Business 9609/12 May/June 2024: question paper and mark scheme

Mark scheme

1(a) Define the term takeover. 2 Indicative content Responses may include: AO1 Knowledge and understanding Clear understanding 2 marks A takeover is when one business/investor buys / acquires / controls / absorbs / integrates another business, often by buying a majority stake in the target company. Partial understanding 1 mark Purchasing a business Accept all valid responses. 1(b) Explain one disadvantage to a business of external growth. 3 Indicative content Responses may include: AO1 Knowledge and understanding 1 mark for identifying one disadvantage to a business of external growth May require considerable additional expenditure May lead to increased debt May cause problems for existing management Might lead to loss of control of core business Disruptive to original business – culture clash Growth may be too rapid – diseconomies of scale May be more regulations/different management culture in a different market AO2 Application 2 marks for developed application/explanation of one disadvantage to a business of external growth 1 mark for limited application/explanation of one disadvantage to a business of external growth Can be very expensive to take over another business – which could raise business costs. Managers may lack the experience to deal with a different business – which could lead to poor decision making and inefficiency. Can lead to loss of control of the business – especially if it is a hostile takeover. Can lead to culture clashes – whereby employees may find it difficult to adapt and leave. Different management styles may be incompatible – which can make decision making difficult. May need to adapt different marketing strategies – which can be very expensive. Can lead to an increase in long-term debt – which can lead to a higher gearing ratio. Can lead to regulatory problems – whereby the government may prevent a merger or takeover from happening. Accept all valid responses.

Mark scheme

2(a) Define the term job description. 2 Indicative content Responses may include: AO1 Knowledge and understanding Clear understanding 2 marks A document/list/explanation/statement/indication setting out the tasks/duties/features/role/responsibilities/requirements of a job NOT the qualifications/skills/attributes of a person doing a job. Partial understanding 1 mark What the job involves/requires Accept all valid responses. 2(b) Explain ONE benefit to a business of internal recruitment. 3 Indicative content Responses may include: AO1 Knowledge and understanding 1 mark for identifying one benefit to a business of internal recruitment Applicants well known to the business / know how the business operates Applicants already integrated into working culture Internal recruitment takes less time / more efficient Internal recruitment likely cheaper than external recruitment Acts as an incentive to employees in a business / increases motivation May mean less disruption to existing employees AO2 Application 2 marks for developed explanation of one benefit to a business of internal recruitment 1 mark for limited explanation of one benefit to a business of internal recruitment Applicants may already be known to the selection team – so they know they would be able to do the job, therefore reduced risk. Culture of the organisation would already be well understood by the applicants – so they know what is expected of them – reduced need for induction training or time to adjust. It is often quicker than external recruitment/advertising – so the business does not have to wait excessively long for the candidate to start contributing. Likely to be cheaper than using recruitment agencies – therefore saving costs Gives internal staff a career structure and a chance to progress – which might reduce labour turnover. Reduces the likelihood that staff will have to adapt to the new recruit’s style of management – as they are already familiar with the person. Accept all valid responses.

Mark scheme

3(a) Define the term job production. 2 Indicative content Responses may include: AO1 Knowledge and understanding Clear understanding 2 marks The production process where a one-off/unique/bespoke product is made/for a customer/product completed before the next one is started Partial understanding 1 mark Where only one item is produced Accept all valid responses. 3(b) Explain ONE benefit to a business of capital intensive operations. 3 Indicative content Responses may include: AO1 Knowledge and understanding – 1 mark for identifying one benefit to a business of capital intensive operations May well lead to economies of scale Machines may well guarantee greater conformity of quality Machines more efficient than labour Production costs reduced Reduces need for labour resource Increases output/productivity AO2 Application 2 marks for developed application/explanation of one benefit to a business of capital intensive operations 1 mark for limited application/explanation of one benefit to a business of capital intensive operations Substantial opportunities for scale economies – therefore unit cost reductions Quality can be standardised so products are the same every time – which reduces human errors and customer complaints Machines can work continuously 24/7 – therefore increased output enabling large orders to be met Less employees are needed – therefore reduced labour/wage costs Higher productivity – more effective utilisation of resources Accept all valid responses.

Mark scheme

4 Analyse one reason why product differentiation may be important to a business. 5 Note: no marks can be awarded if a relevant reason why product differentiation may be important to a business has not been identified Indicative content Responses may include: AO1 Knowledge and understanding 1 mark for identifying one reason why product differentiation may be important to a business May give a product a USP/distinctive/unique feature May increase customer demand for the product May lead to an increase in market share May strengthen the brand Target niche market Allows premium prices to be set Increases morale/motivation of employees 4 AO2 Application 2 marks for a developed application of one reason why product differentiation may be important to a business 1 mark for limited application of one reason why product differentiation may be important to a business Increased competitiveness A product is made distinctive so it stands out from competitors’ products Assumes a USP in the eyes of consumers Consumers now prefer to buy this product Higher sales and possibly increased share of market Stronger brand image and loyalty A distinctive USP supports premium prices Product success/increased employee motivation AO3 Analysis 2 marks for developed analysis of one reason why product differentiation may be important to a business 1 mark for limited analysis of one reason why product differentiation may be important to a business Builds brand loyalty due to perceived differentiation from alternative brands – which leads to repeat customers Enables premium price to be charged – which can result in increased profit margins. Increased competitiveness – lead to higher sales and increased market share. Attract investment from shareholders – which increases market value of business. Enables businesses to compete in areas other than price – such as quality or taste which broadens potential areas for success Customers perceive there to be no substitute for the product – enabling business to gain a market advantage via USP Accept all valid responses.

Mark scheme

5(a) Analyse two limitations to a business of using contribution costing. 8 There are 8 marks in total for Q5(a) – 4 marks for each of the two limitations to a business of using contribution costing: 1 mark for 1 mark for 2 marks for Indicative content Responses may include: AO1 Knowledge and understanding 1 mark for identifying one limitation to a business of using contribution costing It allocates only direct costs to cost/profit centres Overhead costs not apportioned at all May provide a misleading picture of profitability It overlooks the impact of fixed costs Not acceptable for external financial reporting Difficult to allocate costs accurately across a full product range Not an appropriate method for price determination Unsuitable for capital intensive operations/multi-product operations 5(a) AO2 Application 1 mark for application of one limitation to a business of using contribution costing Difficult to analyse as not all costs can be easily split into fixed and variable costs. Poor method for setting prices – as prices are based on contribution which does not cover fixed costs. It violates the principle of matching costs with revenues Has limited scope – so businesses with high automation have high levels of fixed costs, so not suitable to capital intensive industries. Can lead to unrealistic financial statements – as exclusion of fixed overheads in valuation of stock. Firms might find it difficult to cover all costs and earn a fair return on capital employed AO3 Analysis 2 marks for developed analysis of one limitation to a business of using contribution costing L2 1 mark for limited analysis of using contribution costing L1 Not acceptable for stock valuation – if stock is undervalued it could lead to government investigation/fines – affect business image Unrealistic financial statements – could lead to investors withdrawing from the business or government fines. Under-pricing of products – which leads to poor return on capital employed and low profits – shareholder dissatisfaction Costs can be difficult to allocate – which leads to inaccurate pricing decisions – lose customer loyalty Can lead managers to maintain the production of goods just because of positive contribution – perhaps a brand new product should be launched instead which makes a greater contribution. If lower prices are offered to gain customers as contribution can still be earned – may lead to existing customers demanding lower prices – lower profits. If high prices are a key feature that has established brand – then lowering prices could destroy brand image. Accept all valid responses. 5(b) Evaluate whether working capital is the most important source of finance for a start-up furniture manufacturer. 12 There are 12 marks for Q5(b): 2 marks for 2 marks for 2 marks for 6 marks for Indicative content Responses may include: AO1 Knowledge and understanding 2 marks for developed knowledge L2 1 mark for limited knowledge L1 Working capital is the capital needed to pay for raw materials, day-to-day running costs and credit offered to customers. Working capital = current assets less current liabilities. Source of finance – internal (retained profits, reduce working capital, sale of assets) – external (overdrafts, trade credit, factoring, HP, leasing, loans, equity finance, share, debentures, venture capital) A start up business is a company in the first stages of operations, often being financed by its entrepreneurial founders during the initial starting period. AO2 Application 2 marks for developed application L2 1 mark for limited application L1 Needs finance to pay suppliers of wood, tools. Need finance to hire craft persons /machines to make furniture Needs finance for rent to hire premises/ warehouses to store furniture pending sale to retailers 5(b) AO3 Analysis 2 marks for developed analysis L2 1 mark for limited analysis L1 If wages cannot be paid due to low working capital could lead to employees leaving the business – thus a high labour turnover If unable to meet a customer order due to poor working capital – business may lose important customers. Insufficient working capital to pay suppliers – could lead to loss of trade terms – or supplier refusing to do business with them altogether. If don’t have enough working capital to purchase materials – may not be able to produce enough goods to satisfy demand – lose sales Adequate working capital enables materials to be bought in advance of busy periods – such as the lead up to Christmas – so don’t miss out on high sales. Inadequate working capital may prevent the business from raising additional funds – so will limit or prevent further growth. Might be possible to arrange an overdraft – though may only be limited initially – high interest and potential charges. As a new starter will not have traded long enough to have retained profits – so would not have “free” source of finance May not have built up trade relationships – so not trustworthy enough yet to get credit HP and leasing would allow the business to obtain assets without a large initial cash payment – thus reducing cash outflow Venture capital might be an option – but may have to give up a share of the business – as well as a percentage of future profits 5(b) AO4 Evaluation – 6 marks for evaluation Developed/Supported judgement in context L3 6 marks Developed/Reasonable evaluative comments in context L3 5 marks Developed/Supported judgement without context L2 4 marks Developed/Reasonable evaluative comments without context L2 3 marks Limited supported judgement L1 2 marks An attempt to balance the arguments/Weak attempt at evaluative comments L1 1 mark 5(b) A judgement/conclusion is made as to whether working capital is the most important source of finance for a start-up furniture manufacturer. These judgements/conclusions may be made at any point in the essay, not only in a concluding section. A conclusion about what the new furniture manufacturer hopes to achieve in the long and short term and how much finance may be required A conclusion as to what the business hopes to achieve once established and what elements of its working capital need improving. A judgement that a new business will find it harder to raise finance than a well-established business – so it’s imperative to effectively manage working capital. A conclusion that working capital is only one source of finance and is unlikely to be sufficient for a start-up furniture manufacturer. However, other options may not be available due to lack of credit history or length of time that the business has been operating Accept all valid responses.

Mark scheme

6(a) Analyse two benefits to a business of low labour turnover. 8 There are 8 marks in total for Q6(a) – 4 marks for each of the two benefits to a business of low labour turnover. These 4 marks consist of : 1 mark for 1 mark for 2 marks for Indicative content Responses may include: AO1 Knowledge and understanding 1 mark for identifying one benefit to a business of low labour turnover Lowers cost of recruiting new staff. Less employee training required Staff loyalty and morale likely to be high Less risk of work building up with gaps when staff leave Consistency of production Production quality maintained Customer contact retained Reputation of business high 6(a) AO2 Application 1 mark for application of one benefit to a business of low labour turnover Less people leave the business, low replacement costs Fewer employees require induction or other training Staff content to stay in business Sufficient numbers of staff maintained Experienced workers remain in the business Product quality maintained Customers relate to known staff AO3 Analysis 2 marks for developed analysis of one benefit to a business of low labour turnover L2 1 mark for limited analysis of one benefit to a business of low labour turnover L1 Lower recruitment and training costs – means more money to reinvest in other areas of the business. Consistent customer relationships – means less chance of losing customers – maintain or even increase sales. Consistent quality of products and services – less errors – less waste/complaints – decreased costs /improved image Low turnover might make business attractive when business does need to recruit – attract better quality workers. Better morale and team spirit – can lead to higher productivity Less risk of being short staffed – so build reputation with customers for meeting orders Knowledge and skills kept within the business – can increase goodwill and value of the business – if it were to be sold. Accept all valid responses. 6(b) ‘Work-life balance is the most important human resource management (HRM) factor for employee welfare in a local 12 bus service.’ Evaluate this view. There are 12 marks for 6(b): 2 marks for 2 marks for 2 marks for 6 marks for Indicative content Responses may include: AO1 Knowledge and understanding 2 marks for developed knowledge L2 1 mark for limited knowledge L1 Work-life balance is about creating and maintaining supportive and healthy work environments that enable employees to have balance between work and other aspects of life – family, friends, community, personal growth. Employee welfare is overseen by HRM departments who may offer counselling and other services to staff who are in need of support, perhaps because of family or financial problems. HRM is the strategic approach to the effective management of organisations workers so that they help the business gain a competitive advantage. 6(b) AO2 Application 2 marks for developed application L2 1 mark for limited application L1 Bus drivers and conductors have stressful jobs Bus drivers are required to drive safely They need to be alert and not over tired Bus drivers and conductors are close to passengers They need to be work regularly to guarantee a bus timetable AO3 Analysis 2 marks for developed analysis L2 1 mark for limited analysis L1 WLB could lead to bus drivers feeling more optimistic about responsibilities – better able to meet timetable targets Potentially lower labour turnover and absenteeism reduced if staff feel they have a good WLB Bus drivers might have more energy and be less tired with good WLB – leading to better customer experience Stressed and overworked bus staff may be rude or not deal very well with angry passengers – which might lead to customer complaints and demotivated/demoralised drivers WLB could reduce negative effects of work-life conflict – such as health risks – smoking, drinking, weight gain, depression – on employees – business will build good image for business as a caring employer – leading to healthier drivers Strengthen employee loyalty and productivity – which means buses might run on time – increase reputation and esteem for drivers Duty of care to employees – means it will reduce likelihood of paying compensation to employees/customers if accidents occur to elderly passengers due to speeding drivers. 6(b) AO4 Evaluation 6 marks for Evaluation Developed/Supported judgement in context L3 6 marks Developed/Reasonable evaluative comments in context L3 5 marks Developed/Supported judgement without context L2 4 marks Developed/Reasonable evaluative comments without context L2 3 marks Limited supported judgement L1 2 marks An attempt to balance the arguments/Weak attempt at evaluative comments L1 1 mark A judgement/decision as to whether WLB is the most important HRM factor for employee welfare in a local bus service. These judgements/decisions may be made at any point in an essay, not just in the concluding section of an essay. A judgement is made as to the importance of HR concern for WLB for the welfare of those working for a local bus service. How might WLB be an important HRM factor for employee welfare? – improve performance, improve morale of staff, prevent over tiredness, signal concern for and confidence in staff Might other HRM factors be equally/more important than WLB fir welfare of bus service staff such as training, shorter work hours, more pay, or better quality management/supervision, better canteen facilities, better holiday entitlements? Accept all valid responses.