Business 9609/22 May/June 2024: question paper and mark scheme

Mark scheme

1(a)(i) Identify one feature of a private limited company. 1 Responses may include: Any feature of a private limited company , including: limited liability shareholders incorporated shares not traded on stock exchange/publicly must make accounts publicly available separate legal identity continuity sells shares to people they know (invited). Accept all valid responses. 1(a)(ii) Explain the term sustainability. 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 AO1 Knowledge and understanding Knowledge of sustainability may include: maintaining operations/production. Allow (but do not require) knowledge of sustainability from an environmental perspective, which may include: environmental balance. conserve natural resources. 1(a)(ii) AO2 Application Explanation of sustainability may include: maintaining operations/production: at the current level the ability to maintain an environmental balance: now and in the future for our planet's natural environment to conserve natural resources: to support the wellbeing of current and future generations Context applied to business of how to behave in a sustainable way , including: An example of a business behaving in a sustainable way Application can be made to PS or any other scenario/context/business/person. Allow application to environmental sustainability. Accept all valid responses. Guidance in awarding marks Knowledge & understanding Knowledge of sustainability 1 mark Explanation Explanation of sustainability 1 mark Context Applied to a business context/ business 1 mark environment 1(a)(ii) Exemplar and annotations Mark Rationale Keeping the natural environment safe now . So that it is usable 3 Sustainability from an in the future , to reduce dependence on single use plastic . environmental perspective – what the business could do now and then explained in terms of how it might help the future – plus an example (single use plastic) Making sure a business can maintain its current production now 3 Clear knowledge based on now and in the future . For example, not relying on fossil fuels . and in the future , with a clear example. Sustainability involves looking after the environment for 2 Knowledge and an example – no example by recycling explanation. Sustainability is a social goal about the ability of people to co-exist 1 A reasonable definition with the on Earth over a long time. . idea of now and the future. Sustainability is about looking to the future. 0 Too vague. Some idea of the future, but not about maintaining now. 1(b)(i) Refer to Table 1.1. Calculate the variances in 2023 (x, y and z) and state whether each variance is favourable or 3 adverse. Budgeted Actual Variance $000 $000 Revenue 500 600 100 and Favourable (F) Direct costs 300 350 50 and Adverse (A) Indirect costs 150 125 25 and Favourable (F) 1 mark for each correctly calculated variance (including favourable or adverse). Ignore + and – signs. Allow unfavourable. 1(b)(ii) Explain one benefit to PS of using incremental budgeting. 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 AO1 Knowledge and understanding Knowledge of a benefit of using incremental budgeting , including: Simplicity / easy to adjust Speed (quicker) Consistency Avoids conflict between managers Realistic Allows business to respond to changes Must be about incremental budgeting. As opposed to budgeting in general. No further marks can be gained without knowledge and understanding of a benefit of incremental budgeting. 1(b)(ii) AO2 Application Explanation of a benefit of using incremental budgeting , including: Simplicity; by adding a small amount to the previous time period, this avoids any complicated preparations Speed (quicker); reduced the time needed to prepare a business’ budgets Consistency; as each budget uses the previous as a base, there is a consistent approach every time Avoids conflict between managers; due to the consistent approach Realistic; because based on previous data Context of a benefit of using incremental budgeting , including: Use of Table 1.1 Each budget has a variance OFR from answer to Q1(b)(i) PS sells through its own website Web sales and subscription available PS uses the postal service Aim to improve the sustainability of its operations New Marketing Manager being recruited Accept all valid responses. Guidance in awarding marks Knowledge & Knowledge of a benefit of using incremental budgeting 1 mark understanding Explanation Explanation of a benefit to a business of using incremental 1 mark budgeting Context Context linked to a benefit to PS of using incremental budgeting 1 mark 1(b)(ii) Exemplar and annotations Mark Rationale It is quicker than other methods of budgeting because the 3 Speed/quicker is enough for Manager just adds on a small amount to budget from last year knowledge, which is then explained which means they can focus on PS’s website . with context. Because it is based on past data incremental budgeting is 3 Starts with the explanation, more realistic , so that the revenue variance should be less followed by the knowledge. Without than 100 next year . the knowledge, this would be 0 marks. The example has OFR based on the answer to Q1(b)(i). It is easy to use incremental budgeting because it’s based on 2 Knowledge (easy to use) with some previous figures . explanation, but no context. It is easier as they can just add 100 to the revenue budget . 2 Knowledge and context. Incremental budgeting is easier and quicker than other forms 1 Knowledge at the start – the rest of of budgeting such as zero budgeting, where the Manager has to the answer is NAQ. start from scratch every year. There is also historical budgeting which is doing it based on what happened in the past. This would take longer and be more complicated than incremental budgeting. Incremental budgeting involves adding a small amount to each of 0 There is knowledge of incremental the budgets for previous years. budgeting, but no knowledge of a benefit. Incremental budgeting is about guessing how much revenue, cost 0 No knowledge of a benefit of and profit a business will achieve and then comparing this to what incremental budgeting. actually happened. PS had a variance on every budget, so they must not have done their budgeting well. 1(c) Analyse one advantage and one disadvantage to PS of using an assessment centre when selecting a Marketing 8 Manager. 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 Application of two Limited analysis relevant points is relevant points to a Limited analysis that identifies connections used to answer the business context. between causes, impacts and/or consequences of question. Application of one two points. Knowledge of one relevant point to a Limited analysis that identifies connections relevant point is business context. between causes, impacts and/or consequences of used to answer the one point. question. 0 0 marks 0 marks 0 marks No creditable response. No creditable response. No creditable response. 1(c) Indicative content AO1 Knowledge and understanding Knowledge of an assessment centre (max 1 mark if no knowledge of advantage or disadvantage), including: a combination of tasks and activities that test suitability for the job chance to demonstrate a wider range of skills than during a traditional face-to-face interview. hosted over anything from an afternoon to two days often the final stage of the selection process a group of candidates usually attend together. Knowledge of an advantage (max 1 mark – annotate on left) may include: More suitable/knowledgeable/skilled recruit Wider skilled recruit / more skills tested More detailed process Useful as final stage of recruitment Allows direct comparison with other candidates Less time involved Knowledge of a disadvantage (max 1 mark – annotate on right) may include: Takes more time Cost of an assessment centre Not realistic / not linked to specific employment / may assess unnecessary skills / knowledge AO2 Application Context applied to an advantage (max 1 mark) and disadvantage (max 1 mark) of using an assessment centre, including: To plan the recruitment and training of a new sales team. To organise the production of digital promotions. To advise the board of directors on changes to the PS product portfolio. To do tasks relating to the marketing of PS (e.g. perfume, website sales, subscription sales, importance of packaging). Five shortlisted applicants. Use of Table 1.1 1(c) AO3 Analysis Limited analysis – candidate shows one link in the chain of analysis. Developed analysis candidate shows two or more links in the chain of analysis or a two-sided analysis. Advantages may include: More suitable recruit lower costs of marketing – increase profitability higher sales – increase profits Wider skilled recruit lower costs of marketing – increase profitability higher sales – increase profits Longer process than an interview; more likely to find a better candidate – increase sales and growth of PS. Final stage of recruitment; may be a suitable way to distinguish between qualified and similar candidates – increase chances of getting the best candidate. Allows direct comparison with other candidates – increases probability of finding the best candidate who can improve the marketing of PS. Disadvantages may include: Takes more time; increase costs – reduces profitability. May assess unnecessary skills and provides an unrealistic image of the candidates and increases the probability of choosing the wrong candidate – increases costs in the long run (more recruitment needed). Cost of an assessment centre; significantly more expensive than an interview – decreased profitability. Accept all valid responses. 1(c) Exemplars and annotations AO1 Knowledge AO2 Application AO3 Analysis Better skilled employees . So that PS can make sure their Which can help PS to increase new manager can organise the their sales revenue by selling production of digital promotions . more perfume and make a greater profit . Assessment centres have a high As all five potential managers Which will reduce the profitability of cost will be invited. PS and reduce the dividends for the shareholders . 1(d) Evaluate the role of effective packaging for PS. 12 Level AO1 Knowledge AO2 Application AO3 Analysis AO4 Evaluation and understanding 2 marks 2 marks 6 marks 2 marks 3 5–6 marks Developed evaluation in context A developed judgement/conclusion 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 Developed Developed Developed evaluation knowledge of application of analysis A developed judgement/conclusion relevant key term(s) relevant point(s) to that identifies is made. and/or factor(s) is the business connections Developed evaluative comments used to answer the context. between causes, which balance some key question. impacts and/or arguments. consequences. 1 1 mark 1 mark 1 mark 1–2 marks Limited knowledge Limited application Limited analysis Limited evaluation of relevant key of relevant point(s) that identifies A judgement/conclusion is made term(s) and/or to the business connections with limited supporting factor(s) is used to context. between causes, comment/evidence. answer the question. impacts and/or An attempt is made to balance the consequences. arguments. 0 0 marks 0 marks 0 marks 0 marks No creditable No creditable No creditable No creditable response. response. response. response. 1(d) Indicative content AO1 Knowledge and understanding Knowledge of the role of packaging (max 2 marks), including: information to customers protection for the product to attract potential customers to promote a brand / branding to enable efficient distribution/portability to add value to meet legal requirements (labelling, weight, ingredients etc.) AO2 Application Context applied to the role of packaging for PS (max 2 marks), including website purchases subscription purchases Most perfumes sold in glass bottles (fragility) all products delivered to homes by post can be left in mailbox can be left in safe place outside of the home (weatherproof) PS aim to improve sustainability of operations use of Table 1.1 1(d) AO3 Analysis Limited analysis – candidate shows one link in the chain of analysis. Developed analysis – candidate shows two or more links in the chain of analysis. Information to customers; to increase sales of both product lines for PS – increase profits and enable growth of SS. Protection for the product; Glass bottles will break if not packaged correctly – PS needs to replace products increasing costs Packages need to be able to be left outdoors – otherwise poor customer satisfaction and lower repeat sales. To attract potential customers; good packaging may encourage increased sales from customers – however as the products are sold through the website this may not have a large effect on sales. To enable efficient distribution/portability; products left in mailbox so packaging needs to be small enough to post and increase speed of delivery – reduces costs of delivering the product. To add value – sales have been 20% higher than budgeted so poor packaging might discourage customers from repurchasing products – increases sales/profit. The packaging is not the main product and so may not add much value in a customer’s perception – increased costs without an increase in sales. Balance between importance of packaging and sustainability – more packaging likely to protect the product but also less sustainability. AO4 Evaluation Limited evaluation – unsupported judgement and/or a weak attempt at evaluative comment Developed evaluation – supported judgement and/or reasonable evaluative comment Developed evaluation in context – supported judgement in context and/or reasonable evaluative comment in context. A judgement over role of effective packaging. Evaluation of the relative importance of different factors. Elements that the evaluation/judgement might depend upon – cost of the packaging as a proportion of the total costs of the product, packaging that the perfume is purchased with (from manufacturers), likelihood of products being left outside, likelihood of moving into retail shops in the future, the new Marketing Manager’s strategy. Accept all valid responses. 1(d) Exemplars for awarding evaluation L1 (limited L2 (developed supporting L3 (developed supporting evidence supporting evidence) with context) evidence) Effective packaging is Effective packaging is essential for PS, Effective packaging is essential for PS, so essential for PS. so that their products are delivered safely that the glass bottles are delivered to customers. unbroken to customers. There are many more There are many more things that are There are many more things that are more things that are more more important to PS than packaging. If important to PS than packaging. If the important to PS than the price is wrong, then no matter how price is wrong, then no matter how good packaging. good the packaging is, no-one will want the packaging is, no-one will want it, that is it. why PS sells its perfume cheaper than high street stores. The role of packaging The role of packaging depends upon the The role of packaging depends upon the depends upon the cost of the packaging. If the packaging cost of the packaging. If the packaging cost of the packaging. increases PS direct costs, then it may be increases PS direct costs beyond $350 better to spend the money on more 000, then it may be better to spend the promotion. money on more promotion. In the short term, In the short term, effective packaging In the short term, effective packaging may effective packaging may cost too much, however in the long cost too much, however in the long term it may cost too much. term it will make the PS brand will make the PS brand memorable, which memorable. is vital to keep customers paying for their subscription.

Mark scheme

2(a)(i) Identify one type of training. 1 Indicative content Types of training are: Induction On the job Off the job 2(a)(ii) Explain the term mass market. 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 AO1 Knowledge and understanding Knowledge of mass market (max 1 mark), including: Aiming a product or service at the majority of people. Made for the large part of the population Made for most of the population/market Allow ‘not a segment of the market’ or ‘all of the market’ or ‘everyone’. 2(a)(ii) AO2 Application Explanation of a characteristic of the mass market (or mass marketing) , including: Many different size/colour products May benefit from economies of scale One size fits all products /standardised Lower risk than niche markets or segmented Customer wants are more general and less specific markets Associated with high output/quantity (than a segment or High level of competition niche market) Competition on national/international/global Associated with low(er) prices (than a segment or niche scale. market) Context applied to mass market(s) , including: Relevant example of mass market(s) (including the shoe market) Must be an example of the market (the people who might purchase canned drinks) – not a product aimed at the mass market (Coke) Application can be made to PS or any other scenario/context/business/person. Accept all valid responses. Guidance in awarding marks Knowledge & Knowledge of a/the mass market 1 mark understanding Explanation Explanation of a characteristic of the mass market 1 mark Context Applied to a business context/ business environment 1 mark 2(a)(ii) Exemplar and annotations Mark Rationale Mass markets are aimed at everybody . For example, in the 3 An answer which starts with the shoe market, this might be plain black shoes that anybody could knowledge and then applies it to wear which are all the same . mass shoe market, with a characteristic. CS can sell in high quantity to the whole market . At a low 3 Two characteristics surrounding the price . knowledge. Aiming at the majority of people who might want to buy the 2 Clear knowledge. Some application product . For example, customers who might buy a blank T- through an example. Shirt . A mass market is one that is not focussed on a market segment 1 A reasonable definition but what . Therefore, the product could be bought by anyone. It is likely follows is more of the same that a large number of people would be potential customers. knowledge. Mass markets have high sales revenue and products are likely 0 There are two characteristics here, to have higher price than a niche market . This could give the but no knowledge of mass markets. business access to economies of scale . Therefore, no marks can be awarded. 2(b)(i) Refer to Table 2.1. Calculate the contribution per unit for the recent batch of shoes. 3 Formula: Contribution per unit = price – VC or TR – TVC / output or Profit (TR – TC) / margin of safety (1) Method 1 $18 750 / 500 = $37.50 and $25 000 / 500 = $50 (1) $50 – $37.50 = $12.50 (1) Method 2 ($25 000 – $18 750) = $6250 (1) $6250 / 500 = $12.50 (1) Method 3 $25 000 – $23 750 = $1250 (1) $1250 / 100 = $12.50 (1) Answer = $12.50 (3) 2(b)(i) Exemplar and annotations Marks 3 marks Correct answer Working and $ do not matter. $12.50 or 12.50 or 12.5 2 marks Both of the following: To award two marks, there must be Formula Two and a One correct stage of OR calculation One , one and one OR An incorrect answer with one mistake allowing OFR for final stage. 1 mark One of the following: To award one mark, there must be: Correct formula One and two One correct stage of calculation. 0 marks No creditable content. To award zero marks, there must be One 2(b)(ii) Explain one limitation for CS of using break-even analysis. 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 AO1 Knowledge and understanding Knowledge of a limitation of using break-even analysis , including: not all costs and revenue can be split assumes all costs are a straight line (constant) assumes price is constant assumes all output is sold/does not take into account demand/demand fluctuates assumes all costs are fixed or variable needs to be calculated for each product it ignores capacity assumes that fixed costs do not change as output increases assumes fixed costs can be allocated assumes no external influences. Do not accept that break-even analysis data may be inaccurate/wrong or time consuming. This is not a specific limitation of break-even analysis. 2(b)(ii) AO2 Application Explanation of a limitation if using break-even analysis , including: not all costs and revenue can be split: and break-even assumes that all costs can be split. assumes all costs are a straight line (constant); whereas costs are likely to fall (on average) as output increases. assumes price is constant; whereas most businesses will need to reduce the price to sell more. assumes all output is sold; which is unlikely for most businesses – wastage, obsolescence etc. assumes all costs are fixed or variable; whereas there are semi-fixed / semi-variable costs. needs to be calculated for each product: only really works for a single product business. it ignores capacity; if the capacity is below the break-even point, then the business will never break even. assumes that fixed costs do not change as output increases; but as output increases most firms will need to source more fixed assets. assumes fixed costs can be allocated: which is not always possible for a multi-product business. Context applied to a limitation of using break-even analysis including: Yazeem uses a range of colours and sizes – may be impossible to do break-even for each style of shoe/size/colour. Uses batch production – may be impossible to allocate the fixed costs to each style/size/colour. At least two employees (Yazeem and Abir) – how can their time be allocated to production/administration etc. Increase in low-priced shoes – may make it impossible to sell all the output. Use of Table 2.1. OFR from Q2(b)(i) Accept all valid responses. Guidance in awarding marks Knowledge & Knowledge of a limitation of using break-even analysis 1 mark understanding Explanation Explanation of a limitation of using break-even analysis 1 mark Context Context linked to a limitation of using break-even analysis 1 mark 2(b)(ii) Exemplar and annotations Mark Rationale Break-even analysis assumes average costs do not change 3 Knowledge of a limitation with but CS’s average variable costs are likely to change because explanation of why it is a limitation CS is using batch production . and application to the context of CS. Abir has suggested using JIT , which is likely to mean the 3 A backwards answer. Starts with transportation costs are not constant . the context, then the explanation and lastly knowledge. An equally valid approach – as long as there is knowledge somewhere in the answer. The price may not be the same for every pair of shoes which 2 The knowledge is fine. The could mean that the Total Revenue is not constant . explanation refers to a different point of knowledge, but it DOES explain this limitation, so it is valid. No context. Break even analysis assumes all output produced is sold . 1 Knowledge and no explanation or application to the context. Break even analysis is a way of calculating the quantity needed to 0 Although there is some relevant stop making a loss and start making a profit. This is useful to CS context, there is no knowledge of a because they can calculate how many shoes need to be sold to limitation, so no marks can be cover all of the costs which were $23 750 for the recent batch. awarded. Break even analysis can be wrong. If the Manager miscalculates 0 Being incorrect/wrong/inaccurate, the break-even point, then any decision made on this will also be is not a limitation of break-even wrong. analysis. It could be said about any calculation, so do not award. 2(c) Analyse two disadvantages to CS of adopting a JIT approach to inventory management. 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 Application of two Limited analysis relevant points is relevant points to a Limited analysis that identifies connections used to answer the business context. between causes, impacts and/or consequences of question. Application of one two points. Knowledge of one relevant point to a Limited analysis that identifies connections relevant point is business context. between causes, impacts and/or consequences of used to answer the one point. question. 0 0 marks 0 marks 0 marks No creditable response. No creditable response. No creditable response. 2(c) Indicative content AO1 Knowledge and understanding Knowledge of just in time inventory management (max 1 mark if no knowledge of disadvantage(s)), including: Orders made from suppliers as needed. Products produced as required by customers. Limited or zero inventory required to be held. Knowledge of disadvantages of just in time (max 2 marks – annotate first disadvantage on left and second disadvantage on right), including: Risk of running out of stock. Reliance on (new) suppliers – frequency of ordering/deliveries Requires planning/time. Limited scope for mass/batch production (little scope for economies of scale) – increased average cost Finished product inventory cannot be used for promotional purposes. Difficult to forecast/budget Cost of infrastructure/capital Might be difficult to respond to changing demand. AO2 Application Context applied to a disadvantage of using JIT (max 2 marks), including: Currently selling to mass market (professionals for work or smart dress). Currently using batch production. Abir has suggested a move towards niche, unique (job produced) shoes. New local supplier suggested by Abir. Shoes on display in the shop. Raw material of leather must be in climate controlled storage. No current relationship to suggested new supplier. Range of sizes and colours. 2(c) AO3 Analysis Analysis of disadvantage(s) of using JIT, including: Limited analysis – candidate shows one link in the chain of analysis. Developed analysis candidate shows two or more links in the chain of analysis or a two-sided analysis. Risk of running out of stock; may dissatisfy customers and lead to bad publicity – lower sales/profit. May lead Yazeem to be idle increasing costs – lower profitability. Reliance on suppliers; if the new local supplier is chosen then there is no current relationship, so shoe production may be delayed – decreased sales/profit. Requires planning/time – If Yazeem/Abir are planning the logistics they may be less productive in producing shoes – lower sales/profit. Limited scope for mass/batch production (little scope for economies of scale); increased costs – lower profitability. Finished product inventory cannot be used for promotional purposes; customers may not come into a show shop without any shoes to try on – lower sales/profit. Accept all valid responses. Exemplars and annotations AO1 Knowledge AO2 Application AO3 Analysis CS may run out of stock . And since CS is selling to the mass Customers may choose to go market . elsewhere, reducing CS’s revenue leading to less profit . CS would need a new supplier Although Abir has already found However, CS do not have a one who is happy to deliver as relationship with them and they required might not deliver the materials on time leading to customers being dissatisfied and going to a competitor. . 2(d) Evaluate the importance to CS of being a small business. 12 Level AO1 Knowledge AO2 Application AO3 Analysis AO4 Evaluation and understanding 2 marks 2 marks 6 marks 2 marks 3 5–6 marks Developed evaluation in context A developed judgement/conclusion 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 Developed Developed analysis Developed evaluation knowledge of application of that identifies A developed judgement/conclusion relevant key term(s) relevant point(s) to connections is made. and/or factor(s) is the business between causes, Developed evaluative comments used to answer the context. impacts and/or which balance some key question. consequences. arguments. 1 1 mark 1 mark 1 mark 1–2 marks Limited knowledge Limited application Limited analysis Limited evaluation of relevant key of relevant point(s) that identifies A judgement/conclusion is made term(s) and/or to the business connections with limited supporting factor(s) is used to context. between causes, comment/evidence. answer the question. impacts and/or An attempt is made to balance the consequences. arguments. 0 0 marks 0 marks 0 marks 0 marks No creditable No creditable No creditable No creditable response. response. response. response. 2(d) Indicative content AO1 Knowledge and understanding Knowledge of the features of being a small business (max 2 marks), including: Lifestyle Independence Opportunities Creative freedom Less reliance on other people Expertise Unique selling point (USP) Personal satisfaction Personal service for customers Focus Easy to plan Easy to control/coordinate/lead Potential for growth Encourages innovation/intrapreneurship/entrepreneurship May struggle obtaining finance / limited finance Increased risk 2(d) AO2 Application Context applied to features of being a small business (max 2 marks), including: Yazeem is a highly skilled shoemaker Sole trader Abir is fully trained in making shoes CS opened in 1975 Currently targeting a mass market (professional men and women) Currently produced using batch production Shoes sold in own shop Range of sizes and colours Increase in low-priced mass market shoes – reduced CS sales and repairs Abir feels it is time for Yazeem to retire Abir would like to design and produce unique shoes for niche markets New products would use price skimming Use of Table 2.1 Abir suggested adoption of JIT 2(d) AO3 Analysis Limited analysis – candidate shows one link in the chain of analysis. Developed analysis – candidate shows two or more links in the chain of analysis. Lifestyle/personal satisfaction; Yazeem (and Abir) can choose their own hours which may increase their happiness – likely objective of Yazeem as a sole trader. Independence; Yazeem does not have to ask anyone’s opinion when making decisions which may suit him – increased happiness. Opportunities; as a small business Yazeem and Abir can more easily take advantage of new trends (such as the niche markets) – increased sales/profit. Creative freedom; both Yazeem and Abir are skilled and can create shoes which suit the market without having to have decisions agreed by others – increased sales/profit. Less reliance on other people; less opportunities for wastage – lower costs, increased profitability. Expertise; both Yazeem and Abir are highly skilled and can focus these on their small customer base – increased customer satisfaction. Unique selling point (USP); having expert owners may allow CS to sell at a higher price – increased profitability. Personal service for customers; customers feel like they are being well looked after (as they are dealing with the owners) – increased sales/profit. Focus; As Yazeem is the owner he is more likely to be motivated – increased productivity. Easy to plan; few employees mean that CS can adapt their business to meet current demand – increased sales/profit. Easy to control/coordinate/lead; less customers mean that CS can adapt their business to meet current demand – increased sales/profit. AO4 Evaluation Limited evaluation – unsupported judgement and/or a weak attempt at evaluative comment Developed evaluation – supported judgement and/or reasonable evaluative comment Developed evaluation in context – supported judgement in context and/or reasonable evaluative comment in context. A judgement the importance of being a small business. Evaluation of the relative importance of different advantages/factors. Elements that the evaluation/judgement might depend upon – Yazeem and Abir’s personal objectives, whether Yazeem wants to retire (or not), the relative size of competitors in the market, the location of CS, changes in the shoe manufacture and retail market, changes in technology, price elasticity of demand for CS shoes. Accept all valid responses. 2(d) Exemplars for awarding evaluation L1 (limited L2 (developed supporting L3 (developed supporting evidence supporting evidence) with context) evidence) Being a small Being a small business is important for Being a small business is important for CS business is important CS because it means Yazeem can retain because it means Yazeem can retain for CS. control of his business. control of his sole trader business. It is not important for It is not important for CS to be a small It is not important for CS to be a small CS to be a small business because the business should business because the business should be business. be allowed to grow to a more efficient allowed to grow to a more efficient size, size, where costs are lower. where costs are lower, so that it can compete with the mass market retailers who are selling cheaper shoes for people to wear to work or dress smartly. The importance of CS The importance of CS being a small The importance of CS being a small being a small business depends on the objectives of business depends on the objectives of business depends on Yazeem. If his objective was to maximise Yazeem. If his objective was to give the the objectives of profit, then it is more important for CS to business to Abir, then maybe she should Yazeem. grow. decide how important the size of CS is. In the short term being In the short term being a small business In the short term being a small business is a small business is is important, however in the long term important, however in the long term important. Yazeem may need to grow to take Yazeem may need to grow to take advantage of economies of scale. advantage of economies of scale to reduce the cost of the batch production process used by CS.