Business 9609/12 February/March 2023: question paper and mark scheme

Mark scheme

1(a) Define the term opportunity cost. 2 AO1 Knowledge and understanding Marks Knowledge of the term that demonstrates a clear understanding of the term. 2 Knowledge of the term that demonstrates a partial understanding of the term. 1 No creditable response. 0 Indicative content Responses may include: AO1 Knowledge and understanding • Benefits lost / costs incurred when making a choice between options (clear definition) • Choice of one option over another (partial definition) Accept all valid responses. 1(b) Explain one quality an entrepreneur needs for business success. 3 AO1 Knowledge and understanding AO2 Application 1 mark 2 marks 2 marks Developed application of one relevant point to a business context. 1 mark 1 mark Knowledge of one relevant point is used to answer the Limited application of one relevant point to a business question. context. 0 marks 0 marks No creditable response. No creditable response. Indicative content Responses may include: AO1 Knowledge and understanding • Clear understanding of quality(ies) of a successful entrepreneur. • Risk taker • Creativity • Innovation • Commitment • Self-motivated • Multi-skilled • Self-confidence • Lead and manage • Ability to bounce back 1(b) AO2 Application • Developed application of one entrepreneur quality to business context: risk taker – prepared to take chances in business – uses own money to start the business. • Limited application of one entrepreneur quality to business context: innovation – identifies new ideas/products. Accept all valid responses.

Mark scheme

2(a) Define the term product life cycle. 2 AO1 Knowledge and understanding Knowledge of the term that demonstrates a clear understanding of the term. 2 Knowledge of the term that demonstrates a partial understanding of the term. 1 No creditable response. 0 Indicative content Responses may include: AO1 Knowledge and understanding • Stages a product goes through from initial design to removal from the market (clear definition) • The life of a product/the stages set out (partial definition). Accept all valid responses. 2(b) Explain one way a business could extend the life of a product 3 AO1 Knowledge and understanding AO2 Application 1 mark 2 marks 2 marks Developed application of one relevant point to a business context. 1 mark 1 mark Knowledge of one relevant point is used to answer the Limited application of one relevant point to a business question. context. 0 marks 0 marks No creditable response. No creditable response. Indicative content Responses may include: AO1 Knowledge and understanding • One way to extend the life of the product e.g. reduce price, more advertising. AO2 Application • Developed application of one way to extend – reduce product price to attract customers and gain more sales • Limited application of one way – more advertising to attract customers Accept all valid responses.

Mark scheme

3(a) Define the term induction training. 2 AO1 Knowledge and understanding Knowledge of the term that demonstrates a clear understanding of the term. 2 Knowledge of the term that demonstrates a partial understanding of the term. 1 No creditable response. 0 Indicative content Responses may include: AO1 Knowledge and understanding • Training given to new employees – business systems and business layout etc (clear definition) • Training given to new employees (partial definition) Accept all valid responses. 3(b) Explain one benefit to a business of training its employees. 3 AO1 Knowledge and understanding AO2 Application 1 mark 2 marks 2 marks Developed application of one relevant point to a business context. 1 mark 1 mark Knowledge of one relevant point is used to answer the Limited application of one relevant point to a business question. context. 0 marks 0 marks No creditable response. No creditable response. Indicative content Responses may include: AO1 Knowledge and understanding • Clear understanding of one business benefit – allows specialisation. AO2 Application • Developed application of one business benefit of employee training e.g. skilled employees more efficient so reduced errors. • Limited application of one business benefit of employee training – e.g. increases motivation and reduces staff turnover. Accept all valid responses.

Mark scheme

4 Analyse one way a business might raise productivity levels. 5 Level AO1 Knowledge and AO2 Application AO3 Analysis understanding 2 marks 2 marks 1 mark 2 2 marks 2 marks Developed application of one Developed analysis that identifies relevant point to a business connections between causes, context. impacts and/or consequences of one relevant point. 1 1 mark 1 mark 1 mark Knowledge of one relevant point is Limited application of one relevant Limited analysis that identifies used to answer the question. point to a business context. connections between causes, impacts and/or consequences of one relevant point. 0 0 marks 0 marks 0 marks No creditable response. No creditable response. No creditable response. Indicative content Responses may include: AO1 Knowledge and understanding • Knowledge of productivity levels – ratio of outputs to inputs during production OR ways to improve productivity levels e.g. capital investment, training, etc. AO2 Application • Developed application of ways to improve productivity levels in a business context - . • Limited application of ways to improve productivity levels in a business context - . 4 AO3 Analysis • Developed analysis of one chosen way - how increased training can increase confidence/interest of employees leading to enhanced worker productivity and performance. • Limited analysis of one chosen way - how raising the skill levels of employees may improve efficiency and productivity. Accept all valid responses.

Mark scheme

5(a) Analyse two ways in which accurate cost information can be used to improve business performance. 8 Level AO1 Knowledge and AO2 Application AO3 Analysis understanding 2 marks 4 marks 2 marks 2 3–4 marks Developed analysis • Developed analysis that identifies connections between causes, impacts and/or consequences of two points. • Developed analysis that identifies connections between causes, impacts and/or consequences of one point. 1 1–2 marks 1–2 marks 1–2 marks • Knowledge of two relevant • Application of two relevant Limited analysis points is used to answer the points to a business context. • Limited analysis that identifies question. • Application of one relevant connections between causes, • Knowledge of one relevant point to a business context. impacts and/or consequences point is used to answer the of two points. question. • Limited analysis that identifies connections between causes, impacts and/or consequences of one point. 0 0 marks 0 marks 0 marks No creditable response. No creditable response. No creditable response. 5(a) Indicative content Responses may include: AO1 Knowledge and understanding • Knowledge of accurate cost information / improved business performance OR knowledge of ways to improve business performance e.g. price setting, setting budgets, cost cutting strategies, construct CFF, record keeping/attracting investors in a business/cash flow AO2 Application • Accurate cost information applied to a business context e.g. price setting / setting budgets / cost cutting strategies / construct CFF / record keeping / attracting investors in a business. AO3 Analysis • Accurate information about business costs is vital for a number of key decisions – without it a business will likely fail. • Cost information relating to pricing, budgets, objectives, profitability and competitors is essential for management monitoring and control • Benchmark cost levels can be set – used to compare comparative performance internally and with competitors externally. • Cost reduction strategies can be developed – requires accurate information to be effective. • Cost information can be used to identify significant areas and factors for attention – allows focussed analysis on organisation sections. • Assets on the balance sheet need to be accurately valued on the balance sheet – the cost basis of inventory might signal change required • Business performance requires optimal choices – these alternatives depend heavily on cost factors • Competitive edge requires regular monitoring of financial performance – accurate cost data is fundamental to many financial metrics that need tracking – e.g. profit margins • Cost information is fundamental to business questions such as – what are the most and least profitable areas of the business? • Accurate cost information leads to effective cost controls – produces an ability to check if the business is functioning in compliance with the budget • Accurate cost control information is the mechanism for effective monitoring of performance – and improvement of its operations Accept all valid responses. 5(b) Evaluate whether cash flow forecasting is the most important activity for a new restaurant to succeed. 12 Level AO1 Knowledge and AO2 Application AO3 Analysis AO4 Evaluation understanding 2 marks 2 marks 6 marks 2 marks 3 5–6 marks Developed evaluation in context • A developed judgement/conclusio n is made in the business context. • Developed evaluative comments which balance some key arguments in the business context. 2 2 marks 2 marks 2 marks 3–4 marks Developed knowledge Developed application Developed analysis Developed evaluation of relevant key term(s) of relevant point(s) to the that identifies • A developed and/or factor(s) is used business context. connections between judgement/ to answer the question. causes, impacts and/or conclusion is made. consequences. • Developed evaluative comments which balance some key arguments. 5(b) Level AO1 Knowledge and AO2 Application AO3 Analysis AO4 Evaluation understanding 2 marks 2 marks 6 marks 2 marks 1 1 mark 1 mark 1 mark 1–2 marks Limited knowledge Limited application Limited analysis Limited evaluation of relevant key term(s) of relevant point(s) to the that identifies • A judgement/ and/or factor(s) is used business context. connections between conclusion is made to answer the question. causes, impacts and/or with limited consequences. supporting comment/evidence. • An attempt is made to balance the arguments. 0 0 marks 0 marks 0 marks 0 marks No creditable response. No creditable response. No creditable response. No creditable response. Indicative content Responses may include: AO1 Knowledge and understanding • Developed knowledge of CFF /new restaurant / success - . • Limited knowledge of CFF / new restaurant / success - . AO2 Application • Developed application of CFF to context of a restaurant business - . • Limited application of CFF to context of a restaurant business - . 5(b) AO3 Analysis • A business may run out of cash – cannot pay suppliers or wages – it may face insolvency-cash flow forecast may be the vital missing measure of control/discipline • CFF enables a business to track expected cash movements over a period of time in the future – and take appropriate action • CFF provides an early warning system for future shortfalls in cash balances in the future – allows a business to take informed business decisions, e.g. overdraft provision or short-term loan • CFF assists effective cash flow management – provides greater certainty for internal and external stakeholders • CFF is a strategic tool – it informs business plans for survival and growth • Cash is the lifeblood of new and small businesses, so it is essential that forecasts are made about future cash flows – to make sure a business has enough to survive • External stakeholders, such as banks, may want to look at CFF at regular intervals – to make judgements about the viability of a business AO4 Evaluation The following examples illustrate how the levels and marks within the levels are applied. The annotation is shown in bold. Developed evaluative comments might include – • Without effective CFF, cash problems will not be identified. It is crucial that businesses have financial stability in the short and the long term. • As well as CFF, promotion/marketing is also very important. Business success is unlikely to be achieved if the business is not made attractive to potential customers through effective operation of the 4P’s e.g. competitive pricing. • Without an effective recruitment and selection process that produces appropriately experienced and skilled employees, a business is unlikely to achieve lasting success. This HRM activity is crucial for business success.’ (EVAL L2 3 marks) Only developed evaluative comments applied directly to the context of a restaurant to move into (EVAL L3 5 marks). Developed judgement – example - CFF is very important, as analysed above, because a business is at risk without sufficient cash controls, however, CFF is not the most important activity. Cash control will not necessarily guarantee product quality, customer satisfaction and loyalty. CFF is an essential activity but others such as marketing and appropriately skilled employees are all essential in their own way and as important as CFF. Activities other than CFF are crucial to business success, but unless they are combined with CFF, success is unlikely to be achieved and the business might even fail. (EVAL L2 4 marks) Only a developed judgement applied directly to the context of a restaurant can move into EVAL L3. 5(b) Limited evaluation (EVAL L1 1 mark) • What does success mean for a new restaurant – survival in the short term / large profits in the long term • Are there other activities as important, or more important, that might affect a restaurant’s ability to succeed, such as – perception of the quality of the food/menu – location – reputation of chef – ambience created – strength/weakness of the economy – amount of discretionary/disposable income? • How significant is cash control and CFF for a new business such as a new restaurant? Example of limited evaluation (EVAL L1 2 marks) CFF is more important than any other business activity to lead to success. It supports all other activities a business carries out such as marketing. Accept all valid responses.

Mark scheme

6(a) Analyse two reasons why changing a business`s objectives might affect its shareholders. 8 Level AO1 Knowledge and AO2 Application AO3 Analysis understanding 2 marks 4 marks 2 marks 2 3–4 marks Developed analysis • Developed analysis that identifies connections between causes, impacts and/or consequences of two points. • Developed analysis that identifies connections between causes, impacts and/or consequences of one point. 1 1–2 marks 1–2 marks 1–2 marks • Knowledge of two relevant • Application of two relevant Limited analysis points is used to answer the points to a business context. • Limited analysis that identifies question. • Application of one relevant connections between causes, • Knowledge of one relevant point to a business context. impacts and/or consequences point is used to answer the of two points. question. • Limited analysis that identifies connections between causes, impacts and/or consequences of one point. 0 0 marks 0 marks 0 marks No creditable response. No creditable response. No creditable response. 6(a) It is acceptable for candidates to answer this question by using ONE changed objective that causes TWO different effects on shareholders. Indicative content Responses may include: AO1 Knowledge and understanding • Knowledge of objectives/shareholders. • Reasons why objectives might change e.g. survival to growth, profit making to social responsibility. AO2 Application • Changed business objectives applied to shareholders - . AO3 Analysis • Changes may be agreed by some shareholders but not supported by others – leading to conflict and division • Different shareholders have their own personal interests – they will try to protect those interests • Some shareholders may see CSR as detrimental to profit making – raise issue at AGM • Shareholders may see a movement away from economic objectives towards social or human objectives as undermining the very purpose of the business – to make profit Accept all valid responses. 6(b) ‘The main reason why many niche cake manufacturing businesses fail is that they grow too quickly’. Evaluate this 12 view. Level AO1 Knowledge and AO2 Application AO3 Analysis AO4 Evaluation understanding 2 marks 2 marks 6 marks 2 marks 3 5–6 marks Developed evaluation in context • A developed judgement/conclusio n is made in the business context. • Developed evaluative comments which balance some key arguments in the business context. 2 2 marks 2 marks 2 marks 3–4 marks Developed knowledge Developed application Developed analysis Developed evaluation of relevant key term(s) of relevant point(s) to the that identifies • A developed and/or factor(s) is used business context. connections between judgement/conclusio to answer the question. causes, impacts and/or n is made. consequences. • Developed evaluative comments which balance some key arguments. 6(b) Level AO1 Knowledge and AO2 Application AO3 Analysis AO4 Evaluation understanding 2 marks 2 marks 6 marks 2 marks 1 1 mark 1 mark 1 mark 1–2 marks Limited knowledge Limited application Limited analysis Limited evaluation of relevant key term(s) of relevant point(s) to the that identifies • A judgement/ and/or factor(s) is used business context. connections between conclusion is made to answer the question. causes, impacts and/or with limited consequences. supporting comment/evidence. • An attempt is made to balance the arguments. 0 0 marks 0 marks 0 marks 0 marks No creditable response. No creditable response. No creditable response. No creditable response. Indicative content Responses may include: AO1 Knowledge and understanding • Knowledge of business failure/growth / niche/manufacturing businesses. AO2 Application • Developed application of business failure/growth to a niche cake manufacturing business - . • Limited application of business failure/growth to a niche cake manufacturing business - . 6(b) AO3 Analysis • Fast growth can mean a business loses focus on essential functions and take too many risks – e.g. product diversification • Fast growth can lead to significantly increased demands on employees and especially managers- stress, fatigue, burn out • Inferior service may result in lower levels of customer satisfaction as attempt is made to produce more • Output demands may outpace capability • A business might accept new clients without resources to meet the demand • A business might launch a new product with inadequate research and development – not ready for market • A business might expand into unfamiliar/ fragile markets and territories – suffer significant losses • A business might fail to account for and control overhead costs – that increase disproportionately in relation to growth • Too fast growth can result in cash shortages and/or long-term damage to the brand and customer relations of a business AO4 Evaluation The following examples illustrate how the levels and marks within levels are applied. The annotations are shown in bold. Developed evaluative comments (EVAL L2 3 marks) • Growth that is too quick is likely to undermine the success of any business, particularly if the managers are not skilled enough to see that fast growth places enormous pressure on some aspects of the business, such as cash flow. • Businesses that grow very quickly may assume that profit-making in the short term means success, but if the quality of the products deteriorates due to unskilled workers the long term viability of the business is not guaranteed and the business might fail as quickly as it grows. • Without effective marketing and quality control and a recognition of the threat of competitive ‘copy-cats’ a business may be quickly undermined and fail.’ Only developed evaluative comments applied directly to the context of a niche cake manufacturing business can move to EVAL L3 5 marks. 6(b) Example of developed judgement (EVAL L2 4 marks) There are many other reasons why a business might fail (already discussed) but none of those are more important than the ability to manage the growth of the business. Many businesses lack the skills to meet the demands made as a business grows quickly, such as the control of cash flows and the hiring of an appropriate number of skilled employees. Fast growth may mean that a business is still making profits, but losing control of costs and employees, and/or managers that may not have the time or ability to recognise that lack of control, is the most important factor in the failure of a new business. Only developed judgement applied directly to the context of a niche cake manufacturing business can move to EVAL L3 6 marks. Limited evaluation (EVAL L1) • Growth alone is not sufficient to sustain a business – stability and controlled growth are required • Are there some recognisable risks associated with fast growth of a niche cake manufacturing business that can lead to business failure? • Are there some specific characteristics of a niche cake manufacturing business that are likely to lead to failure? • Does failure depend on whether the business is new or established? • Niche cake manufacturing businesses are often single product businesses (e.g. cupcakes) – which are often fashionable/trendy but high risk – is this the reason for failure rather than fast growth? • Are there other factors/risks (some closely associated with fast growth) such as poor management, level of competition, poor decision-making, poor marketing and cash control, lack of innovation/creativity that can explain business failure of a niche cake manufacturing business? Accept all valid responses. Example of limited evaluation (EVAL L1 2 marks) Fast growth is the main reason why businesses fail. Without an understanding of the effect of fast growth on a business, many problems will not be anticipated, such as lack of skilled employees, and the business will fail. Example of limited evaluation (EVAL L1 1 mark) The analysis above indicates that fast growth is an important reason why a business fails – but other reasons such as marketing and promotion are also important.