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

Question 1

Fish and Chips (FC) Min is a sole trader who is the owner and overall manager of FC. Min started the business as a restaurant but FC has gr…

Accepted Answer

2(a)(i) Define the term ‘unique selling point’ (line3). 2 Knowledge Marks A correct definition 2 A partial, vague or unfocused definition 1 No creditable content 0 Content • Different/differentiates about a business’s product/service • Factor or feature Exemplar Mark Rationale A factor that differentiates a product 2 Full definition from its competitors A feature that differentiates a product 2 Implied competition service A feature that sets you apart from 2 Full definition competitors No relation to A special feature of your product 1 competition 2(a)(ii) Briefly explain ‘Herzberg’s motivation theory’ (line 18). 3 Award one mark for each point of explanation: Knowledge Marks Example or some other way of showing good C* 1 understanding Explaining hygiene and motivating: B e.g. may motivate but will not demotivate and 1 e.g. do not motivate but may demotivate A Identifying ‘Hygiene factors’ and ‘motivating factors’ 1 *C is dependent on A and B being identified Content Herzberg’s two factor theory; Motivating factors – may motivate but will not demotivate, e.g. unexpected bonuses, praise, etc. Hygiene factors – do not motivate but may demotivate, basic pay, health and safety, etc. Exemplar Mark Rationale Hygiene factors which may demotivate and motivation which does not 3 A, B and C covered demotivate but motivates e.g. a bonus (is a motivator) Hygiene factors which may demotivate and motivation which does not 2 A and B only demotivate but motivates Identification not Motivating factors and hygiene factors 1 explanation Keeping your staff happy and motivated 0 Too vague / one only Bonuses are a motivating factor 0 No A or B Herzbergs theory is about motivation/ 0 TV two factor theory 2(b)(i) Using Table 1, calculate the total annual profit for FC. 3 Rationale Marks Correct answer with or without correct working 3 Two correct percentage calculations 2 Correct percentage calculation or formula 1 No creditable content 0 Content Formula = TR – TC OR Profit margin × annual revenue 2% of $50 000 = $1000 1% of $70 000 = $700 15% of $200 000 = $30 000 Total profit = $31 700 Rationale Marks 31 700 with or without working 3 1000 + 700 + 30 000 2 100 + 70 + 3000 = 3170 (one error – decimal place) 2 OFR (formula wrong way round) 2 18% of 320 000 = 57 600 1 Revenue × profit margin 1 2(b)(ii) Explain one problem that Min might have in allocating costs. 3 Level Knowledge and Application Marks Explanation of a problem of allocating costs in 2b APP 3 context Explanation of a problem of allocating costs no 2a (APP) 2 context 1 (K) Identification of a problem of allocating costs 1 0 No creditable content 0 Content • May make one aspect of the business seems unprofitable – however all interdependent • If a fish is bad/inedible – which part of the business should have the waste as a cost? • The restaurant and kitchen are part of the same building – how can costs be separated (utilities, rent etc.) • The kitchen staff could easily be seen as restaurant staff • Min makes the decision – what qualifies her as able to allocate the costs? ARA Explanation Problem (K) Possible context (APP) (APP APP) Separating similar How would which costs E.g. kitchen or costs apply to each area restaurant To be able to know May not have E.g. is the chef which costs are in which appropriate skills secondary or tertiary area 2(c) Analyse two appropriate ways that could be used to measure the size of 8 FC. Knowledge and Analysis Level Marks Marks Application (4 marks) (4 marks) Shows Developed analysis of understanding of two 2b 4 two ways to measure 4 ways to measure the the size of FC size of FC Shows Developed analysis of understanding of one 2a 3 one way to measure 3 way to measure the the size of FC size of FC Shows knowledge of Limited analysis of two 1b two ways to measure 2 ways to measure the 2 the size of a business size of a business Shows knowledge of Limited analysis of one 1a one way to measure 1 way to measure the 1 the size of a business size of a business 0 No creditable content Note profit is NOT an acceptable measurement of size – 0 marks FC is a sole trader so share price is a non-contextual answer Content • Revenue – whole business or individual part. What to compare it to? • Number of customers – only applicable to the restaurant • Number of employees • Capital employed – kitchen, restaurant, boat, etc. • Market share 2(c) Examples Examples of Examples of Examples of possible of ways application/ possible developed analysis context analysis Can compare So that Min/potential Revenue 31 700 with other investors can judge the businesses success of the business However is only Number of Who buy fish Will tell Min the applicable to the customers and chips size of her market restaurant Shows Min how However does not take Number of E.g. 3 chefs much growth year into account productivity/ employees on year automation Kitchen, boat Which may attract future Capital Can show growth and investors/ allow bank employed over years restaurant loan Market Met growth Satisfied initial However the market may share objective objectives have shrunk 2(d) Evaluate which stakeholders might be most affected by the change in 11 FC’s business objective from growth to profit maximisation. Knowledge and Marks Analysis and Evaluation Marks Application (4 marks) (7 marks) A justified judgement based on a developed argument of 7 at least two stakeholders A developed judgement based on a developed 6 argument of at least two stakeholders A basic judgement based on a developed argument of at 5 least two stakeholders Arguments based on how two Shows understanding of or more stakeholders may be how two or more 4 4 affected by the change in stakeholders in context business objectives in context Argument based on how one Shows understanding of stakeholder may be affected how one stakeholder in 3 3 by the change in business context objectives in context Limited analysis of how two Shows knowledge of two stakeholders may be affected 2 stakeholders by the change in business 2 objectives Limited analysis of how one Shows knowledge of one stakeholder may be affected 1 stakeholder by the change in business 1 objectives No creditable content 0 Content • Min – as owner this may increase her personal income – better lifestyle, etc. • Employees – may see a reduction in costs as a way of increasing profits, so may lead to redundancies or cut in wages, longer hours, etc. • Customers – may be lower quality standards (costs cutting) and prices may increase • Government – increase in taxation revenue • Local community – increased trade, noise, etc. • Competitors – May see a chance to compete with lower prices, attracted by higher profit margins. ARA

Question 2

Market Solution (MS) MS is a public limited company in the tertiary sector. MS advises businesses on elements of the marketing mix. Most of…

Accepted Answer

2(a)(i) Define the term ‘tertiary sector’ (line 1). 2 Knowledge Marks A correct definition 2 A partial, vague or unfocused definition 1 No creditable content 0 Content Businesses that sell services (intangible goods) instead of end products. 2(a)(ii) Explain the term ‘performance related pay’ (lines 12–13). 3 Award one mark for each point of explanation: Knowledge Marks Example or some other way of showing good 1 understanding Understanding of performance related 1 Understanding of a pay 1 Content: • Pay is the reward given to workers for their labour. • Performance related means that this is linked to the output that the worker produces, or by meeting a required target. ARA 2(b)(i) Refer to Table 2.1. Calculate the difference between the labour turnover 4 of the specialist marketing workers and the labour turnover of the administrative support workers. Rationale Marks Correct answer with or without correct working or % 4 Correct calculation of LT for both groups 3 Correct calculation of LT for one group 2 Formula 1 No creditable content 0 Answer = 7.5% Marketing specialists 2 × 100 = 5% 40 Administrative workers 11 × 100 = 12.5% 88 Difference 12.5% – 5% = 7.5% Number of workers who left Formula: × 100 Average number of workers OFR 2(b)(ii) Analyse how Hetti could use the ideas of two motivational theorists to 8 reduce the labour turnover of the administrative support workers. Knowledge and Level Marks Analysis (4 marks) Marks Application (4 marks) Shows understanding of Good analysis of two two motivation theories motivation theories to context improve the labour 2b 4 4 turnover for the administrative support workers Shows understanding Good analysis of one one motivation theory in motivation theory to context improve the labour 2a 3 3 turnover for the administrative support workers Shows knowledge of Limited analysis of two 1b 2 2 two motivation theories motivation theories Shows knowledge of Limited analysis of 1a 1 1 one motivation theory one motivation theory 0 No creditable content Content: • McClelland (Three Needs Theory) – Workers have a need for affiliation so may be motivated by social events, opportunities to work with colleagues etc. • Herzberg (Two Factor Theory) – The factors in the table are unlikely to motivate (i.e. hygiene factors). Do workers have enough holidays and, for example, a staff restaurant? Otherwise this could be a reason for their demotivation and labour turnover. • Vroom (Expectancy Theory) – although the bonus is part of the payment system for the admin workers it is not expected so is unlikely to motivate them and keep them in the business – are targets too high? Should the bonus be paid more often to reduce labour turnover? • Taylor (Scientific Management) – is the pay high enough to motivate – low compared to national average. • Mayo (Hawthorne Effect) – is there enough supervision – PRP suggests monitoring but is it effective? • Maslow (Hierarchy of Needs) – Table suggests that social needs are most important for the workers – are these needs being met? ARA 2(c) Explain one possible advantage to MS of being labour intensive 2 Level Knowledge and Application Marks 2 Explanation of an advantage to MS of being 2 (APP) labour intensive Explanation of an advantage of being labour 1 (K) 1 intensive 0 No creditable content 0 Content: • Can be more flexible – particularly important for MS as each business is unique) • Workforce can be flexible and respond to times of high peak need • No maintenance issues (compared to being capital intensive) • May be perceived as being better quality – some businesses may feel that the customer service is better • Can employ experts who can adapt to each customer’s needs ARA 2(d) BO has an objective to increase its revenue by targeting a younger 11 market segment (lines 25–26). Recommend how BO should change its marketing mix to achieve this objective. Justify your recommendation. Knowledge and Analysis and Evaluation Marks Marks Application (4 marks) (7 marks) Justified recommendation 7 based on argument in context Developed recommendation 6 based on argument in context An evaluative/recommendation statement based on argument in 5 context Shows understanding of Argument based on changing changing the marketing 3–4 BO’s marketing mix to achieve 3–4 mix in context their objectives Shows knowledge of the Limited analysis of changes to 1–2 1–2 marketing mix the marketing mix No creditable content Note: There are many possible changes that could be made and context is likely to come from the combination of the elements of the mix to meet the needs of the new target market. Content: • Product – need to stock books aimed at a younger audience (under 30 years) – perhaps books that are not so targeted on specific areas, or make the topics more suitable for younger readers. Could start to sell e-books. • Price – younger target market are unlikely to have such high incomes, so skimming is unlikely to be successful. May need to be more competitive in their pricing strategy or use it to penetrate the market as they will be new to this target market. • Promotion – the current below the line promotion may still be suitable. However they may need to target social media and methods more suitable for a younger audience. • Place – the retail shop may still be appropriate but it may be necessary to develop an online presence or to have distribution that suits the younger audience – postal sales are unlikely to be suitable. ARA

Question 3

Energy Solutions (ES) ES is a public limited company in country X. The business was set up in 1980. For 25 years most of ES’s revenue came …

Accepted Answer

Question Answer Marks 1(a)(i) Define the term ‘revenue’ (line 2). 2 Knowledge Marks A correct definition 2 A partial, vague or unfocused definition 1 No creditable content 0 Content A correct definition should include the following elements (allow one mark for each element): • Revenue is the money received (by a business) • for selling its products and services. Alternatively, a candidate can gain BOTH marks for a correct formula: • Price × quantity sold (2) Exemplar Mark Rationale Revenue is the money a firm gets 2 Both elements from sales Price × Quantity 2 Valid formula The income of a firm 1 First element only Revenue is the profit of a firm 0 Incorrect 1(a)(ii) Explain the term ‘unit costs’ (line 6). 3 Award one mark for each point of explanation: Rationale Marks C Example or some other way of showing good 1 understanding – only if both A and B marks have been gained B An understanding of unit – must be an idea of a 1 single product/good A An understanding of costs – must be an idea that a 1 cost is something paid by a business or incurred from production 1(a)(ii) Content Exemplar Marks Rationale The amount that a business must pay 3 All three marks out (A) to produce a single item (B). For example, this may be what ES has to pay out to produce a single unit of energy. How much a business pays (A) to 2 Both A and B marks make a single produce (B). Total costs/output. 2 Both A and B marks Costs are incurred by a business by 1 A mark only production. The total costs, which include fixed 1 Clear understanding of and variable costs of products divided a single unit, but no by the number of products (B). explanation of what a cost is. What it costs for a unit (B). 1 ‘…a unit’ is enough for the B mark. The cost of one (B) unit of a good. An 1 A clear idea of a single example would be the cost of one can unit. However, of cola. example mark cannot be given without A and B marks awarded. The cost of units. 0 Neither unit or cost is explained. 1(b)(i) Refer to Table 1.1. Calculate the difference in dollars received by each 3 director and each manager from the profit-sharing scheme. Rationale Marks Correct answer with or without correct working or $ 3 Correct calculation of Directors share and Managers share 2 Correct calculation of Directors share or Managers share 1 No creditable content 0 Content • Directors share of the profit = 0.25% = 0.25% of $12 m = $30 000 ($0.03 m) • Managers share of the profit = 0.1% = 0.1% of $12 m = $12 000 ($0.012 m) • $30 000 – $12 000 = $18 000 Answer = $18 000 ($0.018 m) OFR – award for the answer if there is clear working shown for the two earlier numbers (even if both of these numbers are wrong) Common answers Answer Mark Rationale 18 000 3 Correct answer – does not need $ $12 m 1 Candidate has inverted the profit- 0.25 = $48 m sharing formula for both Directors and Managers, which are not creditable. $12 m However, the candidate then 0.1 = $120 m completes the last stage correctly and based on their own figure (OFR) $48 m + $120 m = should be awarded one mark. $168 m *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 to ES of using a profit-sharing scheme. 3 Level Knowledge and Application Marks 2b (APP) Explanation of one disadvantage to ES of a profit- 3 sharing scheme in context 2a (K+K) Explanation of one disadvantage to a business of 2 a profit-sharing scheme 1a (K) Identification of one disadvantage to a business of 1 a profit-sharing scheme 0 No creditable content 0 Content • ES might not have enough retained profit to invest in the new licenses for fracking. • ES shareholders might sell their shares because of low dividends leading to the company being taken over. • Increases the costs of the business and therefore could make ES less competitive (many competitors in the market). • May cause employer/employee issues because of the different shares gained (use of previous answers – OFR). Example of how responses should be marked Identification of a Explanation Possible context disadvantage The owners get less Which may lead to Because ES is a public profit them selling their limited company shares There is less retained Which may lead to Which might stop their profit for ES lower growth for ES expansion into future fracking sites 1(c) Analyse one internal source of finance and one external source of 8 finance that ES could use to purchase a fracking license. Level Knowledge and Marks Analysis Marks Application (4 marks) (4 marks) 2b Shows understanding 4 Good analysis of one 4 of one internal and one internal and one external source of external source of finance in context finance in context 2a Shows understanding 3 Good analysis of one 3 of one internal or one internal or one external source of external source of finance in context finance in context 1b Shows knowledge of 2 Limited analysis of 2 one internal and one one internal and one external source of external source of finance finance 1a Shows knowledge of 1 Limited analysis of 1 one internal or one one internal or one external source of external source of finance finance 0 No creditable content 0 Content Internal • Retained earnings – ES made $12m profit in 2018, so likely to have some retained earnings to use as a source of finance • Sale of assets – ES owns some old coalmines – could these be sold to raise finance for the licenses. External • Selling shares – plc so able to raise funds in this way – profitable and may be able to sell on the basis of publicity that profits will increase • Government grants – government of country X is very supportive of fracking, so may be willing to give a grant to ES • Bank loans – profitable business, promising future returns Allow a rights issue (to current shareholders) as an internal source of finance. However, simply selling shares (with no explicit reference to selling to current shareholders) is an external source of finance. 1(c) Example of an Examples of Examples of possible internal source of application/context analysis (AN + DEV) finance (K) (APP) Retained profit (K) ES had $12m retained Does not need to be profit in 2019 (APP) repaid (AN) but there is an opportunity cost (DEV) Example of an Examples of Examples of possible external source of application/context analysis (AN + DEV) finance (K) (APP) Sell shares (K) ES is a Public Limited So, by selling shares Company (APP) this can release cash to finance the purchase of the fracking license (AN), however, this may lead to a loss of control by the current owners (DEV) 1(d) Evaluate how two external stakeholders of ES might be affected by the 11 company continuing to use the fracking process. Knowledge and Marks Analysis and Evaluation Marks Application (4 marks) (7 marks) Justified evaluation based 7 on arguments in context Developed evaluation 6 based on arguments in context An evaluative statement 5 based on arguments in context Shows understanding of 4 Arguments based on the 4 two external stakeholders effect on two external in context stakeholders in context Shows understanding of 3 Arguments based on the 3 one external stakeholder effect on one external in context stakeholder in context 2 Limited analysis of the 2 Shows knowledge of two effect on two external external stakeholders stakeholders 1 Limited analysis of the 1 Shows knowledge of one effect on one external external stakeholder stakeholder No creditable content 0 1(d) Content • Local community/society – devaluation of houses, earthquakes, pollution • Activists/environmentalists/pressure groups – damage to the natural environment, pollution etc. • Potential investors – attracted to future profit but could be put off by bad publicity (not current shareholders) • Potential employees – Growth in jobs • Customers – cheaper energy, cost of living • Suppliers – increased demand because of ES growing • Lenders – risk of bad publicity or government changing mind at a later date • Government – increase energy self-sufficiency, increased tax revenue, economic growth • Competitors – May lead them to having to purchase a fracking license and increasing costs to compete Analysis should be focussed on the effect on each stakeholder (not the business). Evaluation is most likely to be demonstrated by: • The relative level of effect on each stakeholder • Which stakeholder is likely to be most affected • Whether the effect on each stakeholder is likely to be all bad or all good • How external stakeholder’s effects might be mitigated 1(d) Examples of how an answer could develop and how it should be annotated. K APP AN DEV EVAL Government Gain money Allows the Which may The local (K). from selling government increase community the licenses to invest in the welfare are likely to (APP). infrastructure of the be most (AN). citizens of affected country X (EVAL) (DEV). because they also have to suffer from earthquakes whereas the Local Who live This means Which government community near a their houses might will get the (K). fracking site are worth less mean they money from may see a (AN) get less the licenses reduction in money if no matter the price of they sell what their home their home (EVAL). (APP). (DEV). However, this depends on whether the people keep voting for the government (EVAL). 1(d) K APP AN DEV EVAL Customers May get Which And have The (K). cheaper means the more money customers energy customers to spend on are likely to through ES have to pay household only benefit growing less for their goods from ES (APP). energy (AN). (DEV). continuing to use the Competitors May find Which And may fracking (K) more increases reduce their process competition their costs profit (DEV). (EVAL) for fracking (AN). because licenses increased (APP). competition may lead to even lower prices (EVAL). However, this depends on whether ES and their competitors reduce their prices (EVAL).

Question 4

Planting Pots (PP) Emily and Kabir are entrepreneurs. In 2012 they set up PP in country K. As the business grew, they converted it from a p…

Accepted Answer

2(a)(i) Define the term ‘batch production’ (line 17). 2 Knowledge Marks A correct definition 2 A partial, vague or unfocused definition 1 No creditable content 0 A correct definition should include the following elements: • Separate groups/set amount/limited number – do not accept batch. • Go through production process together before moving on to the next. Batch production is where quantities of identical goods are produced in small groups. They go through the production process at the same time. Production is then switched over to allow another batch to be produced. Example(s) not required. Exemplar Mark Rationale Batch production is where 2 A correct definition quantities of identical goods are produced together and then move on to the next process A group of products go from 2 Both elements covered one stage of production to the next together Produced at the same stage 1 Partial definition When products are made in 1 Partial definition small quantities Products made one a time 0 Confusion with job production Products made continuously 0 Confusion with flow/mass and are all the same production 2(a)(ii) Explain the role of an ‘entrepreneur’. (line 1) 3 Award one mark for each point of explanation C Example or some other way of showing good 1 mark understanding. B Understanding of one or more roles of an entrepreneur. 1 mark A Knowledge of what an entrepreneur is/knowledge of a 1 mark characteristic of an entrepreneur Content An entrepreneur is a person who sets up a business and takes on financial risks in the hope of profit. Someone who co-ordinates the other factors of production. The role of an entrepreneur includes: Allow any reasonable characteristic of an entrepreneur, for example: • risk taking • innovative • multi-skilled • leader • resilience/able to bounce back • sets up a business • passion • self-confidence • ambition • hardworking • persuasive • aiming for profit (do not allow ‘get rich’ – too vague) • makes decisions • entrepreneurship is one of the factors of production • organises the factors of production • organises/raises/provides finance • an example of an entrepreneur • Takes initiative – starting a business and planning ahead. • Innovative - changing, adapting and developing their products and the way they do things in a business. • Identifying opportunities - new products and opportunities to expand into different markets. • Organising resources – to effectively manage employees, money, buildings, products and any other business resources. 2(a)(ii) Examples might include, specific businesses/entrepreneurs/decisions made. Exemplar Rationale Marks A risk taker who sets up a All three elements. 3 business to make a profit, deciding the business’ market and activities A risk taker who sets up a All three elements. 3 business to make a profit, Takes the risk of bringing A mark for risk and courage 2 together the factors of and B for brings together the production factors of production Risk taker A only 1 ARA 2(b)(i) Refer to Table 2.1. Calculate the change in PP’s market share between 3 2020 and 2021. Rationale Marks Correct answer with or without correct working or % 3 Correct calculation of both market share figures 2 Formula or correct calculation of one market share figure 1 No creditable content 0 Content Business sales volume  100 Market sales volume 0.8m  100 = 25% (2020) 3.2m 0.82m  100 = 20% (2021) 4.1m 20% – 25% = –5% (decrease of 5%) Answer = –5% (3) 2(b)(ii) Explain one implication for PP of a fall in market share. 3 Level Knowledge and Application Marks 2b Explanation of one implication of a change in 3 (APP) market share in context 2a Explanation of one implication of a change in 2 (K+K) market share 1a Knowledge of one implication of a change in 1 (K) market share 0 No creditable content 0 Note: allow OFR from answer to Q2(b)(i) Context: • Market is growing but market share is decreasing. • PP is a public limited company. Implications may include: • Increased competition – which PP may need to respond to • PP may need to market their products more successfully – to remain competitive/relevant • Need to improve promotion, price, distribution, product differentiation • PP’s share price may fall – lack of investor confidence • Decrease in demand – if a loss of reputation or image (no context allowed as demand has increased in context) ARA Example of how a response may develop and should be marked: Identification of an Explanation Possible context implication (K+K – 2 marks) (APP – 3 marks) (K – 1 mark) Decrease in Need to increase To gain back –5% MS competitiveness marketing budget Reduction in share Lack of investor Share price price confidence 2(c) Analyse two factors which may affect PP’s choice of a source of 8 finance to build the additional factory. Level Knowledge Marks Analysis (4 Marks and marks) Application (4 marks) 2b Shows 4 Developed 4 understanding analysis of two of two factors APP factors DEV affecting + affecting + source of of APP source finance context finance in DEV context 2a Shows 3 Developed 3 understanding analysis of one of one factor factor affecting affecting source of APP DEV source of finance in finance in context context 1b Shows 2 Limited 2 knowledge of analysis of two K AN two factors factors + + affecting K affecting AN source of source of finance finance 1a Shows 1 Limited 1 knowledge of analysis of one one factor factor affecting K AN affecting source of source of finance finance 0 No creditable content Note: this question is not asking candidates to analyse possible sources of finance. Analysis should only be rewarded for a factor affecting the choice of a source of finance. ARA 2(c) Indicative content AO1 Knowledge and understanding Factors may include: • Cost • Flexibility • Control • Use of finance • Level of existing debt • Timeframe AO2 Application • $1.5m capital • fixed use (for a building) • Emily and Kabir own 50% of shares • factory is to develop product portfolio • short term – can start construction immediately AO3 Analysis • likely to need a long-term source of finance – affordability of repayments • Building project may over-run – PP may need some flexibility for contingencies • Share issue may make them lose control of the business – ability to make future decisions • extend sales in a growing market – future sales may cover any finance costs • speed of funds could be important – may restrict options Examples of how an answer could develop and how it should be annotated. K APP AN DEV Cost of finance $1.5m High monthly Increases financial repayments risk Length of Long May affect Which makes finance term/mortgage gearing ratio sourcing additional adversely finance more difficult 2(d) Refer to Table 2.2 and other information. Evaluate PP’s use of different 11 payment methods for its employees. Knowledge and Analysis and Application (4 Marks Evaluation Marks marks) (7 marks) Annotation Annotation Justified evaluation 7 + based on arguments in context EVAL + EVAL EVAL Developed 6 + evaluation based on EVAL arguments in context EVAL An evaluative 5 statement based on EVAL arguments in context Shows 4 Arguments based on 4 understanding of two + two payment + payment methods in APP methods in context DEV APP DEV context Shows 3 Argument based on 3 understanding one payment of APP onemethodpaymentin context DEV method in context Knowledge of two 2 K Limited analysis of 2 + payment methods + two payment AN K AN methods Shows knowledge of 1 Limited analysis of 1 one payment K one payment AN method method No creditable content 0 Note: evaluation based on argument in context of any two methods can achieve full marks. 2(d) AO1 Knowledge and understanding Knowledge* of payment methods may include: • Payment methods: – time based – e.g. hourly rate – salary – paid the same every month – piece rates – paid per outcome – commission – paid per sale made – bonuses – extra payment for hitting targets – profit sharing – dividing profit by getting a percentage – performance related – different levels of pay for different targets *Knowledge must be in the form of definition or understanding as the payment methods are clearly stated in the text AO2 Application • Public limited company – answerable to shareholders • Decorated plant pots • Growing market • Creative designers – piece rate • Manufacturing employees – time based • Supervisors – salary • Managers – salary and profit sharing AO3 Analysis Creative designers • Payment by results of how many new designs are created – may motivate employees to produce new design – links productivity to output – controls costs. • Piece rate may lead to a focus on quantity not quality – unlikely to lead to creative innovation – more likely to lead to hitting specific targets. Manufacturing employees • Time based, so could be an emphasis on ‘going slow’ to maximise pay but at a minimal output – may allow them to gain overtime payments but will increase PP’s costs • Since pots are made using batch production, other systems may not be suitable as the changeover time would not allow a piece rate system and might be unfair. Time based allows for different times to produce different pots and could be a simple payment method for these workers. May also be in line with minimum wage legislation in country K. Supervisors • Salary allows for a known payment each week/month/year and this may allow PP to plan and forecast cashflow better. May also allow PP to get a higher output from the supervisors for the same payment. • May not motivate the supervisors as their pay is not linked to hours worked or how many are produced. Might be most appropriate as they are not producing products. 2(d) Managers • Mangers are making the functional decisions and therefore the ultimate profitability of the firm is likely to be based on their decision making. Therefore, linking their pay to the profits is likely to motivate them and lead to better decision making. • However, the market share is declining – does this mean that the managers might not get paid. Might this lead to a high staff turnover for managers leading to poor decision making. Loss of profit for the shareholders (including Emily and Kabir) – also less money for reinvestment, especially the new factory. AO4 Evaluation • A judgement/evaluation over the suitability of different payment methods • Evaluation of the relative benefits/costs of each payment method • Elements that the evaluation/judgement might depend upon – type of worker, objectives of the firm, type of workers (theory X and Y), profitability of the firm, productivity of the different employees etc. ARA Examples of how an answer could develop and how it should be annotated. K APP AN DEV EVAL Piece rate Plant pots Motivates However PP’s use of paid per unit designed employees can lead to different produced to create as a lack of payment many creativity/ methods is designs as care mainly possible beneficial because the employees Time based For Manufacture So quality do different paid per decorated wouldn’t be should tasks which hour plant pots rushed improve/be have different high motivational requirements Especially as they are in a dynamic market and need to be flexible

Question 5

Fruit Farm (FF) FF is a private limited company that provides packaged fruit to the industrial market (B2B). The farm grows a variety of di…

Accepted Answer

Question Answer Marks 1(a)(i) Identify one content theory of motivation. 1 Indicative content. Responses may include: • Taylor / scientific management • Mayo / human needs / Hawthorne effect • Maslow / hierarchy of needs • Herzberg / 2 factors • McClelland / 3 needs Accept all valid responses. 1(a)(ii) Explain the term supply chain management. 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 The coordination (allow management) of the flow/movement of goods and services / raw materials. AO2 Application Limited application applies knowledge of supply chain management from one aspect of the supply chain (i.e. suppliers to a business, within a business or from the business to customers). Developed application + applies knowledge of supply chain management in two or more aspects of a business. Exemplars for application: • Between suppliers and the business – and the business to customers . • Between different parts of the business – and to the customer. • Raw materials within the business – and distribution channels. • Involves the complete chain of inventory from suppliers – or to customers. • Involves inventories, such as raw materials – and finished goods. Accept all valid responses. 1(b)(i) An employee works for 8 hours and picks 5 boxes of apples, 2 boxes of bananas and 4 trays of strawberries. 3 Refer to Table 1.1 and other information. Calculate the difference between the employee’s pay using piece rate and time-based payment. Indicative content. Piece rate: Apples – 5 boxes  $2 = $10 Bananas – 2 boxes  $1.50 = $3 Strawberries – 4 trays  $3 = $12 Total pay = $25 (1) Time based: 8 hours  $4.50 = $36 (1) Difference: $36 – $25 = $11 (1 OFR applies) Answer = ($)11 (3) 1(b)(ii) Explain one advantage to FF of introducing time-based payment. 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 Advantages of time-based payment method may include: • improves flexibility • improves quality • easier to forecast cash flow / costs • produce more output • motivates employees. AO2 Application Limited application , applies knowledge to FF once. Developed application + applies knowledge to FF twice. • Higher payment to fruit pickers • Answer to Q1(b)(i) (OFR) • FF already has poor motivation among its fruit pickers • Fruit pickers on piece rate may choose poor quality e.g., unripe/over-ripe fruit to fill boxes/trays • Different fruit may be more financially beneficial to fruit pickers on piece rate • $4.50 is only one flat payment. Accept all valid responses. 1(c) Analyse two non-financial motivators that FF could use to motivate its fruit pickers. 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. Annotate the first non-financial motivator ( ) in the left margin. Annotate the second non-financial motivator ( ) in the right margin. 1(c) Responses may include: AO1 Knowledge and understanding Knowledge of non-financial motivators (max 2 s), including: • Induction training • On the job / off the job training • opportunities for promotion • development • status • job re-design • team working • empowerment • participation / different leadership / management style • job enrichment. Do not allow any financial motivators, including: time based, salary, piece rates, commission, bonuses, profit sharing, performance-related pay, fringe benefits, paid holiday, gifts etc. AO2 Application Max one for application in the first non-financial motivator and max one for application in the second non-financial motivator. Application of knowledge of a non-financial motivator to FF (max 2 s), including • Fruit picking is labour intensive work . • 80 fruit pickers currently employed who are paid using piece rate, but would like time based • Change to time-based would increase FF’s costs significantly, 44% increase (based on OFR Q1(b)(i)). • Poor induction. • No encouragement of multi-skilling. • Autocratic management style. 1(c) AO3 Analysis Limited analysis – candidate shows one link in the chain of analysis. Developed analysis candidate shows two or more links in the chain of analysis or a two-sided analysis. Analysis may include: • (Training) can improve the induction of employees and lead to greater efficiency – greater sales, profit . • (Development) could be used to encourage employees to move between different jobs which increases employee flexibility – increased efficiency / sales / profit. • (Job re-design) may reduce the costs for FF – increased profitability. A two-sided analysis may also provide development: • (Team working) may allow different employees to work together which may improve efficiency – however may increase costs / cause distraction among employees . • (Empowerment) may improve the quality of decisions made – however FF’s fruit pickers may not make good decisions that benefit the business. • (Participation) may lead to improved efficiency – however could slow down decision-making process. • (Job enrichment) may make the employees want to and produce more – however there may not be any opportunities for enrichment. Accept all valid responses. 1(d) Evaluate the likely impact on FF’s stakeholders of improving the sustainability of operations. 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 and/or • Developed evaluative context. 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) that identifies • A judgement/conclusion is and/or factor(s) is used to the business connections between made with limited supporting to answer the question. context. 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 No creditable response. No creditable response. response. 1(d) Responses may include: AO1 Knowledge and understanding Limited knowledge will be demonstrated through knowledge of sustainability or knowledge of a stakeholder. Developed knowledge + will be demonstrated from the knowledge of sustainability and knowledge of a stakeholder. For example: Knowledge of sustainability (max 1 ), including: • the importance of sustainability, or a green business, is when a business has minimal negative impact or a positive effect on the global or local environment, community, society, or economy. • The impact of sustainability in terms of cost, publicity, new markets etc. Knowledge of business stakeholders (max 1 ), including: • individuals or groups with an interest in the activities of a business • internal stakeholders e.g. owners/shareholders, employees, managers / external stakeholders e.g. customers, local community, suppliers • the roles, rights and responsibilities of stakeholders. AO2 Application Limited application applies knowledge of FF once. Developed application + applies knowledge of FF twice. • FF provides products to the industrial market (not consumer market) . • Move from single use plastic in packaging to recycled materials . • Current system is labour intensive – new machinery would be capital intensive. • Less chemicals used in growing. • New Supply Chain Management required. • Relevant stakeholders of FF; fruit pickers, shareholders (FF is a private limited company), industrial customers (likely to be grocery shops, supermarkets, restaurants etc.), suppliers (seeds, packaging), directors, environmentalists, local community (farm – large agricultural area), final customers (of fruit purchased in 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. 1(d) Impacts may include: • Increase in costs e.g. purchase of machinery, cost of recycled materials – (Shareholders) reduced profit in the short run , however, may increase profitability in the long run . – (Directors) opportunity cost of new capital / increased decisions to be made – reduced employees to supervise. – (Customers) increased price – may attract a new market of final customers (who favour sustainable products). • More environmentally sustainable: – (Customers) may choose to stock more of FF’s products – to attract environmentally conscious final customers. – (Environmental groups) may be happier with FF – may become customers of FF’s customers. – (Fruit pickers) may prefer to work for an environmentally sustainable business – may increase motivation. – (Suppliers) may not be able to provide new materials so may lose sales – decreased profit. – (Suppliers) FF may use new suppliers who gain FF as a customer – increased revenue. • New supply chain management: – (Suppliers) may have to change what is sold to FF – increasing suppliers’ costs. – (Environmental groups) may be happier with FF – and get more satisfaction from FF’s products. – (Local community) may be happier from less chemicals being used – increase value of homes / more pleasant living conditions. – (Shareholders) may increase costs – however, may also increases sales to new customers. • Change to capital intensive packaging process: – (Shareholders) increased production costs – however, may increase profitability with new target market. – (Employees) may no longer be required and may face redundancy – reduced income. 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 impacts of measures to improve the sustainability of operations on the stakeholders of FF. • A judgement over which stakeholder(s) may be most impacted by the measures to improve sustainability. • A judgement over the measures which are most likely to impact the stakeholders. • Elements that the judgement could depend upon, including, the number of workers in the packaging section, the cost of the machinery to produce the recycled packaging, the availability of new suppliers, the level of impact on FF’s costs/profitability, the objectives of different stakeholder groups, the objectives of FF. • Weighing up of the impacts on stakeholders of the proposed measures to improve the sustainability of FF. Accept all valid responses.

Question 6

Plasshape (PS) PS manufactures plastic packaging for industrial markets (B2B). Its customers include food manufacturers and cosmetics firms…

Accepted Answer

Question Answer Marks 1(a)(i) Identify one non-financial motivator. 1 Indicative content: Identification of an element may include: • Job rotation / enlargement / enrichment • Job redesign • Training and development • Promotion, status and empowerment • Teamworking • Quality circles Accept all valid responses. 1(a)(ii) Explain the term piece rate. 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. Knowledge of piece rate may include: • Payment for each item produced • Ensures employees paid for the amount of work they do • Payment by results No further marks can be gained without knowledge and understanding. AO2 Application Limited application • applies knowledge of piece rate to a product OR business. OR • Example or some other way of showing good understanding of piece rate. Developed application + • applies knowledge of piece rate to a product AND a business. AND • Example or some other way of showing good understanding of piece rate. Application can be made to PS or any other scenario / context / business / product. Accept all valid responses. 1(a)(ii) Exemplar and annotations Mark Rationale Based on how many units produced used when 3 An answer which starts with the knowledge and then output can be measured and it can then be a applies it to a type of output and develops the point in financial motivator. . a business context. Paid per unit produced for example if the employee 3 Again, knowledge first, followed by application to a receives $5 per unit, produces 20 units in a day, they business scenario, with a developed example. will be paid $100 for the day. . Paid per item manufactured , in country V 2 Clear knowledge. Application to an example of a employees paid according to the amount of plastic business from the case study. packaging produced . Pay depends on their units of output . 1 Not a perfect definition, but enough to award the knowledge mark. No attempt to apply. Paying and rewarding for hours they complete 0 This is a time-based payment. Payment for the numbers sold 0 This is commission not piece-rate. 1(b)(i) Refer to Table 1.1 and other information. Calculate the change in forecast profit if the new product is launched. 3 Profit with new product – profit without new product OR [(TR-TC new) – (TR-TC old)] (1) Profit before new product = 40 – (26 + 6) = $8m Profit after new product introduced: Revenue = 40 + 30% = 52 (1) Direct costs + indirect costs = 32 + 6 + 1 = 39 (1) 52 – 39 = $13 m (1) Change in profit = 13 – 8 (2) = $5 m (accept 5) (3) Note: may calculate the percentage change which is 62.5% (3) (5 / 8  100). Marks Answer Rationale 3 Correct answer Working, m and $ sign do not matter but if 5 or 62.5% answer a percentage must have % Must be three to denote the three marks. 2 Both of the following: To award two marks, there must be • Correct / implied formula [Profit with new product- • Two and a profit without new product] OR AND • One , one and one • Correct calculation of either new revenue (52) • Correct calculation of new costs (39) • Correct calculation of original profit (8) • new profit (13) OR An incorrect answer with one mistake allowing OFR for final stage. 1(b)(i) Marks Answer Rationale 1 One of the following: To award one mark, there must be: • Correct / implied formula [Profit with new product- One and two profit without new product] OR • Correct calculation of either new revenue (52) • Correct calculation of new costs (39) • Correct calculation of new profit (13) • Correct calculation of original profit (8) 0 No creditable content. To award zero marks, there must be 1(b)(ii) Explain one way PS could use cost information to improve business performance. 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 the Limited application of one relevant point to a business question. context. 0 marks 0 marks No creditable response. No creditable response. Indicative content – Responses may include: AO1 Knowledge and understanding: Knowledge of a use of cost information to improve business performance : • Help make the investment decision / to obtain loans e.g from a bank. • Identify unnecessary expense. • Forecast profit. • To set prices. • To improve cash flow. • other factors involved e.g. cost of investment, future market conditions, whether the product will be successful No further marks can be gained without knowledge and understanding. AO2 Application Limited application , applies knowledge to PS once. Developed application + applies knowledge to PS twice OR applies once to PS AND develops answer to explain how it can help improve business performance. • The profit has increased from $8m to $13m. • Environmentally friendly. • Added value. • Expenses do not increase very much so can spread over higher number of units. Accept all valid responses. 1(b)(ii) Exemplar and annotations Mark Rationale To consider where costs can be reduced , as 3 A use explained in the specific context of PS by using the PS move to becoming more capital intensive information in the case study and develops answer to which will require capital investment . explain why it is useful. To determine the impact on profits , if PS launch 3 A financial use in this one and there is context from the the new packaging, profits forecast to increase data in Table 1.1., also how the use given is linked to the by $5 m (62.5% or OFR) issue. To determine if PS can launch the new packaging 3 Although the appears first, it cannot be awarded until as costs will impact the decision but the the has been found. However, there is obvious , so forecast revenue increase is greater than the cost you can go back and award the . increase . To compare labour costs because PS use 2 Relevant use . The context linked to this is reasonable different payment methods . , but is not developed. To help improve cashflow as cost information 1 Knowledge of a use. The rest of the answer is not applying includes fixed and variable costs it to the context so (Not Answering Question). To consider where costs can be reduced , to 1 Both are knowledge of a use but there is only 1 mark for help improve cashflow knowledge . 1(c) Analyse two elements of the marketing mix that PS should consider when launching the new packaging. 8 Level AO1 Knowledge and AO2 Application AO3 Analysis understanding 2 marks 4 marks 2 marks 2 3–4 marks Developed analysis • Developed analysis that identifies connections between causes, impacts and / or consequences of two points. • Developed analysis that identifies connections between causes, impacts and / or consequences of one point. 1 1–2 marks 1–2 marks 1–2 marks • Knowledge of two relevant • Application of two relevant Limited analysis points is used to answer the points to a business • Limited analysis that identifies question. context. connections between causes, impacts • Knowledge of one relevant • Application of one relevant and / or consequences of two points. point is used to answer the point to a business context. • Limited analysis that identifies question. 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. Indicative content Knowledge of elements of the marketing mix (max 2 s), may include: AO1 Knowledge and understanding • Product • Price • Promotion • Place (distribution channels) 1(c) No further marks can be gained without knowledge and understanding. AO2 Application Max one application for the first element and a second , application for the second element • Product environmentally friendly • Higher cost of production • Used for packaging food • Premium product AO3 Analysis Limited analysis – candidate shows one link in the chain of analysis. Developed analysis – candidate shows two or more links in the chain. • Product is environmentally friendly – could use in marketing and may allow a premium price • Costlier to produce – likely to be higher priced than competitors • Quality is an issue particularly as product is used with food • May have an impact on sales of existing products and therefore their Marketing Accept all valid responses. Exemplars and annotations AO1 Knowledge AO2 Application AO3 Analysis One element of the marketing mix When launching the Price directly affects the demand from that PS should consider is price . environmentally friendly packaging businesses that buy the environmentally Annotations for the first impact friendly packaging therefore they could should be placed in the left-hand use penetration pricing and set the prices margin. low when they launch . Another element of the marketing For example, when a business They can give discounts or some of their mix could be promotion. buys their new environmentally other products for free, this will lead to a Annotations for the second friendly packaging above a certain higher willingness to buy their new product impact should be placed in the amount and they will be noticed in the market and right-hand margin. increase their sales 1(d) Evaluate whether PS should use the same payment method and employee development in both factories. 12 Level AO1 Knowledge and AO2 Application – AO3 Analysis – AO4 Evaluation – 6 marks understanding – 2 marks 2 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 of Developed Developed analysis Developed evaluation relevant key term(s) application of that identifies • A developed and / or factor(s) is used to relevant point(s) to connections between judgement / conclusion is answer 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 application Limited analysis Limited evaluation of relevant key term(s) of relevant point(s) that identifies • A judgement / conclusion is and / or factor(s) is used to to the business connections between made with limited supporting answer the question. context. causes, impacts comment / evidence. 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. 1(d) Indicative content Responses may include: AO1 Knowledge and understanding - knowledge of one of the key terms (max 2 s), including: • Payment methods • Development opportunities • Depends on finances • Financial / non-financial motivators No further marks can be gained without knowledge and understanding. AO2 Application Limited application applies knowledge of payment method / employee development of PS once. Developed application + applies knowledge of payment method / employee development of PS twice. • Currently pay and opportunities different in countries • Payments different, time based v piece rates • Fewer opportunities in some countries • Use of non-financial motivators vary • Employees demanding equal treatment 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 marks can be awarded without context. • Could be expensive. • Management of change can be difficult. • Could lead to discontent with those workers who have an advantage. • Might be difficult to get arrangements that suit laws in several countries. • May not recognise local conditions. • May give firm good reputation as fair employer. • Could enable employees to move from country to country easily. • Would act as a motivator in some countries. • Whether or not trades unions are involved and the extent to which they cooperate. 1(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. • A justified recommendation • Identifying that the decision will ultimately depend on a number of unknowns (e.g. extent of differences between the regulations, financial state of firm, strength of views of workforce). • Discussion of costs v benefits Accept all valid responses. Exemplars for awarding evaluation L1 (limited L2 (developed supporting L3 (developed supporting evidence with supporting evidence) evidence) context) PS should use the PS should use the same payment PS should use the same payment method and same payment method method and employee development in employee development in both factories and should and employee both factories and should use time- use time-based pay, non-financial motivators and development in both based pay, non-financial motivators and employee development in country Z as this will factories employee development increase motivation and satisfy the employees demanding equal pay and opportunities. PS shouldn’t use the PS shouldn’t use the same payment PS shouldn’t use the same payment method in both same payment method method in both countries because in countries because in one country employees might in both countries one country employees might be more be more motivated by non-financial motivators, such motivated by non-financial motivators. as in country Z, whereas in country V employees might like to know they can get higher pay by working faster.

Question 7

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 8

Custom motorcycles (CM) CM is a private limited company. It was set up by Joyce, who identified a gap in the market for specialist motorcyc…

Accepted Answer

2(a)(i) Identify one non-financial motivator. 1 Identification of a non-financial motivator may include: ( ) Any non-financial motivators • job rotation/enlargement/enrichment • job redesign • training and development • promotion, status and empowerment • teamworking • quality circles Accept all valid responses. 2(a)(ii) Explain the term demand. 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 demand may include: • the number of consumers willing to pay at a given price • the quantity of a product that consumers are willing/(and able) to buy at a given price (in a specific time period). 2(a)(ii) AO2 Application Limited application applies knowledge of demand to one of the below Developed application + applies knowledge of demand to two of the below Can change as a result of a change in any of the following factors: • consumer incomes • prices of substitute goods and complementary goods • population size and structure • fashion and taste • advertising and promotion Can affect: • pricing • production • Examples of demand Accept all valid responses. Exemplar and annotations Mark Rationale The quantity of products customers are willing and able to buy . 3 A clear definition with two elements from That can affect pricing decisions , in response to the price of the indicative application substitutes . The quantity of products customers are willing and able to buy . 2 A clear definition with one element from Which may change due to consumer incomes . the indicative application The quantity of products customers are willing and able to buy . 1 A basic definition The quantity of products customers want to buy. 0 Too vague. Some idea of an increase however could relate to simply selling higher quantities. 2(b)(i) Refer to Fig. 2.1. Calculate the total market growth between summer 2022 and summer 2023. 3 total sales in a time period present value – past value Formula:  100 (1)  100 (1) Total sales in a time period past value 7.5 ( 7.5 − 5 )  100 (2)  100 (2) 5 5 = 150 (%) (3) = 50% (3) OFR applies Percentage sign not required Exemplar and annotations Marks Answer Rationale 3 marks Correct answer Working and tonnes do not matter. 150 OR 50 (%) Must be three to denote the three marks. Correct rounding must be applied. 2 marks Both of the following: To award two marks, there must be • Correct formula • Two and a • Correct use of figures OR OR • One , one and one An incorrect answer with one mistake allowing OFR for final stage. (eg not multiplying by 100) OR A correct answer from an inverted formula (–50% – OFR) 1 mark One of the following: To award one mark, there must be: • Correct formula • One and two • Correct identification of figures 0 marks No creditable content. To award zero marks, there must be • One 2(b)(ii) Explain one benefit to CM of using price skimming. 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 benefit of using price skimming may include: • High (selling) price • High profit margin • Maximises short run profits before competition enters the market • Creates an exclusive image • Covers high development costs 2(b)(ii) AO2 Application Limited application , applies knowledge of a benefit of price skimming to CM once. Developed application + applies knowledge of a benefit of price skimming to CM twice. • private limited company • specialist motorcycle components • specialist engineers • job production • high quality products • quality unique products Accept all valid responses. Exemplar and annotations Mark Rationale Higher selling prices as selling specialist motorcycle 3 One benefit which is related to the case parts to customers who are happy to wait 10 weeks material twice . Higher selling prices as selling specialist motorcycle 2 One benefit which is related to the case parts material Higher selling prices 1 High(er) selling price is a correct answer 0 This is generic and does not show understanding of Make more money/profit price skimming as can be achieved in many ways 2(c) Analyse two impacts on CM of its employees having a poor work-life balance. 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 of • Knowledge of one • Application of one 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. 2(c) Indicative content Responses may include: AO1 Knowledge and understanding • the minimisation of work-related stress, and the establishing of a stable and sustainable way to work while maintaining health and general well-being. • maintaining a harmonious relationship between your work and personal life. • a situation in which employees are able to allocate the right amount of time and effort to work and to their personal life outside work. Knowledge of two impacts of poor work life balance (max 2 s), may include: • tired employees • lack of motivation • increased staff turnover • increased training costs • longer lead/production times • reputation of the business AO2 Application Max one for application to each impact of poor work life balance. • private limited company • specialist motorcycle components • specialist engineers • job production • high quality products • quality unique products • highly skilled, trained and motivated and very proud of their high-quality products • lead times increased from 4 to 10 weeks • additional pressure onto CM’s engineers who are salaried employees • often have to work evenings and weekends 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 may include: • a lack of motivation from pressurised workforce may reduce the current output – further increase the production times • poor work-life balance may lead to mistakes – reduce the USP/reputation used to justify price skimming approach • increased staff turnover – may lead to increased production times – may reduce demand/sales Accept all valid responses. AO1 Knowledge AO2 Application AO3 Analysis Exemplar for one impact of poor work Tired employees As often work evenings This could reduce balance and weekends . motivation and increase Annotations for the first impact should the likelihood of be placed in the left-hand margin. mistakes/low productivity . Exemplar of a second impact of poor work Increased staff Of the highly skilled, Could increase recruitment balance turnover trained and motivated and training costs and Annotations for the second impact engineers . reduce profitability . should be placed in the right-hand margin. 2(d) Evaluate whether CM should change its method of production. 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 application Developed analysis Developed evaluation of relevant key term(s) of relevant point(s) to that identifies • A developed and/or factor(s) is used the business context. connections between judgement/conclusion is made. to answer the question. causes, impacts • Developed evaluative and/or 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 comment/evidence. 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 response. No creditable response. No creditable response. 2(d) Indicative content AO1 Knowledge and understanding Knowledge of methods of production (max 2 s), including: • job/batch/flow/mass customisation • factors of production • the nature of economic activity • the dynamic business environment • business risk and uncertainty • business growth AO2 Application Limited application applies knowledge of methods of production to CM once. Developed application + applies knowledge of methods of production to CM twice. • CM uses job production • current reputation for CM of handmade, quality products • highly skilled, trained and motivated mechanic/engineers (has to be explicit, not e.g. well trained workforce) • employees proud of high quality motorcycle products/components • Joyce wants batch and Harry wants more job production • sales have increased by 1.5x in one year • specialist products allow for price skimming • lead times for have increased from 4 weeks to 10 weeks • salaried employees often work evenings and weekends • employ more skilled engineers • invest in new technology for batch production 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. Continue with job production • retain reputation – keep using price skimming – increases profit per unit • customers are happy with 10 week lead times – future demand guaranteed • job production will not allow for economies of scales – profit may be below target • increased pressure on engineers – may leave for a less stressful job – increases training/recruitment costs or lose valuable skills Invest in batch • increase rates of production – reduce production times/increased sales • reduce pressure on high skilled employees which may increase motivation • allow for economies of scale – will reduce the cost per unit – increase profit margins • may damage CM reputation/USP as no longer hand made products – may reduce demand • machine made products may not be as popular – may reduce ability to use price skimming methods – would reduce selling price and profit margin 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 feasibility and risk of investing into each option • the likely impact on profit/profit margin • weighing up of objectives and risks • the potential consequences of not investing into the future • a judgement on whether or not CM should invest in any or all of the options • an attempt to advise CM on investment decisions and the short and long term impacts on CM Accept all valid responses. 2(d) Exemplar and annotations Job production increases demand as products are made to specific customers’ needs which will allow CM to charge premium prices and gain higher profits CM is already well-known specialist motorcycle parts Batch production can also allow CM to produce a variety of motorcycles to meet more different customer choices and increase sales revenue continuing the trend already seen by CM 50% increase in sales in one year. CM should not change its production method as it is already using job production and it will allow JC to continue providing specialist motorcycles to meet the gap in the market and benefit from the increase in sales and profits However, this also depends on whether JC is able to maintain competitiveness with only specialist parts as batch may give it a chance to expand it market and reduce the 10 week lead time.

Question 9

Festival Wear (FW) FW is a partnership started by two friends, Maz and Jane. FW manufactures and sells high quality T-shirts at $40 each. T…

Accepted Answer

2(a)(i) Identify one fixed cost. Indicative content Fixed cost  rent  interest  salaries  wages Accept all valid responses. Question Answer Marks 2(a)(ii) Explain the term mass customisation. 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 Mass customisation is the use of flexible computer-aided technology on production lines to make products that meet individual customers’ requirements for customised products. Knowledge of mass customisation (max 1 mark), including:  Bulk production  Flexible  Made to order  Customer preferences AO2 Application Explanation of a characteristic of mass customisation , including:  Lower unit costs combined with personalisation / Increased product choice  Higher customer retention/loyalty  Customers prepared to pay a higher price  Higher profit margins 3 Question Answer Marks 2(a)(ii) Context applied to mass market(s) , including:  Relevant example of mass customisation (including the T-shirt market) Application can be made to FW or any other scenario/context/business/person. Accept all valid responses. Guidance in awarding marks Knowledge & understanding Knowledge of mass customisation 1 mark Explanation Explanation of a characteristic of mass customisation 1 mark Context Applied to a business context/ business environment 1 mark 2(b)(i) Calculate FW’s break-even output per month if the new payment method is introduced. FC/contribution = BE (1) FC = 182 000, VC = 12 (1) Contribution = 40 – (12) (1) = 28 (1) 182 000/28 = 6500 (3) OFR 3 Question Answer Marks 2(b)(ii) Explain one advantage to FW’s employees of the new payment method. 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 – Note: Must be linked to employees NOT FW Knowledge of an advantage of lower salary + commission , including:  Payment made according to number of sales – commission  Possibility of higher monthly pay  Incentive so motivating Do not accept disadvantages. AO2 Application Explanation of an advantage of lower salary + commission , including:  If sales forecast correct employees would earn more  Can choose to work harder/longer for increased pay  Investment could expand sales possibilities so higher pay  Rewards successful selling Context applied to a limitation of using break-even analysis including:  Maz estimates sales volume to increase to 30 000 per month  Commission $2 per T-shirt 3 Question Answer Marks 2(b)(ii)  Business is expanding  Diversification of product portfolio – baseball caps  OFR from Q2(b)(i) Accept all valid responses. Guidance in awarding marks Knowledge & understanding Knowledge of an advantage of the change in payment method 1 mark Explanation Explanation of an advantage of the change in payment method 1 mark Context Context linked to an advantage of the change in payment method 1 mark Question Answer Marks 2(c) Analyse two external sources of finance that FW could use to invest in new machinery. 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 AO1 Knowledge and understanding Knowledge of an external source of finance (max 2 marks – annotate first source on left and second source on right), including:  bank loan  another partner  convert to a limited company  venture capital  leasing  hire purchase  bank loans  mortgages  debt factoring  trade credit  micro-finance  crowd funding  government grant AO2 Application Context applied to an external source of finance (max 2 marks), including:  $4m needed  Low break-even so good contribution to help get a loan  Good business attractive to shareholders  Required for expansion  New product could be risky  Market research needed to assess viability  Partnership Question Answer Marks 2(c) AO3 Analysis Analysis of a relevant external sources of finance, including: Limited analysis – candidate shows one link in the chain of analysis. Developed analysis candidate shows two or more links in the chain of analysis or a two-sided analysis.  Long term loan may be suitable – would banks lend to a partnership?  Venture capitalist will want quick returns – so less time to make returns  Probably no debts to factor – so unavailable source  Government grant unlikely – unless help available to help (small) businesses to expand  Too much for micro-finance  Loss of ownership if convert – danger of takeover  Effect on liquidity – depending on length of time involved  Cost of finance – could be high interest rates Note: Analysis must relate to a suitable source for financing machinery. For example, a mortgage is an external source so would get a K mark but not realistic for financing machinery unless linked by, e.g. saying a mortgage on the factory building to get finance to purchase the machinery. Accept all valid responses. Question Answer Marks 2(d) Evaluate whether FW should expand its product portfolio to increase its sales volume. 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 product portfolio (max 2 marks), including:  Range of products in one business  Product diversification  Meet customer demand for more product choice Could relate to product life-cycle, Boston matrix Could consider impact on the 4ps/4cs e.g.  Price  Product  Promotion  Place AO2 Application Context applied to features of FW (max 2 marks), including:  Reliance on one product is risky so maybe should diversify into baseball caps  May need to change distribution method - sell at music festivals only – maybe could sell elsewhere e.g., other retailers, online  Other products more suitable e.g., posters  Move to a bigger factory provides opportunity  Requires $4m investment  FW is expanding 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.  Requires research to establish demand  Single product portfolio – is the market saturated?  Satisfy more customers – increasing sales volume and increasing revenue and profit  There is a lack of direction for the future of the business and so there is a risk to the security and stability of FW.  Need for an integrated marketing mix to increase sales volume 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.  An evaluation is likely to come from candidates making a judgment and justification of expanding product portfolio.  Any changes that might need to be made to make it more effective/less risky.  Are there more suitable methods of increasing sales volume?  Business expanding is now the right time to increase products.  High investment in the new factory needs careful consideration of equipment if expand portfolio. Accept all valid responses. . Note: Developed evaluation in context should link to sales.

Question 10

Premium Homes (PH) PH owns student rental accommodation in all the major cities in country Y. PH used demographic segmentation in its marke…

Accepted Answer

2(a)(i) Identify one way in which business size can be measured. 1 Indicative content Identification of a method may include: • Capital employed • Market capitalisation • Market share • Revenue (allow sales, sales turnover or turnover, income) • Quantity sold • Value of output • Number of employees • Area/space • Number of outlets • Number of customers Do not allow profit – which is a measure of success or performance, but not size. If more than one answer is given, only mark the first, reading from top left to bottom right. Accept all valid responses. 2(a)(ii) Explain the term demographic segmentation. 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 demographic segmentation may include: • The identification of groups of customers with similar or common needs or characteristics within a market • Dividing the market according to factors that describe the population • Specific customer groups / target markets AO2 Application Explanation of demographic segmentation (max 1 mark) including: • Study of population data/trends • Examples of demographic factors, e.g. age, gender, race, social class, income Context applied to demographic segmentation , including (max 1 mark): • A valid example of a business that uses demographic segmentation to plan how it markets its products, e.g. a luxury car manufacturer may use demographic segmentation to target its advertising at high-income individuals or PH targets its student rental accommodation at university students 2(a)(ii) • Used for marketing of different products or services to specific consumer groups • Helps the business to adapt the marketing mix to the needs of the target customer group • Different marketing decisions for different groups Accept all valid responses Application can be made to PH or any other scenario/context/business/person. Exemplar and annotations Mark Rationale Dividing the market into groups according to age 3 The answer starts with application but shows or gender , for example a clothes retailer has knowledge by the reference to age/gender. There is three departments with products for men, women an example of the use of demographic segmentation and children . by a clothes retailer. Identifying groups of customers with similar needs or 2 Clear knowledge. With some application of how characteristics within a market using population data such as age Used for marketing of different products or services 1 A reasonable definition to specific types of customer Segmenting using demographics 0 Tautological 2(b)(i) Refer to lines 6–8. Calculate PH’s labour turnover in 2024. 3 Formula to calculate labour turnover: number of employees leaving in 1 year •  100 (1 mark – formula only) Average number of people employed Use of figures: 45 •  100 (1 mark – use of correct figures) 150 Labour turnover: • 30% (1 mark – correct answer – no % necessary) Exemplar and annotations Marks Answer Rationale 3 marks Correct answer Working and % do not matter. 30% Must be three to denote the three marks. Correct rounding must be applied. 2 marks Both of the following: To award two marks, there must be • Correct formula • Two and a • Correct identification of figures OR • One , one and one OR An incorrect answer with one mistake allowing OFR for final stage. OR 0.3 (has not completed final stage to multiply by 100) OR A correct answer from an inverted formula (3.3 – OFR) 2(b)(i) Marks Answer Rationale 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 • One 2(b)(ii) Explain one way in which PH could use Maslow’s Hierarchy of Needs 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 use of a motivational theory (max 1 mark), including: • Change the way that employees are treated/managed/motivated at PH or relevant examples • Make changes to increase motivation to maintain PH’s low labour turnover/retain employees • Understand employee behaviour/employee motivation • Measuring employee needs AO2 Application Explanation of a use of Maslow’s hierarchy of needs (max 1 mark), including: • Explain how motivation affects how employees behave, e.g. an employee doing a repetitive job/working alone may have a high absenteeism rate • Explain the use with reference to one of Maslow’s categories of need, e.g. physiological, safety, love and belonging, esteem and self-actualisation needs • Examples of how PH could change the way that employees are managed/motivated: • Offer more opportunities for internal promotion • Increase employee salaries • Encourage employees to stay in the business • Change working conditions 2(b)(ii) Context applied to PH (max 1 mark), including: • Use of demographic segmentation in its market research • University students would pay a premium price for high specification rental accommodation • Specialist teams focused on sales, maintenance, customer service and finance. • Little opportunity for internal promotion • Low salaries • Offers profit sharing • 150 employees • Low labour turnover • Profit reduced by 75% • In 2024, 45 employees left PH • Increased complaints about maintenance and customer service • Use of data from Fig. 2.1 • Operations Director wants to improve the sustainability of PH’s operations Accept all valid responses. Exemplar and annotations Mark Rationale Managers can understand what motivates 3 Use of Maslow’s hierarchy of needs by managers employees such as ensuring physiological needs , with further explanation with reference to Maslow’s are met for the 150 employees . hierarchy . The third mark is for reference to the context . Helps managers decide how to change their 2 Knowledge of a use and applied to the number of management style so that less than 45 employees. employees leave this year . Identifies the different motivations for human 1 Knowledge of a use with no application behaviour Maslow’s Hierarchy of needs is a motivational theory 0 No use of Maslow’s hierarchy of needs. This answer is the study of understanding what drives a person to is a definition of the theory and does not answer the question work towards a particular goal or outcome . 2(c) Analyse one advantage and one disadvantage to PH of using an overdraft as a source of finance. 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. Advantage in the left hand side column, disadvantage in the right hand side column 2(c) Indicative content AO1 Knowledge and understanding Knowledge of one advantage using an overdraft as a source of finance (max 1 mark), including: • Quick – previously agreed / immediately available • Convenient – can use it as required • Flexible • No repayment schedule • No loss of ownership Knowledge of one disadvantage using an overdraft as a source of finance (max 1 mark), including: • High interest rates / fees • Can be recalled at any time • Often low limit available • Can only be used for short-term needs • Must be repaid Note: the advantages/disadvantages have to be true for an overdraft, but not exclusively true to an overdraft (i.e. they may apply to other sources of finance). AO2 Application Application of an advantage or disadvantage to PH , including: • Use of demographic segmentation in its market research • University students would pay a premium price for high specification rental accommodation • Specialist teams focused on sales, maintenance, customer service and finance. • Little opportunity for internal promotion • Low salaries • Offers profit sharing • 150 employees • Low labour turnover • Profit reduced by 75% • In 2024, 45 employees left PH • Increased complaints about maintenance and customer service • Use of data from Fig. 2.1 2(c) • Operations Director wants to improve the sustainability of PH’s operations • Use of data from Fig. 2.1 • Operations Director wants to improve the sustainability of PH’s operations AO3 Analysis Limited analysis of an advantage/disadvantage of using an overdraft – candidate shows one link in the chain of analysis. Developed analysis of an advantage/disadvantage of using an overdraft candidate shows two or more links in the chain of analysis or a two-sided analysis. Analysis may include: • Quick – previously agreed / immediately available; the funds can be used for expansion immediately – leading to increased market share • Convenient – can use it as required; no time is wasted with application – can be used for other activities such as marketing • Flexible; can be used for any type of purchase – to meet the business objectives • No repayment schedule; this will reduce cash outflows – This money can be used to better maintain the properties rented, reducing customer complaints. • High interest rates/fees; higher interest rates may increase costs – this will reduce profits • Can be recalled at any time; the business may need to suddenly repay the money leading to cashflow problems – threatening business survival • Often low limit available; The overdraft limit may be low. This will limit the investments that PH can make – therefore the business will not be able to reduce complaints. • Can only be used for short-term needs; limiting the project that the money can be used for – some objectives may not be met • Must be repaid; increasing cash outflows – less funds available for marketing Accept all valid responses. 2(c) Exemplar and annotations AO1 Knowledge AO2 Application AO3 Analysis Exemplar of an advantage Interest only charged on the For upgrading Ensures short term cost is Annotations for the overdrawn amount accommodation in high- minimal reducing further advantage should be income cities . pressure on profit levels . placed in the left-hand margin. Exemplar of a disadvantage The funds need to be repaid If student accommodation This could lead to a bad Annotations for the not rented out . credit rating if payments disadvantage should be missed which may placed in the right-hand increase cost of future margin. borrowing . 2(d) Evaluate whether Frank’s plan will improve the sustainability of PH’s operations 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 application Developed analysis Developed evaluation of relevant key term(s) of relevant point(s) to the that identifies • A developed and/or factor(s) is used to business context. connections between judgement/conclusion answer the question. causes, impacts and/or is made. consequences. • Developed evaluative comments which balance some key arguments. 2(d) Level AO1 Knowledge and AO2 Application AO3 Analysis AO4 Evaluation understanding 2 marks 2 marks 6 marks 2 marks 1 1 mark 1 mark 1 mark 1–2 marks Limited knowledge Limited application Limited analysis Limited evaluation of relevant key term(s) of relevant point(s) to the that identifies • A and/or factor(s) is used to business context. connections between judgement/conclusio answer the question. causes, impacts and/or n is made with limited consequences. supporting comment/evidence. • An attempt is made to balance the arguments. 0 0 marks 0 marks 0 marks 0 marks No creditable response. No creditable response. No creditable response. No creditable response. Indicative content AO1 Knowledge and understanding Knowledge of sustainability of operations (max 1 ), including: • Operating / surviving / remaining in business for the long-term / future / not running out of money / continuity / stable • Efficiency • Productive • Day-to-day running of the business • Keeping customers satisfied • Maintaining profitability – reducing expenses and increasing revenue Note: The question stem asks about operational sustainability. Therefore, operational sustainability must be the focus of the answer, not environmental sustainability. 2(d) AO2 Application Application of an advantage or disadvantage to PB , including: • Use of demographic segmentation in its market research • University students would pay a premium price for high specification rental accommodation • Specialist teams focused on sales, maintenance, customer service and finance. • Little opportunity for internal promotion • Low salaries • Offers profit sharing • 150 employees • Low labour turnover • Profit reduced by 75% • In 2024, 45 employees left PH • Increased complaints about maintenance and customer service • Use of data from Fig. 2.1 AO3 Analysis Limited analysis of whether the plan will improve the sustainability of PH’s operations – candidate shows one link in the chain of analysis. Developed analysis of whether the plan will improve the sustainability of PH’s operations – candidate shows two or more links in the chain of analysis. • Financial stability; reduce short term cash inflow – reduce debt burden and interest payments • Focus on profit; increase profit margins – focus on core values • Increased efficiency of workforce; may lose excellent employees who take knowledge to competitors – lose market share/customer service may reduce further due to losing more experienced employees • Keeping customers satisfied; increased market share – more market power / ability to increase prices • Business continues for the long-term; increased employee satisfaction from greater job security – reduced labour turnover AO4 Evaluation Limited evaluation – an unsupported judgement and/or weak attempt at an 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 . 2(d) • The impact of the plan depends on the timescales, future aims and objectives and financial liquidity of PH. After downsizing the amount of revenue generated may not meet shareholder expectations • Will demand for premium accommodation increase in the future? What are the demands of students? • Should PH repurpose its accommodation for a different target audience, create a subsidiary brand and grow market share? • Is market share and size the most important measure of success, or is profitability more important? • The extension strategy may generate a short-term boost to sales/market share, but will it be sustained in the long- term? • A judgement on whether the course of action is suitable for PH. Accept all valid responses. Exemplars for awarding evaluation L1 (limited supporting L2 (developed supporting L3 (developed supporting evidence) evidence) evidence with context) Frank’s plan will improve the Frank’s plan will improve the Frank’s plan will improve the sustainability of PH’s operations. sustainability of PH’s operations. sustainability of PH’s operations. Increased labour efficiency will reduce Increased labour efficiency will reduce expenditure on salaries. expenditure on salaries. This will help to reverse the trend of reducing profit levels over the past two years. I don’t think the sustainability of PH’s I don’t think the sustainability of PH’s I don’t think the sustainability of PH’s operations will be improved. operations will be improved. Investing operations will be improved. Investing in new accommodation will cost a lot in new accommodation will cost a lot of money. of money, and PH does not have experienced employees to do the work as they have left.

Question	Answer	Marks	From
1	see sheet	30	9609/23 Oct/Nov 2018
2	see sheet	30	9609/22 May/June 2020
3	see sheet	30	9609/22 Oct/Nov 2020
4	see sheet	30	9609/23 Oct/Nov 2022
5	see sheet	30	9609/22 Feb/March 2023
6	see sheet	30	9609/21 Oct/Nov 2023
7	see sheet	30	9609/23 Oct/Nov 2023
8	see sheet	30	9609/23 Oct/Nov 2023
9	see sheet	30	9609/23 May/June 2024
10	see sheet	30	9609/21 May/June 2025

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

Questions11 pages

Mark scheme10 answers

Another paper, or another topic

Questions as text

Q1 · Fish and Chips (FC) Min is a sole trader who is the owner and overall manager of FC 9609/23 Oct/Nov 2018

Q2 · Market Solution (MS) MS is a public limited company in the tertiary sector 9609/22 May/June 2020

Q3 · Energy Solutions (ES) ES is a public limited company in country X 9609/22 Oct/Nov 2020

Q4 · Planting Pots (PP) Emily and Kabir are entrepreneurs 9609/23 Oct/Nov 2022

Q5 · Fruit Farm (FF) FF is a private limited company that provides packaged fruit to the… 9609/22 Feb/March 2023

Q6 · Plasshape (PS) PS manufactures plastic packaging for industrial markets (B2B) 9609/21 Oct/Nov 2023

Q7 · Jake’s Cakes (JC) Jake started baking cakes while at university 9609/23 Oct/Nov 2023

Q8 · Custom motorcycles (CM) CM is a private limited company 9609/23 Oct/Nov 2023

Q9 · Festival Wear (FW) FW is a partnership started by two friends, Maz and Jane 9609/23 May/June 2024

Q10 · Premium Homes (PH) PH owns student rental accommodation in all the major cities in… 9609/21 May/June 2025