Business 9609/12 February/March 2022: question paper and mark scheme

Mark scheme

1(a) Define the term ‘marginal cost’. 2 The extra cost of producing one more unit of output (2). Change in total cost of output Formula (2). Change in quantity of output Cost of making more products (1). Producing one more product / unit of output (1). Extra variable costs (1). Sound definition 2 of the factors listed above (2 marks) Partial definition 1 of the factors listed above (1 mark) No creditable content. (0 marks) 1(b) Explain two uses of break-even analysis. 3 Answers could include: • Identify the effect of changes in the fixed or variable costs and revenues. • Identify how changing circumstances will affect the break-even point and margin of safety to decide whether this is acceptable. • Explore different scenarios using amended costs and revenues • Deciding whether to launch a new product. • Marketing decision – impact of a price increase. • Operations management decision – purchase of new equipment with lower variable costs. • Choosing between two locations for a new factory. Accept any other valid response. Sound explanation of two uses of break-even analysis. (3 marks) Sound explanation of one use or partial explanation of two uses of break- even analysis. (2 marks) Partial explanation of one use of break-even analysis, or a list of two uses. (1 mark) No creditable content. (0 marks)

Mark scheme

2(a) Define the term ‘commission’. 2 A payment to a salesperson for each sale made (2). Payment used for salespeople / to pay people who sell products (1). A payment method (1). Can be an extra payment over basic salary (1). Paying employees who sell things (1). Sound definition 2 of the factors listed above (2 marks) Partial definition 1 of the factors listed above (1 mark) No creditable content. (0 marks) 2(b) Explain two disadvantages to a business of using empowerment to 3 motivate its employees. Answers could include: • Employees not capable of taking control over their work. • Empowerment/training and development makes employees attractive to other businesses (poaching). • Employees prefer other methods of motivation. • Managers need to keep control over production. • Employees are unskilled. • Managers are Theory X not Theory Y. Accept any other valid response. Sound explanation of two disadvantages to a business of using empowerment to motivate its employees. (3 marks) Sound explanation of one disadvantage or partial explanation of two disadvantages to a business of using empowerment to motivate its employees. (2 marks) Partial explanation of one disadvantage to a business of using empowerment to motivate its employees, or a list of two disadvantages. (1 mark) No creditable content. (0 marks)

Mark scheme

3 Explain the problems a sole trader might have if they change the legal 5 structure to a partnership. Answers may include: • A sole trader would lose total control of the business as would have to share ownership with the other partners. This would affect the way the business operates. • A Deed of Partnership should be produced. If not, there may be issues later with sharing of responsibility / workload, role allocation, division of costs and profits etc. • Some partners can damage the reputation of the business by their actions. • The partners may have different ideas about how to run the business. • Conflict may arise between the different partners due to different objectives or idea of importance within the business. • There may be problems when one partner wants to leave or dies. Accept any other valid response. Effective explanation with specific example(s) of the problems a sole trader might have if they change the legal structure to a partnership. (4–5 marks) Limited explanation of the problems a sole trader might have if they change the legal structure to a partnership. (2–3 marks) Explanation of a sole trader and/or a partnership. (1 mark) No creditable content. (0 marks)

Mark scheme

4(a) Define the term ‘customer (market) orientation’. 2 An outward looking approach (1). Led by the market (1). Basing product decisions on customer demand (1). Using the findings of market research (1). Producing what the customer / market wants (1). Putting the consumer first (1). Sound definition 2 of the factors listed above (2 marks) Partial definition 1 of the factors listed above (1 mark) No creditable content. (0 marks) 4(b) Explain two limitations to a business of using market segmentation. 3 Answers could include: • Cost taken to research the needs of the different segments. • Time taken to research the needs of the different segments. • Cost of research and development to adapt the product to different market segments. • Additional cost of changes to production to meet the needs of different segments. • Focus on one or two limited market segments may result in problems if consumers in that segment change their buying habits. • Promotion costs may be high as different types of promotions might be needed for different segments. • Marketing economies of scale may not be possible. • Production and inventory management costs may be higher than those for producing one type of product. Accept any other valid response. Sound explanation of two limitations to a business of using market segmentation. (3 marks) Sound explanation of one limitation or partial explanation of two limitations to a business of using market segmentation. (2 marks) Partial explanation of one limitation to a business of using market segmentation, or a list of two limitations. (1 mark) No creditable content. (0 marks)

Mark scheme

5(a) Analyse the benefits of using internal sources of finance for business 8 growth. Level Description Marks Good analysis of the benefits of using internal 4 7–8 sources of finance for business growth. Limited analysis of the benefits of using internal 3 5–6 sources of finance for business growth. Application of the benefits of using internal sources 2 3–4 of finance for business growth. Knowledge and understanding of internal sources of 1 1–2 finance / growth of a business. 0 No creditable content. 0 Answers may include: Knowledge and Understanding 2 marks • Clear understanding of internal sources of finance. • Clear understanding of growth of a business. Application 2 marks • Reference to the use of internal sources of finance. – Retained earnings – Sale of unwanted assets – Sale and leaseback of non-current assets – Working capital • Reference to growth of a business: – having more machinery – having more workers – making more products – having more customers – selling more products – increasing product portfolio – having larger / more premises Analysis 4 marks • The benefits and limitations of different sources of internal finance. • Interest saved. • No need to take out loans. • Flexibility of using internal sources. • Ready availability of internal sources. • Less risky than using external finance. • The use of different sources of finance for particular types of growth. Accept any other valid response. good measure of the performance of the business. Level Description Marks 4 accounts of a (luxury) hotel provide a good measure 9–12 of the performance of the business. 3 accounts of a (luxury) hotel provide a good measure 7–8 of the performance of the business. 2 accounts of a business provide a good measure of 3–6 the performance of the business. 1 1–2 / performance of a business / (luxury) hotel. 0 No creditable content 0 Answers may include: Knowledge and Understanding 2 marks • Clear understanding of performance of a business • Clear understanding of (luxury) hotel Application 2 marks • Reference to the performance of a business Analysis 2 marks • Analysis of ways of measuring the performance of a business. performance of a business. accounts. • Limitations of quantitative measures of performance. • Potential importance of qualitative measures of performance. 5(b) Evaluation 6 marks • A candidate may make a judgement/conclusion as to whether the performance of the business. • These judgements/conclusions may be made at any point in the essay as well as in a concluding section • The context is a (luxury) hotel • Reference to a hotel e.g. rooms, guests, holidays, business travellers, facilities (meals etc). performance of the business. accounts. depending on which stakeholders of the business are using them. • Evaluation of whether other measures provide a more appropriate measure of the performance of the business. Eg quality of service, comments on feedback questionnaires, reviews on forums, return customers. • Reference could be made to the level of competition in this market. • Strong answers may refer to the target market of luxury hotels and that their performance is measured differently to more basic or standardised hotels. Accept any other valid response.

Mark scheme

6 ‘The most effective way for a loss-making retail clothing business to 20 survive is to change the price element of its marketing mix.’ Discuss whether you agree with this statement. Level Description Marks Effective evaluation of the statement that “The most effective way for a loss-making retail clothing 5 17–20 business to survive is to change the price element its marketing mix.” Limited evaluation of the statement that “The most effective way for a loss-making retail clothing 4 15–16 business to survive is to change the price element its marketing mix.” Good analysis of the statement that “The most effective way for a loss-making retail business to 3 11–14 survive is to change the price element its marketing mix.” Limited analysis with application of the statement 2 that “The most effective way for a (loss-making) 5–10 business to survive is to change its marketing mix.” Knowledge and understanding of a loss-making 1 business / (clothing) retail business / business 1–4 survival / marketing mix. 0 No creditable content. 0 Answers could include: Knowledge and Understanding 4 marks • Clear understanding of a loss-making business. • Clear understanding of a retail business. • Clear understanding of a business survival. • Clear understanding of a marketing mix. Application 4 marks • Reference to ways that a loss-making / retail / clothing business. • Reference to ways that a business can change its marketing mix. Analysis 6 marks • Analysis of advantages / disadvantages of changing elements of the marketing mix including pricing. • Analysis of advantages / disadvantages of ways that a (loss-making) business can survive. • Analysis of why it might be difficult to survive in a retail (clothing) market. • Analysis of the marketing mix that is used in the retail (clothing) market. 6 Evaluation 6 marks • A candidate may make a judgement/conclusion as to whether ‘The most effective way for a loss-making retail clothing business to survive is to change the price element its marketing mix.’ • These judgements/conclusions may be made at any point in the essay as well as in a concluding section • The context is a loss-making retail clothing business. • Reference to retail clothing businesses e.g. GAP, H&M, Next, ASOS. • Evaluation of reasons why it might be difficult to survive in the retail clothing market. • Evaluation of the marketing mix that is used in the retail clothing market. • Consideration of the level of competition within the retail clothing market and the market share of the top retailers, which will affect survival of different businesses. • Consideration of how important different elements of the marketing mix are to the consumers in this market and therefore which elements may be the most effective to change. • Consideration of the ease and ability of the loss-making business to change its marketing mix. • Whether there are short / long term effects of changing the marketing mix which need to be considered by the loss-making business. Accept any other valid response.

Mark scheme

7(a) Analyse factors that might determine the relocation of a business. 8 Level Description Marks Good analysis of factors that might determine the 4 7–8 relocation of a business. Limited analysis of factors that might determine the 3 5–6 relocation of a business. Application of factors that might determine the 2 3–4 relocation of a business. Knowledge and understanding of relocation of a 1 1–2 business. 0 No creditable content. 0 Answers may include: Knowledge and Understanding 2 marks • Clear understanding of relocation of a business. Application 2 marks • Factors that might cause relocation of a business. Analysis 4 marks Factors that might determine the relocation of a business: • Geographic – climatic or physical conditions e.g. volcanic eruption, flooding. Consideration of CSR / environmental effects. Room for expansion. • Demographic – changing population structure. Target market no longer exists in the original location, consumer attitudes to actions of the business. • Legal – import and export taxes and quotas make it appropriate to move operations to a different country. Planning restrictions. • Political – changes in political landscape make existence in original country impossible e.g. lack of democracy, change in attitudes of government to certain types of business, change to a planned economy. • Resources – closer to inputs, labour etc to reduce production costs, change in available resources in the current location. • Infrastructure – better infrastructure appropriate to the business to reduce transport costs or provide better communication. • Marketing – the effect of ecommerce so a physical location unnecessary. Accept any other valid response. 7(b) Discuss whether flexibility of operations might improve the sales of a 12 toy manufacturing business. Level Description Marks Effective evaluation of whether flexibility of 4 operations might improve the sales of a toy 9–12 manufacturing business. Limited evaluation of whether flexibility of operations 3 might improve the sales of a toy manufacturing 7–8 business. Application and analysis of whether flexibility of 2 operations might improve the sales of a 3–6 (toy/manufacturing) business. Knowledge and understanding of flexibility / 1 1–2 operations / sales / manufacturing. 0 No creditable content. 0 Answers could include: Knowledge and Understanding 2 marks • Clear understanding of flexibility. • Clear understanding of operations. • Clear understanding of sales. • Clear understanding of manufacturing. Application 2 marks • How flexibility of operations might improve the sales of a business. • How flexibility of operations might improve a manufacturing business. • Reference to toy manufacturing business. Analysis 2 marks • Advantages and disadvantages of different types of flexibility of operations of a business e.g. ability to change levels of production, increased capacity, hold high stocks, adaptable workforce, range of products, reaction to consumer demand, use of automation, robotics, flow production, mass customisation. • Analysis of how flexibility of operations might improve the sales of a (toy manufacturing) business. • Advantages and disadvantages of methods of improving sales of a business e.g. promotion, reduced price, improved product, quality, customer service. • Reference to toys e.g. dolls, cars, construction, farm animals, puzzles, etc. • Reference to toy manufacturers e.g. Mattel, Hasbro Fisher-Price, Lego. 7(b) Evaluation 6 marks • A candidate may make a judgement/conclusion as to whether flexibility of operations might improve the sales of a toy manufacturing business. • These judgements/conclusions may be made at any point in the essay as well as in a concluding section • The context is a toy manufacturing business. • There are many opportunities to improve the operational flexibility and this will depend on the type of toy, the size of the business, the demands of the consumer, the size of the market. • Discussion of the relative importance of flexibility of operations to improving sales. • The extent to which other methods of improving sales may be more effective e.g. marketing. • The extent to which flexibility of operations may be the key to developing a competitive advantage in the competitive toy manufacturing industry. • The extent to which the cost of implementing flexibility of operations is balanced by the improvement in sales of the business. • Recognition that flexibility of operations can lead to significant cost reductions and improvements in operational efficiency, however this may not have any effect on the consumers and their willingness to buy the product. Accept any other valid response.