Business 9609/12 May/June 2022: question paper and mark scheme

Mark scheme

1(a) Define the term ‘piece rate’. 2 Piece rate payments are payments made to employees (1) based on the number of units produced by each individual (1) Payment by results (1) Clear definition of 2 of the factors listed above 2 marks Partial definition of 1 of the factors listed above 1 mark No creditable content 0 marks 1(b) Explain two advantages to a business of using a time based payment 3 method. The question asks for advantages to a business. Do not award marks for answers which are related solely to an employee. Answers could include: Time based payments are made to employees based on the number of hours worked within a given time period. A business only pays for the hours worked, unlike for an employee who receives a fixed payment per week or month regardless of the length of time worked This method can avoid some of the quality issues that can arise when using the e.g. piece rate payment method – fast work can lead to poor quality It is easy for a business to calculate – it reduces administrative costs/time for a business A business can set the number of hours per week that should be worked and can therefore organise the number of workers in terms of when and how long they are required and know plan its costs Productivity may increase when a business requires it if workers are willing to work overtime to get more money Productivity may increase because it improves motivation in employees; encourages them to work harder for a business Accept any other valid response. Clear explanation of two advantages to a business of using a time based payment method 3 marks Clear explanation of one advantage to a business of using a time based payment system or a partial explanation of two advantages 2 marks Partial explanation of one advantage or a list of two advantages 1 mark No creditable content 0 marks

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2(a) Define the term ‘franchise’. 2 A franchise is a business that uses the name/logo of an existing business (2) A legal contract between two businesses for one business to operate as a franchise (2) The process of a franchisor selling the rights of its business to a franchisee (2) Example of a franchise, e.g. McDonald’s, KFC (1) Clear definition 2 marks Partial definition 1 mark No creditable content 0 marks 2(b) Explain two advantages to a business of buying a franchise. 3 Answers could include: The business can benefit from the reputation of the franchise giving a higher chance of success Marketing/advertising costs may be spread between all franchisees and have national/wider coverage Help and advice from the franchisor can be useful to a business new to the franchise (industry) or new to business ownership of any type Increased chance of success because the product/service is established (known by customers) Competition might be limited due to the franchisor restricting the setting up of another outlet in the same area Opportunity for the franchisee to expand their business Relations with suppliers already established Accept any other valid response. Clear explanation of two advantages to a business of buying a franchise 3 marks Clear explanation of one advantage or a partial explanation of two advantages 2 marks Partial explanation of one advantage or a list of two advantages 1 mark No creditable content 0 marks

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3 Explain why a business manager needs to understand the difference 5 between capital expenditure and revenue expenditure. Answers could include: Capital expenditure is money spent on the purchase of fixed assets such as premises and machinery. Items that will be in use for a long period (more than 1 year) which managers must plan for Revenue expenditure is money used to pay for everyday running costs of a business, e.g., raw materials or components, tea or coffee for the canteen or paper for the offices. These items will be used in the short term and, even though lower value, must still be planned for They should normally be funded differently; working capital / retained capital Revenue expenditure recorded correctly allows a manager to accurately measure the cost of the day-to-day running of a business which is vital information in the early days of a business. They are recorded on different financial documents: revenue expenditure is recorded in the Income Statement; capital expenditure is recorded in the Statement of Financial Position – managers use these documents to assess the financial situation of a business Accept any other valid response. Effective explanation of why a business manager needs to understand the difference between capital expenditure and revenue expenditure 4–5 marks Explanation of why a business manager needs to understand the difference between capital expenditure and revenue expenditure 2–3 marks Descriptive information about capital expenditure/revenue expenditure 1 mark No creditable content 0 marks

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4(a) Define the term ‘price elasticity of demand’. 2 Correct answers must refer to the responsiveness of the demand for a product. Price elasticity of demand (PED) measures the degree of responsiveness of demand (1) to a change in the price of the product/service. (1) % change in quantity of demand for a product PED = (2) % change in price of the product Clear definition of 2 of the factors listed above or formula 2 marks Partial definition of 1 of the factors listed above 1 mark No creditable content 0 marks 4(b) Explain two benefits to a business of knowing the price elasticity of 3 demand of its products. Answers could include: Allows a business to anticipate the reaction of its customers to a change in price and to forecast the level of sales following a change in price Pricing strategies (e.g. price discrimination) are influenced by an understanding of how demand might be affected by price changes Maximises revenue, i.e. price inelastic – revenue rises when price of product increases; price elastic – revenue rises when price of product falls Helps a business to decide on its pricing policy, e.g., a product with a PED greater than 1; a change in the price of the product would result in a percentage change in the level of demand which is higher than the percentage change in price. This might lead a business towards competitive pricing A business can use the knowledge that demand for their product is inelastic to know that an increase in the price would lose proportionately fewer customers than the price increase. Businesses that provide goods that customers view as essential know that an increase in price will not harm demand significantly Accept any other valid response. Clear explanation of two benefits to a business of knowing the price elasticity of demand of its products 3 marks Clear explanation of one benefit to a business of knowing the price elasticity of demand of its products or a partial explanation of two benefits 2 marks Partial explanation of one benefit or a list of two benefits 1 mark No creditable content 0 marks

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5(a) Analyse the advantages to a business of using mass customisation. 8 Level Description Marks 4 Good analysis of the advantages to a business of using 7–8 mass customisation 3 Limited analysis of the advantages to a business of 5–6 using mass customisation 2 Application of the advantages to a business of using 3–4 mass production/customisation 1 Knowledge and understanding of mass 1–2 production/customisation 0 No creditable content 0 Answers could include: Knowledge and Understanding 2 marks Understanding of mass production Understanding of customisation Application 2 marks Any reference to advantages of mass production/customisation in a manufacturing context Analysis 4 marks Increases the ability of the business to satisfy customer needs; slight differences in products might more easily satisfy consumers Reduces the costs of customising products assuming that the volume is sufficiently high for each variation of the product The components/materials used in each variation will be the same or similar in most cases but still allow for some bulk-buying discounts The customisation of products is a strong marketing point which can be used to promote a business and its products This allows a business to differentiate itself from its competitors and therefore increase the strength of the brand of the product By responding to customer needs through the process of mass customisation a business might gain a better understanding of exactly what its customers want, and this might allow more focused product development Accept any other valid response. 5(b) Discuss the importance to a hotel of having effective inventory control. 12 Level Description Marks 4 Effective evaluation of the importance to a hotel of 9–12 having effective inventory control 3 Limited evaluation of the importance to a hotel of 7–8 having effective inventory control 2 Analysis and application of a business having 3–6 effective inventory control 1 Knowledge and understanding of inventory control 1–2 0 No creditable content 0 Answers could include: Knowledge and Understanding 2 marks Understanding of inventory control Application 2 marks Reference of the control of inventory to the type of items to be found in a hotel such as, for example, food, bedding, towels, cleaning materials Analysis 2 marks A suitable level of inventory is needed to satisfy customer needs, in this case guests in the hotel Most hotels serve meals and so the hotel will need to hold sufficient food supplies to provide meals to the guests as required Food stock will need to be carefully monitored to ensure that food is used within a suitable period. Food usually has a date by which it should be used (shelf life) A hotel will want to purchase its inventory at the best possible price but will have to be aware of the shelf life of the goods being purchased. Food not kept in the right conditions might cause illness to guests The reputation of hotels can depend on the quality of the food served Hotels also need to keep sufficient bedding and towels to adequately meet the needs of guests A sudden surge in demand for the services of the hotel must not leave the business unable to meet the needs of its guests therefore sufficient inventory must be held for that purpose 5(b) Evaluation 6 marks Any judgements/conclusions can be made at any point in the essay not just in a concluding section. Judgements may be reached that: Can the reputation of the business be ruined if goods are not stored in sufficient quantities and the hotel cannot meet the demands of customers? Although many hotels will have a steady flow of guest bookings it can also be difficult to predict a sudden surge or slump in demand e.g., the coronavirus pandemic caused a collapse in bookings leaving hotels with inventory ready to meet the demand of guests who never arrived Inventory control is not only about the quantity but equally importantly about the methods of storage used – cleaning materials will need to be stored safely (hazardous substances) but the most important are probably the food items which need to be stored correctly (perhaps refrigerated) and used in a timely manner Businesses need to make a profit which can be aided by careful inventory control. Other factors may be equally important such as quality of customer service given, sufficient well trained staff, it may depend on the type of hotel. Can risk factors be planned for in terms of effective inventory control? Accept any other valid response.

Mark scheme

6 Discuss the importance of emotional intelligence to a manager of a 20 luxury holiday resort. Level Description Marks 5 Effective evaluation of the importance of emotional 17–20 intelligence to a manager of a luxury holiday resort 4 Limited evaluation of the importance of emotional 15–16 intelligence to a manager of a luxury holiday resort 3 Good analysis of the importance of emotional 11–14 intelligence to a manager of a (luxury) holiday resort 2 Limited analysis with application of the use of 5–10 emotional intelligence to a business manager 1 Knowledge and understanding of emotional 1–4 intelligence/manager 0 No creditable content 0 Answers could include: Accept answers that relate the discussion to luxury hotels rather than luxury holiday resorts. Knowledge and Understanding 4 marks Knowledge of the elements of Goleman’s theory of emotional intelligence Candidates might list the four key competencies Knowledge of the role of a manager Application 4 marks Appreciation of this situation being a luxury holiday resort/hotel where many employees will be in direct contact with the guests Recognising the need for empathy towards employees who, in turn, will need to show empathy towards the guests if they have a problem during their stay Reference to how elements of Goleman’s theory can be applied to the role of a manager of a luxury business Analysis 6 marks The owners of a luxury holiday resort/hotel will require managers to recognise and understand the needs of both employees and guests. Such understanding is essential in emotional intelligence. 6 Analysis could include some development of the four key competencies: Self-awareness: Being aware of and understanding their own emotions and how they might react when experiencing a particular emotion and how such reactions/behaviour might affect those around them Self-management: Once managers understand their own behaviour, they must develop ways to manage and control their emotions in the workplace. Without the ability to do this they might cause an adverse reaction in their employees in stressful situations. - A negative work environment is likely to be created if managers cannot control their emotions - When difficult situations arise, managers can create or maintain a positive feeling among employees by demonstrating their own positive attitude and that they are in control of the situation - They must be able to recognise and assess risk and work to reduce the impact of any element of risk - Their behaviour must inspire confidence and trust in their employees if the luxury resort/hotel is to create the type of positive environment that guests would expect - Setting and achieving goals can also inspire other employees to work harder and to develop their own aspirations. Social skills: Managers must be able to develop a good relationship with employees and customers and be able to understand and manage their emotions. - Each employee will have different needs - Managers must be able to recognise dissatisfaction among employees and/or customers and must be able/willing to understand why that dissatisfaction exists and then seek to resolve it. Anger, disappointment or dissatisfaction that is not recognised and resolved can lead to further deterioration of a bad situation - When employees feel that their emotions and needs are understood by their managers, they are more likely to have a positive relationship with the manager. Social awareness: An ability to understand the emotions of their employees. - Successful managers will recognise that not all employees are motivated in the same way. Each employee might have a different level of aspiration - Managers need to recognise that each employee could have had or is having a different life experience or are at different stages of their working life which changes the level of aspiration and the ways in which they can be motivated eg money, status etc. Discussion of how managers could understand what motivates their employees to work; what is important to their employees is likely to influence how the employees interact with the guests. The atmosphere created at the luxury resort for the guests is likely to be strongly influenced by the relationship between managers and employees If managers have a high level of emotional intelligence, they are more likely to understand the needs of, not only their employees but also their guests. This should lead to guests having a more positive experience and therefore a higher level of satisfaction with their stay at the luxury resort/hotel 6 Evaluation 6 marks Any judgements/conclusions can be made at any point in the essay not just in a concluding section. The importance of having a high level of emotional intelligence is probably stronger in a business situation where there is a lot of personal interaction. In a luxury hotel many employees will be in regular direct contact with guests Each guest might also have a different level of expectation of their experience at the resort which again needs to be understood by the managers. It can be difficult to recognise and meet the needs of a wide variety of people and their expectations. If managers can create a happy and relaxed atmosphere in the resort, guests are likely to be content with the experience. In order to achieve this the manager must rely on the employees who have contact with guests. Happy employees = happy guests. However, some may argue that emotional intelligence is not necessary if the managers can ensure that employees do what they are asked. However, clear analysis of emotional intelligence is still essential to adopt this approach In a luxury holiday resort/hotel, the expectations of guests will be high, and their demands might be difficult to meet. High standards that are expected by guests will require the highest level of performance from employees which is more likely to be achieved when they feel valued and understood by managers. A less luxurious resort/hotel might not present the same problems to management due to the expectations of guests perhaps being lower and therefore easier to achieve with a less positive workforce. Most manager skills needed for success in this context come under the heading of emotional intelligence, but equally important might be inventory control, financial planning and creative service provision. Accept any other valid response.

Mark scheme

7(a) Analyse the advantages to a business of using online advertising. 8 Level Description Marks 4 Good analysis of the advantages to a business of using 7–8 online advertising 3 Limited analysis of the advantages to a business of 5–6 using online advertising 2 Application of the advantages to a business of using 3–4 online advertising 1 Knowledge and understanding of online advertising 1–2 0 No creditable content 0 Answers could include: Knowledge and Understanding 2 marks Understanding that online advertising involves using the internet to make customers aware of the products that a business has available Application 2 marks Making the link between advertising and the wider potential audience reached via the internet Analysis 4 marks The possibility of reaching a much larger number of possible customers A business might also save on advertising costs; the cost of an advertisement on the internet is likely to be lower than for billboards, magazines, newspapers etc A business can reach customers who would not have been aware of its existence if not for the online advertising A business will be able to capture data about the number of people viewing the advertisement e.g. the geographical location of those people. This gives a business information that might be useful to future developments of the products/business Reaching more customers will hopefully lead to an increase in demand and therefore might enable expansion of a business or a move into new markets. Accept any other valid response. 7(b) Discuss the usefulness to a furniture retailer of using secondary 12 market research when planning to enter a new market. Level Description Marks 4 Effective evaluation of the usefulness to a furniture 9–12 retailer of using secondary market research when planning to enter a new market 3 Limited evaluation of the usefulness to a furniture 7–8 retailer of using secondary market research when planning to enter a new market 2 Analysis and application of the use of secondary 3–6 market research in a business 1 Knowledge and understanding of secondary market 1–2 research/new markets 0 No creditable content 0 Answers could include: Knowledge and understanding 2 marks Clear understanding of what secondary market research is Candidates might also define what could be a new market. Application 2 marks Appropriate reference to entering into a new market e.g. the new market could be a new geographical market or a new demographic i.e., age group or income level. Specific reference to a furniture product e.g. chairs/tables. Analysis 2 marks Secondary market research might not be completely relevant to a business. The collected data might not be directly relevant to furniture or specifically to the type/style of furniture being offered by this business The data has, by definition, been collected for another purpose and might not be relevant to this business proposal Managers need to know how old the market research information is A business might not be offering the same type of furniture to this new market or wants to discover the needs and preferred style of the new market in which case secondary market research is likely to be of little use. 7(b) Evaluation 6 marks Any judgements/conclusions can be made at any point in the essay not just in a concluding section. A judgement might be made that usefulness might depend on the following: If there is only limited information about the new market, might it be more appropriate for a business to carry out some primary research that has a focus on the product and the intended consumers? The usefulness of secondary market research might depend on the similarity between the proposed new market and the cohort used for the secondary market research If a business wants to find out the preferences of the new market, then it is more essential that primary market research should be undertaken The usefulness will depend on the quality of the research already conducted and also the length of time since the information was collected It might be that secondary market research is all that a business can afford and therefore is better than no research at all. Will the furniture demanded in another market, either geographic or demographic, be very different? This will depend on the extent to which designs etc. differ between markets. If there is little difference, then the secondary market research could be adequate and save money for a business Accept any other valid response.