Business objectives — Paper 2 — A Level Business (for first examination in 2016) 9609 topical questions

Question 1

Paul’s Clothes (PC) PC is a sole trader business that is owned and managed by Paul. Paul financed the business using a mortgage on his home…

Accepted Answer

Question Answer Marks 1(a)(i) Define the term ‘unique selling point’ (line 6). 2 Knowledge and Application Marks A correct definition 2 A partially correct definition 1 No creditable content 0 A correct definition should cover the following aspects. • Differentiates • Features • A unique selling point is something that makes a product stand out from its competitors, such as a phone with a new feature that no other phones have. • It is a feature that none of the other businesses have and means the product can be sold for a higher price. 1(a)(ii) Briefly explain the term ‘business objective’ (line 5). 3 Award one mark for each point of explanation: Rationale Marks Example or some other way of showing good C 1 understanding A feature of business objectives, e.g. specific, measurable, achievable, realistic, time-based, based on B market research, resourced, short-term, long-term, can 1 change over time/in response to factors, set by management, SMART etc. Something a business is trying to achieve, direction, A 1 aim, target, goal etc. Note: A, B and C marks are independent of each other Exemplar: This is a specific target that a business aims to achieve. Examples include survival, profit and entering new markets. 1(b)(i) Refer to Table 1. Calculate the value of X. 2 Rationale Marks Correct calculation of the value of X (no $ or 000s required) 2 with or without correct working Correct formula or correct calculation of cash out (with 1 working) No creditable content 0 Formula: Opening Balance + cash in-cash out = closing balance Cash out = $5000 (allow 5) -1 + X – 5 = closing balance of 1 -1 + 7 – 5 = closing balance of 1 X = 7 Answer = 7 ($7000) Common answers Answer Rationale Marks 7 (no working) Correct answer 2 2 + 2 + 1 = 5 Correct calculation of cash out 1 Without working there is no way to know 5 (no working) 0 where this figure came from 1(b)(ii) Explain two methods that PC could use to improve its cash flow. 4 Level Knowledge and Application Marks Explanation of two methods of improving 2 (APP+APP) 4 cash flow in context Explanation of one method of improving 2 (APP) 3 cash flow in context Identification of two methods of improving 1b (K+K) 2 cash flow Identification of one method of improving 1a (K) 1 cash flow 0 No creditable content 0 Cash flow could be improved by: • Decreasing cash out (without decreasing cash in) • Increasing cash in (without increasing cash out) Context and content is likely to come from: Method Context • Declining in forecast Revenue • Focus on market segment suitable for country with rising unemployment New computerised • $10 000 – could use a different source of inventory system finance (i.e. not cash) • Reduce number of workers in one/both stores • Reduce wages (seems to be happening in Employee costs month 6 anyway – can this be done earlier) • Unemployment in country is rising, so may be able to reduce wages. • Revenue is forecast to fall significantly but Purchases purchases do not fall by same proportion – can these be reduced? • Will reduction in the marketing budget mean sales reduce further? Marketing • High spending on marketing budget (50% of revenue in Month 6) – is this necessary? Sources of finance • To cover short term issue in Month 5 1(c) Analyse one advantage and one disadvantage to PC of purchasing the 8 computerised inventory management system. Knowledge Level and Marks Analysis Marks application Good analysis of one advantage and one 4 disadvantage of purchasing 4 Shows an inventory management understanding system in context 2 of inventory Good analysis of one management in advantage or one context 3 disadvantage of purchasing 3 an inventory management system in context Limited analysis of one advantage and one 2 disadvantage of purchasing 2 an inventory management Shows system knowledge of 1 inventory Limited analysis of one management advantage or one 1 disadvantage of purchasing 1 an inventory management system 0 No creditable content Inventory management is the control of stock – this could be raw materials, work in progress of finished products. Contextual analysis likely to come from: Advantages: • PC is in fashion business so being able to respond to customer need important e.g., not running out of sizes or style of clothes • Will allow PC to identify sales patterns quickly and respond to demand, boost revenue and cash in, possibly improve cash flow Disadvantages: • Economy slowing down so making sure not over ordering is important so not left with clothes/footwear that does not sell • Initial outlay expensive and economy slowing down, is this the best time to be investing in a stock control system? • Training for Paul on using the new system – will he have time as a sole trader running two shops? Can he afford it? 1(d) Evaluate Paul’s decision to set up PC as a sole trader. 11 Knowledge and Analysis and Evaluation Marks Marks Application (4 marks) (7 marks) Justified evaluation based on 7 argument(s) in context Developed evaluation based 6 on argument(s) in context An evaluative statement based on argument(s) in 5 context Shows understanding Argument about Paul’s of setting up as a sole 3–4 decision to set up PC as a 3–4 trader in context sole trader Shows knowledge of Limited analysis of being a 1–2 1–2 being a sole trader sole trader No creditable content 0 Note: A candidate may evaluate the decision in terms of setting up as a sole trader or in terms of not setting up as another legal structure (or both). • Paul gets to make his own decisions –he has been through survival and now focusing on maximising profits/sales. Gets to decide what he wants to do with the business e.g., opened up the second shop, investing in the new stock control system • Paul keeps the profits to himself and he has been pleased with the level of profit made. Rewards for his investment/entrepreneurial skills. • Unlimited liability = higher risk especially if economy slowing down and considering Paul’s market, cash flow slowing down and so if the business fails Paul is liable. • Unlimited liability – heightened risk as Paul financed PC with mortgage on his home • Loss of income for Paul as revenue expected to slow for at least the next 6 months. This will affect his livelihood and his standard of living. • More susceptible to competition/changes in the economy.

Question 2

Planet Internet (PI) PI is a public limited company. It is an internet service provider. The business provides fast internet connections to…

Accepted Answer

2(a)(i) Define the term ‘objective’ (line 8). 2 Knowledge Marks A correct definition 2 A partial, vague or unfocused definition 1 No creditable content 0 The stated specific/measurable/achievable/realistic/time-based * target\s (1) * only one needed that the business wants to achieve (1) in the future *** If the student shows understanding and a purpose of the objective then 2 marks *** Exemplar Mark Rationale A specific target a business wants to 2 Both elements (minimum) achieve A specific business target 1 One element only What a business wants to achieve in 1 One element (achieve and the future achievable are different) 2(a)(ii) Explain the term ‘secondary market research’ (line 12). 3 Award one mark for each point of explanation: Rationale Marks C* Example or some other way of showing good understanding 1 B Understanding of secondary/that already exists 1 A Understanding of collection of data 1 * Has to include at least one of points A or B Secondary marketing research (book research) finds data that already exists. It has already been collected by someone else for another purpose. Sources of secondary data can come from competitors, census, sales data etc. ARA Exemplar Mark Rationale Collection of information/data that 3 A and B plus a basic example already exists e.g. off the internet Data that already exists, such as sales 2 B and C only no understanding of data collection Data that already exists 1 B only Sales data/internet 0 No A or B 2(b)(i) Refer to Table 2. Calculate the total value of the internet service market in country X. 3 Rationale Marks Correct answer with or without correct working or $ or BN 3 Incorrect attempt using correct figures 2 Calculation of rest of market share (i.e. 22%) OR 1 Implied knowledge of total market value (i.e. 31.2bn) No creditable content 0 Formula Individual market share values (added up) = total market value They know and apply the formula through the use of figures but missed 22% Content Total value of industry = 100% of market share PI = 31% TB = 32% WS = 15% Therefore other = 22% (100%–78%) 78% of the market = $31.2bn $31.2bn = 0.4bn 78% $0.4bn × 22% = $8.8bn $31.2bn + $8.8bn = $40bn Answer = $40bn (3) Answer Marks Rationale $40 bn/40bn/40 (no units or $) 3 Correct answer 0.4*22 = $8.8bn 2 One mistake (+ 31.2) 31.2/78% = 0.4bn 1 Incorrect attempt, two errors (× 22% + 31.2bn) 31.2bn (with working) 1 Implied knowledge of formula 31 + 32 + 15 = 22% (missing) 1 Worked out the missing percentage of mkt 0.4 bn 0 Wrong answer – no working 2(b)(ii) Explain one suitable way, other than market share, to measure the size of PI. 3 Level Knowledge and Application Marks 2b (APP Explanation of one suitable way to measure the size of IP 3 +APP) 2a (APP) Identification of a suitable way to measure the size of IP 2 1a (K) Identification of one way to measure the size of a business 1 0 No creditable content 0 NB Profit is not an acceptable measure of business size Content • By revenue – PI charges its customers monthly (and we can presume its competitors do too) so this would be a good way to measure the size of the business • By number of customers – The more households who choose PI to provide their internet the bigger the business, since this is the main source of revenue • By coverage – over 95% of the households in country X can access PI’s services. The more coverage the bigger the business. • By market capitalisation – PI is a public limited company so sells shares. Value of the shares (NOT the share price) can be used to suggest how big the business is. ARA Example of how responses should be marked Identification of a way Explanation of a way Explanation of a way in (1 mark) (2 marks) context (3 marks) By revenue As PI charges customers So can compare against monthly competitors By customer numbers As internet provider is their The bigger the number the largest source of business larger the business By coverage Over 95% of households The larger the number the can access PI larger the business By market capitalisation Which shows the value of Which can be compared the PLC against competitors 2(c) Analyse one above the line promotional method and one below the line promotional 8 method which PI could use to gain new customers. Level Knowledge and Marks Analysis (4 marks) Marks Application (4 marks) 2b Shows understanding of 4 Good analysis of one 4 above and below the line method of above and one promotion in context method of below the line promotion in context 2a Shows understanding of 3 Good analysis of one 3 above or below the line method of above or one promotion in context method of below the line promotion in context 1b Shows knowledge of above 2 Limited analysis of one 2 and below the line method of above and one promotion method of below the line promotion 1a Shows knowledge of above 1 Limited analysis of one 1 or below the line promotion method of above or one method of below the line promotion No creditable content 0 Content Above the line methods: • Advertising – market is the whole of country X so although advertising is expensive it may be suitable. • Television advertising • Radio advertising • Newspaper adverting • Social media advertising • ARA 2(c) Below the line methods: • Direct mail – relatively cheap way to target specific areas in country X. PI can target the areas where they have coverage, not waste money on areas without coverage. • Trade shows/roadshows – stalls at shows/markets can be used to ‘sign up’ customers – effective because the service can be personalised to customer needs – employees could be paid on commission keeping costs low • Leaflets – relatively cheap way to target specific areas in country X. PI can target the areas where they have coverage, not waste money on areas without coverage. • Point of sale information – could be placed near computer sales in appropriate shops • Social media – relatively cheap and targets people who like the internet. However, data suggests that households do not change provider, so if they already have the internet they are unlikely to swap. • Putting together a package of existing services ARA Example of a below Examples of Examples of possible the line method (K) application/context (APP) analysis (AN + DEV) Direct mail To the 95% of households they So do not waste money in cover areas without coverage (AN) where they could not fulfill orders (DEV) Trade shows Can offer 3 free months As direct contact can tailor service orders (AN) to meet customer needs (DEV) Leaflets Can highlight offers e.g. 3 Can stimulate interest (AN) months free service and meet the requirements of new customers (DEV) PoS info Placed in computer sales Allows for upselling (AN) which shops can attract new customers (DEV) Example of an Examples of Examples of possible above the line application/context (APP) analysis (AN + DEV) method (K) Advertising Can advertise internet services It might be expensive (AN)but to the whole country e.g. as the service is generic the tv/radio price per customer is low (DEV) Social media People who are interested in But research suggests few new internet deals may follow people switch providers (AN) the company so uptake may be low (DEV)nope, 2(d) Refer to Table 2.1 Evaluate the financial performance of PI compared to its 11 competitors. Knowledge and Application Marks Analysis and Evaluation Marks (4 marks) (7 marks) Justified evaluation based on 7 arguments in context Developed evaluation based on 6 arguments in context An evaluative statement based 5 on arguments in context Shows understanding of two or 4 Developed arguments based on 4 more measures of financial two or more measures of performance in context financial performance in context Shows understanding of one 3 Developed argument based on 3 measure of financial one measure of financial performance in context performance in context Shows knowledge of two or 2 Limited analysis of two more measures of financial measures of financial 2 performance performance Shows knowledge of one 1 Limited analysis of one measure 1 measure of financial of financial performance performance No creditable content 0 Note: Market share is not a correct answer as it is not a financial indicator/measure of financial performance Rationale – Cannot evaluate financial performance based off only one indicator i.e. GPM only Content • GPM of PI is higher that the competitors – suggests that PI is efficient in terms of direct costs (economies of scale) • NPM is lower than all of the other competitors – suggests that PI is inefficient in terms of indirect costs (diseconomies of scale) • Working capital is negative – suggests that PI could struggle to pay short term debts. Does it have enough cash to pay for any promotion? Will IP be able to survive the short term? Will IP need a short-term source of finance? • Current ratio shows that PI does not have enough CA to cover CL – Does it have enough cash to pay for any promotion? Will IP be able to survive the short term? • However, TB seems to be holding too many CA – is this efficient? • Web solutions has much better (twice) NPM than PI – how can this business be so much more efficient? Can PI copy any of its techniques? 2(d) ARA Routes to evaluation • Which firm is best/worst • Which set of financial data is most important • The relative importance of financial performance compared to other areas – i.e. sales performance An example of how an answer could develop and how it should be annotated. K APP AN DEV EVAL Gross profit PI has the This means Which could PI has a good margin margin highest GPM that they mean they which is essential for a have low have more profitable business direct costs efficient production However they may still face liquidation Working Is the only Which may And not have capital one of the mean they enough This depends on three that can struggle money to whether their creditors has a to pay their spend on insist on immediate negative debts marketing payment working capital

Question 3

Job Shop (JS) JS is a public sector organisation in country X. The mission statement of JS is in Fig. 1.1. To match up businesses that need…

Accepted Answer

Question Answer Marks 1(a)(i) Define the term ‘public sector’ (line 1). 2 Knowledge Marks A correct definition 2 A partial, vague or unfocused definition 1 No creditable content 0 Content Organisations that are owned/controlled by the government (2). ARA* Exemplar Mark Rationale Businesses that are owned by the state 2 Correct definition The sector of the economy which is 2 Correct definition controlled by the government A business that is owned by the state 1 Partial because the and where shares are sold on the stock candidate has some exchange confusion with PLC Paid for by taxes 1 Partial understanding Run for the good of society 1 Partial understanding – it is run by the state for this reason Not in the private sector 0 No creditable content Not for profit organisation 0 No creditable content – confusion with a charity *ARA means ‘all reasonable answers. This allows for answers which are similar to the ones in the mark scheme and are correct. 1(a)(ii) Explain the relationship between a mission statement and a business objective Rationale Marks C Identification of the relationship between a mission 1 statement and a business objective B Understanding of a business objective 1 A Understanding of a mission statement 1 Note: allow any reasonable understanding of ‘aims’, ‘targets’ ‘goals’ in relation to mission statements and objectives. These terms are often used in completely different ways by different sources and so any reasonable use is acceptable if you believe the candidate has shown understanding of an objective and/or missions statement. Content • Objectives should be in line with the mission statement and move the business towards the mission statement (C) • A mission statement is a visionary aim for a business of the direction/purpose. (A) • An objective is a specific target that should have a time period in which to achieve it. (B) 1(a)(ii) ARA Exemplar Mark Rationale The mission is the aim (A) but the 3 All three elements business has the specific targets called objectives (B) to reach that aim (C) Achieving the objectives help move the 1 No explicit business towards the mission statement understanding of (C only) either an objective or a mission statement – only the relationship The mission statement sets out the 2 No explicit direction (A) and the objectives should understanding of help the business go in that direction (C). business objectives. A mission statement is something a 2 Both mission business wants to aim towards that may statement and be unattainable (A), whereas a business objective have been objective is a specific, measurable, understood but the achievable, realistic and times-based relationship is not goal that can be reached (B). explained. A mission statement is a visionary aim 2 Both mission for a business of the purpose (A). statement and Whereas an objective is a specific target objective have been that should have a time period in which understood but the to achieve it (B). relationship is not explained. 1(b)(i) Refer to Table 1.1. Calculate the rate of labour turnover for the whole 3 of JS in 2018. Rationale Marks Correct answer with or without correct working or % 3 Identification of correct figures from Table 1.1 used in formula 2 Correct formula* 1 No creditable content 0 *Formula can be implied through the correct use of figures Content Number of employees who left × 100 Total number of employees 6250 + 550 + 600 × 100 25000 + 5000 + 10000 7400 × 100 40000 = 18.5% OFR* 1(b)(i) Common incorrect answers Answer Mark Rationale 18.5 3 Correct answer – does not require % sign 7400 2 A mistake in the = 0.185 (implied) knowledge 40000 of the formula by not multiplying by 100 (turning it into a percentage) 0.185 (no working) 0 There is no reference to where this (wrong) answer came from, so no marks. 40000 2 Inverted formula – × 100 = 540.54% but correct figures 7400 and OFR for the answer. 6250 2 Implied formula × 100 = 25% correct, but wrong 25000 use of figures. However, based on those wrong figures the answer is correct using the OFR. 6250 1 Implied formula × 100 25000 *OFR means the use of the own figure rule – this aims to reward a candidate for the stages of a calculation that are correct, even if an earlier stage or figure used is incorrect. An early mistake, for example, would create all following calculations to have wrong answers, but these are still rewardable (if correct when using a candidate’s own figures) Therefore the candidate cannot gain marks for the stage that was incorrect, but can gain all the subsequent marks. 1(b)(ii) Explain one disadvantage for JS of having high labour turnover. 3 Level Knowledge and Application Marks 2b (APP) Explanation of one disadvantage of high labour 3 turnover in context 2a (K+K) Explanation of one disadvantage of high labour 2 turnover 1a (K) Identification of one disadvantage of high labour 1 turnover 0 No creditable content 0 Content • Increased recruitment costs – these are highly trained and skilled employees so difficult to replace. Also, as a public sector organisation, this reduces funding for other government spending. • Loss of productivity – time-lag between losing workers and gaining new workers – JS still needs to run. New employees are unlikely to be as productive as experienced employees. Might give poor customer service or result in less employment opportunities – highest labour turnover in customer service department. • Cost of training/induction – new employees will need to be trained in customer service. • Poor reputation – might be difficult/take longer to hire new workers • Lowers motivation/demotivates ARA and OFR Example of how responses should be marked Identification of a Explanation of a Explanation of a disadvantage disadvantage (2 disadvantage in (1 mark) marks) context (3 marks) Increased costs (K) Increased costs (K) Because the workers because those workers are highly skilled and who leave JS will need trained JS will have to be replaced which high recruitment costs adds to the recruitment when they leave (APP) costs (K) People might not People might not want It may be become very want to work at JS to work at JS (K) which difficult to recruit (K) will make recruitment people, especially in much more difficult (K) department A (APP) *OFR in this case is if a candidate has used an incorrect answer from 1(b)(i) – if their explanation is correct using their own figures then ALL marks can be rewarded in this question. 1(c) Analyse one economy of scale and one diseconomy of scale which 8 may affect JS. Level Knowledge and Marks Analysis (4 Marks Application (4 marks) marks) 2b Shows 4 Developed 4 understanding of analysis of one one economy economy and and diseconomy diseconomy of of scale in scale in context context 2a Shows 3 Developed 3 understanding of analysis of one one economy or economy or diseconomy of diseconomy of scale in context scale in context 1b Shows 2 Limited analysis of 2 knowledge of one one economy and economy and diseconomy of diseconomy of scale scale 1a Shows 1 Limited analysis of 1 knowledge of one one economy or economy or diseconomy of diseconomy of scale scale 0 No creditable response LARGEST is contextual as it is stated in the case. However LARGE is not as it is generic to most/all businesses experiencing economies of scale. Content A candidate does not need to name an economy or diseconomy of scale – a description is good enough (for example ‘bulk buying’ is enough to award purchasing economies of scale). 1(c) Economies of scale: • Managerial economies of scale – for example personnel managers who may be able to deal with JS labour turnover issue • Marketing economies of scale – many outlets in every main town and city means that marketing costs can be averaged out over a large number of outlets • Purchasing (allow bulk buying) economies of scale – in terms of administration items (do not accept bulk buying of inventory unless it is in context as this is a service sector business) • Technical (do not reward technological) economies of scale – better admin computer software/systems • Financial economies of scale – government backing likely to be more important than size but JS is still more likely to get favourable financial terms due to their size. • Risk bearing – unlikely to be contextual as JS only focuses on one/two services Diseconomies of scale: • Communication problems – outlets must cooperate with each other to maintain good customer service. • Poor leadership – 25% of labour turnover is due to poor leadership – too many workers to lead? • Poor motivation – Is the high labour turnover and issues due to the size of the business? • Bureaucracy – 10 000 admin workers suggest a great deal of ‘red tape’ • Duplication of effort – Each outlet likely to have the same job-role repeated. Allow external economies or diseconomies of scale – ARA Example of an Examples of Examples of possible economy of scale application/context analysis (AN + DEV) (K) (APP) Marketing Because JS has an JS can use nationwide economies of outlet in every major advertising campaigns scale town and city which are likely to have less cost per potential customer who sees it (AN) which means JS has more money to spend on finding people jobs (DEV) 1(c) Example of a Examples of Examples of possible diseconomy of application/context analysis (AN + DEV) scale (K) (APP) Communication Because JS is spread This means that diseconomies of out over the whole of messages may not get scale country X properly communicated and some jobs might not get filled (AN) meaning that JS does not get as many people out of unemployment (DEV). 1(d) Recommend how JS could improve the motivation of its employees in 11 Department A. Justify your recommendation. Knowledge and Marks Analysis and Mark Application (4 marks) Evaluation s (7 marks) Justified recommendation 7 based on argument in context Developed 6 recommendation based on argument in context An evaluative statement / 5 recommendation based on argument in context Shows understanding of 3–4 Developed argument 4 (de)-motivation in the (balanced**) based on customer service way(s) which JS could department improve motivation in the customer service department Developed argument 3 (imbalanced*) based on one way which JS could improve motivation in the customer service department Shows knowledge of 1–2 Limited analysis of way(s) 1-2 (de)motivation which a business can improve motivation No creditable content 0 1(d) *Imbalanced argument is when a candidate only looks at what is good or bad about only one way. **Balance in an argument can be gained by looking at more than one way OR by having developed analysis of is good and developed analysis about what is bad about one way Content • Increase pay/financial motivation – 30% of leaving employees are leaving for ‘poor pay’. However, can the government of county X afford a pay increase? • Non-financial motivation – 20% leaving because of a boring job (job enrichment/enlargement/rotation – improve motivating factors etc.), more delegation etc. • Increase levels of hierarchy to improve promotion chances. 5% of workers leaving for this reason. • Allow movement between outlets – 5% have moved to another town – JS may be able to keep them in the business by offering them a job in another outlet. • Improve leadership – is JS using the right leadership styles? Do the managers need training? • Improve training – employees are highly skilled and trained, but maybe they could be offered more to keep them in the business. In particular, training on how to deal with customers as this is a major reason for the turnover. • Make more social opportunities for staff • Improve recruitment and selection processes – are people leaving because they were not the right people in the first place? 1(d) ARA An example of how an answer could develop and how it should be annotated. K APP AN DEV EVAL JS could This may be This is likely Which will Overall pay pay its effective to lead to decrease could help to workers because less people the improve the better to 30% of leaving recruitment motivation of motivate people who Department costs of JS the them (K) leave think A (AN) (DEV) employees that JS has in poor pay Department (APP) A (EVAL) However, And there So, the extra Which because it money does are many pay may not means that has the not motivate other motivate the JS has less highest everyone reasons why employees money labour (K) employees but will available to turnover rate leave JS, increase meet their and the such as the costs (AN) mission biggest 25% of statement reason is people who (DEV) poor pay leave (EVAL). because of poor However, it leadership depends on (APP) whether JS can afford to increase pay enough to make a real difference to the motivation of the employees (EVAL).

Question 4

First Nature (FN) FN is a co-operative farm producing milk, beef and vegetables. Products are sold in its shop and at local farmers’ market…

Accepted Answer

Question Answer Marks 1(a)(i) Define the term ‘mission statement’ (line 2). 2 Knowledge and Application Marks A correct definition 2 A partial, vague or unfocused definition 1 No creditable content 0 Note: Do not allow objectives or confusion with a business’s objectives Answers could include: A written summary of an organisations main purpose / focus. Usually doesn’t change over time. Shows what is important to the organisation, communicates sense of intended direction to external and internal stakeholders. May give examples. A correct definition should include two aspects of a mission statement, for example two of the of the following: • Vision / beliefs • Purpose • Goals • Values • Focus • Marketing / communication – attract customers • (Core) aim • Motivational • Long term • Sense of direction • Creates interest by external groups • Communicates to stakeholders • It is not an objective Exemplar Mark Rationale The goals and aims of a 2 Two aspects business Statement of an organisation’s 1 Simple but correct definition vision Document showing the purpose 1 Partial definition of a business A mission statement is a 0 Do not reward linking to statement of objectives being an objective 1(a)(ii) Explain the term ‘co-operative’ (line 1). 3 Award one mark for each point of explanation: Example or some other way of showing good understanding, e.g. bulk buying, common in 1 mark C agriculture, motivational, slow decision making, allows Pink the achievement of economies of scale etc. • Responsibilities are shared • Owners may contribute to the running of the 1 mark B business Yellow • Shared decision making • All members have one vote • Owned / financed by workers / customers / 1 mark A members Blue • Profits are shared Note: using the case as an example is repetition and not rewardable as the C mark A co-operative is a business structure where the workers are the owners. The profits are shared with workers. Workers (owner) do not have to run the business, they will vote for Directors. In smaller co-operatives such as co- worker operatives then workers may also run the business. Exemplar Mark Rationale Members (A) own a co-operative and share the running (B) of the business. QL is a 3 A, B and C worker co-operative which mean the workers are the members (C). A co-operative can be owned by customers or workers (A) who will each have a vote 3 B and C (B). Because they own it, they are motivated for it to do well (C). A co-operative has shared profit (A) and 2 A and B responsibilities (B) Members (A) who join together to benefit 2 A and C from bulk buying (C) A co-operative is made up of people who Three points but share the responsibilities of the business 1 all from so only (B). Each person has a vote and the one mark. decision making is shared. 1(b)(i) Refer to Table 1.1. Calculate the value of X in quarter 4. 2 Rationale Marks Correct answer with or without correct working or $ or 000s 2 Correct formula* or the correct identification of figures 1 No creditable content 0 *Correct formula can be implied through the use of figures Formula: Opening balance + cash in – cash out –$100 000 + $200 000 – $10 000 = $90 000 (accept 90) Answer Mark Rationale 90 (no working) 2 A correct answer 200 – 10 – 10 = 180 1 Only mistake is doubling up the cash 180 – 100 = 80 out figure, so one mark –100 + 200 – 20 = 80 1 Formula implied through use of figures (i.e. one added and one subtracted from opening balance) but wrong cash out and wrong answer 0 A wrong answer with no working to 80 (no working) show thinking $100 000 + $10 000 = 0 Formula is obviously wrong and 110 000 answer is also wrong 1(b)(ii) Explain two benefits to FN of cash flow forecasting. 4 Level Knowledge and Application Marks 2b Explanation of two benefits of cash flow 4 (APP+APP) forecasting in context Explanation of one benefit of a cash flow 2a (APP) 3 forecasting in context 1b (K+K) Identifies two benefits of cash flow forecasting 2 1a (K) Identifies one benefit of cash flow forecasting 1 0 No creditable content 0 Note: an answer which explains ONE benefit in context (i.e. APP annotation) gains 3 marks. Content is likely to come from: • Identifies potential cash shortfalls – If a business runs out of cash and is able to obtain new finance, it will become insolvent. • To measure the financial performance of the business • Makes sure the business can pay debts / bills • Identifies potential problems with customer payments • Allows better management of a business’s finances • To give information to other stakeholders, e.g. banks • Identify potential shortfalls in cash balances in advance – ‘early warning system’. Note: cash flow forecasting does not allow a business to forecast profit / loss Context may come from: • Expansion • Use of numbers from Table 1.1 • Purchase of neighboring farm • Answer to 1(b)(i) Example of how responses should be marked: Identification of a benefit of Explanation of a benefit in context cash flow forecasting (K) (APP) Manage cash To see if they can afford to expand Identify times when they do not For example in the first three quarters have cash 1(c) Analyse two sources of finance, other than selling shares, FN could 8 use to purchase the neighbouring farm. Knowledge and Analysis Level Marks Marks Application (4 marks) (4 marks) Shows understanding Developed analysis of two sources of 4 two sources of 4 finance in context finance in context 2 Shows understanding Developed analysis of of one source of 3 one source of finance 3 finance in context in context Shows knowledge of Limited analysis of two sources of finance 2 two (or more) sources 2 of finance 1 Shows knowledge of Limited analysis of 1 1 one source of finance one source of finance 0 No credible content Note: do not reward the sale of share OR the change of legal structure to a PLC (unless it is totally unrelated to share issue) Content: Internal sources of finance: • Retained earnings • Sale of unwanted assets • Sale and leaseback of non-current assets • Working capital External sources of finance: • New partners • Venture capital • Overdrafts • Leasing • Hire purchase • Bank loans • Mortgages • Debentures • Micro-finance • Crowd funding • Government grants 1(c) Could choose any source of finance but, from the context, most likely to consider getting more members in the co-op or obtaining a bank loan – analysis and understanding will come from the context Note: ‘internal’ and ‘external’ can be sources of finance in themselves Contextual analysis likely to come from: • Amount to raise is $80 000 (or $140 000 based on negative cashflow) • One option discussed to invite more members of the co-op • Bank loan – cash flow predicts a healthy surplus in just over a year • Internal finance may not be suitable as FN has limited capital / poor cashflow • Being a co-operative Example of Examples of application Examples of possible a source of / context (APP) analysis (AN + DEV) finance (K) Bank loan Been established for 10 Interest will have to be repaid years so likely to be (AN) which may mean that FN granted has even worse cashflow (DEV) Mortgage The farm is a property so Mortgage would have a lower a mortgage would be interest rate than a bank loan suitable (AN) but still reduces the profits of the business (DEV) 1(d) Evaluate the likely impacts on the local community if FN changes from 11 a co-operative to a public limited company. Knowledge and Analysis and Evaluation Marks Marks Application (4 marks) (7 marks) Justified evaluation based 7 on arguments in context Developed evaluation based on arguments in 6 context An evaluative statement based on arguments in 5 context Argument based on two impacts of FN changing from a co-operative to a 4 public limited company on Shows understanding of the local community changing from a 3–4 cooperative to a public Argument based on one limited company in context impact of FN changing from a co-operative to a 3 public limited company on the local community Limited analysis of two impacts of a change in 2 legal structure a local Shows knowledge of community changing from a co- 1–2 operative to a public limited Limited analysis of one company impact of a change in legal 1 structure on a local community No credible content 0 Note: local community could include customers, neighbouring farms, suppliers. Internal stakeholders are not local community, such as investors and members. 1(d) This is a question about changing legal structure, not creating jobs. If knowledge of changing legal structure has been shown, then creating jobs can be an impact (i.e. analysis) but no reward if that knowledge has not been shown earlier in the answer. Context / content: • Customer focused business – will it alienate their customer base • Will prices rise as shareholders would want high profit / dividends • Culture of a PLC very different to a co-operative • Will it affect working relationships • Not all members agree so already causing conflict • Could provide finance for the expansion and no interest to pay • Provide income for members • Would have to appoint Board of Directors – members might all want to be on the board • Currently all have equal rights – this could change • Will it change mission statement especially in relation to local community? • Will it change plans for use of additional land from education and events for the local community? • Will it still commit to sustainable farming? • Neighbouring farms may fear possible takeover An example of how an answer could develop and how it should be annotated: K APP AN A PLC can sell shares It could use the capital It can afford to employ (K) so FN can gain to open more local more people from the more capital (K) farm shops (APP) and local community (AN) provide more and living standards educational would rise (AN) programmes (APP) A PLC can sell shares FN may no longer offer To increase profits to the general public educational prices may go up (AN) (K) its main business programmes (APP) or lower quality objective is profit and may cut costs by products offered (AN) maximization (K) using lower quality seeds (APP) 1(d) DEV EVAL If shops are nearby In the short-term then this will be more converting to a PLC convenient for local will benefit the people who will buy community (EVAL) as their daily foods more they will have lower easily which will reduce living costs and higher travelling costs (DEV). incomes from employment (EVAL). More educational programmes will mean In the long run the that more local people educational can benefit from these programmes will also programmes and their give them skill levels will increase qualifications which and they will be more will make it easier for employable (DEV) those people to get better paid jobs (EVAL) FN’s mission to The impact on the contribute to the local local community will be community may no negative (EVAL) as longer be an aim and they will not be offered the local community programmes to will not be able to increase their skill benefit from the levels and educational employability (EVAL) programmes (DEV) and, at the same time, The rise in the price of will face lower living products will impact the standards as there is a local community, greater impact on especially the poorest, income, from paying as they will be unable higher prices for a to buy as much and necessity (EVAL) food is a necessity (DEV)

Question 5

UPlane Components (UC) UC is a private limited company providing engine parts for commercial aircraft. It uses batch production in factory …

Accepted Answer

Question Answer Marks 1(a)(i) Define the term ‘corporate social responsibility (CSR)’ (line 3) . 2 Knowledge and Application Marks A correct definition 2 A partial, vague or unfocused definition 1 No creditable content 0 Answers could include: When a company aims to act ethically and responsibly to ensure that the public perceives it positively and may help to attract new customers. A correct definition should include the following elements (allow one mark for each element): • Acts ethically / in the interests of society / the environment • Helps attract new customers / considers impact on stakeholders / business objective beyond legal obligations Exemplar Mark Rationale Businesses act ethically and consider 2 Both elements – the impact of their actions on customers ethically and impact on a stakeholder (customers) Where a business considers the impact 1 One element only on the environment CSR is a business objective 0 Not defined 1(a)(ii) Explain the term ‘triple bottom line’ (line 15). 3 Rationale Marks C An explanation of all three elements of a triple bottom 1 line to include, e.g. an example or some other way of showing a good understanding B An understanding of all three elements of a triple 1 bottom line A An understanding of two elements of a triple bottom line 1 Answers could include: The 3Ps of people, planet and profit. Broader measure than the financial bottom line to include a measure of businesses social responsibility, economic value, and environmental impact. Exemplar Mark Rationale It is to maximise profits for 3 All 3 elements + shareholders, taking care of the example ‘maximising environment and benefitting the profits for community shareholders’ The triple bottom line includes social, 2 All 3 elements but no environmental and economic objectives expansion Triple bottom line puts the planet before 1 Only 2 elements profit The triple bottom line refers to the base 0 NAQ – no explanation objectives of a business or evidence of understanding 1(b)(i) Refer to Table 1.1. Calculate the forecast profit margin for the year 3 ending 30 November 2020. Rationale Marks Correct answer with or without correct working or % 3 Formula and correct calculation of profit 2 Formula or correct calculation of profit for end of Nov 2020 1 No creditable content 0 e.g. Profit margin = (profit / total revenue) x 100 (1) Profit for end of Nov 2020 = 6.4m – (3.4m + 1.6m + 200 000) = $1.2m (1) $1.2m / $6.4m = 0.1875 (2) ($1.2m/$6.4m) x 100= 18.75% (3) Accept any answer between 18.7% and 19% (3) % not required for full marks OFR* 1(b)(i) Common incorrect/correct answers Answer Mark Rationale 18.75 3 Correct answer – does not need % 18.8% 3 Correctly rounded answer (1 dec place) 19% 3 Correctly rounded answer (0 dec places) 0.1875 2 Incomplete calculation – did not x100 [3 – (1.6 – 0.2)] / 6.4 x 2 Method is correct except (1.6 – 0.2) 100 = 25% should be (1.6 + 0.2), a mistake in the sign. This is an example of *OFR below 25% (no working) 0 No calculation and wrong answer Profit margin = 1 Formula only (profit/total revenue) x 100 $1.2m 1 Correct calculation of profit *OFR means the use of the own figure rule – this aims to reward a candidate for the stages of a calculation that are correct, even if an earlier stage or figure used is incorrect. An early mistake, for example, would create all following calculations to have wrong answers, but these are still rewardable (if correct when using a candidate’s own figures) Therefore the candidate cannot gain marks for the stage that was incorrect, but can gain all the subsequent marks. 1(b)(ii) Explain one likely effect on UC of a decrease in profit. 3 Level Knowledge and Application Marks APP Explanation of an effect of a decrease in profit 3 on UC K+K Explanation of an effect of a decrease in profit 2 K Identification of an effect of a decrease in profit 1 0 No creditable content 0 Context and content is likely to come from: Possible effects may include: • May affect surplus for reinvestment in the apprenticeship scheme • May affect demand if business confidence in UC falls • May delay plans for factory A • May cause employees to worry which could lead to demotivation Identification of Explanation Possible context an effect (K+K - 2 marks) (APP - 3 marks) (K - 1 mark) May have to to avoid getting into so may cut its training decrease costs debt scheme for the long-term unemployed They have less which could affect such as the automation of to invest in the expansion plans factory A business 1(c) Analyse two likely effects on the other employees if Jack is dismissed. 8 Level Knowledge and Marks Analysis Marks Application (4 marks) (4 marks) 2 Shows 4 Developed analysis of 4 understanding of two two effects, on other effects, on other employees, of employees, of dismissal in context dismissal in context Shows 3 Developed analysis of 3 understanding of one one effect, on other effect, on other employees, of employees, of dismissal in context dismissal in context 1 Shows knowledge of 2 Limited analysis of 2 two effects of two effects of dismissal dismissal Shows knowledge of 1 Limited analysis of 1 one effect of one effect of dismissal dismissal 0 No creditable content Dismissal is when an employee is asked to leave the workplace for misconduct or for disobeying company rules and policies. Context could come from • Jack’s negligence causing faulty part – Is the dismissal fair? • Because of the recall cost, there will be a reduction in profit - some employees may be asked to leave • Accelerate the automation of factory A – less need for production supervisors or other workers • Effect on motivation to work overtime • Uncertainty/distrust of management 1(c) Example Examples of Examples of possible analysis of an application/context (AN + DEV) effect (K) (APP) Other as they may have to hence this increased workload employees cover Jack’s supervisor could cause them to become may have role tired, (AN) make more mistakes an and fear dismissal (DEV) increased workload It could Jack’s mistake, which with more consistent production lead to the lead to his dismissal, (due to automation) there will be firm could accelerate plans less need for production becoming to automate factory A supervisors (AN) or other more workers. They may find it hard to capital get another job as those workers intensive were previously long-term unemployed (DEV) 1(d) Recommend whether UC should automate factory A. Justify your 11 recommendation. Knowledge and Marks Analysis and Evaluation Marks Application (4 marks) (7 marks) Justified recommendation 7 based on arguments in context Developed recommendation 6 based on arguments in context A recommendation based 5 on arguments in context Shows understanding of 4 Arguments (two-sided) 4 two aspects of based on the advantages automation in context and disadvantages of automation in context Shows understanding of 3 Argument (one-sided) based 3 one aspect of on the advantages or automation in context disadvantages of automation in context Shows knowledge of two 2 Limited analysis of 2 aspects of automation advantages and disadvantages of automation Shows knowledge of 1 Limited analysis of 1 one aspect of advantages or automation disadvantages of automation No creditable content 0 Context/content: • Faulty part made in factory A which uses batch production • Costs of recall may delay change • Effect on employees especially skilled workers • Effects on apprenticeship scheme • Will they be able to meet their social enterprise objectives? • Lower unit costs in factory B • Cost of investment may mean less to invest in employee training • Why the need to reduce unit costs? Social enterprise is already making a good profit, even after recall • Could reduce price, asked by customers, through efficiency savings 1(d) Examples of how an answer could develop and how it should be annotated. K APP AN DEV EVAL Automated The This should Therefore UC To some machinery company mean that could re-invest extent is more will be the average the extra profits automation consistent able to unit cost will into the could be produce fall company, as a damaging to engine source of UC because parts finance, and of high start- more help it achieve up costs quickly its CSR (EVAL) objective. However, I would UC should The cost This could Consequently, recommend not of sales mean that as UC is a that UC automate are UC’s private should as it would already profitability company it automate have high forecast will cannot sell Factory A set-up costs to rise by decrease shares to the (EVAL) as it $1.1m in public to cover will have a 2020 these costs so higher level of they may face consistent a cash-flow output leading problem and to lower their liquidity average costs may not be and higher sustainable. profits in the long-run (EVAL)

Question 6

Lakeland Oysters (LO) Lakeland Oysters (LO) is a private limited company in country G that was started by the Dar family in 2010. LO farms …

Accepted Answer

2(a)(i) Define the term ‘market’ (line 6). 2 Knowledge Marks A correct definition 2 A partial, vague or unfocused definition 1 No creditable content 0 Content Consumers who want a product/service / the demand for a product/service (1) from different types/groups/segments of consumers (1) who are willing/able to pay for it (1). The term ‘market’ has a number of different meanings. Any legitimate definition can be used. The most common definition (as a means of trade) is likely to include: • A system/place/facility whereby products are bought (1) and sold (1) • Where businesses and consumers (1) trade (1) However other definitions may include: Market as a group of potential customers for a product: • The customers/consumers (1) who may potentially purchase a product (1) • The businesses (1) who are competing to sell a product (1) • The group of people (1) who the business is trying to sell to (1) Market as a verb, i.e. to market a product • The combination/mix of decisions (1) that a business uses to target a group of customers (1) Exemplar Marks Rationale Where buyers and sellers come to 2 A correct definition. trade. Where you exchange goods and 2 A correct definition services The market is a group of businesses 1 An idea of the market (from the businesses point of view) but not selling/competing 2(a)(ii) Explain the term ‘profit margin’ (line 6). 3 Award one mark for each point of explanation: Rationale Marks C Example or some other way of showing good 1 understanding – i.e. a use of profit margins, or two different profit margins – gross, net, operating). B Understanding of the concept of a profit margin (in terms 1 of a profit/percentage) A Understanding of profit 1 Content A profit margin is the difference between the revenue and costs/revenue minus costs (1) expressed as a proportion of revenue/divided by revenue (1) used to determine/compare performance (1). Any profit margin is acceptable (gross, net, operating). ARA 2(a)(ii) Exemplar Mark Rationale Net profit/revenue × 100. It can be 3 A, B and C used to compare business performance. It is the proportion of revenue that is 3 A, B and C profit. A 15% profit margin means that for every $1 of revenue, the business makes $0.15 profit. Grossprofit 2 A formula gains the A ( × 100 ) and B marks. Could be Revenue expressed as a ratio, not percentage. The proportion of revenue that is 2 Although there is not an profit. explicit understanding of profit, if a candidate gains the B mark, then they also gain the A mark. It is the difference between costs 1 Understanding of profit, and revenue. but no the margin. It is how much profit a business 0 No understanding of makes. profit or the margin. 2(b)(i) Calculate the total profit made from selling oysters in 2020. 2 Rationale Marks Correct answer with or without correct working or $ 2 Correct calculation of the profit for restaurants or local 1 customers No creditable content 0 Content 15% of $100 000 = $15 000 25% of $150 000 = $37 500 Total profit = $52 500 (2) 2(b)(ii) Explain two possible reasons why the profit margin for the consumer 4 market is higher than the profit margin for the industrial market. Level Knowledge and Application Marks 2b Explanation of two possible reasons why the profit 4 (APP+ margin for the local consumer market is higher than APP) the profit margin for the industrial market 2a Explanation of one possible reason why the profit 3 (APP) margin for the local consumer market is higher than the profit margin for the industrial market 1b Identification of two possible reasons for different 2 (K+K) profit margins 1a (K) Identification of one possible reason for different 1 profit margins 0 No creditable content 0 Content may include: • Consumers may be willing to pay a higher price (K) - of $3 per oyster. (APP) - because oysters are a premium product. (APP) - because consumers are purchasing customer service as well as the oysters (visit the farm). (APP) - because they do not buy in bulk. (APP) • Consumer market may have lower costs (K) - because the consumer market may be subsidised by the larger industrial market. (APP) - because the consumer market is 50% bigger, but may only be allocated half of the fixed costs. (APP) • Industrial market may demand a lower price (K) - of $1.25 per oyster. (APP) - because the restaurant industry is very competitive (many restaurants). (APP) - because each restaurant buys in bulk. (APP) - because there are many substitute foods that the restaurant could use. (APP) - because the restaurant must re-sell the oysters for a profit. (APP) • Industrial market may have higher costs (K) - because LO have to transport the Oysters to the restaurants (APP) - because restaurants use the website, which may be an additional cost to LO (APP) ARA 2(c) Analyse why two of the elements of the triple bottom line are important 8 to LO. Level Knowledge and Marks Analysis (4 Mark Application marks) s (4 marks) 2b Shows 4 Good analysis of 4 understanding of APP two elements of DEV two elements of + the triple bottom + the triple bottom line in context line in context APP DEV 2a Shows 3 Good analysis of 3 understanding of the importance of one element of one element of the triple bottom the triple bottom line in context APP line in context DEV 1b Shows knowledge 2 Limited analysis of 2 of two elements the importance of of the triple two elements of AN bottom line K the triple bottom + + K line AN 1a Shows knowledge 1 Limited analysis of 1 of one element of the importance of the triple bottom one element of line the triple bottom K line AN 0 No creditable content 2(c) Content: Knowledge includes: • economic (financial), social and environmental targets Application and analysis may include: Economic (financial) • Dar family will require profit to be made as shareholders of LO – owners income. • Retained profit – need finance for expansion plans to purchase the new farm. • Potential grant from government for oyster farms – subsidise operations/growth. Social • Provides employment for six local workers – improve image of LO in locality. • Provides an opportunity for local customers to purchase oysters – market opportunity. • Pays local taxes – improve locality. • Provides pleasant area for the local community – increases reputation. Environmental • Oyster farming reduces pollution – improves area, quality of life for owners. • Better for the environment if lakes are managed / regenerating disused lakes – improves local area / reputation. ARA 2(d) Refer to Table 2.2 and any other relevant information. Recommend 11 which location LO should choose. Justify your recommendation. Knowledge and Analysis and Application Marks Evaluation Marks (4 marks) (7 marks) Annotation Annotation Justified 7 + + recommendation EVAL based on arguments of EVAL EVAL two factors in context Developed 6 + recommendation EVAL based on arguments of EVAL two factors in context An evaluative 5 statement/recommend ation based on EVAL arguments of two factors in context Shows 4 4 understanding of APP DEV + Argument based on + two factors two factors in context affecting location APP DEV in context Shows 3 3 understanding of Argument based on one factor APP DEV one factor in context affecting location in context Shows 2 2 K Limited analysis of two AN knowledge of two + + factors affecting factors affecting K location AN location Shows 1 1 knowledge of one Limited analysis of one K AN factor affecting factor affecting location location No creditable content 2(d) Content Knowledge may include: • Any factor that may affect the location of a business. Application may include: • LO is a private limited company (limited finance) • Consumer and industrial (restaurant) markets • The new location is to be a second location – it does not replace the original LO location • Data in Table 2.2 Analysis may include: Location A • Used to be an oyster farm – less time and cost to set up for LO • Lower purchase price – less finance needed to purchase • Lower start-up costs – LO could reduce price and/or increase profit • Lower operating costs – increased profitability. Location B • Much closer than Location A – lower costs, e.g. transportation, management, are easier • Can produce 50% more oysters than Location A – more profit in long- term? If there is the demand / additional oysters are sold at a good price • Higher operating costs, but lower variable cost of production ($1.33 per oyster compared with $1.5 at Location A) ARA 2(d) Examples of how an answer could develop and how it should be annotated. K APP AN DEV EVAL Previous Location A Which may Which may Location A use (K) is already mean that allow LO to is the better an oyster LO can start increase option for farm (APP) selling their profits. LO. (EVAL) oysters (DEV) more This is quickly and because keep the there is less costs low. risk (AN) involved since the costs are lower. (EVAL) However, it depends on whether LO can make immediate use of the extra capacity since Location B could actually produce much higher output and profit in the long run. (EVAL) Output (K) Location B Which Allowing the can would allow business to produce LO to expand 50% more increase faster. oysters than their sales (DEV) Location A. more than (APP) Location A. (AN)

Question 7

Belted Up (BU) Belted Up (BU) is a manufacturer of hand-made leather belts for clothing. The business makes a range of sizes and colours of…

Accepted Answer

2(a)(i) Define the term ‘liquidity’ (line 15). 2 Knowledge Marks A correct definition 2 A partial, vague or unfocused definition 1 No creditable content 0 The ability (cash) for a business to pay its short-term debts / the ease with which assets can be turned into cash (or are cash) to use immediately. A correct definition should include the following elements: • Assets that can be turned into cash • To use immediately if needed or to pay short-term debts Exemplar Rationale Marks Liquidity means current Both elements 2 assets that can be quickly sold for cash The ability to sell assets for No mention of immediacy 1 cash Liquidity means an asset that Tautology 0 is liquid ARA 2(a)(ii) Explain the term ‘internal growth’ (line 13). 3 Award one mark for each point of explanation: Rationale Marks C Example or some other way of showing good 1 understanding B Understanding of the concept of internal 1 A Knowledge of growth 1 When a business increases in size, by reinvesting money to increase output, for example using retained profit to buy new assets. Often referred to as organic or natural growth. Could come from developing new products, increasing efficiency, successful marketing, diversification, process change etc. Exemplar Rationale Marks When a business increases A+B+C 3 in size (A) using its own resources (B) generated from increased efficiency (C) When a business expands A and B 2 (A) by reinvesting profits (B) Opening new branches (A + Expansion and internal both B) implied When a business expands A point only 1 (A) When a business grows Tautology 0 internally ARA 2(b)(i) Refer to Table 2.1 and any other relevant information. Calculate the 2 total revenue from selling the Classic belt in 2020. Rationale Marks Correct answer with or without correct working or $ 2 Formula or correct calculation of the revenue for one belt 1 No creditable content 0 Output = 265 000 Price = $11 Formula: Output × price = revenue (1) or 10 000 + 60 000 + 40 000 + 15 000 + 80 000 + 60 000 = 265 000 belts (1) 265 000 × $11 = $2 915 000 ($2.915m) Total revenue = $2.915m (2) 2915 (1) (without $ and million) 2(b)(ii) Explain one advantage and one disadvantage to BU of selling a range 4 of sizes and colours of the Classic belt. Level Knowledge and Application Marks 2b Explanation of one advantage and one 4 (APP+A disadvantage to BU of selling a range of sizes PP) and colours for the classic belt. 2a (APP) Explanation of one advantage or one 3 disadvantage to BU of selling a range of sizes and colours for the classic belt. 1b (K+K) Identification of one advantage and one 2 disadvantage of selling a range of products 1a (K) Identification of one advantage or one 1 disadvantage of selling a range of products 0 No creditable content 0 Advantages may include: • To increase sales revenue – each size and colour has a relatively large number of sales • To suit/attract a larger number of market segments • To target a mass market Disadvantages may include: • High levels of inventory • Increased training for workers • Different levels of demand Context could include: • Reference to data in table 2.1 • Batch production • Non-perishable product ARA 2(c) Analyse two disadvantages to BU of the proposed process innovation. 8 Knowledge and Level Application Marks Analysis (4 marks) Marks (4 marks) 2b Shows 4 Good analysis of 4 understanding of two disadvantages two elements of of process process innovation innovation in in context context 2a Shows 3 Good analysis of 3 understanding of one disadvantage of one element of process innovation process innovation in context in context 1b Shows knowledge 2 Limited analysis of 2 of two elements of two disadvantages process innovation of process innovation 1a Shows knowledge 1 Limited analysis of 1 of one element of one disadvantage of process innovation process innovation 0 No creditable content Knowledge may include: • Putting a new approach into action • About adding value • Improving/developing existing goods, services or processes • Need to understand customer needs • Developing imaginative solutions • Can be expensive Analysis may include: • May require retraining of the 70 workers in the factory – additional costs for BU • Will require the purchase of machinery for mass production – does BU have the finance available? • May lose their reputation of being hand-made • Could lead to redundancy of the 70 factory workers • No guarantee that the new belt will be successful, so the investment in the new process may be wasted ARA 2(d) Evaluate the usefulness of Mintzberg’s roles of management for BU 11 when recruiting a new factory manager. Analysis and Knowledge and Marks Evaluation Marks Application (4 marks) (7 marks) Justified evaluation 7 based on argument in context Developed evaluation 6 based on argument in context An evaluative statement 5 based on argument in context Shows understanding of 3–4 Argument based on the 3–4 Mintzberg’s management usefulness of roles in context Mintzberg’s management roles in context Shows knowledge of 1–2 Limited analysis of the 1–2 Mintzberg’s management use of Mintzberg’s roles management roles No creditable content Knowledge may include: Interpersonal roles • Figurehead • Leader • Liaison Informational roles • Monitor • Disseminator • Spokesperson Decisional roles • Entrepreneur • Disturbance Handler • Resource Allocator • Negotiator 2(d) Application and Analysis may include Mintzberg’s roles are useful because: • Figurehead – Factory manager must inspire the 70 workers and 8 supervisors • Leader – Factory manager must lead the 70 workers and 8 supervisors • Liaison – To meet regularly with the worker representatives • Monitor – New process for the mass-produced belts and the inventory in the warehouse • Disseminator – 70 workers and supervisors – need to get information to them quickly and efficiently, especially with the new process • Spokesperson – May need to represent the company to other stakeholders • Entrepreneur – may need to innovate the processes of production further • Disturbance Handler – New process may lead to conflict with the 70 workers, 8 supervisors and worker representatives. • Resource Allocator – Inventory management of the warehouse • Negotiator – May need to negotiate with customers (businesses) as well as the workforce Evaluation may include: • Manager has authority and status so interpersonal skills necessary to earn respect • Managers have to communicate to various stakeholders so important to have informational ability • Managers have to make decisions, adapt to situations, allocate resources • Managers ensure operations run efficiently BU can use this in recruitment, job description and interviews to ensure it employs someone who will have the correct impact on the business ARA

Question 8

Auto Bike (AB) AB is a private limited company that repairs and maintains motorbikes. AB has nine garages in country J and employs eight hi…

Accepted Answer

2(a)(i) Define the term ‘objective’ (line 13). 2 Knowledge Marks A correct definition 2 A partial, vague or unfocused definition 1 No creditable content 0 Indicative content AO1 Knowledge and understanding • Specific and measurable goals which a business sets out to achieve. A correct definition should include: • an idea that an objective is an aim/goal/target (allow any similar term) • that a business (or a stakeholder) wants to achieve/reach/obtain (allow any similar term). Exemplar Marks Rationale The aims that a business wants to 2 Both elements achieve covered The targets a business wants to reach 2 Both elements covered What an owner is aiming to do 2 Both elements The long-term aims which can be about 1 One element – there profit, sales, or CSR is no idea that a business is trying to achieve them What a business wants to achieve 1 One element – no idea of an aim Objectives are the business objectives 0 Tautology that a business has ARA 2(a)(ii) Explain the term ‘private limited company’ (line 1). 3 Award one mark for each point of explanation: Rationale Marks C Application of a private limited company to an 1 example or some other way of showing good understanding B Understanding of a feature unique to a private 1 limited company A Understanding of feature(s) of a company 1 Must have A and B marks before awarding the C mark. Indicative content AO1 Knowledge and understanding Features of a company including: • an incorporated business • shares can be sold/owners are shareholders • limited liability • separate legal identity • continuity • must make accounts available to everyone Features unique to a private limited company including: • cannot sell shares on a public stock exchange • do not need to publish accounts (just make available) • may only be sold to family and/or friends AO2 Application Application of a private limited company, such as: • an example of a private limited company, such as Jaguar, Lifestyle International, etc. (Do not reward repetition from the data, i.e. ‘AB is a private limited company’.) • application of how any of the K&U points might apply to a business, e.g. a private limited company not being able to sell shares on the stock market might restrict its ability to raise finance • application of further knowledge of a private limited company, such as continuity, legal personality, limited liability 2(a)(ii) Exemplar Marks Rationale A business with shares but they 3 All elements covered cannot be sold on the stock market. This limits their sources of finance A limited liability business that does 3 All elements covered not have to publish its accounts so the competitors cannot see them Sells shares but not on the stock 2 A and B marks only exchange A company which can sell shares has 1 Only the A mark limited liability and is incorporated (many times) AB is a private limited company 0 No K&U, just repetition from the data AB is privately owned 0 Confusion with a private sector business ARA 2(b)(i) Calculate the profit made from selling standard and advanced services 3 in April. Rationale Marks Correct answer(s) with or without correct working or $ 3 • Correct calculation of total revenue and total costs for both 2 services • Correct calculation of the total profit of standard or advanced services • Correct calculation of the profit from one standard and one advanced service • Formula 1 • Correct calculation of one total revenue or one total cost figure • Correct calculation of the profit from one advanced or one standard service No creditable content 0 Indicative content Formula: revenue – total costs or (price – total costs per unit) x quantity Standard services Advanced services $250 – ($50 + $60) = $140 (profit $400 – ($60 + $100) = $240 (profit from one standard service) from one advanced service) $140 × 1000 = $140 000 (profit $240 × 200 = $48 000 (profit from from all standard services) all advanced services) 1000 × $250 = $250 000 (total 200 × $400 = $80 000 (total revenue from standard services) revenue from advanced services) ($50 + $60) × 1000 = $110 000 ($60 + $100) × 200 = $32 000 (total (total cost of standard services) cost of advanced services) $250 000 – $110 000 = $140 000 $80 000 – $32 000 = $48 000 (total (profit from all standard services) profit from all advanced services) $140 000 + $48 000 = $188 000 (total profit from all services) $188 000 (3 marks) or $140 000 and $48 000 (3 marks) 2(b)(i) Common incorrect answers Answer Mark Rationale 188 000 (no working) 3 A correct answer, $ not required 140 000 and 48 000 3 A correct answer, $ not required 140 000 2 The calculation of only standard services profit, $ not required 48 000 2 The calculation of only standard services profit, $ not required $140 + $240 = $380 2 Correct calculation of profit from one standard and one advanced service 1000 × $250 = 1 Only calculation of total revenue, needs $250 000 total costs for 2 marks 200 × $400 = $80 000 $250 000 + $80 000 = $330 000 $110 000 + $32 000 1 Only calculation of total costs, needs = $142 000 total revenue for 2 marks $550 (no working) 0 Only the revenue from one standard and one advanced service, not the total. Also no working to back this up 2(b)(ii) Explain one possible problem for AB of trying to allocate indirect 3 costs. Level Knowledge and Application Marks 2b (APP+ Explanation of one possible problem of allocating 3 APP) indirect costs in context 2a (APP) Identification of one possible problem of allocating 2 indirect costs in context 1a (K) Knowledge of one possible problem of allocating 1 indirect costs 0 No creditable content 0 Although the definition of an indirect cost (a cost that cannot be attributed to a production process) is not rewardable, it contains a problem, so will usually gain a K mark. Indicative content AO1 Knowledge and understanding Knowledge of problems of allocating indirect costs may include: • not attributable to the production process • not attributable to a specific product/service • how to split costs such as marketing, administration, expenses when they are not directly linked to a costs centre AO2 Application • The attributed indirect cost of an advanced service is $40 more than a standard service (APP) – this may not reflect the difference in marketing/admin/expenses (APP+APP). • It may be difficult to allocate costs to the different types of service (APP) – because some garages may be busier than others (APP+APP). • The allocation is fixed, even though the garage sells five times more standard services than advanced (APP). If a garage does more/fewer services, then the contribution should vary (APP+APP). • Marketing for the different services may be through the AB brand (APP) – but the allocation does not reflect this (APP+APP). • The two services have different allocated indirect costs (APP) – $60 for a standard service and $100 for an advanced service (APP+APP) – however, there is no reason given for the difference (APP+APP). Application (APP) is likely to come from the context, with developed application (APP+APP) from further use of that context. 2(b)(ii) Example of how responses should be marked. Knowledge of Application Developed problem of allocating (APP – 2 marks) application indirect costs (APP+APP – 3 (K – 1 mark) marks) It may be difficult to The standard service But it may take as know the true level of only has an allocation much administration indirect cost that of $60 as the advanced should be allocated to service each product Each service will be But the advanced And this might make sold using the same service is allocated the advanced service branding which is part $40 more in indirect seem less profitable of the indirect costs costs ARA 2(c) Analyse two below the line promotion methods that AB could use to 8 increase the sales of advanced services. Level Knowledge and Marks Analysis Marks Application (4 marks) (4 marks) 2b Applies promotion 4 Good analysis of 4 to two below the two below the line line promotion promotion methods methods in context 2a Applies context to 3 Good analysis of 3 one below the line one below the line promotion method promotion method in context 1b Shows knowledge 2 Limited analysis of 2 of two below the two below the line line promotion promotion methods methods 1a Shows knowledge 1 Limited analysis of 1 of one below the one below the line line promotion promotion method method 0 No creditable content Annotate marks for the first method in the left-hand margin and marks for the second method in the right-hand margin. Indicative content AO1 Knowledge and understanding Knowledge of below the line promotion methods, including: • Sales promotion; allow promotional pricing (i.e. BOGOF), but not just pricing • Direct marketing and direct mail, e.g. flyers • Public relations • Sponsorship • Personal selling • Branding and merchandising • Telemarketing • Trade fairs and exhibitions • Social media • Using own website (not a third party) • Word of mouth 2(c) AO2 Application • AB repairs and maintains motorcycles • Nine garages • Highly qualified mechanics • Two types of service: standard and advanced • May be possible to ‘upsell’ from standard to advanced services • AB sells five times as many standard services compared to advanced services • Higher profit margin for advanced services AO3 Analysis • Sales promotion: no outlay required (AN) – may focus on upselling from standard services to advanced, meeting the objective of increasing advanced sales (DEV) – however, may reduce sales of standard services (DEV). • Direct marketing and direct mail: can be focussed on customers who may have purchased services from AB in the past which can increase the chance of targeting the right customers (AN) – reduces the cost of promotion, increasing profits (DEV). • Public relations (PR): articles about AB in local newspapers may target the local market which increases the chances of successful promotion (AN) – however, there is no guarantee that the articles will show AB in a positive light (DEV). • Sponsorship: of local/national sports teams close to branches of AB may link AB to a successful team leading to increased sales (AN) – however, if the team does badly then AB may suffer from being associated with the team, leading to decreased sales (DEV). • Personal selling: upselling advanced services increases sales of a more profitable service (AN) – which could lead to a higher average profit margin and increased total profit (DEV). • Branding and merchandising: toys of motorbikes branded with AB, pens, etc., may get passed around and be seen by a large number of people (AN) – however, there may be a large initial cost with no guarantee of success (DEV). • Packaging: AB may be able to put stickers on motorcycles which have been serviced by AB and which could be seen by many potential customers (AN) – however, owners may not want to have the stickers, meaning they throw them away, wasting the money spent to produce them (DEV). • Telemarketing: direct calling of potential/existing customers of AB may increase sales (AN) – however, the cost is likely to be high and may not be targeted on the right market, wasting time and money (DEV). • Trade fairs and exhibitions: may allow AB to team up with other local businesses (for example, tyre garages) leading to cross promotion of the services (AN) – increasing sales of all services with minimal cost (DEV). 2(c) Examples of how an answer could develop and how it should be annotated. K APP AN DEV Sponsorship (K) Of a sports team This could lead However, AB that competes to the may have to pay near one of AB’s supporters of a large amount nine garages the team seeing to sponsor the (APP) the AB brand team and the every week audience may when their team not have a plays, motorcycle, increasing sales leading to a for AB (AN) waste of AB’s marketing budget (DEV) Direct mail (K) AB could send These previous And since many emails to all of customers are vehicles need a their previous likely to yearly service, it customers purchase may build up a because they services from loyal customer know that they AB, increasing base who repeat are most likely sales (AN) purchase from to own a AB often (DEV) motorcycle (APP) ARA 2(d) Recommend a new payment method for the mechanics at AB. Justify 11 your recommendation. Knowledge and Marks Analysis and Evaluation Marks Application (4 marks) (7 marks) Justified evaluation based 7 on argument in context Developed evaluation 6 based on argument in context An evaluative statement 5 based on argument in context Applies two pieces of 4 Argument based on two 4 context to impacts of payment understanding of a new method(s) in context payment method(s) Applies one piece of 3 Argument based on one 3 context to impact of payment understanding of a new method(s) in context payment method(s) Shows two pieces of 2 Limited analysis of two 2 knowledge about a new impacts of payment payment method(s) method(s) Shows one piece of 1 Limited analysis of one 1 knowledge about a new impact of payment payment method(s) method(s) No creditable content Do not reward time-based payment methods as these are repetition of the case and not a new method. Candidates can gain all the marks from one payment method or more than one method. 2(d) Indicative content AO1 Knowledge and understanding Knowledge of payment methods, including: • Salary – a set payment for the completion of a set of tasks. Does not vary based on time/output. • Piece rates – payment per item of output. • Commission – a reward for sales, usually as a percentage of sales/profit. • Bonuses – a payment to reward the best employees. • Profit sharing – a reward based on the level of profit to link employee pay to success of the business. • Performance related pay – linking the business/employee performance to the amount paid. AO2 Application • AB repairs and maintains motorcycles • Nine garages • Highly qualified mechanics • Two types of service: standard and advanced • Higher profit margin for advanced services • Motivation of the mechanics is low • Mechanics believe that they are not paid well • Working conditions are dirty and noisy • Currently use time-based payment based on hours worked • Some mechanics believe current pay system rewards lazy workers • Current pay does not take into account level of difficulty of different jobs. AO3 Analysis Analysis of leasing may include: • Salary: could be varied for each employee based on experience/skill, increasing motivation of those who have higher skills (AN) – however, likely to be seen as unfair as current method and therefore increasing cost with no increase in revenue (DEV). • Piece rates: may reward speed increasing the number of services that AB can perform and increase revenue (AN) – but could reduce quality which may ruin AB’s reputation which is important for a service (DEV). • Commission: may reward sales and encourage the upselling of standard to advanced service, increasing the profit of AB (AN) – however, since services seem to have a fixed price this again would not reward complexity or quality of work, demotivating the mechanics (DEV). • Bonuses: could be used to reward harder work/skill increasing the number of and/or quality of AB’s services and increasing revenue (AN) – but may be divisive amongst workforce leading to more demotivation and a lack of quantity or quality (DEV). • Profit sharing: may be used to reward hardest worker/those with greater skill, motivating the mechanics to produce more (AN) – however, may not account for how much each worker really contributes to the overall profit (DEV). • Performance related pay: may reward hardest workers leading to increased sales (AN) – but might not reward the complexity of the task, in which case it may demotivate and be seen as unfair (DEV). 2(d) AO4 Evaluation • A recommendation about a new payment method for the mechanics at AB. • A judgement over the relative suitability of the chosen payment method. • Elements that the recommendation/judgement could depend upon, including: the AB’s budget, AB’s profitability, the expected increase in sales from a motivated workforce, the profit margin of each of the types of services, the reaction of the mechanics, the payment system/level at similar businesses (competitors). • Weighing up of the impacts on the mechanics and AB of the recommended new payment method. • Weighing up of the likely advantages/disadvantages of the new payment system against the advantages/disadvantages of the current (time-based) system. Examples of how an answer could develop and how it should be annotated. K APP AN DEV EVAL AB could This would This will This means A piece rate pay their mean reward the that AB can system of mechanics paying mechanics sell more payment may be using a them for who work services a suitable piece rate each hardest leading to replacement for (K) service because increased AB’s time-based they they will profit system (EVAL). complete earn more (DEV) This is because it on a and overcomes one motorcycle increase of the mechanics’ (APP) the biggest concerns capacity of that lazy workers AB (AN) are currently rewarded the However, And a If the This will same as those piece rate service services damage who work hard rewards business are rushed, AB’s (EVAL). quantity not like AB then reputation However, its quality (K) needs a customers and could suitability good might start lead to a depends on reputation to complain significant whether AB can so that and seek loss of ensure the customers their sales and mechanics do feel their money profit not cut corners motorcycle back (AN) (DEV) and give poor is safe quality services (APP) (EVAL) ARA

Question 9

Rehana Recycles (RR) Rehana is very environmentally aware. One year ago, Rehana identified a business opportunity to reuse waste products a…

Accepted Answer

Question Answer Marks 1(a)(i) Define the term ‘mission statement’ (line 7). 2 Knowledge Marks A correct definition 2 A partial, vague or unfocused definition 1 No creditable content 0 Content • One mark for understanding of the concept of aims and values (mission) • One mark for understanding that it defines a company or organisation’s reason for being (statement) Exemplar Mark Rationale A statement of a company’s 2 Both elements covered. vision (1) which helps to set objectives (1). Is the goal of a company (1). 2 Clearly defined. Corporate objectives are used to achieve the mission statement (1). A kind of business target (1). 1 Vague definition. Something a business aims for 1 Vague definition but (1), in this case to ‘make waste example copied from the beautiful’. case, so do not award. The vision of the business owners 1 Vague definition. (1) A statement of a business’s 0 Tautological. mission Accept any reasonable answer 1(a)(ii) Explain the term ‘democratic leadership style’ (line 13). 3 Award one mark for each point of explanation: C Example or some other way of showing good 1 mark understanding B Understanding that it is to do with 1 mark direction/guidance/coordination etc. A Understanding of the concept of participation 1 mark C marks dependent on A and B mark being present Content All members of the business (1) take part in the decision-making process, often by voting (1). If Rehana is a democratic leader then she will ask for the local artists to help her make decisions (1). Exemplar Mark Rationale All employees’ views are 3 A, B and C considered (1) when making decisions and every employee has one vote (1). Sometimes called participative leadership (1). The leader takes other people’s 3 A, B and C views into account (1) when making decisions (1), however the leader makes the final decision (1). All members of the business take 2 A and B only part (1) in the decision-making process (1). All employees are involved (1). 1 A mark only Decisions are made by voting (1). B mark only Accept any reasonable answer 1(b)(i) Refer to table 1.1. Calculate the acid test ratio for RR. 3 *May be implied Rationale Marks Correct answer with or without correct working or $ 3 Attempt with correct figures 2 Formula*/attempt to calculate 1 No creditable content 0 Current assets − stock [1 mark – formula] Current liabilities (14000 − 12000) [1 mark – use of correct figures] 8000 Answer = 0.25:1 [3 marks – correct answer] Common incorrect answers Answer Mark Rationale 25% 3 A percentage is a ratio. 1/4 3 A fraction is close enough to a ratio. 0.25 (no working) 3 Allow as a correct answer with or without working shown. 25 (no working) 0 Do not award any marks for an incorrect answer without working. CA 1 Attempt to correctly calculate using one correct CL figure (CL). 14000 = 1.75:1 8000 2000 1 Attempt to correctly calculate using one correct 14000 figure (CA). 1(b)(i) Answer Mark Rationale 1.75:1 (no working) 0 Do not award any marks for an incorrect answer without working. CL 2 Incorrect formula (but right elements – inverted) and CA − inventory subsequent results are OFR 8000 2000 = 4:1 (400%) 8000 0 Without formula these are ‘random’ numbers 2000 = 4 1(b)(ii) Explain one method Rehana may use to improve liquidity. 3 Level Knowledge and Application Marks 2 (APP) Explanation of a method of improving liquidity, in 3 context 2a (K+K) Explanation of a method of improving liquidity 2 1a (K) Identification of a method of improving liquidity 1 0 No creditable content 0 Content Indicative content AO1 Knowledge and understanding Liquidity can be improved by: • A method of increasing current assets (cash, inventory, trade receivables etc.): – Sell fixed assets – for cash. – Take out a long-term loan – to increase cash. – Encourage prompt payment – to decrease trade receivables (debtors). – Sell inventory – to increase cash (can improve liquidity if measured using the acid test). • A method of decreasing current liabilities (overdraft, trade receivables, dividend payable etc.) – Take out a long-term loan – to pay off the overdraft. – Retain more profit – to avoid paying dividends AO2 Application • Context of RR. • Use of Table 1.1 ACCEPT ANY REASONABLE ANSWER 1(b)(ii) Exemplar Mark Rationale Rehana could sell the machine 3 Explanation of a method in that melts down bottles to context increase RR’s cash. Rehana could sell $5000 of the 3 Explanation of a factor not inventory so that the business can in context. Allow based on pay off its overdraft. acid test measure of liquidity. Rehana could take out a long- 3 Explanation of a method in term loan for $5000 to pay off the context overdraft. Take out a long-term loan to pay 2 Explanation of a method. off the overdraft. Take out a bank loan. 1 BOD that a bank loan is a long-term liability. Borrow some money. 1 Too vague – could be short-term or long-term debt. 1(c) Analyse two benefits for RR of having a unique selling point (USP). 8 Knowledge and Analysis Level Application Marks Marks (4 marks) (4 marks) 2b Shows knowledge of 4 Developed analysis 4 two benefits of of two benefits of having a USP in having a USP in context context 2a Shows knowledge of 3 Developed analysis 3 one benefit of having of one benefit of a USP in context having a USP in context 1b Shows knowledge of 2 Limited analysis of 2 two benefits of two benefits of having a USP having a USP 1a Shows knowledge of 1 Limited analysis of 1 one benefit of a USP one benefit of having a USP 0 No creditable content AO1 Knowledge and understanding Knowledge of benefits may include: • To sell more • To increase the price • Increase customer loyalty / repeat purchases • Brand recognition • To differentiate from competition • To give a focus for the marketing mix AO2 Application • RR is a sole trader / small business and is likely to have limited resources • RR makes unique vases and glassware products • RR’s mission statement ‘to make waste beautiful’. • Markets products as ‘lovely for the planet, lovely for you’. • RR has a strong local brand image. • RR’s USP is recycling waste (assumption can be made that no other competitors do this). • RR employs two local artists, who are environmentally aware. • Employees are skilled. • RR uses job production. • Table 1.1. • Demand has grown and Rehana needs to increase output. • Rehana wants to increase output by either employing more artists or changing to batch production. 1(c) AO3 Analysis • Increase customer loyalty / repeat purchases: gives RR an established customer base and revenue stream – more likely to make Rehana’s growth strategies successful. • Brand recognition: means that customers who are looking for recycled products are more likely to purchase RR’s vases – increasing Rehana’s incomes/profit. • To differentiate from competition: likely to be a competitive market and RR may need customers to recognise their recycled products so that sales increase – so that Rehana can reinvest more profit and grow the business. • To give a focus for the marketing mix: the ‘lovely for the planet, lovely for you’ marketing slogan shows a double benefit to making a purchase, meaning that Rehana may be able to charge a higher price – increasing her income/profit. Accept any reasonable answer 1(d) Evaluate whether RR should change to batch production. 11 Analysis and Knowledge and Evaluation Application (4 marks) Marks Marks (7 marks) Annotation Annotation Justified evaluation 7 based on argument in context. EVAL + EVAL + EVAL Developed evaluation 6 based on argument in context. EVAL + EVAL An evaluative 5 statement based on EVAL argument in context. Applies context to 4 Argument based on two 4 understanding pieces of knowledge of two APP piecesanalysisofaboutdevelopedRR’s DEV about job/batch + decision to change + production. APP production method. DEV Applies context to 3 Argument based on 3 understanding of one one piece of developed piece of knowledge analysis about RR’s APP DEV about job/batch decision to change production. production method. 1(d) Analysis and Knowledge and Evaluation Application (4 marks) Marks Marks (7 marks) Annotation Annotation Shows two pieces of 2 Limited analysis of two 2 knowledge about factors influencing job/batch production K job/batch production AN + + K AN Shows one piece of 1 Limited analysis of one 1 knowledge about K factor influencing AN job/batch production job/batch production No creditable content Content AO1 Knowledge and understanding Knowledge of job production may include: • On-off unique products • Produced one at a time Knowledge of batch production may include: • Production in groups, not individual or mass/flow • Whole batch passes through each stage of production at the same time • Use of machinery AO2 Application • RR is a sole trader / small business and is likely to have limited resources • RR makes unique vases and glassware products • RR’s mission statement ‘to make waste beautiful’. • Markets products as ‘lovely for the planet, lovely for you’. • RR has a strong local brand image. • RR’s USP is recycling waste (assumption can be made that no other competitors do this). • RR employs two local artists, who are environmentally aware. • Employees are skilled. • RR uses job production. • Table 1.1. • Demand has grown and Rehana needs to increase output. • Rehana wants to increase output by either employing more artists or changing to batch production. 1(d) AO3 Analysis For batch: • will meet the increase in demand boosting revenue • The only way to cost effectively increase her output • Costs of recruiting skilled artists may be too expensive Against batch: • Amount of raw materials (waste bottles) available may not be sufficient for expansion • Impact on recent marketing focusing on USP may be negative • Batch production/machinery skills of two local artists/herself may not be sufficient leading to waste • Amount of liquidity available for investment (0.25:1 acid test ratio) may be too low for investment For job: • Maintain USP of RR • Utilise skilled workers who are already employed by RR Against job: • High cost of skilled workers • High unit cost for production of handmade products • May not be able to meet demand AO4 Evaluation • A recommendation about a whether RR should introduce batch production (or not). • A judgement over the relative suitability of production methods. • Elements that the recommendation/judgement could depend upon. • Weighing up of the impacts on RR of the change. • Weighing up of the likely advantages/disadvantages of batch production. Accept any reasonable answer

Question 10

Motorcycle Components (MC) MC is a large public limited company that produces a range of components used by motorcycle manufacturers. MC’s …

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2(a)(i) Define the term ‘lead time’ (line 5). 2 Knowledge Marks A correct definition 2 A partial, vague or unfocused definition 1 No creditable content 0 A correct definition should cover the following: The period between the start of a process and the completion of that process such as the time period between placing an order and receiving the goods. Must have both starting and finishing a process for two marks. Vague statements such as the time a process takes only 1 mark. Exemplar Rationale Marks The amount of time taken both starting and finishing an 2 between the placing an order order process and delivery The time taken to receive Time between order and 2 inventory from when it was delivery identified ordered Time between delivery and This is not lead time, this is 2 (BOD) reorder of supplies backwards The time it takes for an order Order time not identified 1 to be delivered How long it takes to get an BOD finish time 1 order The amount of stock a Wrong definitions 0 business keeps as a buffer 2(a)(ii) Explain the term ‘mission statement’ (line 2). 3 Award one mark for each point of explanation. Point Knowledge Marks C Example or some other way of showing good 1 understanding – e.g. communicates to stakeholders what the business stands for/ helps establish aims and objectives B One mark for understanding of the concept of 1 aims and values (mission) A One mark for understanding that it defines a 1 company or organisation’s reason for being (statement) No creditable content 0 Note: C mark can only be awarded if A and B marks have already been awarded Exemplar Rationale Marks A vague and general phrase Describes what it is (vague), 3 that transmits what the what it is for (transmits business is about and values) and a benefit motivates workers (motivates) A phrase that represents the All points met 3 business core objectives and motivates employees A phrase that represents the A and B only 2 business core objectives A document that tells A and B 2 stakeholders the business values A statement that motivates A only – C not awarded 1 employees The aims and objectives of a Part of a mission statement – 1 business limited understanding 2(b)(i) Refer to Table 2.1. Calculate MC’s acid test ratio. 4 Rationale Marks Correct answer (with or without formula) 4 Attempt using correct figures 3 Correct formula and calculation of current assets or current 2 liabilities OR Correct calculation of current assets and current liabilities Correct formula 1 No creditable content 0 current assets – inventory (1) current liabilities Current Assets = 26 + 19 + 1 = 46 46 – 1 = 45 Current Liabilities = 30 + 20 = 50 (2) 45 50 = 1 : 0.9 (accept 0.9) or 9:10 Common incorrect answers 45/50 3 marks This is a fraction, ratio/calculation not completed 45:50 3 marks Has not been simplified 46/50 = .92 3 marks Correct current ratio – OFR 46/50 2 marks Correct calculation of current assets and current liabilities 2(b)(ii) Explain one reason why the acid test ratio is useful to MC’s Finance 2 Director. Level Knowledge and Application Marks 2 (APP) Explanation of one use of the acid test ratio in 2 context 1 (K) Identification of one use of the acid test ratio 1 0 No creditable content 0 Content is likely to come from:  Measure of liquidity to see if it can cover short term debts without selling inventory  Check the risk of illiquidity  To gain finance/investment Context is likely to come from:  At 0.9 it is below the industry average  Any relevant data from Table 2.1  Investment of $4m Exemplar Rationale Marks 0.9:1 is less than industry Context and content 2 average and can signify liquidity problems To see if it can cover short No context 1 term debts without selling inventory Measures liquidity No context 1 Check the risk of illiquidity No context 1 Ratio calculation only No usefulness 0 ARA 2(c) Analyse two benefits to MC of Just in Time (JIT) inventory control. 8 Level Knowledge and Marks Analysis Marks application 2 Understanding of 4 Developed 4 two benefits of analysis of two JIT in context benefits of JIT in context Understanding of 3 Developed 3 one benefit of JIT analysis of one in context benefit of JIT in context 1 Knowledge of 2 Limited analysis 2 two benefits of of two benefits of JIT JIT Knowledge of 1 Limited analysis 1 one benefit of JIT of one benefit of JIT 0 No creditable content Generic benefits may include:  Reduces waste and overstocking  Improves financial efficiencies / reduces capital invested in stock  Reduces storage costs  Reduces risk of obsolescence Application may include:  Large plc with B2B model  Mission statement is ‘to be the world leader in delivering quality motorcycle components to our customers’  Motorcycle component industry is very competitive and MC’s customers expect high-quality and a short lead time  Good relationships with its suppliers ensure that JIT operates efficiently.  Liquidity management is very important  Industry average for the acid test ratio is 1  automation of the production process 2(c) Analysis of benefits may include:  Reduction in fixed costs as warehouse/storage not required to store raw materials – which improves profit  Storage space no longer needed and could be used to expand production  Decrease in labour costs as fewer people required in warehouse as no need to receive, store, then move inventory to production – increases profit  Reduction in costs should mean increased profit – which could be used towards funding expansion  Improved cash flow as only order inventory as needed to fulfil customer orders – more money for expansion ARA 2(d) Evaluate the possible impact on MC from introducing process 11 innovation. Knowledge and Marks Analysis and Marks Application (4 marks) Evaluation (7 marks) A justified judgement 7 on the importance of the impact A judgement on the 6 importance of the impact An evaluation 5 statement of the given arguments of an impact in context Understanding of two 4 Developed analysis of 4 effects of process two effects of process innovation in context (*) innovation Understanding of one 3 Developed analysis of 3 effect of process one effect of process innovation in context innovation in context Knowledge of two 2 Limited analysis of two 2 effects of process effects of process innovation innovation Knowledge of one 1 Limited analysis of one 1 effects of process effect of process innovation innovation * Two effects can come from one impact Note: Use of a process innovation (i.e. Capital expenditure is acceptable for Application without explicit reference to process innovation) Knowledge of effects/impacts of process innovation  Increases/expands competitive advantage  Develops performance by decreasing costs  Enhances quality  Makes the best use of competencies, skills and/or knowledge  Builds a culture of continuous learning 2(d) Application is likely to come from:  Large plc with B2B model  Mission statement is ‘to be the world leader in delivering quality motorcycle components to our customers’  Motorcycle component industry is very competitive and MC’s customers expect high quality and a short lead time  Good relationships with its suppliers ensure that JIT operates efficiently  Liquidity management is very important  automation of the production process Analysis likely to come from: Impact should focus on MC and could be: positive  Creates shorter lead times – which may increase orders due to high expectations  Matches high customer quality expectations – increases sales revenue  Links to mission statement (increased quality) – better dividends/marketing opportunity  Reduced costs – eases cash flow pressures/acid test  Increased market share as the industry and suppliers are competitive – better brand image negative  Image/reputational damage e.g. if redundancies happen – poor publicity  Results in redundancies – increases costs  Negative impact on morale – lower productivity  Cost of automation – reduces profits/dividends Other  Process innovation may improve efficiency however this could result in redundancies – reducing the need for some employees – may be seen as not socially responsible (damage to image, want to be world leaders) and lead to lower sales - reduced revenue and profit  Impact on employees and morale – fear of redundancies, change, could affect quality of work and conflict with the mission statement  The industry and suppliers are competitive, so process innovation will reduce cost pressures and assist MC in being price competitive, however, other firms may also introduce new processes so less of an impact on MC  Lower costs could allow MC to become more price competitive, increasing revenue (if PED is elastic), leading to higher profit and increasing share value, but other firms could retaliate and start a price war resulting in losses for MC Evaluation is likely to come from:  An evaluation of the possible impact on MC of introducing process innovation  A judgement in the outcomes of process innovation  An evaluation on the level of argument  What the judgement/evaluation may depend on: cost, reputation, customer reaction, supplier ability to deliver quantities of inventory, sources of finance, shareholder expectations 2(d) K APP AN DEV EVAL Decreases Helps ATR Which So the The impact is costs of 0.9:1 improves $4mn cap likely to be shareholder ex will be positive value approved As the Increases From $4mn Increases Which could investment into redundancies capital reputational be used by new machinery expenditure damage competitors will improve into negative lead time and automation advertising quality Which is likely more important to business customers than a reputation for laying off staff

Question 11

Move Well (MW) MW is a business that organises the transportation of people’s possessions when they move from one house or apartment to ano…

Accepted Answer

2(a)(i) Define the term ‘corporate objectives’ (line 3). 2 Knowledge Marks Reference to long term goals/over a period of time or 2 focus/direction or helps form strategic business plan / should be SMART Reference to goals/aims/targets 1 No credible content 0 A correct definition could cover the following: • The (long term) goals of a company • Give focus and direction to the business. Exemplar Rationale Marks The long-term goals of a Two elements covered 2 company Goals of a company giving Two elements covered 2 direction to employees Gives focus to a business A simple statement 1 Company goals An understanding but too vague 1 Aims Vague but alternative for 1 objectives 2(a)(ii) Explain the term ‘internal growth’ (line 3). 3 Award one mark for each point of explanation Point Knowledge Marks C Example or some other way of showing good 1 understanding – by means of opening new branches, shops, factories. Contrasts with external (takeovers, mergers etc.) B From within – organic 1 A Expansion of a firm/business. 1 Content: Internal/organic growth is when a business uses its own funds to reinvest in itself and increase the capital. Exemplar Rationale Marks Increase of the business scale All three elements 3 (A), from within (B), does not involve external parties such as mergers (C) Expansion of a business, from All three elements 3 within, which can be slow when compared with external growth through a merger Expansion of a business, from All three elements 3 within, which requires investment to open new branches Expansion of a business, from A and B 2 within, which can take a long time and requires investment Slow growth of a business. B only 1 Expansion of a business Identified key themes only, no 1 real understanding Increase market Not necessarily growth as e.g. 0 share/employees market share could increase because of successful promotion without growth 2(b)(i) Refer to Table 2.1. Calculate the forecast profit margin for year one. 3 Rationale Marks Correct answer (with or without formula or %) 3 Correct calculation of profit 2 Correct formula 1 No credible content 0 profit  100 sales revenue Profit = 110 – (50+20) = 40 40 110 = 36.36% allow 36, 36.3, 36.4 (3) Common answers Answer Mark Rationale 36.3% 3 Correct answer 110-70 = 40 2 Correct calculation of profit 40/110 2 Correct calculation of profit Profit/sales revenue  100 1 Correct formula Profit/sales revenue 0 Incorrect formula (no  100) 2(b)(ii) Explain one method MW could use to improve its cash flow. 3 Level Knowledge and Application Marks 2 (APP) Explanation of one method to improve cash flow in 3 context 1b (K+K) Explanation of one method to improve cash flow 2 1a (K) Identification of one method to improve cash flow 1 0 No creditable content 0 • Reducing costs – to reduce outflow • Increasing revenue – to increase inflow • Bank overdraft • Debt factoring Context is likely to come from: • The time between booking and receiving revenue • Higher costs due to inefficiency in systems • Take a deposit at the time of booking ARA Exemplar Mark Rationale Take a deposit at the time of booking a 3 Explanation in context move to increase revenue Reduce costs by finding a cheaper 2 Explanation of method supplier Get a bank overdraft 1 Identification only 2(c) Analyse two benefits to MW of introducing process innovation to update 8 its information systems. Level Knowledge and Marks Analysis Marks application Annotation 2 Understanding of 4 Developed 4 two benefits of analysis of two process benefits of DEV APP innovation in + process + context APP innovationcontext in DEV Understanding of 3 Developed 3 one benefit of analysis of one process benefit of process innovation in innovation in context APP context DEV 1 Knowledge of two 2 Limited analysis of 2 benefits of two benefits of AN process K+ process + innovation K innovation AN Knowledge of one 1 Limited analysis of 1 benefit of process one benefit of innovation process K innovation AN 0 No creditable content 0 ARA Indicative content AO1 Knowledge and understanding • Information – keep up-to-date, • Time saved • Increase cash flow • Reduce costs • Increase quality • Increase efficiency • Ease of access to information AO2 Application • Wants to achieve internal growth • Many locations in country Q • Successful business • Growth affecting cash flow 2(c) • Want to locate to other countries • Want to achieve cost savings • Current system uncoordinated • Use paper customer records • 3 different computer-based systems • Records not kept up to date • Need to improve cash flow AO3 Analysis • Information – keep up-to-date, easier to co-ordinate • Time saved – quickly find the correct information • Increase cash flow – Decrease the time between booking and receiving revenue • Reduce costs – improve profit/help fund expansion 2(d) Evaluate the factors that John needs to consider before opening the 11 new location in country P. Knowledge and Marks Analysis and Marks Application (4 Evaluation marks) (7 marks) Annotation Annotation A justified 7 judgement on the + + importance of each factor EVAL EVAL EVAL A judgement on the 6 + importance of each factor EVAL EVAL An evaluation 5 statement of the given arguments of two factors in context EVAL Understanding of + 4 Developed analysis 4 + two factors in of two or more context APP APP factors in context DEV DEV Understanding of 3 Developed analysis 3 one factor in of one factor in context APP context DEV Knowledge of two + 2 Limited analysis of 2 + factors K K two factors AN AN Knowledge of one 1 Limited analysis of 1 factor K one factor AN No creditable comment 0 Indicative content AO1 Knowledge and understanding • Language barriers, • Costs, • Opportunities, • Competition, • Available resources • Infrastructure • Communication 2(d) AO2 Application • Growth in housing demand in other countries. • Business successful in the past • Decline in sales in country Q • Fewer people moving in country Q • Each city location made a loss last year • Requires good transport infrastructure • Tracking vehicles requires a good communication system AO3 Analysis • Expensive to set up operations in another country, can MW afford it? • Might be a competitive market so hard to break into • Might be legal barriers such as licence requirements • Will require employees in the new country adding to expense • Important to consider culture of new country – will it be a good fit for MW? AO4 Evaluation • Inefficient operation – should they expand internationally if own business inefficient • Will need to spend a lot on infrastructure in another country, can they afford it if made losses last year • Inefficient systems could be a major issue when trying to coordinate internationally • But declining market in country Q • Need to research carefully before making a decision • Will take a long time to establish ARA

Question 12

Delicious Cocoa (DC) DC is a co-operative owned by cocoa farmers in country X. It has 500 workers. In 2022, DC produced 2000 tonnes of raw …

Accepted Answer

2(a)(i) Identify one element of the triple bottom line. Identification of an element may include: Any features of CSR  Economic (financial)  Social  Environmental  People  Planet  Profit Accept all valid responses. 1 Question Answer Marks 2(a)(ii) Explain the term added value. AO1 Knowledge and understanding 1 mark AO2 Application 2 marks 2 marks Developed application of one relevant point to a business context. 1 mark Knowledge of one relevant point is used to answer the question. 1 mark Limited application of one relevant point to a business context. 0 marks No creditable response. 0 marks No creditable response. Indicative content AO1 Knowledge and understanding Knowledge of added value may include:  Added value refers the difference between the cost of purchasing bought in inputs (materials) and the selling price of the finished goods.  Selling price – cost of raw materials  Profit margin AO2 Application Limited application applies knowledge of added value to one of the below. Developed application + applies knowledge of added value to two of the below.  The costs of the production process including, land, labour and/or capital  The value of enterprise  Unique features and benefits of a product/service e.g. branding, delivery times  Excellent service/ convenience which persuades customers to pay a premium  Product or service  Examples of added value Application can be made to DC or any other scenario/context/business/person. 3 Question Answer Marks 2(a)(ii) Accept all valid responses. Exemplar and annotations Mark Rationale Added value is the difference between the purchase and selling price of a good or service . For example, if DC processes their raw cocoa beans they can make a premium product with higher profit margins . 3 An answer which starts with the knowledge and then applies it to DC. Added value is the difference between the purchase and selling price of a good or service . A business could process their raw materials , for example refining oil into petrol . 3 Knowledge of added value in a generic format. Increasing the value of the product sold . So, DC can attract higher profit margins . 2 Clear knowledge. Some application to the benefit, but not how. Added value is the difference between the purchase and selling price of a good or service. . 1 A clear definition. Adding value is making more money when selling products . 0 Too vague. Some idea of an increase, however, could relate to simply selling higher quantities. Question Answer Marks 2(b)(i) Refer to lines 1–2. Calculate DC’s expected labour productivity in 2023. Formula: total output in a given time period Total workers employed (1 mark – formula) (2000 1.05) 500  or 2100 500 (1 mark – formula plus figures) 4.2 (tonnes per farmer) (1 mark – correct answer – no tonnes needed) Final answer for DC = 4.2 (tonnes per farmer) (3 marks – no % or working needed) OFR applies Exemplar and annotations Marks Answer Rationale 3 marks Correct answer 4.2 Working and tonnes do not matter. Must be three to denote the three marks. Correct rounding must be applied. 2 marks Both of the following:  Correct formula  Correct calculation of 2023 output (2100) OR An incorrect answer with one mistake allowing OFR for final stage. OR (has not calculated 2023 figure) OR A correct answer from an inverted formula (453.96 – OFR) x To award two marks, there must be:  Two and a OR  One , one and one 3 Question Answer Marks 2(b)(i) Marks Answer Rationale 1 mark One of the following:  Correct formula  Correct calculation of 2023 output (2100) To award one mark, there must be:  One and two 0 marks No creditable content. To award zero marks, there must be:  One 2(b)(ii) Explain one reason why labour productivity is important to DC. AO1 Knowledge and understanding 1 mark AO2 Application 2 marks 2 marks Developed application of one relevant point to a business context. 1 mark Knowledge of one relevant point is used to answer the question. 1 mark Limited application of one relevant point to a business context. 0 marks No creditable response. 0 marks No creditable response. Indicative content AO1 Knowledge and understanding Knowledge of a reason why labour productivity is important may include:  To keep costs down  To keep revenue/profits up AO2 Application Limited application , applies knowledge of a reason why labour productivity is important to DC once. Developed application + applies knowledge of a reason why labour productivity is important to DC twice. Application of a reason may include:  DC is a co-op owned by farmers  It has 500 workers  Productivity is expected to increase by 5%  DC is profitable  DC has no retained earnings  The triple bottom line is its main objective  Concerns include lack of investment, manual work and lack of control  Investment into a capital-intensive factory  Significant capital investment needed into the processing factory  Any data from Table 2.1 3 Question Answer Marks 2(b)(ii) Accept all valid responses. Exemplar and annotations Mark Rationale Profits may increase , if productivity rises by 5% which will be useful for the $260 000 investment . 3 A reasonable reason for importance of LP, applied using the data from the text (5% increase and investment into processing factory). All profits are shared between the 500 co-op owners so profits are dependent on productivity levels as well as the social and environmental main objective . 3 profits dependent on productivity and reference to the data is . DC can use labour productivity to assess the performance of their workers and help in making future decisions such as workforce planning . 2 Workforce planning decisions relate to the costs of a business (obvious reference to a cost) which means the assessing performance is the . Higher productivity can lead to higher profits . These can be used for future investments and can lead to DC being more successful. 1 Higher profits is a reason, but the rest is not specifically related to DC. Labour productivity is the average output per employee in a given time period. If labour productivity is low, DC is unlikely to be successful which will make the cocoa farmers who own the co- operative unhappy and may even jeopardise future investments . 0 Although there is some relevant context, there is no knowledge of a reason why labour productivity is important, so no marks can be awarded. DC can use labour productivity to assess the performance of their workers and help in making future decisions . 0 There is no reference to costs or revenue for the K. Question Answer Marks 2(c) Analyse two ways DC can motivate young people to work on its farms. Level AO1 Knowledge and understanding 2 marks AO2 Application 2 marks AO3 Analysis 4 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  Knowledge of two relevant points is used to answer the question.  Knowledge of one relevant point is used to answer the question. 1–2 marks  Application of two relevant points to a business context.  Application of one relevant point to a business context. 1–2 marks Limited analysis  Limited analysis that identifies connections between causes, impacts and/or consequences of two points.  Limited analysis that identifies connections between causes, impacts and/or consequences of one point. 0 0 marks No creditable response. 0 marks No creditable response. 0 marks No creditable response. 1st method on the left hand side 2nd method on the right hand side 8 Question Answer Marks 2(c) Indicative content AO1 Knowledge and understanding  Motivation is internal and external factors that stimulate the desire in workers to be continually interested in and committed to doing a job well. Knowledge of factors that can motivate people (max 2 s), may include:  Employee input  Personal enrichment  Setting of goals/targets  Celebrating milestones/achievements  Create a positive and inclusive workplace  Invest in training and promotion opportunities  Increase financial benefits  Knowledge of any relevant motivational theorists including Mayo, Maslow and Herzberg AO2 Application Max one for application to each method of motivation.  Creation of jobs off the actual farms  Increase investment in training ($15 000 extra)  Create skilled jobs to replace manual work in cocoa processing  Explore alternative payment methods to allow for control over earnings  Investment into a capital-intensive factory 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. Analysis may include:  Investment into training by encouraging modern farming methods – reduce the reliance on manual work – may increase productivity  Change the current payment method will provide more control over earnings – so productivity increases  Highlight a promotional path satisfies the needs for promotion – keeps youth at the co-op. Accept all valid responses. Question Answer Marks 2(c) Exemplar and annotations AO1 Knowledge AO2 Application AO3 Analysis Exemplar for one method of motivation Annotations for the first method should be placed in the left-hand margin. Investment into training and promotion opportunities For the young people who do not want to work on DC’s/the cocoa farms/the co-operative . This could encourage modern working methods which would reduce the reliance on manual work and create a new generation of workers . Exemplar of a second method of motivation Annotations for the second method should be placed in the right-hand margin. They could also use theorists such as Maslow Who would focus on ensuring the safety needs are met by improving the control over earnings . This could lead to more people seeing farming as a good career choice and ensuring that the amount of output increases to meet future needs . Question Answer Marks 2(d) Evaluate whether DC should grow its operations by opening its new cocoa processing factory. Level AO1 Knowledge and understanding 2 marks AO2 Application 2 marks AO3 Analysis 2 marks AO4 Evaluation 6 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 Developed knowledge of relevant key term(s) and/or factor(s) is used to answer the question. 2 marks Developed application of relevant point(s) to the business context. 2 marks Developed analysis that identifies connections between causes, impacts and/or consequences. 3–4 marks Developed evaluation  A developed judgement/conclusion is made.  Developed evaluative comments which balance some key arguments. 1 1 mark Limited knowledge of relevant key term(s) and/or factor(s) is used to answer the question. 1 mark Limited application of relevant point(s) to the business context. 1 mark Limited analysis that identifies connections between causes, impacts and/or consequences. 1–2 marks Limited evaluation  A judgement/conclusion is made with limited supporting comment/evidence.  An attempt is made to balance the arguments. 0 0 marks No creditable response. 0 marks No creditable response. 0 marks No creditable response. 0 marks No creditable response. 12 Question Answer Marks 2(d) Indicative content AO1 Knowledge and understanding Knowledge of capital and labour-intensive operations (max 2 s), including:  the benefits and limitations of capital-intensive operations  the benefits and limitations of labour-intensive operations  Efficiency, effectiveness, productivity and sustainability  Profitability and level of sales needed to breakeven  Business objectives, profit maximisation, sales growth  Operations e.g. transformation of inputs to outputs AO2 Application Limited application applies knowledge of growth of operations to DC once. Developed application + applies knowledge of growth of operations to DC once twice.  Reputation for high quality cocoa  500 farming families benefit from the co-op  Communities benefit from investment into the future of the young people  Productivity to increase by 5%  Appetite for risk from 500 farming families due to $265 000 initial investment  Ability to gain financial investment as DC has no retained earnings to contribute  Ability of farmers to operate cocoa processing machinery  Profit margins will increase to 100% 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.  Need to provide jobs for trained/skilled employees – keep employees in the co-op  Provide reasons for workers to stay – secure the future of the co-op  Financial risk of investment – reduces long term certainty of income  Reduction of short-term profits – which may reduce workers’ standard of living  Negative impact on cashflow – requires risky capital investment  Return on capital investment is quick – medium/long term increased profits  Increased future profits – more finance to meet organisational objectives  Increased purchasing economies of scales – improve profit margins Question Answer Marks 2(d) 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.  The decision to invest in the new processing factory depends on the priorities and finances of DC. A significant investment may reduce the short-term profits of the farmers who depend on the income to support their families and living standards.  Will demand for premium cocoa fall in the future? Will DC be able to process enough cocoa to be viable in the long term?  Will processing the raw cocoa harm DC’s abilities to focus on the triple bottom line?  Are increased earnings/profits the most important factor for cocoa farmers, or is sustainability of operations and meeting current needs more important?  Will DC be able to grow and provide enough raw materials if the young people migrate to cities in search of better employment?  A recommendation on whether DC should grow its operations by opening a new cocoa processing factory. Accept all valid responses. Question Answer Marks 2(d) Exemplar and annotations The increased profitability of the processed, high quality cocoa beans, may lead to more investment into the community through the objective of the triple bottom line . This could be used to train the young people and potentially encourage entrepreneurship to create more jobs in the community . However, the increased investment would have a detrimental short-term impact on the profits required by the 500 families to sustain their daily lives , and may limit the investment into the wider community. Overall, DC should invest into the cocoa processing factory to secure the long-term success of operations . Young people do not want to work on farms and may move out of the area, making it more difficult for the co-operative to maintain its current output levels, which would cause the co-operative to fail. . However, whether this investment will be popular with existing owners depends on the impact on short term profits . As the farmers are already motivated by their current operations and are having steady increases in productivity and income, they may not want to risk what they already have on a long-term project which may not benefit them in the short term. AO1 – 2 marks AO2 – 2 marks AO3 – 2 marks AO4 – 6 marks TOTAL – 12 marks Judgement is a yes or no. Comment is anything weighing up the other side of the argument.

Question 13

MX Bikes (MXB) MXB is a successful public limited company with many stakeholders. It has been trading for 15 years. It makes a range of bic…

Accepted Answer

2(a)(i) Identify one stakeholder of a business. Identification of a stakeholder may include:  Employees  Managers/directors  Customers  Shareholders  Lenders, e.g. banks  Local community (not public)  Government  Suppliers. Accept all valid responses. Question Answer Marks 2(a)(ii) Explain the term sustainability. AO1 Knowledge and understanding 1 mark AO2 Application 2 marks 2 marks Developed application of one relevant point to a business context. 1 mark Knowledge of one relevant point is used to answer the question. 1 mark Limited application of one relevant point to a business context. 0 marks No creditable response. 0 marks No creditable response. Indicative content AO1 Knowledge and understanding Knowledge of sustainability may include:  Sustainability refers to maintaining operations/production at the current level. Allow (but do not require) knowledge of sustainability from an environmental perspective, which may include:  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. AO2 Application Limited application applies knowledge of sustainability to  current operations/production OR future operations/production. Developed application + applies knowledge of sustainability to  current operations/production AND future operations/production. Application can be made to MXB or any other scenario/context/business/person. Allow application to environmental sustainability. 3 Question Answer Marks 2(a)(ii) Accept all valid responses. Exemplar and annotations Mark Rationale Sustainability is about maintaining production levels . For example, MXB had to make sure its current production of mountain bikes was not damaged by launching the electric scooters . 3 An answer which starts with the knowledge and then applies it to MXB. Keeping the natural environment safe now . A business could start using glass , to reduce dependence on single use plastic . 3 Sustainability from an environmental perspective. Looking after operations today to secure future operations . So, MXB can make sustainable electric bikes in the future . 2 Clear knowledge. Some application to the future, but not now. Sustainability is a social goal about the ability of people to co-exist on Earth over a long time. . 1 A reasonable definition with the 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. Question Answer Marks 2(b)(i) Refer to Fig. 2.1. Calculate MXB’s market share of the mountain bike market in country J. Formula to calculate market share in words = Sales revenue for MBX Total sales revenue for the market  100 (1) OR Formula to calculate market share in numbers =     $265 000 £1203 000  100 (1) 1 mark for calculating the sales revenue for the total market Total sales revenue for the market = 265 + 85 + 178 + 230 + 185 + 95 + 115 + 50 = $1 203 (000) Market share = (265 / 1203)  100 = 22.028% or 22.03% or 22% 3 Question Answer Marks 2(b)(i) Exemplar and annotations Marks Answer Rationale 3 marks Correct answer 22.028 or 22.03 or 22 Can be expressed as a ratio 0.22:1 Working and % do not matter. Must be three to denote the three marks. Correct rounding must be applied. 2 marks Both of the following:  Correct formula  Correct calculation of total market sales revenue (1203) OR An incorrect answer with one mistake allowing OFR for final stage. OR 0.22 (has not completed final stage to multiply by 100) OR A correct answer from an inverted formula (453.96 – OFR) OR A correct answer with incorrect rounding (ie 22.02) To award two marks, there must be  Two and a OR  One , one and one 1 mark One of the following:  Correct formula  Correct calculation of total market sales revenue (1203) To award one mark, there must be:  One and two 0 marks No creditable content. To award zero marks, there must be  One Question Answer Marks 2(b)(ii) Explain one reason why MXB’s objectives may change. AO1 Knowledge and understanding 1 mark AO2 Application 2 marks 2 marks Developed application of one relevant point to a business context. 1 mark Knowledge of one relevant point is used to answer the question. 1 mark Limited application of one relevant point to a business context. 0 marks No creditable response. 0 marks No creditable response. Indicative content AO1 Knowledge and understanding Knowledge of a reason why objectives might change may include:  changing internal factors, e.g. new Managing Director  changing external factors, e.g. new competitors or technological changes  the achievement of previous objectives. AO2 Application Limited application , applies knowledge to MXB once. Developed application + applies knowledge to MXB twice. Application of a reason may include:  MXB has traded for 15 years  Public limited company / shares sold publicly  Market leader for mountain bikes  Target market are high-income leisure users  Sold in limited number of specialist bicycle shops  Use of Fig 2.1 3 Question Answer Marks 2(b)(ii)  New to electric scooter market, since launching a new electric scooter  Sales revenue for mountain bikes fell by 12% over the past year  Static demand for mountain bikes. Accept all valid responses. Exemplar and annotations Mark Rationale Changing demand , MXB’s sales have declined by 12% despite market demand remaining static . 3 A reasonable reason for objectives changing, applied using the data from the text (12% decline and market remaining static). MXB might lose market share to a competitor such as PE which has the second largest market share with 19% . 3 A change in the market is reasonable and reference to the data is . The table can provide both s. An external shock like a pandemic might mean that people are stuck indoors all the time. This would reduce the sales of MXB’s key product of mountain bikes. 2 Knowledge of a reason and applied to MXB’s main product. If MXB had a new Managing Director they are likely to come in with their own aims and objectives. This would mean that the business might change direction or focus on another market entirely. This could be the key to future sales and success for MXB. 1 A new MD would be a reason, but the rest is not specifically related to MXB. Objectives set the direction for the business and allow stakeholders to know where the business is going. Without objectives MXB is unlikely to remain successful, despite it being the market leader . Rani reviews the objectives regularly . 0 Although there is some relevant context, there is no knowledge of a reason why objectives may change, so no marks can be awarded. Question Answer Marks 2(c) Analyse one advantage and one disadvantage to MXB of growing by launching a new product range of electric scooters. Level AO1 Knowledge and understanding 2 marks AO2 Application 2 marks AO3 Analysis 4 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  Knowledge of two relevant points is used to answer the question.  Knowledge of one relevant point is used to answer the question. 1–2 marks  Application of two relevant points to a business context.  Application of one relevant point to a business context. 1–2 marks Limited analysis  Limited analysis that identifies connections between causes, impacts and/or consequences of two points.  Limited analysis that identifies connections between causes, impacts and/or consequences of one point. 0 0 marks No creditable response. 0 marks No creditable response. 0 marks No creditable response. Annotate the advantage in the left-hand margin and the disadvantage in the right-hand margin. 8 Question Answer Marks 2(c) Indicative content AO1 Knowledge and understanding Knowledge of advantages of launching a new product / growth / increasing product portfolio (max 1 s), may include:  Increase revenue / sales  New target market  Strengthen brand image  Spread risk  Reduce average costs. Knowledge of disadvantages of launching a new product / growth / increasing product portfolio (max 1 s), may include:  Increase costs  Risk of new/unknown market  Risk of damaging brand image  Lack of market research / unknown market. AO2 Application Max one for application in the advantage and max one for application in the disadvantage.  MXB’s current market is high quality mountain bikes  Current target market is high-income leisure users  New target market is urban youth market  Market for e-scooters is expanding in country J  Use of Fig 2.1  MXB has (successfully) traded for 15 years in current market  $265 000 sales revenue  Static demand for mountain bikes  Mountain bikes are currently sold in specialist bicycle shops  Public limited company / shares sold publicly  Sales revenue for mountain bikes fell by 12% over the past year Question Answer Marks 2(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. Analysis of advantages may include:  A way to enter the electric scooter market. Electric scooters are becoming increasingly popular.  MXB can develop new skills and product knowledge regarding the electric scooter market.  May benefit from economies of scale – the products may use similar materials/components.  Internal/organic growth is generally less expensive than external growth.  Electric scooters target a different market segment which helps ‘spread risk’. Analysis of disadvantages may include:  Urban youth market may not be attracted to MXB brand as the brand is associated with mountain bikes.  The electric scooter market may be dominated by well-known/larger competitors so difficult to enter.  MXB specialises in mountain bikes so has no knowledge/experience of the electric scooter market.  MXB may need to purchase expensive new equipment and train its staff so they can create the electric scooters.  High research and development costs from creating a new product.  Internal/organic growth is generally a slower way to grow a business than external growth. Accept all valid responses. Question Answer Marks 2(c) Exemplar and annotations AO1 Knowledge AO2 Application AO3 Analysis Exemplar of an advantage Annotations for the advantage should be placed in the left-hand margin. The new product may help MXB increase sales by targeting a totally new market of urban youths . This could increase the brand awareness of MXB in this new market which is likely to allow MXB to survive if the mountain bike market goes into decline . Exemplar of a disadvantage Annotations for the disadvantage should be placed in the right-hand margin. However, this may risk damaging MXB’s reputation in the mountain bike market, where it has been established for 15 years . This could lead to MXB losing even more sales of mountain bikes which may reduce the overall profitability of the business . Question Answer Marks 2(d) Evaluate how MXB can change its marketing mix to extend the product life cycle of its range of mountain bikes. Level AO1 Knowledge and understanding 2 marks AO2 Application 2 marks AO3 Analysis 2 marks AO4 Evaluation 6 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 Developed knowledge of relevant key term(s) and/or factor(s) is used to answer the question. 2 marks Developed application of relevant point(s) to the business context. 2 marks Developed analysis that identifies connections between causes, impacts and/or consequences. 3–4 marks Developed evaluation  A developed judgement/conclusion is made.  Developed evaluative comments which balance some key arguments. 12 2(d) Level AO1 Knowledge and understanding 2 marks AO2 Application 2 marks AO3 Analysis 2 marks AO4 Evaluation 6 marks 1 1 mark Limited knowledge of relevant key term(s) and/or factor(s) is used to answer the question. 1 mark Limited application of relevant point(s) to the business context. 1 mark Limited analysis that identifies connections between causes, impacts and/or consequences. 1–2 marks Limited evaluation  A judgement/ conclusion is made with limited supporting comment/ evidence.  An attempt is made to balance the arguments. 0 0 marks No creditable response. 0 marks No creditable response. 0 marks No creditable response. 0 marks No creditable response. Indicative content AO1 Knowledge and understanding Knowledge of changing elements of the marketing mix (max 2 s), including:  The marketing mix (four Ps)  Product: new, adapt etc, including knowledge of product portfolio analysis (eg PLC, Boston Matrix)  Price: maintain, increase, reduce etc.  Place: new channels, new distribution methods etc.  Promotion: advertising, digital, direct etc. AO2 Application Limited application applies knowledge of the marketing mix to MXB’s product life cycle of mountain bikes once. Developed application + applies knowledge of the marketing mix to MXB’s product life cycle of mountain bikes twice.  Market leader for mountain bikes  Sales revenue for mountain bikes fell by 12% over the past year  MXB has traded successfully for 15 years  Public limited company / shares sold publicly Question Answer Marks 2(d) Use of Fig 2.1  Market/demand for mountain bikes is currently static  Mountain bikes are currently sold in specialist bicycle shops 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.  Increased promotion – promotions can be expensive and may have minimal impact if the market has reached the maturity stage of the product life cycle and/or other rivals are spending a lot on promotions. Promotions will offer a short-term boost to demand and can increase brand recognition, thereby supporting sales of other types of bikes  New models could be introduced – updating the mountain bike range may stimulate new sales. However, the R&D involved with developing new products could be expensive, and the additional sales may not justify the expenditure.  New brands could be created to help reposition the products.  The price of the mountain bikes could be changed to help stimulate the demand. The pricing strategy could be changed, e.g. if a price skimming approach is used the price could be lowered, or a promotional price discount offered to generate a short term boost in demand. Although the sales revenue generated for every product sold will reduce, the reduction should lead to increased demand which will increase market share and may boost profitability if a large enough increase in the volume sold is achieved.  New markets could be targeted, e.g. new market segments and/or new geographic areas. MXB could sell its mountain bikes to additional countries.  The mountain bikes are currently sold in specialist bicycle shops. MXB could sell its mountain bikes in additional shops and/or online. AO4 Evaluation Annotate evaluative judgements in the left -hand margin and evaluative comments in the right-hand margin. 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.  The most appropriate extension strategy depends on the budget available. After spending money to develop and launch the new range of scooters the business may not have as much finance available.  Will demand for mountain bikes fall in the future? Is the static demand for the product generally a sign that the product has entered the maturity phase of the product life cycle?  Should MXB focus its resources on electric scooters as this market is expanding? Question Answer Marks 2(d)  Is market share the most important measure of success, or is profitability and/or spreading risk from a diversified product portfolio more important?  The extension strategy may generate a short-term boost to sales/market share, but will it be sustained in the long- term?  Does the MXB brand extend from mountain bikes to electric scooters? Accept all valid responses. Exemplar and annotations MXB could reduce the price of their mountain bikes, which may lead to an increase in sales . However, since MXB’s consumers are high-income leisure users , a lower price may damage the brand image . Alternatively, MXB could expand their distribution channels and sell in more places than a limited number of specialist bike shops , for example through their own website. Overall, the better solution would be to change the distribution channels as this would be unlikely to damage the brand reputation . MXB already has the highest market share, so it has the most to lose by reducing price, but very little lose by selling on their own website . However, whether this is enough may depend on the actions of the competitors . If PE, the second largest producer, reduces its price, then MXB may have no choice but to also lower their prices to maintain their market share AO1 – 2 marks AO2 – 2 marks AO3 – 2 marks AO4 – 6 marks TOTAL – 12 marks

Question 14

Direct News (DN) Shila and Lucy own and manage DN, an online publishing business. DN produces a daily online local newspaper called QNews. …

Accepted Answer

2(a)(i) Identify one function of a manager. 1 Indicative content Identification of a function may include: • Planning • Organising • Directing • Controlling • Fayol – Commanding, motivating, co-ordinating and measuring performance / appraisal 2(a)(ii) Explain the term secondary market research. 3 AO1 Knowledge and understanding – 1 mark AO2 Application – 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 Limited application of one relevant point to a business context. the question. 0 marks 0 marks No creditable response. No creditable response. Indicative content AO1 Knowledge and understanding of secondary may include: • Uses data that already exists • Collected by someone else • Can be from another organisation No further marks can be gained without knowledge and understanding AO2 Application to market research Limited application applies knowledge of secondary market research including: • Cheaper than primary research / outdated / not tailored to business OR • Example or some other way of showing good understanding of secondary market research. Developed application + applies knowledge of secondary market research including • Cheaper than primary research / outdated / not tailored to business AND • Example or some other way of showing good understanding of secondary market research. Application can be made to DN or any other scenario / context / business / product. 2(a)(ii) Accept all valid responses. Exemplars and annotations Marks Rationale Information that already exists for other purposes 3 An answer which starts with the knowledge of such as in a newspaper or magazine It saves on secondary, then applies it to market research and research costs . develops the point in a business context. Second-hand research such as magazines, online 3 Again, knowledge of secondary, followed by reports etc. They are not tailored to a specific developed application to market research business but can establish market trends . Market research conducted by others , can be out 2 Clear knowledge of secondary. Limited application to of date and incorrect . market research. Using research someone else has published . It is 1 Both points show knowledge and understanding of second-hand research. secondary but there is no application to market research. Only 1 knowledge mark. Secondary market research is testing your product 0 This is a primary research method. with the public 0 No knowledge / understanding of secondary, without Research from online sources no other marks can be awarded. 2(b)(i) Refer to Table 2.1. Calculate the percentage increase in total revenue of online monthly magazines from 2020 to 3 2022. Indicative content – Responses may include: Revenue 2020 = 50 Revenue 2022 = 150 Change = 150 − 50 = 100 (1) Formula: Can be implied Change / original  100 (1) (150 – 50) / 50  100 (1) = 100 / 50  100 = 200% (3) Accept all valid responses. Exemplars and annotations Marks Answer Rationale 3 Correct answer Working and % sign do not matter 200% Must be three to denote the three marks. 2 Both of the following: To award two marks, there must be • Correct / implied formula • Two and a AND OR Correct calculation of the change in total revenue (100) • One , one and one OR An incorrect answer with one mistake allowing OFR for final stage. For example, (150 – 50) / 150  100 = 100 / 150  100 = 66.67% (accept any figure between 66.6 and 67) – 2 marks, (wrong denominator) 1 One of the following: To award one mark, there must be: • Correct / implied formula One and two OR • Correct calculation of the change in total revenue (100) 0 No creditable content. To award zero marks, there must be 2(b)(ii) Explain one additional piece of market research data DN would find useful before making the decision to produce 3 QLine. AO1 Knowledge and understanding – 1 mark AO2 Application – 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 question. Limited application of one relevant point to a business context. 0 marks 0 marks No creditable response. No creditable response. Indicative content AO1 Knowledge and understanding Knowledge of additional market research may include: • Customer data • Customer feedback • What are forecast trends • What subscription level are customers prepared to pay • Information about competitors • Potential size of the market No further marks can be gained without knowledge and understanding. AO2 Application Limited application , applies knowledge to DN once. Developed application + applies knowledge to DN twice or develops one point • What potential readers want in a magazine • Aimed at 18-30 market, so characteristics / requirements of this market • Other online magazines available, do they charge a subscription fee? • Plans to stop publishing QNews. 2(b)(ii) Accept all valid responses. Exemplars and annotations Mark Rationale DN can use primary research to ask people about 3 Knowledge of an additional piece of market research in the their reading habits and interests because DN specific context of DN by using the information in the case plans to stop publishing QNews it needs to study and develops answer to explain why it is useful. have accurate information about market trends. . Another piece of useful market research would be 3 Although the appears first, it cannot be awarded until the approximately how many 18-30 year olds has been found. However, there is obvious , so you have news subscriptions this will allow them to can go back and award the . anticipate the approximate amount of news subscriptions they may get from people in the targeted demographic . One additional market research data is what 2 Relevant additional data . The context linked to this is topics their targeted group is interested in this reasonable (subscriptions) , but is not developed. would allow DN to have a high revenue from subscriptions . Find out common interests and trends and 1 Knowledge of additional data, the rest of the answer is not identifying their target market using the context so (Not Using the Text). One additional piece of market research DN 0 This is market segmentation not market research so would find useful is to sell their products in a (not Answering the Question) even though there is context niche market so they should segment their without knowledge and understanding no other marks market to 18-30 age group. can be awarded. 2(c) Analyse two reasons why Shila and Lucy will have to change DN’s objectives. 8 Level AO1 Knowledge and AO2 Application – 2 marks AO3 Analysis understanding – 2 marks 4 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 relevant Limited analysis relevant points is used to points to a business • Limited analysis that identifies connections answer the question. context. between causes, impacts and / or • Knowledge of one • Application of one relevant consequences of two points. relevant point is used to point to a business • Limited analysis that identifies connections answer the question. context. 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. Indicative content AO1 Knowledge and understanding – Knowledge of two reasons (max 2 s), may include: • Market conditions • Importance of objectives • Relationship between mission statement, aims, objectives and strategy • SMART objectives • How change influences objectives • Relationship of objectives to budget planning 2(c) No further marks can be gained without knowledge and understanding. AO2 Application – Application of knowledge of a reason for DN to change its objectives (max 2 s), including: Max one for application for the first reason and another for application for the second reason • Employees concerned about the change. • Mission statement change • National revenue data • Not all employees have the right skills • Change from daily news reporting to magazine aimed at a young age group • Impact on local community 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. • Change essential for competition and survival – otherwise firms may make losses / go out of business. • Communicates the direction of the firm to employees – important as a change impacts employees working practices. • Will need to change objectives if want growth – as market conditions change. • Costs of change v benefits Accept all valid responses. Exemplars and annotations AO1 Knowledge AO2 Application AO3 Analysis One reason why Shila and Lucy will have to to provide a community This may mean a more national change DN’s objectives is because of the newspaper for local people readership as opposed to a niche change from its original mission . focus DN may become more Annotations for the first impact should be commercially focused to attract placed in the left-hand margin. advertisers. . Another reason to change objectives is to Who will subscribe to a monthly It is important that DN makes sure retain loyal customers product. that customer expectations are met Annotations for the second impact should and the product maintains quality be placed in the right-hand margin. to ensure they still gain profits 2(d) Evaluate the importance to DN of effective supply chain management. 12 Level AO1 Knowledge and AO2 Application – AO3 Analysis – AO4 Evaluation – understanding – 2 marks 2 marks 2 marks 6 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 knowledge of Developed Developed analysis Developed evaluation relevant key term(s) and / or application of that identifies • A developed factor(s) is used to answer relevant point(s) to connections between judgement / conclusion is the question. the business causes, impacts made. context. and / or consequences. • Developed evaluative comments which balance some key arguments. 1 1 mark 1 mark 1 mark 1–2 marks Limited knowledge Limited Limited analysis Limited evaluation of relevant key term(s) application that identifies • A judgement / conclusion is and / or factor(s) is used to of relevant point(s) connections between made with limited supporting answer the question. to the business causes, impacts comment / evidence. context. and / or consequences. • An attempt is made to balance the arguments. 0 0 marks 0 marks 0 marks 0 marks No creditable response. No creditable No creditable response. No creditable response. response. 2(d) Indicative content Knowledge of supply chain (max 2 s), may include: AO1 Knowledge and understanding: • Supply Chain Management understanding • The process of creating content • Managing content • Delivering content to the consumer • Customer expectations • Employee skills • Suitable content • Quality issues • Cost control No further marks can be gained without knowledge and understanding. AO2 Application Limited application applies knowledge of effective supply chain management to DN once. Developed application + applies knowledge of effective supply chain management DN twice. • content accessible on any device at any time / the magazine content should be available on all devices, • Through all internet service providers and easily available to subscribers. • Content suitable for target market (18-30) • Not easily available to non-subscribers • Need to keep costs low • Allow DN to compete in the new market • Difference between local and national market 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. • Do current employees have the right skills – to provide appropriate content? • Can the business survive inefficient management of the supply chain – as costs need to be carefully controlled throughout the chain? • Large variation of formats required – will involve many suppliers of different platforms / devices. • Multiple service providers add additional complexity – which can be challenging to manage. • Need to provide a quality product – which requires careful monitoring throughout the supply chain. • Content should be easy to find – how to ensure that this applies to all platforms / devices. • Employees important part of the supply chain – they have concerns / careful workforce planning required. 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 justified recommendation • Assessment of the decision • Identification of factors critical in the supply chain • How to ensure quality – what to compare to / what is quality content • Is there enough information to implement • Will revenue outweigh costs • Require complex negotiations with multiple platforms – do they have the expertise? • Discussion of further information required. • Other factors more important e.g., marketing Accept all valid responses. 2(d) Exemplars for awarding evaluation L1 (limited L2 (developed supporting L3 (developed supporting evidence with supporting evidence) evidence) context) Effective supply chain Effective supply chain management Effective supply chain management is important to DN management is is important to DN as it needs to as it needs to deliver content that meets customer important to DN deliver content that meets customer expectations. The main premise of their product is to expectations. deliver factual, entertaining and informative news. Supply chain Supply chain management is not as Supply chain management is not as important as management is not as important as marketing because marketing because without awareness and advertising important as marketing. without awareness and advertising there will be a lack of demand. Since Qline will be a there will be a lack of demand. new online monthly magazine DN will need social media accounts to promote this product.

Question 15

Jake’s Cakes (JC) Jake started baking cakes while at university. He baked cakes for friends’ birthdays and other celebrations. He posted pi…

Accepted Answer

Question Answer Marks 1(a)(i) Identify one element of a business plan. 1 Identification of a business plan element may include: ( ) • executive summary • business objectives • description of the business opportunity • marketing and sales strategy • management team and personnel • operations • financial forecasts Accept all valid responses. 1(a)(ii) Explain the term variable costs. 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 Limited application of one relevant point to a business context. the question. 0 marks 0 marks No creditable response. No creditable response. Indicative content: AO1 Knowledge and understanding Knowledge of variable costs may include: • Costs that vary with output AO2 Application Limited application applies knowledge of variable costs to one of the factors: Developed application + applies knowledge of variable costs to two of the factors • Any relevant example e.g. raw materials, packaging • Increase or decrease with the production volume • Increase or decrease with the sales volume Application can be made to the source material or any other scenario/context/business/person Accept all valid responses. 1(a)(ii) Exemplar and annotations Mark Rationale Expenses that change with the level of output such as raw 3 There is developed application of raw materials for example the flour used for cakes. materials (flour) as well as clear knowledge of the concept at the start of the response. Expenses that change with the level of output such as raw 2 Knowledge first, followed by application to materials . an example Expenses which vary with output . 1 Knowledge mark. No attempt to apply. Expenses which do not stay the same 0 No link to output 1(b)(i) Refer to Table 1.1. Calculate the forecast closing balance in March 2024. 3 Indicative content: Calculation Value 3 marks Net cash flow Total cash in − Total cash out 2.7 1 mark Opening balance Closing balance (Feb) (0.5) 1 mark Closing balance Net cash flow + Opening balance 2.2 1 mark (or )3 OFR applies ONLY if calculation is explicit and correct data values used in calculation Marks 3 marks Correct answer (3) Working is not required. Must be three to denote the three marks. 2 marks EITHER To award two marks, there must be • Correct formula AND • Two and a • Correct identification of figures OR • 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 • Correct identification of figures in an incorrect formula 0 marks No creditable content. To award zero marks, there must be • One 1(b)(ii) Explain one of Jake’s human needs that may be satisfied by operating JC. 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 Limited application of one relevant point to a business context. the question. 0 marks 0 marks No creditable response. No creditable response. Indicative content: AO1 Knowledge and understanding Knowledge of a factor that may satisy a human need • Social connections • Challenge • Significance • Certainty • Maslow’s hierarchy of needs AO2 Application Limited application , applies knowledge of one factor that satisfies Jakes needs once. Developed application + applies knowledge of one factor that satisfies Jakes needs twice. • via followers on social media • unique cakes • creating customer designed unique cakes/orders • sole business owner/sole trader/owns 100% of business • of praise from local celebrity (sharing JC social media posts • garage conversion plan • he is an entrepreneur 1(b)(ii) Exemplar and annotations Mark Rationale Social connections via followers on social media 3 Knowledge plus two specific elements from increases pride in bakery the case study The challenge of creating customer designed unique 2 A challenge is a human need with specific cakes/orders reference to the case material once Esteem needs 1 One of Maslow’s Needs identified only Hygiene factors 0 Incorrect theory Accept all valid responses. 1(c) Analyse two benefits to JC of using digital promotion. 8 Level AO1 Knowledge and AO2 Application AO3 Analysis understanding 2 marks 2 marks 4 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 used relevant points to a • Limited analysis that identifies connections to answer the question. business context. between causes, impacts and/or consequences • Knowledge of one • Application of one of two points. relevant point is used to relevant point to a • Limited analysis that identifies connections answer the question. business context. 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. 1(c) Indicative content AO1 Knowledge and understanding • Digital promotion: the use of advertising, sales promotion, personal selling, direct mail, trade fairs, sponsorship and public relations online • Methods of digital promotion (without reference to JC) e.g. Twitter, hashtags, Facebook, YouTube Knowledge of the benefits of using digital promotion (max 2 ), may include: • wide customer reach • inform consumers and persuade them to buy. • promotional objectives: − increased sales/awareness; − demonstrating abilities/showcasing products • creating or reinforcing a brand image • correcting misleading reports • cheaper than non-digital promotion 1(c) AO2 Application Max one for application to each benefit of using digital promotion. • Jakes uses social media as a source of digital promotion • Use of website to enable customers to design and order cakes • Celebrity share of JC social media posts • Attracting potential investor with $25 000 capital offer 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. • (Costs) low cost and does not require the use of external agencies who may charge a fee – reduces overheads • (Viral marketing) ease to attract the target audience – brand can grow quickly and reach new markets • (Message and image) taken and uploaded regularly without the need to use marketing agencies–increases personal interaction and brand loyalty • (Allows for feedback and direct contact) improve customer loyalty – increases chance of return custom/sales Accept all valid responses. Exemplar and annotations AO1 Knowledge AO2 Application AO3 Analysis Wide customer reach online From cake pictures on social media Attracts target audience and increases number of orders . Reinforcing brand image Of customer designed cakes Which increase the number of social media shares increases profit margins . 1(d) Evaluate whether a bank loan is the most appropriate source of finance for JC’s growth. 12 Level AO1 Knowledge and AO2 Application AO3 Analysis AO4 Evaluation understanding 2 marks 2 marks 2 marks 6 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 knowledge Developed Developed analysis Developed evaluation of relevant key term(s) application of that identifies • A developed and/or factor(s) is used relevant point(s) to the connections between judgement/conclusion is made. to answer the question. business context. causes, impacts and/or • Developed evaluative consequences. comments which balance some key arguments. 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 that identifies • A judgement/conclusion is and/or factor(s) is used the business context. connections between made with limited supporting to answer the question. causes, impacts and/or comment/evidence. consequences. • 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. 1(d) Indicative content AO1 Knowledge and understanding Knowledge of Bank loans (max 2 s) • set amount • fixed period of time • fixed interest rate • requires good credit/reputation Knowledge of other internal and external sources of finance; (max 2 s) • retained earnings • owners investment • mortgage • hire purchase • overdraft • partner AO2 Application Limited application applies knowledge of appropriateness of sources of finance to DC once. Developed application + applies knowledge of appropriateness of sources of finance twice. • retention of 100% stake, not a 50% stake • $25 000 investment offered requires a 50% sale of JC • capital investment to rent business premises/a kitchen, employ staff and invest in promotion • current gearing ratio of 0 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. Bank loan as an appropriate source of finance • retains full control – is able to make investment decisions in his own long term best interest • keeps all future profits for own benefit – no risk of externals hindering future expansion • liable for interest and loan repayments – may reduce cashflow which is already poor and will require an alternative short term SoF such as an overdraft or owners investment Investor as an appropriate source of finance • loss of complete ownership – may have negative implications on Jake’s motivation levels • ability to control finances would be reduced (as he would have to gain agreement from the investor on any financial decisions) – investor may not want to invest capital on non-owned property • able to invest to improve marketing/employ staff – no financial repayment risk – all future profits can be reinvested or taken as dividends Any alternative source of finance compared with the business loan/suitability for JC to be accepted 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. • does JC need the investment as he was able to keep up with demand, invest in his equipment and as the closing balance is positive and growing each month? • does Jake have the necessary ability to manage the risk of an external source of finance? • the most important benefits and drawbacks of a bank loan as a source of finance • weighing up the objectives and risks of choosing a bank loan • a judgement on whether a business loan is most appropriate for JC based on the evidence 1(d) Accept all valid responses. Bank Loans means a fixed amount of money from the bank but can have high interest rates which would lead to increased costs/outflows and lower profits for the business which means he will not be able to improve his cash flow issues as shown by the negative cash flow forecast. Retained earnings can also be another type of source of finance JC can get from its profits. Which means there are no cash outflows required such as when borrowing money. This is a method that JC already used for marketing and new equipment This will allow JC to have a better cash flow but he may not have enough capital to invest into the garage conversion straight away. A bank loan is the most appropriate method as a source of finance as JC requires $15 000 so he can specifically ask for this amount from the bank to be able to reach its aim for growth. However, this also depends on whether JC is able to take a loan from the bank or not and if so whether the interest rate is affordable because if it is not affordable then the cost will increase drastically which will further affect the poor cash flow forecast negatively

Question 16

Fizzy Drinks (FD) FD is a private sector business that manufactures an international brand of carbonated drinks. Its slogan was ‘A premium …

Accepted Answer

2(a)(i) Identify one objective of a private sector business Indicative content Knowledge of a private sector business including:  Profit maximisation or satisficing  Growth  Increased market share/market leader  Survival  CSR  Maximising revenue  Customer satisfaction  New product development/innovation  Diversify into new markets  Increasing shareholder value Do not reward features of private sector businesses that are not related to the objectives Accept all valid responses. 1 Question Answer Marks 2(a)(ii) Explain the term demand. AO1 Knowledge and understanding 1 mark AO2 Application 2 marks 2 marks Developed application of one relevant point to a business context. 1 mark Knowledge of one relevant point is used to answer the question. 1 mark Limited application of one relevant point to a business context. 0 marks No creditable response. 0 marks No creditable response. Indicative content Responses may include: AO1 Knowledge and understanding  A consumer's desire to buy  Willingness to pay a specific price  Popularity of a product amongst customers  The quantity/number of customers looking to buy goods and services at a specific price  Demand varies with price – the relationship varies depending on the type of good, e.g. normal or inferior  Demand is at a specific point in time 3 Question Answer Marks 2(a)(ii) AO2 Application Explanation of demand  APP can be awarded for a second AO1 point  Factors affecting demand  High brand awareness and customer loyalty which increases/maintains demand  Affected by costs and inputs e.g. reducing the quality of ingredients/raising the selling price/reducing the marketing budget reduces demand  Consumer incomes  Price of substitute goods and complementary goods  Population size and structure  Fashion and taste  Quality of the product  Advertising and promotion changes Application to a business context  Demand for the drinks has changed since altering ingredients  People buy more drinks when the weather is warmer  FD’s products taste similar to competitors after the change in ingredients  Cost of raw materials increased Application can be made to FD or any other scenario/context/business/person. Allow application to demand. Accept all valid responses. Guidance in awarding marks Knowledge & understanding Knowledge of demand 1 mark Explanation Explanation of demand 1 mark Context Applied to a business context / business environment 1 mark Question Answer Marks 2(b)(i) Refer to Table 2.1. Calculate FD’s margin of safety in 2023 Indicative content 1 mark for the formula for margin of safety (words or figures) OR calculating the break-even quantity or current sales 1 mark for calculating the break-even quantity and current sales 1 mark for calculating the margin of safety (OFR)  Formula = current sales - breakeven point (1)  Calculation of breakeven point  Fixed costs: $15m  Contribution per unit: selling price per unit ($4) – variable cost per unit $1m  = $3m  BE level of output: 5m units  Current sales 100m  0.6 (60% of maximum capacity) = 60m units  Margin of safety = 60m units – 5m units (1 OFR for 60m units and 5m units) Answer = 55m (units) (3) Accept all valid responses. 3 Question Answer Marks 2(b)(i) Marks 3 marks Correct answer 55m (units) allow 55 Working and units do not matter. Must be three to denote the three marks. 2 marks Both of the following:  Correct calculation of the break-even quantity AND  Correct calculation of current sales OR An incorrect answer with one mistake allowing OFR for final stage. To award two marks, there must be  Two and a OR  One , one and one 1 mark One of the following:  Correct formula for margin of safety (word or figures) OR  Correct calculation of the break-even quantity or current sales To award one mark, there must be:  One and two 0 marks No creditable content. To award zero marks, there must be  One Question Answer Marks 2(b)(ii) Explain one intangible attribute of FD’s products AO1 Knowledge and understanding 1 mark AO2 Application 2 marks 2 marks Developed application of one relevant point to a business context. 1 mark Knowledge of one relevant point is used to answer the question. 1 mark Limited application of one relevant point to a business context. 0 marks No creditable response. 0 marks No creditable response. Indicative content Responses may include: AO1 Knowledge and understanding  Types of intangible attribute, e.g. brand name, customer loyalty, quality, satisfies thirst, taste, reliability, image 3 Question Answer Marks 2(b)(ii) AO2 Application Explanation of the identified intangible attribute  Brand name; because it can’t be touched  Brand name; which contributes to the reputation of the business  Quality; how the customer perceives the drink Context applied to FD of an intangible attribute  ‘A premium drink for premium customers’ reputation/helps become market leader  Marketing budget reduced/erodes brand awareness  ‘High customer loyalty’ ensures market leader status Application must be made to FD and not generic. Accept all valid responses. Guidance in awarding marks Knowledge & understanding Knowledge of an intangible attribute 1 mark Explanation Explanation of an intangible attribute 1 mark Context Applied to a business context/ business environment 1 mark Question Answer Marks 2(c) Analyse two possible impacts on FD of a fall in productivity. Level AO1 Knowledge and understanding 2 marks AO2 Application 2 marks AO3 Analysis 4 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  Knowledge of two relevant points is used to answer the question.  Knowledge of one relevant point is used to answer the question. 1–2 marks  Application of two relevant points to a business context.  Application of one relevant point to a business context. 1–2 marks Limited analysis  Limited analysis that identifies connections between causes, impacts and/or consequences of two points.  Limited analysis that identifies connections between causes, impacts and/or consequences of one point. 0 0 marks No creditable response. 0 marks No creditable response. 0 marks No creditable response. 8 Question Answer Marks 2(c) Indicative content Responses may include: AO1 Knowledge and understanding Knowledge of productivity (max of 1 mark if no impact of a fall in productivity) Knowledge of impacts of a fall in productivity (max 2 marks – annotate first impact on left and second impact on right) including:  Knowledge of productivity – the effectiveness of productive effort  Producing fewer products  Productivity is the ratio of outputs to inputs during production, e.g. labour productivity  Resources are not being utilised to their maximum potential/producing less with the same resources  Measurements of productivity – average output/costs, time or resources incurred in a time period  Producing output at the highest ratio of output to input (more out of less)  Knowledge of possible impacts of a drop in efficiency  Profitability  Average costs of production  Wastage of resources AO2 Application Context applied to an impact of a fall in productivity (max 2 marks), including:  Loss of ‘market leader’ title  Great brand name high brand awareness and customer loyalty lost  Cost of raw materials have increased  Quality of ingredients reduced instead of increasing selling price per unit  Reduced marketing budget  Lack of distinctiveness  Falling demand  Data from table 2.1  Drop in employee morale and loss of key employees Question Answer Marks 2(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.  Reduced productivity will increase the average cost of making each unit of output  Lowers output per time period of fizzy drinks, which may lead to an increase in the unit cost which can further reduce the profit margin per unit which may lead to an increase in the selling price  FD may run out of inventory if supply is not equal to demand, which may lead to an increased lead time for the customer order which may further increase consumer dissatisfaction and help the competitor strengthen their market dominance  May lead to KPI’s not being achieved which may impact on the financial reward for the employees which may persuade remaining employees to find alternative employment  Unexperienced employees may be pressured to increase productivity, however without the prior manufacturing experience may make further mistakes which may negatively impact on the taste and therefore the already dropping brand name and demand which can affect cashflow and reputation  Employee morale may fall further due to the fall in productivity Accept all valid responses. Question Answer Marks 2(d) Evaluate the usefulness to FD of market research methods to inform future marketing decisions. Level AO1 Knowledge and understanding 2 marks AO2 Application 2 marks AO3 Analysis 2 marks AO4 Evaluation 6 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 Developed knowledge of relevant key term(s) and/or factor(s) is used to answer the question. 2 marks Developed application of relevant point(s) to the business context. 2 marks Developed analysis that identifies connections between causes, impacts and/or consequences. 3–4 marks Developed evaluation  A developed judgement/conclusion is made.  Developed evaluative comments which balance some key arguments. 1 1 mark Limited knowledge of relevant key term(s) and/or factor(s) is used to answer the question. 1 mark Limited application of relevant point(s) to the business context. 1 mark Limited analysis that identifies connections between causes, impacts and/or consequences. 1–2 marks Limited evaluation  A judgement/conclusion is made with limited supporting comment/evidence.  An attempt is made to balance the arguments. 0 0 marks No creditable response. 0 marks No creditable response. 0 marks No creditable response. 0 marks No creditable response. 12 Question Answer Marks 2(d) Indicative content Responses may include: AO1 Knowledge and understanding Knowledge of the features of marketing research methods to inform future marketing decisions (max 2 marks), including:  Market research is the process of collecting, recording and analysing data about customers, competitors and the market  Market research can be primary and/or secondary  Market research data can be quantitative and/or qualitative  Purposes of market research – understand the market, reduce risk, understand customers, predict trends  Primary market research methods or examples  Secondary market research methods or examples AO2 Application Context applied to features of market research methods to inform future marketing decisions (max 2 marks), including:  International brand of carbonated drinks  Research focused on customer preferences  Slogan was ‘A premium drink for premium customers’.  7 national and 12 international brands  FD lost the title of market leader to TR  Reduced its marketing budget.  Evidence of high customer loyalty  Change in ingredients led to FD’s products tasting similar to their competitors  Feedback highlighting a ‘flavourless drink’ and demand fell rapidly  Brand name and customer loyalty was lost Question Answer Marks 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.  Primary research data; understand customer needs – so can increase sales  Can help decide whether new business ideas are suitable/relevant; reduces long term costs of a failed product/brand  Identify products customers find appealing; reduces marketing budgets  Make packaging and branding decisions; attract customer interest  May not provide much unknown data; data may already exist so not increase sales  Is there marketing budget suitable; may not have enough finance 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 about the likely usefulness to FD of market research methods to inform future marketing decisions.  Elements that the judgement could depend upon, available finance, brand reputation, competitor branding, taste, trust.  Weighing up of the impacts on external factors to the proposed of market research methods to inform future marketing decisions. Question Answer Marks 2(d) Accept all valid responses. Exemplars for awarding evaluation L1 (limited supporting evidence) L2 (developed supporting evidence) L3 (developed supporting evidence with context) Market research methods are useful to FD. Market research methods are useful to FD because it can help the business make decisions to better meet customer needs. Market research methods are useful to FD because it can help the business make decisions to better meet customer needs and therefore regain its position as market leader. FD should not use market research methods to support future marketing decisions. FD should not use market research methods to support future marketing decisions in case the data is misleading. FD should not use market research methods to support future marketing decisions, such as reducing the quality of ingredients in its drinks, in case the data is misleading. In the short-term market research methods are a good way to inform future marketing decisions. In the short-term market research methods are a good way to inform future marketing decisions, but in the long-term changes in the external environment may reduce the value of the market research data. In the short-term market research methods are a good way to inform future marketing decisions, but in the long-term changes in the external environment may reduce the value of the market research data, especially as the market is competitive with 7 national and 12 international brands.

Question 17

Reliable Car Repairs (RCR) Reliable Car Repairs (RCR) is owned by Freya and her brother Kye as a partnership. The business was set up five …

Accepted Answer

2(a)(i) Identify one method of primary market research. 1 Primary research is the first-hand collection of data by an organisation for its own needs. Award any method that meets this definition. Identification of a primary market research may include: • Questionnaires/surveys/feedback • Focus groups • Interviews • Observations • Consumer trials/samples 2(a)(ii) Explain the term qualitative data. 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 qualitative data may include: • Qualitative data describes customer opinions/qualities/characteristics/subjective. OR • Qualitative data is not measurable in financial or numerical terms. AO2 Application Explanation of qualitative data (max 1 mark), including: • Qualitative data describes customer opinions/qualities/characteristics/subjective. AND • Qualitative data is not measurable in financial or numerical terms. Context applied to qualitative data (max 1 mark), including: • An example of a specific piece of qualitative data • An example of a use of qualitative data • An example of a way of presenting/summarising/analysing 2(a)(ii) Application can be made to RCR or any other scenario/context/business/person. Accept all valid responses. Exemplar and annotations Mark Rationale Qualitative data is not numerical . For example, the owners can 3 Both points covered (K and APP) with an obtain data about customers’ satisfaction with the speed of car example from the context (APP). repairs . Data about customer views and opinions which is not 3 Both points and a generic (but rewardable) measurable for example happiness . example. Not numbers such as opinions . 2 Both points but no further example. Data which can not be measured , such as how much 2 Can not be measured and an example. customers like a chocolate bar . Qualitative data is harder to analyse as it includes information 1 Opinions and characteristics, but only one about customer opinions and characteristics. . point and no context. Data that can be used to make decisions. 0 Too vague. All data can be used to make decisions. No knowledge of qualitative data specifically. 2(b)(i) Refer to Table 2.1 and other information. Calculate the market growth for car repairs in city B between 2023 and 3 2024. Total value of sales in market (2023) = $700 000 (given in text) Formula: New market size (1) Original market size  100 OR The percentage change in the total size of a market (1) OR Total value of sales in market (2024) = (123 165 / 17)  100 = 7245  100 = 724 500 (1) Market growth = 724 500 – 700 000 = 24 500 (1) Answer = $24 500 (3) 2(b)(i) Exemplar and annotations Marks 3 marks Correct answer Working and units do not matter. $24 500 or 24 500 Must be three to denote the three marks. OR 3.5% or 3.5 2 marks ONE of the following: To award two marks, there must be • Correct calculation of 2024 market size • Two and a (724 500) OR OR • One , one and one 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 0 marks No creditable content. To award zero marks, there must be • Three 2(b)(ii) Explain one reason why RCR’s objectives may change over time. 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 reason why objectives might change may include: • changing internal factors • changing external factors • the achievement of previous objectives. AO2 Application Explanation of a reason why business objectives may change over time (max 1 mark), including: • changing internal factors – the business might have more resources available – a significant number of workers may have left – a new manager employed. • changing external factors – new competitors enter the market – an increase in market size – customer demand changes 2(b)(ii) • the achievement of previous objectives – if a business has survived then it may now try to be profitable Context applied to a reason why RCR’s objectives may change over time (max 1 mark) including: • RCR is a partnership • Business operated for five years • Repair a wide range of cars • Freya carried out primary market research to understand her customer’s needs and wants • Collected qualitative data • Customers like the speed of RCR’s service • RCR’s market share has increased annually over the past five years • RCR has a 17% share of the market • Employ two mechanics • Kye uses a democratic style of management • Experienced mechanics who have worked for the business since it started five years ago • Holds a large quantity of inventory • Each car type needs different parts • Buys parts from two suppliers • Suppliers have supplied RCR since it started five years ago • RCR has an objective of increasing efficiency • Partners thinking of introducing Just in Time (JIT). Accept all valid responses. 2(b)(ii) Exemplar and annotations Mark Rationale Once RCR has achieved its business objectives they will need to 3 Reasonable knowledge of a reason with change . For example RCR may have previously had an two examples of application. objective to have at least a 15% share of the market when it was set up five years ago , but now the business has a 17% share of the market . The business may face more competition so may need to 2 Knowledge of a reason (competition is an change its objective from increasing efficiency . external influence) and some context. New objectives may be needed if internal factors change . 1 The answer is brief, but shows some knowledge of why objectives may change over time Objectives give owners direction when making business decisions 0 There is no knowledge of a reason why objectives may change, so no marks can . be awarded. 2(c) Analyse two advantages to RCR of Kye using a democratic management style. 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. Annotate the first advantage in the left-hand margin and the second in the right-hand marking. 2(c) Indicative content AO1 Knowledge and understanding Democratic management style is where the manager actively involves employees in decision making. Knowledge of advantages of using a democratic management style (max 2 s), may include: • Increased motivation • Low labour turnover • More ideas from workforce • Better ideas from workforce (potentially) • More experiences are considered in decision making • May allows for more efficient problem solving (do not accept ‘quicker’ unless this is explained) AO2 Application Max one for application in one advantage and max two for application in two advantages. • RCR is a partnership • Business operated for five years • Repair a wide range of cars • Freya carried out primary market research to understand her customer’s needs and wants • Collected qualitative data • Customers like the speed of RCR’s service • RCR’s market share has increased annually over the past five years • RCR has a 17% share of the market • Freya and Kye have no experience of repairing cars • Employ two mechanics • Experienced mechanics who have worked for the business since it started five years ago • Holds a large quantity of inventory • Each car type needs different parts • Buys parts from two suppliers • RCR has an objective of increasing efficiency 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. 2(c) Analysis of advantages may include: • RCR’s customers like the speed of service offered. The employees are likely to be more motivated as consulted about decisions. Motivated employees are likely to be more productive and offer a quicker work rate. • Two employees are experienced and worked for RCR since it was launched so contributions are likely to lead to more successful decision making, increasing profitability/customer satisfaction. • Lower recruitment costs/time to train new employees etc. due to the low level of labour turnover. Accept all valid responses. Exemplar and annotations AO1 Knowledge AO2 Application AO3 Analysis Exemplar of an advantage Better decision making as the opinions of the two This could help the mechanics can be business to identify other considered . ways of increasing efficiency which could help it to operate more profitably . 2(d) Evaluate whether RCR should introduce Just in Time (JIT). 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 is relevant key term(s) relevant point(s) to connections 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 arguments. question. 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 with term(s) and/or to the business connections limited supporting comment/evidence. factor(s) is used to context. between causes, • An attempt is made to balance the answer the question. impacts and/or arguments. consequences. 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 JIT (max 2 s), including: • JIT is an inventory management system • JIT is where inventory is ordered to be delivered at the time that the part is needed by the business. • Less/zero inventory held • JIT is often used when the customer order initiates the ordering of inventory. AO2 Application Limited application applies knowledge of the use of JIT to RCR once. Developed application + applies knowledge of the use of JIT to RCR twice. • RCR is a partnership • Business operated for five years • Repair a wide range of cars • Freya carried out primary market research to understand her customer’s needs and wants • Collected qualitative data • Customers like the speed of RCR’s service • RCR’s market share has increased annually over the past five years • RCR has a 17% share of the market • Freya and Kye have no experience of repairing cars • Employ two mechanics • Kye uses a democratic style of management • Experienced mechanics who have worked for the business since it started five years ago • Holds a large quantity of inventory • Each car type needs different parts • Buys parts from two suppliers • RCR has an objective of increasing efficiency 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. Analysis for the introduction of JIT, including: • Reduces inventory holding costs – increased profitability • May reduce wastage of materials/inventory – reducing total costs • Reduces capital tied up in inventory – which could be spent on extra marketing to increase sales (opportunity cost) • Responsive to changes in demand – reducing costs / increasing efficiency • Improved cash flow – improving RCR’s liquidity/ working capital (opportunity cost) • May improve supplier relationship – reduced prices / increased demand Analysis against the introduction of JIT, including: • Business would be vulnerable to supply chain disruptions – lower sales / poor customer satisfaction • May exacerbate poor supplier relationships – need to find a new/ more reliable supplier. • Increased transportation costs (due to more deliveries) – reduced profitability • Increased inefficiency (if inventory is not delivered on time) – reduced productivity • Less control over supply chain – increased costs • May not be suitable for large fluctuations/ unexpected changes in demand – lower sales/revenue • Requires careful coordination of production process and inventory ordering – increased training costs 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 whether RCR should introduce JIT, with justification. • A judgement that RCR should continue without using JIT (or continue to use Just in Case – JIC). • What the judgement might depend upon, such as, suppliers, geography, objectives, external environment, actions of competitors, short term vs long term etc. • A discussion of the impact of technology (for example electric cars) on RCR’s decision. Accept all valid responses. 2(d) Exemplars for awarding evaluation L1 (limited supporting L2 (developed supporting L3 (developed supporting evidence) evidence) evidence with context) RCR should introduce JIT. RCR should introduce JIT to avoid RCR should introduce JIT to avoid having to have lots of inventory in having to have lots of car components stock. in stock. RCR should not introduce JIT. RCR should not introduce JIT RCR should not introduce JIT because most customers want a because most customers want a speedy repairs. speedy repairs, in 24 hours. Whether RCR should introduce JIT Whether RCR should introduce JIT Whether RCR should introduce JIT depends on the relationship with its depends on the relationship with its depends on the relationship with its suppliers. suppliers because they will need suppliers because they will need regular supplies delivered. regular supplies delivered to achieve its objective of increasing efficiency.

Question 18

Personalised Blankets (PB) Kaia left university with a degree in textile design. Using her entrepreneurial qualities, Kaia set up PB as a s…

Accepted Answer

2(a)(i) Identify one external source of finance. 1 Responses may include: Knowledge of an external source of finance: • share capital • debentures • new partners • venture capital • (bank) overdrafts • leasing • hire purchase • (bank) loans • mortgages • debt factoring • trade credit • micro-finance • crowd funding • government grants • peer to peer Accept all valid responses. 2(a)(ii) Explain the term business plan. 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. Responses may include: AO1 Knowledge and understanding Knowledge of a business plan , including: • formal written document containing the goals of a business. • the methods for attaining business goals/objectives/targets etc. • a written document that describes a business and its objectives. • a document outlining the direction of the business and how to get there. AO2 Application Explanation of a business plan (max 2 marks), including: • Any example of a section from a business plan (1 mark for each up to max of 2 marks); HRM plan, marketing plan, operations plan, finance plan. • Any other relevant data which might be included in a business plan. • Examples of potential uses of a business; gain finance, find investors etc. • A business plan may have a specific timeframe for achieving its objectives • May include internal and external influence data Accept all valid responses. 2(a)(ii) Exemplar and annotations Mark Rationale A written document showing the objectives for the business and 3 Clear knowledge that objectives form the functional areas, such as Marketing that are involved. part of the business plan. A functional Business plans are often used to apply for finance . area also identified, as well as a use of a business plan. Can be used to inform external stakeholders about the business 3 Some idea of what is in a business plan . A business plan can be created for a specific time period, such (details and environment), and a use of a as 5 years . It is the details about the business and its plan. Also the time period. environment A document outlining what the business does for a specific time 2 Knowledge of what is in a business plan period . and time period. A future plan for how a business will achieve its objectives . 1 Clear knowledge. A plan of the business for the future . 0 Tautology – candidates need to show they know what ‘business’ and ‘plan’ mean. A forecast of the sales made by a business. 0 No understanding of a business plan. 2(b)(i) Refer to Fig 2.1 and other information. Calculate the total payment to the social media influencer in February. Formula: Total payment = salary + commission (% of sales) (1) OR Correct calculation of revenue that comes directly from the influencer in Feb = Total sales in four weeks – $4000 + $3000 + $500 + $3000 = $10 500 (1) OR Correct calculation of total salary for influencer for Feb = $250 + $250 + $250 + $250 = $1000 (1) Calculation: 5% of $10 500 = $525 (1) Total payment = $1000 (salary) + $525 (commission) = $1525 (1 – OFR applies) Ans = $1525 (3 marks) 2(b)(i) Exemplar and annotations Marks 3 marks Correct answer Working and sign do not matter. $1525 $ 2 marks Correct calculation of commission based on total To award two marks, there must be revenue that comes directly from the influencer in • Two and a Feb ($525) OR • One , one and one OR OR An incorrect answer with one mistake allowing OFR • Two and a for final stage. OR An answer that misses out the commission ($11 500 with working) 1 mark One of the following: To award one mark, there must be: • Correct formula • One and two • Correct calculation of total revenue that comes directly from the influencer in Feb ($10 500). • Correct calculation of total salary for FEB ($1000). 0 marks No creditable content. To award zero marks, there must be a minimum of one 2(b)(ii) Explain one disadvantage to Kaia of using a commission payment method. 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. Responses may include: AO1 Knowledge and understanding Knowledge of a disadvantage of using commission (max 1 mark), including • Increases business costs • Reduces profit/ profit margin • Difficult to predict / forecast • May lead to aggressive sales techniques • May cause anxiety/stress/demotivation (for the employee) • May prioritise short-term gains, over long-term business objectives • May be difficult to recruit new workers • May cause employees to compete with one another • Paid from revenue, not profit (may need to be paid even if PB does not make a profit) AO2 Application Explanation of a disadvantage of using commission payment method (max 1 mark), including: • Increases business costs – as the business increases revenue, commission also increases • Difficult to predict / forecast – which can mean that PB may not be able to calculate the break-even point • May lead to aggressive sales techniques – as salespeople push to increase their own income 2(b)(ii) • May cause anxiety/stress (for the employee) – leading to lower motivation • May prioritise short-term gains, over long-term business objectives – as employees focus on increasing short term revenue and not profit margins • May be difficult to recruit new workers – because of the uncertainty of their likely income • May cause employees to compete with one another – and work towards their own utility, not the good of the business • Paid from revenue, not profit – so may need to be paid even if PB does not make a profit Context applied to PB (max 1 mark), including: • 5% commission on direct sales • OFR from Q2(b)(i) • Social media influencer gets a salary as well ($250 a week) • Use of data in chart 2.1 Exemplar and annotations Mark Rationale A commission adds to PBs costs which can reduce 3 A disadvantage identified and explained with the profit available to relocate PB to larger premises context. . It may lead to competition between workers which 3 A disadvantage, which is explained and context could lead to demotivated employees reducing the used. $10 500 revenue from the influencer . May be difficult to recruit new influencers if 5% 2 A disadvantage and context. However the commission seems low. disadvantaged is not explained as to how/why recruitment may be more difficult based on commission. Reduce profit , and may demotivate the employees. 1 There are two pieces of knowledge here, but they are not linked (ie the candidate has not stated that there is less profit because of the demotivation). Only K so max 1 mark. Paying a 5% commission means that for every $1 of 0 There is no knowledge of a disadvantage of using revenue the influencer sells, they get $0.05. commission. Accept all valid responses. 2(c) Analyse one advantage and one disadvantage to Kaia of using job production. 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 used relevant points to a • Limited analysis that identifies connections to answer the business context. between causes, impacts and/or consequences question. • Application of one of two points. • Knowledge of one relevant point to a • Limited analysis that identifies connections relevant point is used business context. between causes, impacts and/or consequences to answer the of one point. question. 0 0 marks 0 marks 0 marks No creditable response. No creditable response. No creditable response. Note: Annotate the first advantage in the left-hand margin and the first disadvantage in the right-hand margin. 2(c) Responses may include: AO1 Knowledge and understanding Knowledge of an advantage of using job production (max 1 mark), including: • High quality • High price • Flexibility • Customisation / customer satisfaction • All finished products are sold Knowledge of a disadvantage of using job production (max 1 mark), including: • High production costs • Long lead time • Requires specialist equipment AO2 Application Application of an advantage or disadvantage to PB , including: • Kaia has a university degree in textile designs • Kaia thinks she has entrepreneurial qualities • Sole trader • Current objective to break even • Blankets personalised with a picture • Picture supplied by customer • Customers design their own blanket (customisable size and picture) • Many customers buy the blankets as gifts for special occasions (birthdays, holidays etc.) • Being promoted by a social media influencer • Use of data in Chart 2.1 AO3 Analysis Limited analysis of an advantage of job production – developed analysis , including: • High quality: increases customer satisfaction and leads to sales – increases profit. • Customisation / customer satisfaction; likely to lead to increased sales – increased profit. • All finished products are sold; more likely to have costs lower than revenue – increased profitability. 2(c) Limited analysis of a disadvantage of job production – developed analysis , including: • High production costs: may need to increase price to cover costs – less chance to break even and make a profit. • Long lead time; may irritate customers leading to bad reviews – lower sales and profit. • Requires specialist equipment; may need to purchase expensive capital equipment increasing costs – reducing profitability. Accept all valid responses. Exemplars and annotations AO1 Knowledge AO2 Application AO3 Analysis Higher prices , For individual blankets that are This is likely to lead to higher revenue personalised with a picture . leading to higher profit . Takes longer to produce . Which may be a issue if customers So, customers may go to a different are purchasing for a special occasion, business, reducing PBs revenue like a birthday , and therefore decrease the profit . 2(d) Evaluate the most likely reason for Kaia’s objectives to change over the next five years. 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 arguments. question. 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. 2(d) Responses may include: AO1 Knowledge and understanding Knowledge of why business objectives may change over time (max 1 mark), including: • As the business grows • If the previous objective has been met • As the business declines • As the business maintains • As the market changes • As competitors act / react • When aims / vision / mission changes • As the business environment changes (not required at AS level, but rewarded) – SLEEPT AO2 Application Application to PB (max 2 marks), including: • Kaia has a university degree in textile designs • Kaia thinks she has entrepreneurial qualities • Sole trader • Current objective to break even • Blankets personalised with a picture • Picture supplied by customer • Customers design their own blanket (customisable size and picture) • Many customers buy the blankets as gifts for special occasions (birthdays, holidays etc.) • Being promoted by a social media influencer • Use of data in Chart 2.1 • Thinking of relocating PB AO3 Analysis Limited analysis of how the objectives change – developed analysis , including: • As the business grows; objectives may change to profit maximisation – so that the owners can start to receive an income for their risk. • As the business declines, objectives may change to survival – and the business may reduce prices in an effort to gain a new market of customers. 2(d) • As the business maintains; the business owner may decide not to continue the business – leading to trying to recover as much of the capital invested as possible. • As the market changes, the business will need to adapt to the changing market, perhaps by making significant changes to the type of product being sold or doing some expensive market research into the new customer preferences – leading to an increase in costs and a reduction in profitability. • As competitors act / react; the business may become a price taker and change their marketing mix – so that they can maintain and grow their market share. • When aims / vision / mission changes; if the owner decides to change the mission of the business, then all the functions of the business may also need to be changed. For example, buying new capital items that allow it to make a different product – leading to an increase in business costs and reduced profit. • As the business environment changes (not required at AS level, but rewarded); for example, if the economy goes into recession, then luxury items may not be demanded, reducing customers – leading to a decrease in sales revenue and profit. AO4 Evaluation Limited valuation of the most likely reason why objectives may change – developed – developed in context , including: • A judgement of the most likely reason for Kaia’s objectives to change over the next five years. • What the judgement may depend upon; the owners desire to continue / grow the business, the market research, dynamism of the market, competitors’ actions / reactions etc. • Kaia has only just started the PB, so the objectives may change significantly over the next five years. Does she have the knowledge / research / experience to judge how the objectives might change over such a long period of time? • To what extent is PB in a growing or declining market and how many of her customers choose to repeat purchase? • Kaia’s own objectives – she thinks she has entrepreneurial qualities, so will she be looking at new products / business ideas over the next five years, which may mean that PB might not even exist, or be in a very different format to what it is today. Is it sensible to try and plan for five years with such limited experience? • A judgement about likeliness of the business objectives needing to change over five years. Accept all valid responses. 2(d) Exemplars for awarding evaluation L1 (limited L2 (developed supporting evidence) L3 (developed supporting evidence supporting evidence) with context) The most likely reason is The most likely reason is because PB has The most likely reason is because PB has because PB has reached reached its previous objective. This means reached its previous objective, to break its previous objective. that Kaia will need a new objective, such as even. This means that Kaia will need a new profit maximisation. objective, such as profit maximisation. It depends on her personal It depends on her personal objectives, It depends on her personal objectives, objectives. because she is the owner, the objectives because she is a sole trader, the objectives will need to change to adapt to her needs. will need to change to adapt to her needs.

Question 19

Fresh Farm (FF) FF is a partnership in country Q that grows a range of fruits and vegetables, such as apples, carrots and potatoes. FF also…

Accepted Answer

2(a)(i) Identify one feature of a partnership. 1 Indicative content Identification of a feature of a partnership may include: • Two or more people join but the exact number can vary depending on the type of partnership and legal regulations • Unlimited liability • Share profits / losses / risks • Must have mutual trust and confidence in each other • Formalised through a legal agreement • Decisions usually made collaboratively / each partner has a say in the business operations 2(a)(ii) Explain the term working capital. 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. Responses may include: AO1 Knowledge and understanding Knowledge of working capital (max 1 mark), may include: • Financial measure • Difference between current assets and current liabilities • A measure of a company's liquidity and short-term financial health • Day-to-day finance required AO2 Application Explanation of working capital (max 1 mark), including: • ensures firm can meet short-term liabilities • indicates liquidity • assesses how efficiently a company is using its resources to generate revenue • can be used as a source of finance • Context applied to working capital (max 1 mark), including: • companies with positive working capital can invest in growth opportunities and expansion • example/calculation Accept all valid responses. 2(b)(i) Refer to Table 2.1. Calculate FF’s profit in 2024. 3 Indicative content • Formula: price = revenue – (direct costs + fixed costs) (1) • Calculation of total costs $50 000 + $30 000 = $80 000 (1) • Calculation of profit = $120 000 – $80 000 (2) = $40 000 (3) 40 (with working) = 2 Answer = $40 000 (3) 2(b)(ii) Explain one factor influencing the supply of FF’s products. 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. Responses may include: AO1 Knowledge and understanding Knowledge of a factor influencing supply may include: • Price of the product • Production costs • Technology/capacity • Number of suppliers • Government policies • Season/harvest/weather conditions • Prices of substitutes/complements • Future expectations • Productivity of workers AO2 Application Explanation of a factor influencing supply (max 1 mark), including • Price of the product – When the price of a product increases, producers are generally willing to supply more because they can achieve higher revenue/vice-versa • Production costs – A decrease in production costs (e.g., lower wages, cheaper raw materials) can increase supply as it becomes more profitable to produce/opposite for an increase in costs 2(b)(ii) • Technology/capacity – Improvements in technology can enhance production efficiency, leading to an increase in 3 supply/availability of spare capacity • Number of suppliers – An increase/decrease in the number of suppliers in the market can lead to a higher/lower overall supply • Government policies – effect of subsidies/taxes • Season/harvest/weather conditions – good harvest/weather conditions can increase the supply of agricultural products. Poor harvest/weather conditions can reduce supply • Prices/availability of substitutes/complements – If the price of a substitute good rises, producers might switch to producing that good, reducing the supply of the original product. An increase in the supply of a complementary good can also increase the supply of the original product • Future expectations – If producers expect higher prices in the future, they might reduce current supply to sell more later at higher prices/if lower prices are expected, producers might increase current supply to sell more before prices drop • Productivity of workers – Increased worker productivity can lead to higher supply as more goods are produced in the same amount of time/decreased productivity can reduce supply Context applied to FF’s supply of products (max 1 mark) including: • Low level of supply • Can only grow a limited number of crops • Seasonal produce • Yield and quality affected by weather conditions • Labour intensive • Competitive market • Customers require fresh, varied and consistent products Accept all valid responses. 2(c) Analyse two benefits to FF of product differentiation. 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 relevant Limited analysis relevant points is used points to a business • Limited analysis that identifies to answer the question. context. connections between causes, impacts • Knowledge of one • Application of one relevant and/or consequences of two points. relevant point is used to point to a business • Limited analysis that identifies answer the question. context. 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. 2(c) Annotate the first benefit in the left-hand margin and the second in the right-hand marking. 8 AO1 Knowledge and understanding Knowledge of benefits of product differentiation (max 2 s), may include: • Greater choice • Responsive to customer wants • Meets customer requirements • Reduce the impact of seasonal products. • Create a strong brand image • Spread risk • Increase price/revenue/profit/added value • Expand customer base/loyalty • Improve competitiveness AO2 Application Max one for application in one benefit and max two for application in two benefits • Loyal customers • Customers want fresh and varied products throughout the year • FF a reliable brand • Appeals to customers who want natural products • Customers appreciate quality, flavour and nutrition of products • High demand • Competitive market 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. • FF can expand market share – differentiation can attract a specific segment of the market, increasing the FF's overall market share/help it to grow • Seasonal products – could ensure year around production • Increase finance – able to re-invest in the business • Competitive Advantage – helps create a unique selling proposition, making the product stand out from competitors • Brand loyalty – highlighting unique features, FF can build brand loyalty and encourage repeat purchases 2(c) • Price flexibility – differentiated products can often command higher prices because consumers perceive them as 8 offering greater value • Reduced price sensitivity – customers may be less sensitive to price changes if they believe the product offers unique benefits • Niche markets – allows FF to target niche markets with specific needs and preferences • Customer satisfaction – meet specific customer needs, leading to higher customer satisfaction • Brand Identity – strong differentiation helps in building a distinct brand identity that is hard for competitors to copy Accept all valid responses. 2(d) Evaluate whether business growth is a suitable objective for FF. 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/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 knowledge Developed Developed analysis Developed evaluation of relevant key term(s) application of that identifies • A developed and/or factor(s) is used relevant point(s) to connections between judgement/conclusion is made. to answer the question. the business causes, impacts • Developed evaluative context. and/or consequences. comments which balance some key arguments. 1 1 mark 1 mark 1 mark 1–2 marks Limited knowledge Limited Limited analysis Limited evaluation of relevant key term(s) application that identifies • A judgement/conclusion is and/or factor(s) is used of relevant point(s) connections between made with limited supporting to answer the question. to the business causes, impacts comment/evidence. context. and/or consequences. • An attempt is made to balance the arguments. 0 0 marks 0 marks 0 marks 0 marks No creditable response. No creditable No creditable No creditable response. response. response. 2(d) Indicative content 12 AO1 Knowledge and understanding Knowledge of business growth/methods of business growth/objectives (max 2 s), including: • The process of improving some measure of an enterprise's success. • Can be achieved through various strategies • The increase in the size, revenue, market share, or profitability of a business over time. • Can be measured in different ways • External/internal growth • Organic growth • Mergers / joint ventures • Strategic alliance Objectives • Business objectives are specific, measurable goals that an organisation aims to achieve within a certain timeframe • Provide direction and a clear focus for the company's efforts and resources. • Guide decision-making • Help allocate resources effectively • Used to measure the success of various initiatives. AO2 Application Limited application applies knowledge of growth/methods of business growth to FF once. Developed application + applies knowledge of growth/methods of business growth to FF twice • Limited production capacity • High level of demand • Labour-intensive • Ethical approach – organic methods / renewable energy sources • Highly competitive market • Impacted by weather conditions • Affected by pests, diseases and natural disasters Expectations of customers for fresh, varied and consistent products/quality, flavour and nutrition 2(d) AO3 Analysis 12 Limited analysis – candidate shows one link in the chain of analysis. Developed analysis – candidate shows two or more links in the chain of analysis. • allows a business to increase profits – reduce costs by using external resources • can improve quality, efficiency or productivity – using experienced providers • reduce risks or liabilities – share with other firms • compromise the quality and consistency of FF’s products – lose customers • expose FF to more risks and uncertainties – such as reliability, delivery delays, contractual disputes etc • increase costs – may not be able to afford internal growth • increased market share – growth can help FF capture a larger share of the market, enhancing its competitive position • economies of scale – as businesses grow, they can achieve economies of scale, reducing the cost per unit of production and increasing profitability • diversification – growth often allows businesses to diversify their product lines or enter new markets, spreading risk and creating new sources of revenue • resource constraints – rapid growth can strain an organisation’s resources, including finances, personnel, and infrastructure • quality control – maintaining product or service quality can be more challenging as the business grows 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 recommendation whether growth is a suitable objective • Elements that the recommendation could depend upon, including such as losing control over the quality and consistency of the products, compromising on the natural / organic approach • A consideration of the implications for cost and ability to attract other firms • Weighing up of the factors and their relative influence on growth. • Depends upon the type of growth/how growth is achieved. • FF should evaluate their strategic goals, market conditions, and internal capabilities to determine if growth is a suitable objective. Note: Only accept judgements about growth but reward alternative objectives if growth discussed. Accept all valid responses.

Question	Answer	Marks	From
1	see sheet	30	9609/22 Feb/March 2018
2	see sheet	30	9609/21 May/June 2019
3	see sheet	30	9609/22 May/June 2019
4	see sheet	30	9609/23 May/June 2019
5	see sheet	30	9609/21 Oct/Nov 2020
6	see sheet	30	9609/22 May/June 2021
7	see sheet	30	9609/23 May/June 2021
8	see sheet	30	9609/22 Oct/Nov 2021
9	see sheet	30	9609/22 Feb/March 2022
10	see sheet	30	9609/21 May/June 2022
11	see sheet	30	9609/21 Oct/Nov 2022
12	see sheet	30	9609/21 May/June 2023
13	see sheet	30	9609/22 May/June 2023
14	see sheet	30	9609/21 Oct/Nov 2023
15	see sheet	30	9609/23 Oct/Nov 2023
16	see sheet	30	9609/21 May/June 2024
17	see sheet	30	9609/22 Feb/March 2025
18	see sheet	30	9609/22 May/June 2025
19	see sheet	30	9609/23 May/June 2025

Business objectives — Paper 2 · A Level Business (for first examination in 2016) 9609

Questions20 pages

Mark scheme19 answers

Another paper, or another topic

Questions as text

Q1 · Paul’s Clothes (PC) PC is a sole trader business that is owned and managed by Paul 9609/22 Feb/March 2018

Q2 · Planet Internet (PI) PI is a public limited company 9609/21 May/June 2019

Q3 · Job Shop (JS) JS is a public sector organisation in country X 9609/22 May/June 2019

Q4 · First Nature (FN) FN is a co-operative farm producing milk, beef and vegetables 9609/23 May/June 2019

Q5 · UPlane Components (UC) UC is a private limited company providing engine parts for… 9609/21 Oct/Nov 2020

Q6 · Lakeland Oysters (LO) Lakeland Oysters (LO) is a private limited company in country G… 9609/22 May/June 2021

Q7 · Belted Up (BU) Belted Up (BU) is a manufacturer of hand-made leather belts for clothing 9609/23 May/June 2021

Q8 · Auto Bike (AB) AB is a private limited company that repairs and maintains motorbikes 9609/22 Oct/Nov 2021

Q9 · Rehana Recycles (RR) Rehana is very environmentally aware 9609/22 Feb/March 2022

Q10 · Motorcycle Components (MC) MC is a large public limited company that produces a range of… 9609/21 May/June 2022

Q11 · Move Well (MW) MW is a business that organises the transportation of people’s possessions… 9609/21 Oct/Nov 2022

Q12 · Delicious Cocoa (DC) DC is a co-operative owned by cocoa farmers in country X 9609/21 May/June 2023

Q13 · MX Bikes (MXB) MXB is a successful public limited company with many stakeholders 9609/22 May/June 2023

Q14 · Direct News (DN) Shila and Lucy own and manage DN, an online publishing business 9609/21 Oct/Nov 2023

Q15 · Jake’s Cakes (JC) Jake started baking cakes while at university 9609/23 Oct/Nov 2023

Q16 · Fizzy Drinks (FD) FD is a private sector business that manufactures an international… 9609/21 May/June 2024

Q17 · Reliable Car Repairs (RCR) Reliable Car Repairs (RCR) is owned by Freya and her brother… 9609/22 Feb/March 2025

Q18 · Personalised Blankets (PB) Kaia left university with a degree in textile design 9609/22 May/June 2025

Q19 · Fresh Farm (FF) FF is a partnership in country Q that grows a range of fruits and… 9609/23 May/June 2025