explain two ways in which a business could improve its intellectual capital. 3 Answers could include: • Train existing workers to give them new skills/knowledge. • Recruit external employees with new/additional knowledge/experience. • Develop better information systems e.g. databases to more effectively manage (store and retrieve) data. • Increase R&D. • Gain patents, copyright, brand names and trademarks. • Improve links with suppliers. • Improve links with customers. Accept any other valid response. Developed explanation of two ways in which a business could improve its intellectual capital. (3 marks) Developed explanation of one way or partial explanation of two ways in which a business could improve its intellectual capital. (2 marks) Partial explanation of one way or a list of two ways in which a business could improve its intellectual capital. (1 mark) No creditable content. (0 marks)

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5(a) Analyse the benefits to a business of recruiting employees from outside 8 the business. Level Description Marks 4 Good analysis of the benefits to a business of recruiting 7–8 employees from outside the business. 3 Some analysis of the benefits to a business of recruiting 5–6 employees from outside the business. 2 Some application of the benefits to a business of 3–4 recruiting employees from outside the business. 1 Knowledge and understanding of employees/recruiting 1–2 from outside the business. 0 No creditable content. 0 Answers could include: Knowledge and Understanding 2 marks • Clear understanding of employees. • Clear understanding of recruiting from outside the business. Application 2 marks • Reference to the benefits of recruiting employees from outside the business/external recruitment. Analysis 4 marks • External recruits bring in new ideas and practices. • Increases intellectual capital of the business. • Keeps existing staff focussed on the future. • Encourages changes to existing methods and attitudes. • Wide choice of potential applicants. • Avoids resentment caused by seeing colleagues being promoted. • High standard of applicants. Accept any other valid response. 5(b) Discuss whether the use of Herzberg’s two factor theory could improve 12 employee motivation in a school. Level Description Marks 4 Effective evaluation of whether the use of Herzberg’s 9–12 two factor theory could improve employee motivation in a school. 3 Limited evaluation of whether the use of Herzberg’s two 7–8 factor theory could improve employee motivation in a school. 2 Some analysis and application of the use of Herzberg’s 3–6 two factor theory to improve employee motivation in a school. 1 Knowledge and understanding of Herzberg’s two factor 1–2 theory/motivation. 0 No creditable content 0 Answers could include: Knowledge and Understanding 2 marks • Clear understanding of Herzberg’s two factor theory. • Clear understanding of motivation. Application 2 marks • Reference to the use of Herzberg’s two factor theory in a business. • Reference to improving employee motivation in a school. Analysis 2 marks • How the use of specific hygiene factors (pay, working conditions, status, policy and administration, over-supervision, relationships) can improve employee motivation in a business. • How the use of specific motivating factors (achievement, recognition, interesting work, meaningful work, advancement/promotion) can improve employee motivation in a business. 5(b) Evaluation 6 marks • A judgement/conclusion is made as to whether the use of Herzberg’s two factor theory could improve employee motivation in a school. • These judgements/conclusions may be made at any point in the essay not only in a concluding section. • Evaluation might recognise that motivation could be achieved more effectively by using other theories of motivation. • Some of these theories overlap to some extent with Herzberg’s two factor theory, particularly Maslow’s hierarchy of needs. • Evaluation might recognise that it is not only the use of Herzberg’s two factor theory but improving motivation by meeting the appropriate needs of different types of employee. • Employees could be working purely for the money i.e. Taylor and therefore only the hygiene factors will apply. If these are acceptable to the worker, they will remain in the job but may not be motivated. Does this matter? • Reference could be made to the cost of methods of motivation and whether non-financial methods may be the only viable option. • The context is schools. There should be specific reference to schools, e.g. teachers, classrooms, head teacher/principal, pupils/students, admin/cleaning staff. • What motivates an employee might depend on their role in the school e.g. principal, teacher, cleaner, caretaker. • Evaluation may compare the relative effectiveness of different types of motivation and under what circumstances one method may be better than another e.g. a failing school, successful school, new school, free or fee-paying school, schools in different countries. • Strong answers may refer to the dynamic environment within many schools and that there may be more emphasis on the performance, efficiency and accountability of human resources rather than their job satisfaction. Accept any other valid response.

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6 A furniture manufacturer is planning to introduce CAD and CAM into the 20 production process. Discuss the extent to which this could make the business more competitive? Level Description Marks 5 Effective evaluation of the extent to which the 17–20 introduction of CAD and CAM into the production process could make a furniture manufacturer more competitive. 4 Limited evaluation of the extent to which the 15–16 introduction of CAD and CAM into the production process could make a business more competitive. 3 Analysis of whether the introduction of CAD and CAM 11–14 could make a business/manufacturer more competitive. 2 Limited analysis, with application, of whether the 5–10 introduction of CAD and/or CAM could make a business more competitive. 1 Knowledge and understanding of CAD / CAM / 1–4 production process / being competitive. 0 No creditable content. 0 Answers could include: Knowledge and Understanding 4 marks • Clear understanding of CAD. • Clear understanding of CAM. • Clear understanding of production process. • Clear understanding of being competitive. 6 Application 4 marks • Reference to whether the introduction of CAD could make a manufacturer more competitive (product designs, computer animation, special effect in movies, graphic design). • Reference to whether the introduction of CAM could make a manufacturer more competitive (automated production, use of robots, programming machines). Analysis 6 marks • The benefits of reduced costs, increased productivity, improved quality, good visualisation, accuracy, easy to re-use, precise manufacturing, faster production, faster lead time, more flexible, more design variants, increased customisation, technical economies of scale. • The disadvantages of complexity of programmes, need for worker training, recruitment of specialist employees, cost of hardware, cost of programmes, processing power required, hardware or software failure, repairs/maintenance, complex and time-consuming to resolve, obsolete/regular updates needed, quality assurance still needed. Evaluation 6 marks • A judgement/conclusion is made as to the extent to which the introduction of CAD and CAM into the production process could make a furniture manufacturer more competitive. • These judgements/conclusions may be made at any point in the essay not only in a concluding section. • Consideration of the significance of the size of the business. A small business may not be able to afford the technology. • Balance between short-term and long-term considerations. • Consideration of whether the opportunity cost of introducing the technology is too high. • Are there other factors which are more important than introducing CAD and CAM to make the manufacturer more competitive: - buying cheaper materials or otherwise adding value; - changing the marketing mix in such a way as to make the manufacturer and its products better than its rivals and therefore more likely to be bought. • Competitiveness will depend on the market and preferences of consumers. Some may prefer hand crafted, unique designs. • For a large furniture manufacturer which is designing many different items of furniture and trying to achieve mass customisation, the use of CAD and CAM may be essential and cost effective. • Much may depend on the type of furniture being manufactured. Simple, standard designs are unlikely to need CAD or CAM. Accept any other valid response.

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7(a) Analyse why a business might invest in market research. 8 Level Description Marks 4 Good analysis of why a business might invest in market 7–8 research. 3 Some analysis of why a business might invest in market 5–6 research. 2 Some application of why a business might invest in 3–4 market research. 1 Knowledge and understanding of market research/ 1–2 investment (in market research). 0 No creditable content. 0 Answers could include: Knowledge and Understanding 2 marks • Clear understanding of market research. • Clear understanding of investment (in market research). Application 2 marks • Reference to why a business might invest in market research. Analysis 4 marks • To reduce the risks associated with a new product launch. • Enable a suitable marketing mix to be developed. • Explain changes in sales of existing products. • Identify patterns in sales/trends of existing products. • Gain awareness of consumer preferences. • Identify gaps in the market. • Assess demand levels in the market. • Assess supply levels in the market. • Identify key conditions in the external environment. • Understand strengths and weaknesses of competitors. • Gain higher market share. Accept any other valid response. 7(b) Discuss whether an airline business might increase its profits by more 12 effective market segmentation? Level Description Marks 4 Effective evaluation of whether an airline business 9–12 might increase its profits by more effective market segmentation. 3 Limited evaluation of whether a business might 7–8 increase its profits by more effective market segmentation. 2 Application and analysis of how a business might 3–6 increase its profits by using market segmentation. 1 Knowledge and understanding of profits / market 1–2 segmentation / airline business. 0 No creditable content. 0 Answers could include: Knowledge and Understanding 2 marks • Clear understanding of profits. • Clear understanding of market segmentation. • Clear understanding of airline businesses. Application 2 marks • Reference to increasing profits. • Reference to using market segmentation. Analysis 2 marks • How segmentation helps to identify sub-groups in a market. • How segmentation can allow targeted marketing campaigns. • How the use of effective market segmentation might improve quantity of sales and/or revenue. • Use of price differentiation. • How the business might use segmentation to identify opportunities for growth. • How a business might increase its profits by effective market segmentation. • Use of specific examples of market segmentation which could apply to any business e.g. type of consumers / age / family grouping / income / social class / niche market / mass market. 7(b) Evaluation 6 marks • A judgement/conclusion is made as to whether an airline business might increase its profits by more effective market segmentation. • These judgements/conclusions may be made at any point in the essay not only in a concluding section. • There may be consideration of the current market segmentation compared to what needs to be done to make it more effective. • Whether the current profitability may be influenced by factors other than market segmentation e.g. external environment. • Whether changing the market segmentation may involve extra costs of market research without being able to influence profitability. • Evaluation might recognise that it depends on how important the objective of profit is to the business. • The context is an airline business There should be specific reference to airlines e.g. planes / internal and international passengers / destination / business or economy class / facilities/extras required / pilots / fuel / frequency of travel. • Is it aiming to maximise sales by selling as many tickets as possible to whoever will buy them? This might target the mass market which can be highly competitive. This may involve reducing prices without decreasing costs, which may decrease profits. • Is it aiming to increase sales revenue to increase profitability? It may wish to enter wealthy niche markets in order to charge high prices whilst not increasing costs. What is the competition like in these markets? • Is it aiming to increase capacity utilisation to fill seats and better cover fixed costs? This might lead to economies of scale and therefore increase profits. • Is it aiming to increase journeys/destinations? How will the costs involved in this compare with the revenue change? • The ability to improve profits may depend on the reputation and current popularity of the airline and how competitive the industry is. • There may be differences in PED between different operators, market segments and destinations and this can influence profits due to the prices which can be charged. • Will depend on the accuracy of the research which identifies the market segments. Accept any other valid response.