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

Question 1

Clean and Tidy (CT) CT is an employee-owned business that specialises in cleaning homes. The homes are cleaned during the day whilst the ho…

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2(a)(i) Define the term ‘profit margin’ (line 5). 2 Knowledge Marks A correct definition 2 A partial, vague or unfocused definition 1 No creditable content 0 Content Measure of the profitability (not profit) of a business. Calculated by finding the profit for the year as a percentage of revenue. Proportion of revenue that is profit for the year. 2(a)(ii) Briefly explain the term ‘above the line promotion’ (line 12). 3 Award one mark for each point of explanation: C Example or some other way of showing good 1 mark understanding B Through a media 1 mark A Communication/advertising/creating awareness to 1 mark consumers/customers Content Above The Line promotion is the use of media to promote a business and reach out to the target consumers. These include conventional media, television and radio advertising, print as well as internet. This is communication that is targeted to a wider spread of audience, and is not specific to individual consumers. 2(b)(i) Refer to Table 2. Calculate the price elasticity of demand for a 3 change in price from $8 to $6 per hour. Mark Rationale 3 marks Correct answer with or without working 2 marks Attempt with correct use of figures 1 mark Formula 0 marks No creditable content Formula: % Change in QD % Change in P % change in QD 5/50*100 = 10% % change in P 2/8*100 = 25% Answer = (–)0.4 Note: Minus sign not required. Common incorrect answers Answer Mark Rationale 25% 2 Formula wrong way round = 2.5 10% 10% 2 Obvious (implied) knowledge of formula but no attempt to calculate 25% answer (or the attempt is wrong) 10% 2 As above = Inelastic 25% 5 1 Candidate missed the % out of the = 2.5 formula (twice) 2 10% and/or 25% 1 No formula or attempt to put % changes in a formula Inelastic 1 Some understanding but no calculation Change in QD 0 Formula is wrong – no % Change in P 2.5 0 No working 2(b)(ii) Explain one way in which CT could make use of price elasticity of 4 demand calculations. Level Knowledge and Application Marks 2b Explanation of a way PED could be used in 3 (APPAPP) context 2a (APP) Identification of a way PED could be used in 2 context 1a (K) Shows understanding of the use of PED 1 0 No creditable content 0 Correct use of an incorrect answer to 1(b)(i) should be fully rewarded (own figure rule –OFR). No credit for knowledge of PED or formula – already awarded in previous question. Content Answers could include: • Can see that cleaning services are price inelastic (OFR). • CT should not reduce their price – they should increase their price back to the original level (or increase it further). • Price is obviously not the most important factor when customers purchase cleaning services. • PED can be used to calculate revenue based on price changes. 2(c) Analyse one advantage and one disadvantage to CT of being an 8 employee-owned business. Knowledge and Level Marks Analysis (4 marks) Marks Application (4 marks) Good analysis of one (or more) advantage(s) AND one (or more) 4 Shows disadvantage(s) of being understanding an employee-owned of employee business in context 2 3–4 owned Good analysis of one (or businesses in more) advantage(s) OR context one (or more) 3 disadvantage(s) of being an employee-owned business in context Limited analysis of one (or more) advantage(s) AND one (or more) 2 disadvantage(s) of being Shows an employee-owned knowledge of business 1 employee 1–2 Limited analysis of one (or owned more) advantage(s) OR businesses one (or more) 1 disadvantage(s) of being an employee-owned business Answers could include: Context: • equal ownership • different skills in cleaning • each owner may have different personal contacts – cleaning homes • each owner may have different business contacts to expand into the industrial market. Advantages: • working together to solve problems • economies of scale • motivation from being owners/sharing profits. Disadvantages: • disagreements – who is in control? • if there is a manager do they have authority • do the workers have the management skills? • could be a lack of capital investment • could lead to slow decision making. 2(d) Discuss how CT's marketing mix might need to change to target 11 customers in the industrial market. Knowledge and Marks Analysis and Evaluation Marks Application (4 marks) (7 marks) Justified evaluation that follows on from a balanced argument of 7 change(s) to the marketing mix in context Evaluation that follows on from a balanced argument of change(s) to 6 the marketing mix in context A balanced argument based on change(s) to the 5 marketing mix in context Shows understanding Argument based on of the marketing mix in 3–4 change(s) to the marketing 3–4 context mix in context Limited analysis of how Shows knowledge of the marketing mix might 1–2 1–2 the marketing mix change/be changed No creditable content Content: Answers could include: • Product – the businesses will expect evening/night-time cleaning – will CT have employees who are willing to do this? Will they expect higher remuneration for anti-social hours? However the essence the service on offer is the same. • Price – need to find out how sensitive the industrial market is to price? Likely to be more price elastic due to being a cost of business. Therefore CT may find themselves in a more competitive market and need to charge lower prices/have lower margin. • May need to move towards below the line promotion – above the line likely to be expensive to target industrial market (except trade magazines). May need to employ sales people to target businesses directly. • Industrial customers are unlikely to come to them (i.e. phone or book on internet) so CT will need to be more proactive in finding customers.

Question 2

Nearly New (NN) NN sells second-hand computers. NN is owned by Nathan who is a sole trader. Nathan is a fully trained and qualified compute…

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2 Nearly New (NN) 2(a)(i) Define the term ‘inventory’. 2 Knowledge and Application Marks A correct definition 2 A partially correct definition 1 No creditable content 0 A correct definition will cover two of the following bullets: • Stock • Raw materials, work in progress, finished products • Used in, or the result of the production process/operations – to fulfil future demand, to sell • Current asset Note: Inventory is a syllabus term to mean the stock of a business – a definition of inventory in terms of all the assets owned by a business (i.e. to take an inventory) is not rewardable. 2(a)(ii) Briefly explain the term ‘sole trader’. 3 C One mark for each of the following (up to a maximum of two 1–2 marks): marks B • Unincorporated • Unlimited liability • No continuity • No separate legal identity • Income tax must be paid (not corporation tax) • Owns all of the profit/responsible for all the losses/takes all the risk • Shares cannot be sold • Accounts do not need to be produced/published/made available A One individual or one person (must be a clear idea of a single 1 mark person) Note: the B and C marks are dependent on gaining the A mark Exemplar Marks Rationale Owned by one person who has 3 A, B and C unlimited liability and takes of the profit for themselves. A single owner with no shareholders 3 A, B and C and accounts do not need to be published. A sole trader has unlimited liability 3 It does not matter if the A and no continuity. It is owned by one mark comes after the B and person. C marks Owned by one person with no 2 A and B shareholders A sole trader does not have any 0 No A mark – this could just shareholders as easily apply to a partnership. A business that has unlimited liability 0 No A mark – this could just with no shareholders and no as easily apply to a continuity. partnership. The person responsible for finance, 0 No understanding of one decision making etc« owner – this could be a manager 2(b)(i) Calculate the total profit that Nathan would make if he sold the whole batch 3 of repaired laptop computers. Mark Rationale 3 marks Correct calculation of the total profit (no $ required) with or without correct working 2 marks Correct calculation of total costs or correct calculation of total revenue (with working) 1 mark Correct formula or correct calculation of total variable costs (with working) 0 marks No creditable content Note: allow an answer of 1500 even if the candidate has identified it as a different figure in the answer (i.e. Total Cost = 1500 = 3 marks) Formula: Total revenue – total costs = profit Calculations: Total variable costs = 20 × £50 repair = $1000 Total costs = Purchase cost = $2000 20 × £50 repair = $1000 $3000 50% mark up = $1500 $4500 Profit = $1500 2(b)(i) Common answers Answer Marks Rationale 1500 (no working) 3 Allow the answer with or without working and $ or incorrect working $2000 + $1000 = $3000 2 Working to support that this is the total cost figure 3000 (no working) 0 A wrong answer with no working to know where the answer has come from 20 × $50 = $1000 1 Working to support the calculation of variable costs $2000 0 A wrong answer with no working to know where the answer has come from 50% of $2000 = $1000 2 One error – mark up was calculated on 20 × $50 = $1000 FC not TC OFR So profit = $0 $2000 2 A route to find total revenue but no 20 = $100 (FC per profit figure – any valid route to find TR computer) correctly without a correct calculation of profit should be awarded 2 marks as $100 + $50 (VC) = $150 long as there is working. (total cost per computer) 50% of $150 = $75 (mark up per computer) $150 + $75 = $225 (price per computer) $225 × 20 = $4500 (total selling revenue) $4500 (no working) 0 A wrong answer with no working to know where the answer has come from 2(b)(ii) Explain one advantage to Nathan of using a cost based pricing strategy. 3 Level Knowledge and Application Marks 2 (APPAPP) Explanation of an advantage of using cost 3 based pricing in context 2 (APP) Identification of an advantage of using cost 2 based pricing in context 1 (K) Identification of an advantage of using cost 1 based pricing 0 No creditable content 0 Answers could include: Examples of Examples of context Possible explanations identifications of an (APP) (APPAPP) advantage (K) Quick and simple Nathan is a computer Therefore this will save engineer and may not Nathan time. be experienced in running a business. Nathan needs to focus So Nathan can focus on on repairing computers gaining sales for the not complicated pricing business. methods. Always leads to a profit Each computer has a So any price higher total cost of $150. than this will result in a Always covers the full profit for Nathan. cost of each computer Predictable profit Nathan chose a 50% So the mark-up should margin mark-up. always equal the profit margin. So Nathan can target a certain margin that he will find acceptable. 2(c) Analyse two methods Nathan could use to improve NN’s cash flow. 8 Level Knowledge and Analysis application 2 Shows 4 Good analysis of TWO 4 understanding of methods of improving cash TWO methods of flow in context improving cash flow in context Shows 3 Good analysis of ONE 3 understanding of method of improving cash ONE method of flow in context improving cash flow in context 1 Shows knowledge of 2 Limited analysis of TWO 2 TWO methods of methods of improving cash improving cash flow flow Shows knowledge of 1 Limited analysis of ONE 1 cash flow or ONE method of improving cash method of improving flow cashflow 0 No creditable content One factor analysed in context, max 3 + 3 Note: the focus of the analysis must be on improving cashflow Answers could include: • Could use a cashflow forecast to identify when Nathan needs extra cash • Nathan could take a partner (this is contextual) • Could arrange credit facilities with suppliers– would the large electrical retailers offer him any credit? • If Nathan currently offers credit (unlikely) he could make sure his customers pay on delivery or in advance. • Nathan could take out a short term source of finance for times when he needs extra cash to purchase inventory – cost of finance, likelihood of getting finance • Take out a long term source of finance to give Nathan access to cash when he needs it – opportunity cost of using finance, cost of finance • Keep a low amount of cash tied up in inventory – unlikely to be popular as customers want next day delivery and a range of computers 2(c) Examples of Examples of application/context Examples of possible methods analysis Arrange Nathan is purchasing from large More time to pay Æ sell credit with electrical retailers who may be computers before paying suppliers likely to give him credit. for the stock Æ revenue before costs need to be Nathan is an established paid Æ less chance of customer of the large electrical negative cashflow businesses and therefore more likely to get credit. Nathan needs the time this credit would give him to repair the computers. Short term Nathan is an established Allow purchase without source of business and may get credit. needing cash Æ Will not finance worsen Nathans Nathan is a sole trader and may cashflow position Æ Less struggle to get a short term chance of negative source of finance cashflow A short term source of finance would allow Nathan to purchase Increase costs of NN Æ the computers without needing a Increase price of a ‘buffer’ of cash available – he can computer Æ May reduce add in the cost of finance to the sales Æ may reduce price of the computers (i.e. costs profits plus). 2(d) Recommend which one of the two potential employees Nathan should select. 11 Justify your recommendation. Knowledge and Marks Analysis and Evaluation Marks Application (4 marks) (7 marks) A justified recommendation for 7 Nathan on which potential employee he should select based on the given arguments for selecting Katy and Sahdat A developed recommendation for 6 Nathan on which potential employee he should select based on the given arguments for selecting Katy and Sahdat An evaluative 5 statement/recommendation based on the given arguments for selecting Katy and Sahdat Shows understanding of 4 Argument(s) based on selecting 4 selection criteria for Katy Katy and Sahdat as potential and Sahdat employees for NN Shows understanding of 3 Argument(s) based on selecting 3 selection criteria for Katy Katy or Sahdat as potential or Sahdat employees for NN Shows knowledge of 1–2 Limited analysis of Katy and 2 selection Sahdat as potential employees Limited analysis of Katy or 1 Sahdat as potential employees Note: APP, AN and ANAN about Katy should be placed in left hand margin and Sahdat in right hand margin Katy • Lower previous salary • Some experience of dealing with electrical retailers (NNs suppliers) • Degree – but is this necessary? • Younger – but is this a benefit and should Nathan make a decision based on age (legal issues?) • Relevant skills and organisation could be useful Sahdat • Higher previous salary – does this mean that he will expect more? • More experience in relevant area • No qualifications, but are they necessary? • Older, but could this be a benefit? • Will his skills of managing employees and communication be any use within NN where he will be the only employee and possibly not customer facing? 2(d) An example of how an answer could develop and how it should be annotated. K APP AN ANAN (one EVAL sided) Selection is Katy has got This may This is likely to I would the ability to some help Nathan reduce the recommend that choose experience to negotiate costs for Nathan chooses between working for a better prices Nathan of doing Sahdat because potential large and credit business, better employees electrical with his improve his productivity will for a retailer. suppliers cashflow and help Nathan to position. (K) (APP) who are the increase his sell computers large chances of quicker and this A business electrical making a profit. may help solve can select retailers. (ANAN – Katy) his major employees (AN) problem of through cashflow. (EVAL interviews, – statement) experience, skills etc. However it However More Quicker repairs (K) depends upon Sahdat has experience could increase whether Nathan more may lead to the productivity feels he can experience quicker of NN and manage Sahdat. than Katy in repairs. (AN) mean that he (EVAL – repairing can sell more developed) computers computers, but he has quicker and If he can’t then been his own gain more this productivity boss for the profit. (ANAN – boost is unlikely last 10 years. However he Sahdat) to happen and (APP) may not be Katy might be willing to the better option take If Sahdat as she may be instructions cannot take easier to from Nathan orders then manage. (EVAL about what Nathan may – justified) to do. (AN) find him difficult to manage and this may lead to conflict and lower productivity for NN. (ANAN – Sahdat) Note: only two ANANs are needed (one for Katy and one for Sahdat) to enable evaluation many candidates will attempt more analysis to give depth to their evaluation. Make sure you are only awarding analysis to the appropriate level – if a candidate has tried to cover lots of different points but only got to limited analysis (AN) each time, then this does not build an argument. Please look out for quality of analysis rather than quantity.

Question 3

Ontime Taxis (OT) OT is a taxi business. OT is owned by two brothers who set up the business as a private limited company to benefit from l…

Accepted Answer

Question Answer Marks 1(a)(i) Define the term ‘limited liability’ (line 2). 2 Knowledge Marks A correct definition 2 A partial, vague or unfocused definition 1 No creditable content 0 Content Any two of the following points: continuity, separate legal identity; shareholders; losses limited to investment/no personal risk. Exemplar Marks Rationale A business whose shareholders/owners are not personally responsible for any 2 Both elements met business debts A business whose owners personal assets will not be used to pay business 2 Both elements met debts A business whose owners have a 2 Both elements met separate legal identity to the business A shareholder can only lose the capital 2 Both elements met invested in the business No reference to Limited liability for business debts 2 owners/ shareholders When a business fails, the owners are Limited liability not 1 not responsible for the debts explained clearly A company is protected from financial 0 Not a correct definition loss No responsibility for business debts 0 Too vague 1(a)(ii) Briefly explain the term ‘competitive pricing strategy’ (line 3). 3 Award one mark for each point of explanation: Knowledge Marks C Example or some other way of showing good understanding 1 B Same price or lower or higher 1 A Price is based on what the competition changes 1 • C mark is dependent on A and B being present Content Basing the price on what the competition is charging. This may be to set the same price as the competition or, in most cases, to set a lower price than the competition. Exemplar Marks Rationale Basing the selling price in relation to the prices of competitors; e.g. a lower price 3 All elements met to attract customers To identify competitors prices and then 3 All elements met pricing lower to achieve more sales To set your prices lower than competitor 2 A and B businesses No example or To set your prices in relation to 1 extended competitor businesses understanding A way of pricing your good to make it 0 Too vague more attractive to purchase 1(b)(i) Using Table 2 and any other relevant information, calculate the break 3 even number of kilometres each month for vehicle Z. Rationale Marks Correct answer, with or without working or units 3 Correct use of figures (price – variable costs per unit) 2 Formula* 1 No creditable content 0 * Can be implied by use of figures ** Can be in the form of a diagram Content Fixed costs or fixed cost or TR = TC** Contribution price – variable costs per unit Contribution = $0.50 – $0.30 = $0.20 $380 $0.20 = 1900 kilometres Rationale Marks 1900 (with or without Km) (ignore miles, etc.) 3 $500 / $0.25 = 2000 (OFR for different car) 2 Fc / contribution 1 $2000 0 380 / 0.3 = 1266.66 (common but incorrect) 0 1(b)(ii) Explain one reason why break even analysis might not be useful to OT 3 when choosing the new vehicle. Level Knowledge and Application Marks Explanation of a limitation of break-even analysis 2b APP 3 in context Explanation of a limitation of break-even analysis 2a(K + K) 2 out of context 1(K) Identification of a limitation of break-even analysis 1 0 No creditable content 0 Content: • Costs could change, especially with a new car which could have accidents, etc. • Not just about the costs – quality/safety may be more important • How long will each car last – what is the maximum mileage? • Does not take into account profitability – If many miles above breakeven are completed then Car Y might be far more profitable Possible context Reason (K) APP Marks (K+K) Other factors in E.g. a non-financial E.g. boot space (in a 3 addition to cost factor car) So on the price of Costs could Which make the replacement car parts 3 change VC and FC change may be important As Car Y may be Does not take into May breakeven but more profitable if more account 3 not make a profit miles are covered As profitability the VC is lower 1(c) Analyse two external sources of finance OT could use for the new taxi. 8 Knowledge and Level Marks Analysis (4 marks) Marks Application (4 marks) Shows understanding Developed analysis of 2b of two external sources 4 two external sources 4 of finance in context of finance in context Shows understanding Developed analysis of 2a of one external source 3 one external source of 3 of finance in context finance in context Shows knowledge of Limited analysis of 1b two external sources of 2 two external sources 2 finance of finance Shows knowledge of Limited analysis of 1a one external source of 1 one external source of 1 finance finance 0 No creditable content Content • New shareholders – OT is a private limited company (LTD/LLC) so can sell shares but not to the general public. Loss of control of business. • Bank loan – can be secured or not on the car • Leasing – good option for a car as lower maintenance costs, etc. • Debt factoring • Hire purchase • Grant/government finance ARA Only award out of context answers (e.g. mortgage with L1 marks) Do not accept ‘buy the new taxi’ for app as in the question 1(c) Examples of Examples Examples of Examples of possible of external application/ possible developed sources context analysis analysis New In addition to the Means they have to Less future profits shareholders two brothers work harder Fixed monthly Help with Bank loan For $30 000 repayments budgeting saves $30 000 up Don’t need up- Leasing No loss on control front costs front investment Don’t need the Don’t need up- Own the car at the HP full $30 k up front front investment end of the period 1(d) Using Table 2 and any other relevant information, recommend the 11 market segment OT should target. Justify your recommendation. Knowledge and Analysis and Evaluation Marks Marks Application (4 marks) (7 marks) A justified recommendation based on a developed 7 argument of the suitability of one market segment in Table 1 A developed recommendation based on a developed 6 argument of the suitability of one market segment in Table 1 A basic recommendation based on a developed 5 argument of the suitability of one market segment in Table 1 Shows understanding of Argument of targeting two two market segments in 4 4 market segments in context context Shows understanding of Argument of targeting one one market segment in 3 3 market segment in context context Knowledge of two or Limited analysis of targeting 2 2 more market segments two market segments* Knowledge of one Limited analysis of targeting 1 1 market segment one market segment No creditable content 0 Using Table 1 and any other relevant information, recommend the market segment OT should target. Justify your recommendation. * If only one segment has been identified, any repeat AN’s should be marked as repeat so the counters show the correct analysis level Contents Shoppers: • Short journeys – low revenue • Long time period for journeys – could be higher number of customers • No brand loyalty – taxis will need to be conveniently placed • Taxis will need to be driving around to pick up customers – will increase variable costs

Question 4

Sadiq’s Social Restaurant (SSR) SSR is a small social enterprise located in a low-income inner city area. SSR employs young people who have…

Accepted Answer

2(a)(i) Define the term ‘induction’ (line 12). 2 Knowledge Marks A correct definition 2 A partial, vague or unfocused definition 1 No credible content 0 Note: Do not reward ‘training’ as it is too generic A correct definition could cover the following: • Introduction to the business rules, regulations and procedures (or an example) • Provided when first joining a business Exemplar Marks Rationale A general introduction to the business 2 Two elements rules provided to all new starters covered Generic training such as fire safety 2 Two elements provided to new employees covered Provided to new employees 1 A simple statement General training and information about 1 An understanding the rules and regulations in a business but too vague A type of training 0 Too vague 2(a)(ii) Briefly explain the term ‘social enterprise’ (line 5). 3 Award one mark for each point of explanation Knowledge Marks C Example or some other way of showing good 1 understanding – triple bottom line, not a charity, people, planet and profit B Profits are reinvested in order to meet the organisations 1 aim or a loss allowed to meet aims of organisation A Understanding of social enterprise – main aim/objective 1 is to fulfil a social need/not maximisation profit The organisations aim is to make a profit not for the shareholders but to meet a social or environmental need. It is often referred to as the triple bottom line. Exemplar Marks Rationale Business making a profit to meet the 3 All three elements social needs of a section of society, often called the triple bottom line Business venture whose main aim is 2 All and C only to help a social need (A) rather than make a personal profit (C) Meeting the needs of society 1 A only The 3 Ps/ People, planet and profit 1 Identified key themes only, no real understanding No identifiable content 0 2(b)(i) SSR uses cost-based pricing to add 60% to variable costs when 3 pricing each meal. Refer to Table 2.1. Calculate the average price of each meal in the proposed city centre restaurant. Level Rationale Marks 2 (APP) Correct calculation (with or without working 3 and/or $) 1b (KK) Correct process 2 1a (K) Correct formula or correct calculation of VC 1 ($3.75) 0 mark No credible content 0 Total price = Total variable costs × 1 + mark-up (1) OR Total variable costs × 60 + TVC (1) 100 Allow any reasonable formula City Centre = ($1.50 + $2.25) = $3.75 (1) × 1.6 (1) = $6.00 (3) Allow full marks for a correct answer with or without working or $ (3) Common incorrect/incomplete answers Answer Mark Rationale $6 3 Correct answer ($1.50 + $1.30) x 1.6 2 Edge of city figures (correct process =$4.48 but wrong figures – one mistake) $4.48 (no working) 0 Incorrect answer 60% of $3.75 = $2.25 2 Correct calculation of VC and mark up $2.25 (no working) 0 An incorrect answer with no working Total variable costs x 1 Correct formula 1.6 $5.50 x 1.6 = $8.80 1 Used price not VC but process is correct 0 No creditable content 2(b)(ii) Briefly explain one advantage to SSR of using cost-based pricing. 3 Level Knowledge and Application Marks 2 (APP) Explanation of 1 or more advantages to SSR of 3 using cost-based pricing 1b (KK) Explanation of 1 or more generic advantages of 2 cost based pricing 1a (K) Knowledge of cost based pricing 1 0 No creditable content 0 Context is likely to come from: • Food is seasonal and prices change so ensures a suitable profit margin is kept • Customers are happy that they are paying reasonable prices based on what they are eating/ not being charged premium prices 2(c) Analyse two possible impacts on stakeholders of SSR if the second 8 restaurant is successful. Knowledge and Level Marks Analysis Marks application 2 Shows knowledge 4 Developed analysis 4 of two stakeholders of two impacts of in context success of the second restaurant on two stakeholder groups in context Shows knowledge 3 Developed analysis 3 of one stakeholder of one impact of in context success of the second restaurant on one stakeholder group in context 1 Shows knowledge 2 Limited analysis of 2 of two stakeholder two impacts of groups success on two stakeholder groups Shows knowledge 1 Limited analysis of 1 of one stakeholder one impact of group success on one stakeholder group 0 No creditable content 0 Note: Do not allow analysis of the impact on any stakeholder group of the factors in Tables 2.1 and 2.2. This question is about the impact of SUCCESS not the location. Major stakeholders: customers, local education provider, local government, employees, competition, investors, suppliers, job centre (any reasonable answer accepted) Contextual analysis likely to come from: • Government – increased size of training scheme impacts on jobless figures which is good for job seekers payments • Customers – more seating/bigger restaurant means more availability for local customers means lower waiting time • Employees – more jobs means that more young people will be able to work and gain new skills leading to better chances of gaining future employment • Suppliers – two successful restaurants lead to more orders and in turn increased profit. 2(d) Recommend which location SSR should choose for its second 11 restaurant. Justify your recommendation. Knowledge and Analysis and Marks Marks Application (4 marks) Evaluation (7 marks) A justified recommendation based on a developed 7 argument of both options A developed recommendation based on a developed 6 argument of both options A basic recommendation/ judgement based on a 5 developed argument of both options Shows understanding Developed argument of decision making based on factors for factors for city centre 4 city centre AND out of 4 AND out of town town location for SSR location for SSR restaurant restaurant Shows understanding Developed argument of decision making based on factor(s) for factor(s) for city centre 3 city centre OR out of 3 OR out of town location town location for SSR for SSR restaurant restaurant Shows knowledge of Limited analysis of two two factors affecting 2 factors affecting 2 location location Shows knowledge of 1 Limited analysis of one one factor affecting 1 factor affecting location location No creditable content 0 2(d) Content/context and analysis: City Centre: • Already has restaurant layout > less initial investment but no personal touch? • Competition from established restaurants > might reduce custom but a popular location for new customers? • Lack of parking > might impact on ability of people to visit but may be well serviced by public transport • Higher average price per mean – $6 • Higher sales revenue per month = $6000 • Higher net profit per month = $1750 Edge of city: • Permission to convert > can create personalised style but expensive • Location has fewer potential customers but less competition – captive audience • Lower monthly fixed costs – less pressure on the finances • Lower average price per mean – $4.48 – better for a social enterprise? • Lower forecast sales revenue per month = $3360 • Lower forecast (net) profit per month = $885

Question 5

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

Accepted Answer

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

Question 6

U-LEARN (UL) Nadia graduated, last year, with a degree in business management. Nadia is friendly and creative with lots of ideas. Whilst at…

Accepted Answer

2(a)(i) Define the term ‘social enterprise’ (line 5). 2 Knowledge and Application Marks A correct definition 2 A partial, vague or unfocused definition 1 No creditable content 0 Content • A business that uses profit (1) for the benefit of the community (1) • ARA Exemplar Mark Rationale Profits are used for the 2 Two points made community/beneficiary and not just for shareholder dividends Profit is not the main aim, main aim is to 2 Two points made benefit society/beneficiary Triple bottom line: social, environmental 1 Only one element; not and financial explicit The business does not make profits 0 incorrect 2(a)(ii) Explain the term ‘’crowd funding’ (line 6). 3 Award one mark for each point of explanation Rationale Marks C E.g. or some other way of showing good 3 understanding; Often using the internet ; may be incentives; Many small investors B Each investor contributes a small amount 2 A Source of finance/investment 1 No creditable content 0 B and C does not require the A mark to be present Answers could include: Raising money for a project or venture, (A) from a large number of people, who each contribute a relatively small amount, (B) typically via the Internet. (C) Mark Rationale A source of finance, where many small 3 All three elements investors each contribute a small covered amount for benefits such as being able to buy the first production run A source of finance where many small 2 Point A and B investors each contribute a small amount for benefits Many small investors 1 Point C only 2(b)(i) Refer to Tables 2.1 and 2.2. Calculate Nadia’s forecast profit for 2020. 3 Rationale Marks Correct answer 3 Correctly calculates total revenue 2 Attempt (e.g. formula or identifies data) 1 0 e.g. Revenue – (total costs) = profit (1 mark) Revenue – (direct costs) = profit Revenue = (225 × $25) + (175 x $200) × (125 × $275) = $75 000 (2 marks) $75 000 – ($30 000 + $15 000) = $30 000 (profit for the year) (3 marks) $75 000 – $30 000 = $45 000 (gross profit) Accept either gross profit or Profit for the year figures Common incorrect answers Answer Mark Rationale 30 000 or 30 3 Dollar sign and ‘000 not required 45 000 or 45 3 Dollar sign and ‘000 not required 75 000 or 75 2 Dollar sign, ‘000 and working not required (as a recognisable figure) 2(b)(ii) Explain one way in which Nadia can use the internet for her marketing 3 campaign. Level Knowledge and Application Marks 2 Explanation of an internet based marketing method 3 (APP) in context 1b Explanation of an internet based marketing method 2 (K × K) 1a Identification of an internet based marketing method 1 (K) 0 No creditable content 0 Context and content is likely to come from: • Ads on internet sites – internet based business, above the line – expensive, can they afford this given low profits • Below the line – target students or parents? Contact schools/colleges? • Social media, viral marketing. Example of how responses should be marked Identification of Explanation of an Explanation of an one method of internet based internet based internet marketing marketing method marketing method in context Ads on internet Above the line method As this is an internet sites based business Social media Viral marketing As A-Level students often use social media 2(c) Analyse two ways in which emotional intelligence may help Nadia be 8 an effective leader. Knowledge and Level Application (4 Marks Analysis (4 marks) Marks marks) Understanding of Developed analysis of two two elements of ways a leader can use 2b emotional 4 emotional intelligence in 4 intelligence in context context Understanding of Developed analysis of one one element of way a leader can use 2a emotional 3 emotional intelligence in 3 intelligence in context context Shows Limited analysis of two knowledge of two ways a leader can use 1b elements of 2 emotional intelligence 2 emotional intelligence Shows Limited analysis of one way knowledge of one a leader can use emotional 1a element of 1 intelligence 1 emotional intelligence 0 No creditable content 0 Knowledge – Emotional Intelligence (EI) • recognising and managing your emotions and those of others. • Goleman’s four competencies of emotional intelligence: − self-awareness, − self-management, − social awareness, and − social skills. Application and analysis– linked to one aspect of knowledge • Nadia’s leadership of a start-up internet business employing a young staff – lack of experience. • All staff are part-time so important to manage well, keep happy and ensure good customer relations. • Staff unlikely to have many opportunities to meet as working from home which can be alienating and a leader should recognise this and take action to help develop a team spirit/engage employees. 2(c) 1 K APP AN DEV Self- Has identified Which may not So can adapt to a awareness laissez faire be suitable for a more suitable management growing method style business Awareness Tutors are may not feel a Which could lead to of employee remote workers connection with poor tutor needs and the business engagement 1. Self–Awareness without any obstruction. She will be able to recognise emotions as they arise in response to an action or situation. As a result, she will be in a better position to address problems/future complications. 2. Self–Management Will help Nadia stay in control so that she is unlikely to make hasty decisions or let her anger take over her behavior. This will help her to maintain respect from her employees. 3. Social Awareness Nadia should be aware of the emotions of others and able to pick up on what is going on around her. She should be able to sympathise with others and give helpful feedback. This is a critical skill for leaders, who work closely to inspire and motivate a team. If the leader is unable to empathise with their employees, she will find it difficult to obtain respect or loyalty. 4. Social skills Nadia should be able to clearly convey directions and know what to say in order to inspire and motivate others. An important skill for leaders, communication can be a deciding factor in whether the team listens or not. She should be able to handle any disagreements that arise between employees, customers, and other parties. In conjunction with the above skills, leaders can use their emotional intelligence to develop a more effective workplace. 2(d) Evaluate whether Nadia should form a business partnership with 11 Emma Knowledge and Analysis and Evaluation Application Marks Marks (7 marks) (4 marks) Justified evaluation based on 7 arguments in context Developed evaluation based on 6 arguments in context An evaluative statement based 5 on arguments in context Shows understanding 4 of two characteristics 4 of legal ownership in context Arguments based on changing legal ownership in context Shows understanding 3 of one characteristic 3 of legal ownership in context Shows knowledge of 2 two characteristics of 2 legal ownership limited analysis of changing legal ownership Shows knowledge of 1 one characteristic of 1 legal ownership 2(d) Context must be explicit not just implied and based on the leadership styles, structure of the firm and changing from sole trader to partnership Context/content: • Leadership styles may clash – autocratic v laissez-faire/Loss of control/Conflict may arise • Nadia will have to share profits (forecast only $30k/45k profit) • Emma may not want to form a business partnership with Nadia. She may have a job she is happy with or she may have her own business • Emma could contribute additional capital but does she have enough resources to ‘buy-in’? • Emma’s skills and expertise could complement Nadia’s / Decision making shared • Shared risks • Help Nadia to expand the business • Running a business is not the same as leading a group project – Emma may not be as skilled in business K APP AN DEV EVAL Sole trader Emma And an Which may Nadia should form makes all often autocratic affect a business business takes leadership employee partnership as she decisions charge style could retention has identified her disenfranchise and leadership style is casual recruitment not appropriate employees (EVAL) Partnership Nadia So Emma Which And Emma could profits are will have may want to could take take control of shared to share charge more the focus employee and task profits away from management (forecast the social (EVAL EVAL) only enterprise. Leaving Nadia free $30/45k to concentrate on profit) other aspects such as marketing and growth.

Question 7

Hannah’s Handbags (HH) Hannah started HH six years ago. HH operates in a niche market providing unique bags. The bags are made using job pr…

Accepted Answer

2(a)(i) Define the term ‘income statement’ (line 8). 2 Knowledge and Application Marks A correct definition 2 A partial, vague or unfocused definition 1 No creditable content 0 A financial statement that reports the revenue, cost of sales, gross profit, operating profit etc. For full marks there should be some reference to revenue, cost of sales and profit. 2(a)(ii) Explain the term ‘viral marketing’ (line 20). 3 Knowledge and Application Marks Good explanation 2–3 Partial explanation/understanding 1 No creditable content 0 Promoting a product using social networks. The name refers to how consumers spread information about a product to other people in their social networks. The basis of viral marketing is in the spread of information by word-of-mouth, nowadays mostly using internet-based applications such as email, social networking sites, web forums etc. Relatively low cost. 2(b)(i) Refer to table 2.1. Calculate the gross profit margin. 3 Correct answer. (3 marks) Right method but mistakes. (2 marks) Attempt (e.g. formula or identifies data). (1 mark) Answer = 392 000 / 980 000 X 100 = 40% 392 000/980 000 = 0.4 (2) 980 000 – 588 000 = 392 000 (1) Revenue – cost of sales / revenue × 100 (1) 2(b)(ii) Explain one reason why HH needs accurate cost data. 3 Level Knowledge and Application Marks APAP Explains a benefit of accurate cost data to HH 3 AP Identifies a benefit of accurate cost data to HH 2 K Identifies a benefit of accurate cost data 1 0 No creditable content 0 Context and content is likely to come from: • Set a price that provides a profit • Set objectives • Effective management of the business Context may include: • Provide partners with financial information • Expensive product so need an accurate budget • Inform expansion of the business / set up website • Inform finance / budget for viral marketing campaign • Ensure business can pay suppliers for expensive materials • Ensure business can pay wages of production workers • High (40%) gross profit margin 2(c) Analyse one advantage and one disadvantage to HH of using job production. 8 Knowledge and Analysis Level Marks Marks Application (4 marks) (4 marks) Shows understanding of Developed analysis of one one advantage and one advantage and one 4 4 disadvantage of using disadvantage of using job job production in context production in context 2 Shows understanding of Developed analysis of one one advantage or one advantage and one 3 3 disadvantage of using disadvantage of using job job production in context production Shows knowledge of one Limited analysis of one advantage and one advantage and one 2 2 disadvantage of using disadvantage of using job job production production 1 Shows knowledge of one Limited analysis of one advantage or one advantage or one 1 1 disadvantage of using disadvantage of using job job production production No creditable content 0 Contextual advantages likely to come from: • Luxury nature of the handbags • Custom made designs – unique and made to customer specifications • Flexible and possible to make changes during production if customer requires • Hannah and Kwom can easily supervise and inspect the work • Employee satisfaction – only 4 employees who can work as a team • High gross profit margin of 40% • The impact on HH reputation and brand as able to produce high quality products • Success of the method in encouraging HH to expand Contextual disadvantages likely to come from: • High unit costs compared to other production methods which might not be suitable for the new online range of bags • Need highly skilled labour especially as a premium / high quality product • Can take a long time to produce – 6 weeks, batch or flow would be quicker and more suitable for the new range 2(d) Evaluate the likely success of the marketing mix for the new product. 11 Knowledge and Analysis and Evaluation Marks Marks Application (4 marks) (7 marks) Justified judgement of the 7 marketing mix in context Developed evaluation of the 6 marketing mix in context Evaluation of the marketing 5 mix in context Shows understanding of Developed analysis of more more than one element of than one element of the 4 4 the marketing mix in marketing mix in context context Shows understanding of Developed analysis of one one element of the 3 element of the marketing mix 3 marketing mix in context in context Shows understanding of Limited analysis of more than more than one element of 2 one element of the marketing 2 the marketing mix mix Shows understanding of Limited analysis of one one element of the 1 element of the marketing mix 1 marketing mix No creditable content 0 Context/content: • Applies elements of the 4Ps • Price - likely to be lower than current range as targeting a potentially larger online market and not custom made. Launch of a new product so possibly penetration pricing. • Product - which designs to choose? Will materials be of same quality as custom made? Flow or batch production more suitable for new range so staff training in new processes required. Likely to need new premises as a building in the garden is not likely to be suitable for mass production. • Promotion - via a viral marketing campaign, likely to be expensive as business intends to use a marketing agency. How effective and what budget? • Place - online distribution but what about selling to shops as well? It could be another way of promoting as well as distributing.

Question 8

Super Heroes (SH) SH is a leisure (theme) park aimed at 10–18 year olds. It is owned by two companies, X and Y, which started SH as a joint…

Accepted Answer

Question Answer Marks 1(a)(i) Define the term ‘joint venture’ (line 2). 2 Knowledge Marks A correct definition 2 A partial, vague or unfocused definition 1 No creditable content 0 Content A business arrangement where two or more businesses (parties) agree to pool resources for a specific task. A business entity created by two or more businesses with a common interest. 1(a)(ii) Explain the difference between ‘redundancy’ and ‘dismissal’ (line 28). 3 Award one mark for each point of explanation: Knowledge Marks Explanation of the difference between A 3 redundancy and dismissal B An understanding of redundancy (may be implied) 1 C An understanding of dismissal (may be implied) 1 Content: • Redundancy is where an employee is made to leave an organisation because their job role is no longer required. • Dismissal is where an employer ends a worker’s employment • The difference is that redundancy is about the job role not being required any more, whereas dismissal is when the employee is no longer required. (A mark, B and C implied) • Redundancy can only happen after two years’ service, whereas dismissal can occur at any point in employment. (A mark, B and C implied) ARA 1(b)(i) Refer to Table 1.1 and any other information. Calculate the total revenue 4 from entrance tickets for SH in 2019. Rationale Marks Correct answer with or without correct working or $ 4 Correct calculation of number of customers 3 Correct calculation of TVC 2 Formula 1 No creditable content 0 Note: A correct answer must (in some way) be expressed in millions (e.g. m) Answer = $110m TC − FC Quantity = VC (per unit) $42m – $12m = $30m (TVC) $30m = 10m customers $3m 10m × $11 = $110m revenue 1(b)(ii) Explain one way in which SH could increase the sales of entrance tickets. 2 Level Knowledge and Application Marks 2 Explanation of a way to increase sales of 2 (APP) entrance tickets in context 1 (K) Explanation of a way to increase sales/revenue 1 0 No creditable content 0 Note: This question is specifically about ‘entrance tickets’. Answers which focus on increasing revenue by other means (e.g. restaurants, fast-track etc.) are unlikely to be contextual. The hotel option gives customers FREE entrance tickets so is unlikely to be contextual. Content: • Develop the rides e.g. the VR ride • Decrease the price – may be elastic because of competition • Selling through different distribution channels e.g. advance tickets, online tickets etc. • Promotion – any method in context ARA 1(c) Analyse two factors that may have determined the location of SH. 8 Knowledge and Analysis (4 marks) Level Marks Marks Application (4 marks) Shows understanding Good analysis of two (or of two (or more) more) factors which may 2b factors which may 4 determine location in 4 determine location in context context Shows understanding Good analysis of one of one factor that may factor that may 2a 3 3 determine location in determine location in context context Shows knowledge of Limited analysis of two two (or more) factors (or more) factors which 1b 2 2 which may determine may determine location location Shows knowledge of Limited analysis of one 1a one factor that may 1 factor that may 1 determine location determine location 0 No creditable content Content: • Access to employees – SH employs 200 f/t workers and 50 seasonal • Access to suppliers – restaurants, shops, builders etc. • Space – large rides (2 km2 of land), car park etc. • Access to customers – 10m customers a year • Access to raw materials – water rides etc. • Infrastructure – ease of access for visitors ARA 1(d) Recommend which one of the two options SH should choose for internal 11 growth. Justify your recommendation. Knowledge and Application Analysis and Evaluation Marks Marks (4 marks) (7 marks) Justified evaluation based 7 on arguments in context Developed evaluation based on arguments in 6 context An evaluative statement based on arguments in 5 context Shows understanding of the Arguments based on the two options for internal 3–4 two options for internal 3–4 growth growth Shows knowledge of internal Limited analysis of internal 1–2 1–2 growth growth No creditable content Content: Option 1: A new Virtual Reality (VR) ride • May improve the popularity of the theme park • New modern technology (VR) is likely to appeal to the target market (10– 18 year olds) • Significantly lower cost than hotel ($2m compared to $15m) • Less time closed (3 months compared to a year) • Can be completed in off-peak time • No redundancy payments or risk of unfair dismissal Option 2: A hotel • Keep up with competitors • New revenue source – high price rooms • More opportunity to spend longer time in park – restaurants, shops etc. • May be an opportunity to get rid of poorly performing employees (are they the reason why customers have decreased on the Iron Blaster ride?) ARA

Question 9

Gemini Theatre (GT) GT is a private limited company fully owned by the Gemini family. It owns a small theatre. This building is used to sho…

Accepted Answer

2(a)(i) Define the term ‘cost-based pricing’ (line 14). 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): • An amount is added on to give the amount the customer must pay (1) • Based on the cost to produce a product (1) Exemplar Mark Rationale The business works out how much it 2 Both elements. costs to make a product and then adds on a set percentage. Adding on to the costs. 1 Second element only. Cost-based pricing means pricing a 1 First element only – product based on the costs of based on the costs of production. production is good enough. Cost-based pricing means pricing 0 Tautology based on the costs. 2(a)(ii) Explain the difference between ‘cash’ (line 15) and ‘profit’ (line 15). 3 Award one mark for each point of explanation: Rationale Marks C Explanation of the difference between cash and profit 1 B Understanding of profit 1 A Understanding of cash 1 Content • Cash is the liquidity of a firm – the money available to pay debts/bills/everyday costs • Profit is the difference between cost and revenue. • Cash is required and will come from revenue, but not all cash is profit as costs need to be paid. • Cash is an asset of the business. • Cash is required to run a business, whereas profit is something to aim for. • A business is unlikely to operate without cash but can operate without profit. Exemplar Mark Rationale A business is unlikely to 3 A difference shown, so all three operate without cash but marks gained – the candidate can operate without profit does not need to show (C). understanding of cash or profit if a valid difference has been explained. Cash can be used to pay 3 Clear understanding of both cash the business costs (A) and profit, the word ‘whereas’ whereas profit is the shows a difference. difference between costs and revenue (B). Cash can be used to pay 2 Two statements but no attempt the business costs (A). to compare them, so only two Profit is the difference marks. between costs and revenue (B). 2(b)(i) Refer to Table 2.1 and any other relevant information. Calculate the 3 revenue GT will receive from all the performances of ‘A Summer Dream’ in January 2021. Rationale Marks Correct answer with or without correct working or $ 3 Correct calculation of TR 2 Correct use of numbers 1 No creditable content 0 Content Formula: $40 × (250 tickets × 9 performances) $40 × 2250 = $90 000 (TR) 50% of revenue to GT = $90 000 / 2 = $45 000 Answer = $45 000 OFR Common incorrect answers Answer Mark Rationale 45 000 3 Correct answer – does not need $ $40 × 9 = $360 2 Candidate has missed out the $360 / 2 = £180 number of seats – however, all the other stages of the calculation have been completed correctly (OFR). $180 (no working) 0 Do not reward incorrect answers without working to show correct stages of the calculation. $40 × 250 = 10 000 2 Candidate has missed out the 50% of 10 000 = $5000 number of performances – however, all the other stages of the calculation have been completed correctly (OFR). $5000 (no working) 0 Do not reward incorrect answers without working to show correct stages of the calculation. 2(b)(ii) Explain one possible advantage to GT, other than increased revenue, 3 of renting the theatre to visiting groups. Level Knowledge and Application Marks 2 (APP) Explanation of an advantage of renting the theatre 3 to visiting groups 2 (K + K) Explanation of an advantage of renting a capital 2 item 1 (K) Identification of an advantage of renting a capital 1 item 0 No creditable content 0 Content • Reduces the risk of operating the theatre • Reduces the average cost of productions (fixed costs are spread over more performances) • May advertise GT performances at a visiting group • Makes use of a redundant resource/capital item • Increases GT’s usage of the theatre • Increases GT’s cashflow ARA Identification of a Explanation Possible context difficulty Advertises the theatre. Which may bring in For example, GT can more customers to a advertise Wise Owl GT show. during the performances of A Summer Dream. Spreads fixed costs. Because the extra Such as upkeep of the performances can be building. allocated some of the fixed costs. 2(c) Analyse two factors which might affect the demand for the 8 performances at GT’s theatre. Level Knowledge and Marks Analysis (4 marks) Marks Application (4 marks) 2b Shows understanding 4 Good analysis of of two factors affecting two factors affecting 4 demand in context demand in context 2a Shows understanding 3 Good analysis of of one factor affecting one factor affecting 3 demand in context demand in context 1b Shows knowledge of 2 Limited analysis of two factors affecting two factors affecting 2 demand demand 1a Shows knowledge of 1 Limited analysis of one factor affecting one factor affecting 1 demand demand 0 No creditable content 0 Content Candidates may choose to analyse the demand from consumers or the demand from visiting theatre groups • Changes in income – being a normal/luxury product, consumers are likely to increase spending on GT performances based on increasing income. • Fashions/trends/tastes/preferences – going to the theatre may become fashionable, or may become a new trend • Advertising – if GT spend on advertising, then it is likely to increase demand for their performances • Brand awareness • Price of substitutes/complements • Availability of substitutes/compliments (for example Netflix, Amazon, other theatres) • Population size • Quality • Uniqueness (USP) • Price – likely to be an increase in QD if price falls and vice versa. 2(c) Example of a Examples of Examples of possible factor (K) application/context analysis (AN + DEV) (APP) Tastes of Customers obviously Which means that more customers (K) prefer A Summer Dream tickets were sold for A to La Poeme Ballet (APP) Summer Dream (AN) and this gains GT more profit (DEV) Income (K) Theatre tickets are likely to Which means that the be a luxury good (APP) higher the income the more tickets GT will sell (AN) and the more profit GT will make (DEV) 2(d) Recommend whether GT should employ Nick or Portia for the position 11 of Theatre Manager. Justify your recommendation. Knowledge and Marks Analysis and Evaluation Marks Application (4 marks) (7 marks) Justified recommendation 7 based on argument in context Developed recommendation 6 based on argument in context A recommendation / evaluative statement based on 5 argument in context Shows understanding Argument based on factor(s) of two factors of 4 affecting the selection of Nick 4 selection in context and Portia Shows understanding Argument based on factor(s) of one factor of 3 affecting the selection of Nick 3 selection in context or Portia Limited analysis of factor(s) Shows knowledge of 2 affecting the selection of Nick 2 two factors of selection and Portia Limited analysis of factor(s) Shows knowledge of 1 affecting the selection of Nick 1 one factor of selection or Portia No creditable content 0 Content Nick • Experience in the sector (three years for a similar business) • A-Level in Business – helps with the admin • Organised and efficient – helps with the admin • No management experience – so will he be able to do the job? • May not stay for long Portia • Eight years of experience in a bank – helps with finance • Good sense of humour – likely to help in job • Likely to stay for a long time • No formal qualifications – but is this made up for by the bank experience? • Late for the interview – does this suggest she is disorganised – however worked for the bank for eight years 2(d) Examples of how an answer could develop K APP AN DEV EVAL Experience Nick has That could Leading to a Nick is the (K). appropriate mean that better better person theatre GT has to chance for to employ experience, pay less GT to make (EVAL) which training profit (DEV) because means he costs if they experience in knows what hire Nick a theatre is to do (APP). (AN). more important than personality in a job that requires administration and accounting Personality Portia has a Which may Which may (EVAL). (K) good sense mean that lead to an However, this of humour GT attracts increase in might depend making her more visiting revenue for on how easier to theatre GT (DEV). complex the work with companies accounting is (APP). (AN). as Portia’s banking experience might make her the better employee (EVAL).

Question 10

Braid Runner (BR) Lewis is a hairdresser. He rents a small shop which he uses as a hairdressers called Braid Runner (BR). Lewis is a sole t…

Accepted Answer

2(a)(i) Define the term ‘price’ (line 6). 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): • The amount of money for a product or service • charged to a customer Exemplar Marks Amount paid by a customer 2 Amount of money to consume 2 Value to the customer 2 Amount charged by a business to the customer 2 What the customer pays 1 Amount charged by a business 1 2(a)(ii) Explain the term ‘franchises’ (line 5). 3 Award one mark for each point of explanation: An element of explanation of franchises: Up to 2 further • May pay a royalty marks • Can be restrictive • May pay an initial fee • May pay advertising costs • Likely to increase sales • Examples Understanding of the use of logo, products etc. from 1 mark an established business Content Where a business sells the rights to use its logo, products, ideas, etc… to another business. A business which has bought the rights to use another businesses’ logo etc… Exemplar Mark Rationale Pay to use the logo, products. May have 3 Three points to pay royalties but is likely to increase sales Pay to use the logo, products. May have 2 Only one development to pay royalties Where a business sells the rights to use 1 Main understanding its logo, products, ideas, etc… only May have to pay royalties but is likely to 0 No understanding of increase sales the use of logos etc 2(b)(i) Refer to Table 2.1. Calculate the break-even quantity of haircuts in a 3 week. Rationale Mark Correct answer with or without correct working or ‘haircuts’ 3 Correct formula (may be implied) and correct calculation of 2 contribution Correct formula or correct calculation of contribution 1 No creditable content 0 Content: Fixed costs Formula: Price − selling price (contribution) $675 (1) $8 − $3.50 $675 $4.50 (contribution) Answer = 150 (haircuts) OFR Common incorrect answers Answer Mark Rationale 150 3 Correct answer – does not need units formula 1 Basic understanding 2(b)(ii) Explain one possible limitation for Lewis of using break-even analysis 3 Level Knowledge and Application Marks 2b Explanation of one limitation of using break-even 3 analysis in context 2a Explanation of one limitation of using break-even 2 analysis 1a Identification of one limitation of using break-even 1 analysis 0 No creditable content 0 Content • Variable costs ($3.50) may change – especially with a new hairdresser starting • Fixed costs per week ($675) may change • Lewis may need to change the price ($8) especially with competition in the city • It assumes every haircut is the same price, but Lewis may charge less for children, OAPs etc. OFR (from Q2(b)(i)) Identification of Explanation Possible context a limitation Only a prediction So does not take E.g. may increase from unexpected debts into £3.50 if new hairdresser consideration starts Only an estimate Fixed costs may From $675 change Assumes all But may vary with E.g. may charge less for services charged discounts OAP haircuts same price 2(c) Analyse one advantage and one disadvantage for Lewis of operating 8 as a small business. Level Knowledge Marks Analysis (4 marks) Marks and Application (4 marks) 2 Shows 3–4 Good analysis of one 4 understanding disadvantage and one of small advantage of being a small business in business in context context Good analysis of one 3 disadvantage or one advantage of being a small business in context Shows 1–2 Limited analysis of one 2 knowledge of disadvantage and one 1 small business advantage of being a small business Limited analysis of one 1 disadvantage or one advantage of being a small business 0 No creditable content Content Advantages: • Easier to organise – Lewis is the only employee (at the moment), only one set of bookings etc. • Flexibility – Lewis can quickly and easily respond to marketing form the franchises – they however are unlikely to be able to respond as quickly. • Personalised customer service – Lewis has many repeat customers – this suggests he has a good relationship which is probably lacking in a bigger business. Disadvantages: • Access to finance – Lewis may struggle to obtain finance because he on his own and may have limited assets. Shop is rented. • Larger franchises may be able to gain economies of scale which will not be available to Lewis – they are able to charge lower prices and undercut Lewis. • Limited funds to compete against the competition – they are likely to be able to afford above the line promotion methods whereas Lewis is unlikely to be able to access these. 2(c) Example of Examples of Examples of possible knowledge (K) application/context analysis (AN + DEV) (APP) Unlimited liability Sole trader So personal possessions are at risk and could lose his house Easy to organise There is only one Does not have to create employee (himself) rotas which reduces time taken for paperwork 2(d) Refer to Fig 2.1 and any other relevant information. Evaluate the 11 usefulness of the person specification when recruiting another hairdresser. Knowledge and Analysis and Evaluation Application (4 Marks Marks (7 marks) marks) Justified evaluation based 7 on argument in context Developed evaluation based 6 on argument in context An evaluative statement based on argument in 5 context Shows understanding Argument based on two of two aspects of a 4 aspects of a person 4 person specification in specification in context context Shows understanding Argument based on one of one aspect of a 3 aspect of a person 3 person specification in specification in context context Shows knowledge of Limited analysis of two two aspects of a 2 aspects of a person 2 person specification specification Shows knowledge of Limited analysis of one one aspect of a 1 aspect of a person 1 person specification specification No creditable content Content Lewis needs an employee to work on their own, be responsible for bookings, deal with customers and do some financial transactions. • Hairdressing qualification makes sense and would be a good way to differentiate between those who might be able to do the job and those who cannot however is a formal qualification needed if the experience is in place? • A-Levels (or high school standards) in Mathematics and Business seems a high level of qualification for what Lewis needs. May restrict the number of applicants. • It may be illegal to set an age limit – why does the employee need to be between 18 and 30 years old? May restrict applicants and Lewis may end up fined. 2(d) • Specifying a female may be illegal. Why would a female make a better hairdresser? Is it to compliment Lewis (who may specialise in men’s hair) in which case the person specification may be poorly written (need someone who specialises in women’s hair) • No experience, as essential, seems unlikely – Lewis needs them to work on their own – the desirable column should be essential to get what he wants and not waste his time sifting through applications which are unsuitable (for trainees). • Why is ability to work in a team essential when the person will be working on their own? • Good communication makes sense and should help Lewis to maintain his loyal customers. • What does friendly mean – why is it desirable? Is this linked to customer service – could be more specific. Examples of how an answer could develop and how it should be annotated. K APP AN DEV EVAL Provides a list E.g. Limits Saves The PS are of essential hairdressing applicants interviewing useful and desirable qualification to those time because they who can do limit the the job number of candidates May be Between May lead to Which and any illegal/ 18–30 a fine reduces illegal/wrong discriminatory profits elements can be easily changed to ensure only quality applicants apply

Question 11

Flora’s Fitness (FF) Flora is a self employed personal trainer and she trades as Flora’s Fitness (FF). She invested $10 000 as start‑up cap…

Accepted Answer

Question Answer Marks 1(a)(i) Define the term ‘corporate social responsibility’ (CSR) (line 4). 2 Knowledge Marks A full definition 2 A partial, vague or unfocused definition 1 No credible content 0 A full definition should cover the following: • objectives/strategy focused on • economic, social and environmental benefits (people, profit and planets), triple bottom line (at least two) Content: A business which aims to benefit society, the environment as well the owners (2) Economic, social and environmental benefits not just about making profit (2) An objective to look after the environment (1) Economic, social and environmental benefits (1) 1(a)(ii) Explain the term ‘start-up capital’ (line 2). 3 Award one mark for each point of explanation: Rationale Marks Example or some other way of showing good 1 understanding. Can be a use of start-up capital or a source. Understanding that it is to launch a business / set-up / 1 seed money Understanding of the concept money invested, used in a 1 business Content: Money invested (1) to purchase everything necessary to set-up (1) a business, e.g. machinery (1) Money used (1) to purchase everything necessary to launch (1) a business Other appropriate responses should also be credited. Do not accept ‘start’ as it is in the question. Do not accept $10 000 invested in FF as this is repetition from the data. The money needed for a business does not NAQ. 1(b)(i) Refer to Table 1.1 and any other relevant information. Calculate the 3 maximum weekly revenue for pricing strategy 1. Rationale Marks Correct answer (with or without working or $) 3 Correct use of figures 2 Correct formula 1 No credible content 0 $5 × 20 = $100 (per session) $100 × 2 = $200 (per day) $200 × 5 = $1000 (per week) Answer = $1000 (accept with or without $) OFR applies Do not reward incorrect answers e.g. $500 or $200 without working. 1(b)(ii) Explain one advantage to FF of pricing strategy 2. 3 Level Knowledge and application Marks 2b Explanation of one advantage to FF of pricing 3 (APP + strategy 2. APP) 2a Identification of one advantage to FF of pricing 2 (APP) strategy 2. 1 Knowledge of one or more pricing strategies. 1 (K) 0 No creditable content 0 Knowledge of pricing strategies may include: competitive, penetration, skimming, price discrimination, cost-based pricing. Knowledge of pricing strategies can be implied. Possible advantages of pricing strategy 2 include: • Guaranteed income – no matter how many people Flora would get $75 • Helps with cash flow – when Flora is starting the business. Other appropriate responses should also be credited. 1(c) Analyse two sources of secondary market information Flora could use 8 to find out more about trends in the fitness market. Knowledge and Marks Analysis Marks Application (4 marks) (4 marks) 2b Shows 4 Good analysis of 4 understanding of two sources of two sources of secondary market secondary market information in information in context context 2a Shows 3 Good analysis of 3 understanding of one source of one source of secondary market secondary market information in information in context context 1b Shows knowledge 2 Limited analysis of 2 of two sources of two sources of secondary market secondary market information with no information context 1a Shows knowledge 1 Limited analysis of 1 of one source of one source of secondary market secondary market information with no information context 0 No creditable content Note: annotate the first source in the left-hand margin and the second source in the right-hand margin. Knowledge and understanding may include: Examples of sources of secondary market information • Reports • Census data • News reports • Magazines • Newspapers • Internet Application may include: • Fitness activities (fitness market is in the question) • $10 000 start-up capital • ABC is a national bank with a focus on CSR • ‘Healthy employer’ • Why employees do not go to fitness centres 1(c) Analysis may include: • Impacts on the business that could arise from the secondary source research • Costs/limitations of the secondary research (out-dated) • Benefits of the secondary research (quicker, cheaper etc.) Exemplars: • Published reports about keeping fit can provide data on current fitness trends which can influence her work out routines. • News reports detailing fitness trends which can be done in lunch hours to meet target market needs. Other appropriate responses should also be credited. 1(d) Evaluate the benefits to ABC of offering employees fitness sessions. 8 Knowledge and Marks Analysis and Evaluation Marks Application (4 marks) (7 marks) Justified evaluation/ 7 judgement based on argument in context Developed evaluation/ 6 judgement based on argument in context An evaluative statement/ 5 judgement based on argument in context Shows understanding 3–4 Argument(s) based on two 4 of motivating benefits of ABC offering employees in context employee fitness sessions Argument(s) based on one 3 benefit of ABC offering employee fitness sessions Shows knowledge of 1–2 Limited analysis of two 2 motivating employees benefits of motivating employees Limited analysis of one 1 benefit of motivating employees No creditable content 0 Knowledge and understanding may include: • Motivation; theory and practice • Fringe benefits and perks • HRM Application may include: • ABC – a national bank • ABC – focus on CSR • One session before work and one session at lunchtime • Paid by bank (discount/fringe benefit) for employees • Survey revealed that high prices and lack of time are reasons employees do not go to the gym • Fitness is becoming a trend in country P Analysis may include: • Benefits of fitness sessions to employees • Impact on ABC of fitness session 1(d) Evaluation: • Extent of the benefit(s) to ABC • Benefit(s) of sessions vs costs to ABC • What the benefit(s) might depend on; number of participating employees, interest from ABC employees, etc. • A judgement over whether fitness sessions are more of a benefit than a cost to ABC • A judgement over which is the most important benefit to ABC. Other appropriate responses should also be credited.

Question 12

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

Accepted Answer

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

Question 13

Priya’s Bookshop (PB) Priya lives in town R which is situated in beautiful countryside with nice walks nearby. Many tourists visit town R. …

Accepted Answer

Question Answer Marks 1(a)(i) Define the term ‘market segmentation’ (line 25). 2 Knowledge Marks A correct definition 2 A partial, vague or unfocused definition 1 No creditable content 0 Note: Do not accept ‘segment’ as a ‘split’ term A correct definition should cover the following:  splits a market into different groups  segmentation could be by age/gender/geographic/demographic or each group has similar characteristics Exemplar Rationale Marks Looks at different groups e.g. Both elements covered 2 by sales value/volume Splits a market into groups, Both elements covered 2 each of which has similar characteristics Splits a market into groups An understanding of 1 segmentation (no expansion) Splits a market by sales Only one element of the flow 1 value identified Segments a market Tautology 0 ARA 1(a)(ii) Explain the difference between cash and profit (line 23). 3 Award one mark for each point of explanation. Point Explanation Marks C* Cash is the revenue a business has after sales 3 while profit is revenue minus expenses B Profit is revenue minus expenses 1 A Cash is the physical flow of money in and out of a 1 business Note: The difference does not need to have clear definitions – implied knowledge is acceptable when in the context of a difference Content could come from:  Cash is the physical flow of money in and out of a business  Cash is the capital used to pay for day-to-day costs  Cash is an example of revenue, ignoring any expenses  Profit is revenue minus expenditure  Profit is the difference between revenue and costs  Profit is calculated at the end of a trading period  Profit is shown on the Income Statement Exemplar Rationale Marks Cash is the revenue a Shows a difference 3 business has after sales while profit is revenue minus expenses Cash is more liquid than Shows a clear difference 3 profits Cash is a current asset, but These are not definitions but 3 profit is on the Income there is a clear difference Statement They appear on different A clear difference 3 accounting statements Cash is the revenue a Both elements correct but a 2 business has after sale. Profit difference not shown is revenue minus expenses Splits a market into groups An understanding of 1 segmentation (no expansion) ARA 1(b)(i) Refer to Table 1.1. Calculate PB’s forecast closing balance in month 3 2 (X). Rationale Marks Correct answer (with or without working or $) 2 Correct formula/identifies correct figures 1 No credible content 0 Content Closing balance = opening balance + inflows – outflows (1) Opening balance –1000 add inflows 11 000 minus outflows 13 000 (1) X = – $3000 (accept –3000, (3000) or –3) (2) Common incorrect answers (2000) No marks no working 3000 No marks No working –1000+11000 1 mark for calculation –13000 = 3000 11000 – 13000 1 mark one mistake (not used opening = –2000 balance) OFR for last stage 1000 + 11000 0 mark Incorrect opening balance and – 13000 = incorrect answer 3000 1(b)(ii) Analyse two benefits to Priya of producing a cash flow forecast. 8 Level Knowledge and Marks Analysis Marks Application (4 marks) (4 marks) 2b Shows 4 Developed 4 understanding of analysis of two two benefits in benefits in context context 2a Shows 4 Developed 3 understanding of analysis of one one benefit in benefit in context context 1 Shows 2 Limited analysis 2 knowledge of two of two benefits benefits Shows 1 Limited analysis 1 knowledge of one of one benefit benefit 0 No creditable content Note: As the business has started trading, using the CFF either before or after starting trading is acceptable. Knowledge of benefits may include:  Anticipate potential shortfalls in cash  Keep track of payments  Understand the impact of future plans  Manage surplus cash  Track whether revenue/spending is on target Application may include:  Buying and selling new and used books  Priya applied for a council grant for entrepreneurs willing to open a bookshop; grant application included a CFF  Any information from Table 1.1  Used to decide promotional methods 1(b)(ii) Analysis of benefits may include:  PB is a new business and having a cash flow forecast will have helped/will help her to receive the grant – which allowed for initial survival  Allows/ed Priya to plan ahead and manage the budget more effectively e.g. the deficit in the first few months – to avoid overdraft fees in months 2 and 3  Many small businesses fail due to a lack of cash flow, so this allows/ed Priya to arrange an overdraft for months 2 and 3  Allows Priya to manage cash flow, e.g. the deficit in months 2 and 3 could be overcome through reductions in cash outflows e.g. marketing. ARA 1(c) Explain two entrepreneurial qualities that Priya has shown. 4 Point Explanation Marks App+App Two entrepreneurial qualities explained in context 4 App One entrepreneurial quality explained in context 3 K+K Two entrepreneurial qualities identified 2 K One entrepreneurial quality identified 1 Content and context could come from:  Motivated – wants to start her own bookshop  self-disciplined – financial discipline by creating a cash flow forecast  risk-taking – has invested $15K of own capital  creative – making appropriate marketing materials for 0 to 15-year-olds  leadership – will manage up to 3 employees  confident – starting own bookshop by risking $15K of own capital  initiative – has applied for a $20K grant Exemplar Mark Rationale She applied for a $20K grant which 4 Two applied shows initiative and is motivated to start qualities explained her own bookshop Priya showed initiative by researching 3 Applied quality and applying for a $20K grant explained Initiative and leadership 2 Two entrepreneurial qualities identified Initiative is taking an opportunity 2 Two generic available to you and risk taking is taking qualities explained a decision which could have negative consequences Initiative is taking an opportunity 1 Generic quality available to you explained 1(d) Recommend suitable promotional methods that Priya could use to 11 raise awareness of PB in town R. Justify your recommendation. Knowledge and Marks Analysis and Marks Application (4 marks) Evaluation (7 marks) Justified judgement(s) 7 that follows on from a discussion based on two promotional methods relevant to PB Recommendation(s) 6 that follows on from a balanced argument relevant to PB A simple 5 recommendation based on a balanced argument relevant to PB Shows knowledge of 4 A balanced argument 4 two promotional based on analysis of methods in context two promotional methods with context Shows knowledge of 4 Argument based on 3 one promotional analysis of one method in context promotional method with context Shows knowledge of 2 Limited analysis of two 2 two promotional promotional methods methods Shows knowledge of 1 Limited analysis of one 1 one promotional promotional method method No creditable content Knowledge may include:  Above and/or below the line promotion with some explanation  BTL examples: direct mail, in-store offers, direct selling, social media, trade shows, catalogues, sponsorship, branding and merchandising and targeted search engine marketing  ATL: examples: radio, television, billboards, magazine and newspapers 1(d) Application may include:  New bookshop  Likely to be lots of competition in ‘booktown’  Any financial information from table 1.1  Using market segmentation  Any market research information from table 1.2 Analysis may include:  BTL is cheaper than ATL and as PB is new and cashflow is restricted/poor – may not be able to survive/pay bills – In-store offers; can offer 15% discount on books which would lead to increased revenue – increased profit  ATL hits a mass audience – but too expensive – Local radio; can advertise to target audience of 16–64 which increases sales of books – raises profile/brand awareness  High competition means tourists are likely to impulse buy based on price so in-store and personal selling – may be useful to provide purchasing incentives so more sales Evaluation may include:  A recommendation for Priya based on arguments in context as to which promotional methods Priya could use  A judgement over which method is/are most suitable  An evaluation on the level of argument  What the judgement/evaluation may depend on: target audience, type of book, price sensitivity, advertising elasticity, competition K APP AN DEV EVAL in store To Which As Priya should use offers persuade increases customers both instore offers tourists to sales may be and social media buy price As social media sensitive can help drive due to traffic and in store competition offers can convert browsers. Social To As it is a To build PB However, it media showcase cheap brand depends on book method and profile whether Priya’s signings easily target audience is updated likely to social media and how diligent she is in updating her profile.

Question 14

Child Play (CP) Su is a sole trader who started a business called CP which operates a play area for children. The play area is inside a bui…

Accepted Answer

Question Answer Marks 1(a)(i) Define the term ‘supply’ (line 7). 2 Knowledge Marks A correct definition 2 A partial, vague or unfocused definition 1 No creditable content 0 Content: The ability and willingness for a business to produce products or services to the market at a given price (2). Award one mark for each partial element of a definition, for example:  The quantity of products/services produced/able to produce/willing to produce  At a given price/over a period of time 1(a)(ii) Explain the term ‘product differentiation’ (line 17). 3 Award one mark for each point of explanation C Example or some other way of showing good 1 mark understanding B Understanding of differentiation 1 mark A Understanding of product 1 mark The process of distinguishing a good or service from others, to make it more attractive to a particular target market. This involves differentiating it from competitors' products as well as a firm's own products. Note: Can get A+B with a good example. If already have A+B mark, then example can get the C mark ARA Exemplar Rationale Marks When a business service (A) All three elements 3 is different from its competitors (B) e.g. Tesla cars can be customised (C) A shoe (A) that is higher A+B 2 quality than competitors (B) Having a distinct product B only 1 compared to competitors (B) Ability of customer to No explanation of product or 0 recognise a product differentiation Introducing a new product to NAQ 0 your portfolio 1(b)(i) Calculate the price elasticity of demand if Su increases the price from 3 $10 to $15 an hour. Rationale Marks Correct answer with or without correct working or minus sign 3 Formula and correct calculation of one change percentage or 2 correct calculation of both change percentages Formula or correct calculation of one change percentage 1 No creditable content 0 Content: Percentage change in quantity demanded = PED (1) or Percentage change in price 40% (1) = –0.8 50% (1) Answer = –0.8 (3) allow 0.8 OFR Exemplar Rationale Marks 0.8 correct answer 3 %change in P/%change in Inverted formula but 2 QD = 0.5/0.4=1.25 percentages correctly calculated %change in QD=50% Calculation of one change 1 only change in P/Change in Incorrect formula, no 0 D=5/4=1.25 percentages just change. 1.25 No workings 0 1(b)(ii) Explain one way in which the size of CP can be measured. 3 Level Knowledge and Application Marks 2b (APP) Explanation of one factor in context 3 2a (K+K) Explanation of one factor 2 1a (K) Identification of one factor 1 0 No creditable content 0 Note: profit is not an appropriate measure of size Content:  Number of customers who book CP’s services, or number of customers who use the café – because the more customers, the bigger the business is likely to be.  Revenue gained from selling CP’s services or goods from the café – because the more revenue, the higher the value of goods and services and therefore the larger the business.  Size of the building owned (or rented), to compare against similar businesses – for example a café with twice the space of CP would be bigger.  Capital invested – for example the value of the building where CP is located – this reflects the assets of the business and therefore the size.  Number of employees – only Su appears to work for CP so must be a small business  Market share – in comparison to competitors – CP’s is likely to be small as only one store and is a sole trader. ARA 1(c) Analyse one advantage and one disadvantage to Su of using working 8 capital as a source of finance for the new café. Knowledge and Level Application Marks Analysis (4 marks) Marks (4 marks) 2b Shows 4 Good analysis of 4 understanding of one advantage and working capital as a one disadvantage in source of finance in context (DEV+DEV) context (APP+APP) 2a Shows 3 Good analysis of 3 understanding of one advantage or source(s) of finance one disadvantage in in context (APP) context (DEV) 1b Shows knowledge of 2 Limited analysis of 2 working capital as a one advantage and source of finance one disadvantage (K+K) (AN+AN) 1a Shows knowledge of 1 Limited analysis 1 source(s) of finance one advantage or (K) one disadvantage (AN) 0 No creditable content Content: Working capital = current assets – current liabilities / the amount of internal finance available for day-to-day expenses Advantages:  No finance costs – as a sole trader, Su may not be able to afford extra costs in her business.  Immediately available – would allow Su to benefit from quicker income from the café, especially important as she plans to open it in four weeks. Disadvantages:  May leave CP financially unable to face future issues – will Su have any funds left if CP needs extra money? What if the café costs more than she expects, does Su have any other funds to support this?  May leave Su unable to pay CP’s bills – this might lead to the cafe having to shut down which may lead to the end of the CP. Risking current business to fund new venture. ARA 1(d) Evaluate appropriate promotion methods that Su could use for the new 11 café. Analysis and Knowledge and Marks Evaluation Marks Application (4 marks) (7 marks) Justified evaluation 7 based on argument in context (EV+EV+EV) Developed evaluation 6 based on argument in context (EV+EV) An evaluative statement/ 5 based on argument in context (EVAL) Shows understanding of 4 Argument based on two 4 two promotion methods promotion methods in in context (APP+APP) context (DEV+DEV) Shows understanding of 3 Argument based on one 3 one promotion method in promotion method in context (APP) context (DEV) Shows knowledge of two 2 Limited analysis of two 2 promotion methods promotion methods (K+K) (AN+AN) Shows knowledge of one 1 Limited analysis of one 1 promotion method (K) promotion method (AN) No creditable content Content: Below the line methods are likely to be more cost effective and suitable than above the line – however, local above the line methods may also be suitable.  CP’s website – already up and running and used by family customers. Low cost (possible zero marginal cost) but may not bring in enough new customers. Would it be enough to just have current customers?  Local newspapers – likely to be low cost and target the local market – may be able to place advertisement in a part of the newspaper which would appeal to parents.  Local television – unlikely to be low cost or able to create within four weeks. However, could effectively show where the café is and communicate the USP. 1(d)  Social media – could be effective in targeting parents (plenty of social media pages dedicated to this) but will it allow Su to focus on the local market?  Word of mouth – this is what Su uses for the play area, but would this bring in enough customers to make the café a success? – only five children each hour in the play area, would need more than this to generate business for a café. Focused on target market, but can Su control this and rely on it?  Posters in local schools/libraries/toy shops – likely to hit target market – but some of the places might have their own cafes and not be willing to advertise Su’s. ARA

Question 15

Pop-up Movies (PM) PM is a private limited company that was set up five years ago. PM shows movies outdoors at night. The movies are projec…

Accepted Answer

Question Answer Marks 1(a)(i) Define the term ‘revenue’ (line 10). 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: • the income received by a business • for selling products and services. Exemplar Rationale Marks Selling price  quantity sold Both elements 2 The money received by a Both elements 2 business from selling goods. Income from sales. Both elements 2 Total value of all sales Both elements 2 Money earned due to the One element 1 payment of price from the customer The cash received by a One element 1 business. What a business has to pay Confusion with costs 0 to produce goods and services. 1(a)(ii) Explain the term ‘above the line promotion’ (line 6). 3 Award one mark for each point of explanation: C Example or some other way of showing good 1 mark understanding B Through a media/paid for 1 mark A Communication/advertising/creating awareness to 1 mark consumers/customers Note: Do not award C mark unless A and B marks have been awarded. Content Above the line promotion is the use of media to promote a business and reach out to the target consumers. These include conventional media, television and radio advertising, print as well as internet. This is communication that is targeted to a wider spread of audience and is not specific to individual consumers. Exemplar Rationale Marks Above the line promotion is All three elements. 3 where a business advertises (A) using media (B) such as television (C). When a business pays All three elements. 3 another business (B) to communicate (A) about its services, for example when Coke pays a radio station to play an advert (C). Tv advertising A and B 2 ATL promotion is a form of A only – do not award the C 1 communication (A) between mark unless B has been the business and the awarded. consumer, for example a billboard. Above the line promotion is Confusion with promotion in 0 when an employee is employment. promoted from within the business. 1(b)(i) Refer to Table 1.1. Calculate the break-even number of customers for 3 Venue B. Rationale Marks Correct answer with or without correct working or units 3 Correct calculation of contribution 2 Formula 1 No creditable content 0 Content Fixed Costs = $14 Price – VC per unit (contribution) $2000 = 142.9 $14 Answer = 143 customers (3) allow 142.88, 142.9 OFR Common incorrect answers Answer Mark Rationale 143 3 Correct answer 2000/14 = 142 2 Incorrect final answer BE = fixed cost/contribution 1 Formula only 142 (no working) 0 1(b)(ii) Explain one way in which PM could use break-even data. 3 Level Knowledge and Application Marks 2b Explanation of one way a business can use break 3 (APP) even data in context 2a Explanation of one way a business can use break 2 (K+K) even data 1 Identification of way a business can use break 1 (K) even data 0 No creditable content 0 Note: OFR from answer to Q1(b)(i) Content • Shows how many customers are needed at each venue (venue B = 143 OFR) so that PM can start making a profit from each venue. • Helps PM to see which venues are likely to be most profitable (venue B is most profitable). • Shows PM the likely margin of safety for future venues (venue B MOS = 457 OFR). • PM can model different prices for different venues and make sure a minimum level of profit is gained. ARA Exemplar Mark Rationale Helps in business decision 3 All three elements seen making (k) to see which shows and movies (app) are most popular (kk) Calculates (Shows) the 2 No application income/revenue needed to make a profit (k) to check the financial health of the business (kk) Reach a point where they 1 Minimum requirements for don’t lose money break even 1(c) Analyse two advantages to PM of training the team of customer 8 service workers. Knowledge and Analysis Level Marks Marks Application (4 marks) (4 marks) 2b Shows 4 Developed 4 understanding analysis of two APP DEV of two advantages of + + advantages of training in training in context APP DEV context 2a Shows 3 Developed 3 understanding analysis of one of one advantage of APP advantagetraining in of DEV training in context context 1b Shows 2 Limited 2 knowledge of K analysis of two AN two + advantages of + advantages of K training AN training 1a Shows 1 Limited 1 knowledge one analysis of one K AN advantage of advantage of training training 0 No creditable content Content: Training is the action of improving an employee’s knowledge and/or skills. Indicative content AO1 Knowledge and understanding Knowledge of training may include: • Increase productivity • Improve customer service • Motivate the workers • reduce customer complaints • reduce damages • Improve communication 1(c) AO2 Application Application may include: • show customers to their seats – workers will need to know the seating configuration, where each seat is. • sell food and drink – PM sells soft drinks, popcorn and other snacks • assist with parking for those customers who bring a car (valet parking) • workers may need training on driving customer cars, customer service training etc. AO3 Analysis Analysis may include: • Increased productivity – (increase the sales of food and drink, park customer cars quicker/more efficiently) – may increase revenue. • Increase customer satisfaction – repeat purchases etc. • increase employee satisfaction – decrease staff turnover. • Reduce customer complaints – decrease costs/increase customer retention. • Reduce damages – decrease costs. • Improve communication – decrease speed of set up and take down (of screen and seating). ARA Examples of how an answer could develop and how it should be annotated. K APP AN DEV Can be more When selling Avoids people So they will be efficient food and drink waiting for a long more satisfied time Can motivate In charge of Will offer an And increase workers valet parking excellent service the brand reputation 1(d) Evaluate the economies of scale that PM might gain from booking 11 larger venues. Knowledge and Analysis and Application (4 Marks Evaluation Marks marks) (7 marks) Annotation Annotation + Justified evaluation EVAL based on arguments 7 + EVAL in context EVAL Developed + evaluation based on 6 EVAL arguments in context EVAL An evaluative statement based on 5 EVAL arguments in context Shows + Arguments based on + understanding of two 4 two economies of 4 economies of scale APP DEV APP scale in context DEV in context Shows Argument based on understanding of 3 one economy of 3 one economy of APP DEV scale in context scale in context K Limited analysis of + Knowledge of two 2 + two economies of 2 AN economies of scale K AN scale Shows knowledge of Limited analysis of one economy of 1 K one economy of 1 AN scale scale No creditable content 0 1(d) Indicative content: AO1 knowledge and understanding Knowledge of economies of scale may include: • Internal economies of scale: – purchasing, – marketing, – financial, – technical, – managerial/specialist, – risk-bearing. • External economies of scale: – concentration, – infrastructure. Note: describing an EoS is allowable as Knowledge AO2 Application Application may include: • Moving to larger venues – more seats • Films projected on to big screen. • Temporary contracts for 20 employees at each venue – may need more workers. • Transportation of consumables (food and drink). • Set up and take down of the screen (a day for each). • Six weeks above the line promotion before each venue. AO3 Analysis Analysis may include: • Purchasing – able to bulk buy consumables for a venue which may reduce unit cost of these items – increase profitability (assuming same price) or decreased price – increased sales/competitiveness. • Marketing – ATL promotion can be spread over larger venue – reduce average costs – profitability – however will the length and amount of promotion need to be increased for ten times the length of time at a venue? • Financial – limited context – increased venue may lead to a larger business and therefore lower average finance costs. • Technical – may be able to afford a better projector or screen – reducing average costs. May be able to afford more recent films? • Managerial/specialist – can employ workers for a longer time period – training spread over more customers, can afford to employ better salespeople (food and drink), valet parkers, better customer service. • Risk-bearing – costs spread over a larger number of customers – however spread over less venues – the wrong venue might increase risk. AO4 Evaluation Evaluation may include: • A judgement over the economies of scale. • Evaluation of the relative impact of different economies of scale. • Elements that the evaluation/judgement might depend upon – local competitors, the chosen venue(s), workers available in the area, length of time needed to market before longer event, availability of larger venues, demand etc. 1(d) ARA Examples of how an answer could develop and how it should be annotated. K APP AN DEV EVAL internal Purchasing Reduces Increases The bulk unit cost of profit economies of products for item margins scale will be the food mostly stand beneficial for PM Risk As allocated Increases However Likely to bearing fixed costs margin of can reduce increase remain safety over atmosphere overall profits static at 143 BE if larger However $2000 point venues are depends upon empty whether marketing is successful and the film choice is suitable for the audience

Question 16

Wedding Gifts (WG) WG is owned by Tomas who is a sole trader. He used to own part of a large wedding business which failed and went into ad…

Accepted Answer

2(a)(i) Identify one factor of production. 1 Indicative content Responses may include: The four factors of production: • land • labour • capital • enterprise/entrepreneurship. Do not accept examples of the factors of production. 2(a)(ii) Explain the term sole trader. 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 • One individual or one person (must be a clear idea of a single person) owning a business . AO2 Application Limited application , applies knowledge of a sole trader through one aspect of the ownership. Developed application + applies knowledge of a sole trader through two or more aspects of the ownership. One mark for each of the following (up to a maximum of two marks): • unlimited liability • shared legal identity with business • no continuity • no requirement to produce or make available accounts • unincorporated / no shares / no shareholders • likely to be a small business • the owner keeps all the profits or bears the losses 2(a)(ii) • has all the risk • the owner has full control / makes all decisions themselves • example of a sole trader. Accept all valid responses. 2(b)(i) Refer to Table 2.1 and any other information. Calculate the total price of Jo’s order. 3 Indicative content 1 mark for formula or correct calculation of total costs ($450) 1 mark for calculation of mark-up (+50% OFR) 1 mark for calculation of price (adding TC to mark up OFR) • Formula: price = total costs (TVC + FC) + mark-up (1) • Calculation of total cost (1) – 250  $1.20 = $300 + $150 = $450 (1) • Calculation of price (1 OFR) – $450  1.5 = $675 Answer = ($)675 (3) 2(b)(ii) Explain one advantage for Tomas of using cost-based pricing. 3 AO1 Knowledge and understanding AO2 Application 1 mark 2 marks 2 marks Developed application of one relevant point to a business context. 1 mark 1 mark Knowledge of one relevant point is used to answer the Limited application of one relevant point to a business question. context. 0 marks 0 marks No creditable response. No creditable response. Responses may include: AO1 Knowledge and understanding Knowledge of an advantage of using cost-based pricing , including: • easy to calculate • flexibility/ can change price for different customers /products • all costs are covered • always provides a profit (margin per unit) / does not make a loss AO2 Application Limited application , applies knowledge to Tomas/WG once. Developed application + applies knowledge to Tomas/WG twice. Application of knowledge to FF may include: • answer to Q2(b)(i) (OFR) • Will give Tomas a 33.33% profit margin • Tomas’ variable costs ($1.20) 2(b)(ii) • Tomas’ allocated fixed costs ($150) • 3D printer accessories, such as computer, graphite, carbon fibre etc. • level of mark-up (50%) • Will provide Tomas with a $375 contribution to FC • Will provide Tomas with a $225 profit on Jo’s order Accept all valid responses. 2(c) Analyse one advantage and one disadvantage for Tomas of giving Jo the order for free. 8 Level AO1 Knowledge and AO2 Application AO3 Analysis understanding 2 marks 4 marks 2 marks 2 3–4 marks Developed analysis • Developed analysis that identifies connections between causes, impacts and/or consequences of two points. • Developed analysis that identifies connections between causes, impacts and/or consequences of one point. 1 1–2 marks 1–2 marks 1–2 marks • Knowledge of two • Application of two relevant Limited analysis relevant points is used points to a business • Limited analysis that identifies connections to answer the context. between causes, impacts and/or question. • Application of one relevant consequences of two points. • Knowledge of one point to a business • Limited analysis that identifies connections relevant point is used context. between causes, impacts and/or to answer the consequences of one point. question. 0 0 marks 0 marks 0 marks No creditable response. No creditable response. No creditable response. Annotate the advantage ( ) in the left margin. Annotate the disadvantage ( ) in the right margin. Responses may include: 2(c) AO1 Knowledge and understanding Knowledge of an advantage (max one ) might include: • open up new markets • promote the business • Increased publicity • increased (future) sales. Knowledge of a disadvantage (max one ) might include: • lost revenue • missed opportunity • Not cover costs • reduced profitability. AO2 Application Limited application, applies knowledge to Tomas/WG once. Developed application + applies knowledge to Tomas/WG twice. Max one for application in the advantage and max one for application in the disadvantage • Price with mark-up should be $675 (OFR from Q2(b)(i)) . • Total variable costs for the order of $300 . • Allocated fixed costs on this order of $150. • Total (full) cost will be $450. • Jo would like the products for free • Jo is a social media influencer 0.2m followers wedding streamed on internet • WG is at 90% capacity which may mean that he can produce Jo’s order 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. Advantages, including: • (Open up new markets) may open WG up to a new market of people who might use WG in the future – increased sales, profit . • (Promote the business) marketing benefits may allow Tomas to increase sales and make the purchase of the new machine more likely – although may be busy, the promotion may lead to future orders which will be needed to afford the machine. • (Increased future sales) promotion through this is likely to be lower cost than above the line methods of promotion to a similar number of people – increased profitability. Disadvantages, including: • (Lost revenue) order would make a loss – which may affect Tomas’ income or lead to WG making a loss for the year . • (Missed opportunity) Since Jo has suggested promotion for WG, the price she paid may be advertised – leading to Tomas being unable to charge full-price to future orders. • (Reduced profitability) taking the order will affect Tomas’ profitability and may jeopardise his ability to gain external finance – may not be able to purchase the new machine. Accept all valid responses. 2(d) Evaluate the most important factor that may influence Tomas’ choice of sources of finance for the new 3D printing 12 machine. Level AO1 Knowledge and AO2 Application AO3 Analysis AO4 Evaluation understanding 2 marks 2 marks 6 marks 2 marks 3 5–6 marks Developed evaluation in context • A developed judgement/conclusion is made in the business context. • Developed evaluative comments which balance some key arguments in the business context. 2 2 marks 2 marks 2 marks 3–4 marks Developed knowledge Developed Developed analysis Developed evaluation of relevant key term(s) application of that identifies • A developed and/or factor(s) is used relevant point(s) to connections between judgement/conclusion is made. to answer the question. the business causes, impacts • Developed evaluative context. and/or consequences. comments which balance some key arguments. 1 1 mark 1 mark 1 mark 1–2 marks Limited knowledge Limited Limited analysis Limited evaluation of relevant key term(s) application that identifies • A judgement/conclusion is and/or factor(s) is used of relevant point(s) connections between made with limited supporting to answer the question. to the business causes, impacts comment/evidence. context. and/or consequences. • An attempt is made to balance the arguments. 0 0 marks 0 marks 0 marks 0 marks No creditable response. No creditable No creditable No creditable response. response. response. 2(d) Responses may include: AO1 Knowledge and understanding Limited knowledge will be demonstrated through knowledge of a factor or knowledge of source(s) of finance. Developed knowledge + will be demonstrated through knowledge of a factor and knowledge of source(s) of finance. Factors influencing sources of finance, including: • cost • flexibility • need to retain control/ownership • the use to which it is put / type of business • level of existing debt • Availability of funds/finance – may not have any retained profit / may be a country with no banking infrastructure. • Size of the business – a large business may have more collateral. • Reputation (credit rating) – of the business/owner Knowledge of sources of finance • Internal and external sources of finance • Identification of any source of finance (owners’ investment, retained earnings, sale of unwanted assets, sale and • leaseback of non-current assets, working capital, share capital, debentures, new partners, venture capital, bank overdrafts, leasing, hire purchase, bank loans, mortgages, debt factoring, trade credit, micro-finance, crowd funding and government grants) AO2 Application Limited application applies knowledge to Tomas/WG once. Developed application + applies knowledge to Tomas/WG twice. • $60 000 for new machine • WG/Tomas is a sole trader • Previous business went into administration • WG is profitable • 33.33% profit margin 2(d) • 50% mark up • but not enough retained earnings to fund whole $60 000 • No current debts • Positive cash flow • Niche market • 3D printer, owned by Tomas 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. • (Cost) small businesses are likely to need an external source of finance – however there will be a cost (interest, payments etc.) which might make WG unprofitable . • (Flexibility) may allow a wider choice of source – however without repeat business there is little stability of income. • (Need to retain control) by taking a partner or selling shares the owner is likely to lose full control – however may not be able to attract an investor. • (The use to which it is put) gains a fixed asset with value – may make a securable source of finance more likely to be given (at a lower cost). • (Level of existing debt) will increase debt to be paid back – could makes some sources unobtainable or more expensive. • (Type of business) new businesses are likely to have high repayments – reducing the profitability. • (Ownership) selling part of the business may bring in enough capital – however the percentage required by the investor might be very high. AO4 Evaluation Limited evaluation – unsupported judgement and/or a weak attempt at evaluative comment Developed evaluation – supported judgement and/or reasonable evaluative comment Developed evaluation in context - supported judgement in context and/or reasonable evaluative comment in context • A judgement over the most important/influential factor when Tomas is choosing the sources of finance for the new 3D printing machine. 2(d) • Elements that the judgement could depend upon, including: level of current and forecast demand, will there be enough demand to cover the cost of repayments, potential partners/investors, will Tomas be able to work with these personalities, Tomas’ willingness to give up control of WG, the extent to which external sources of finance are open to Tomas with his background, the willingness of the supplier to offer terms of credit, etc. • Weighing up of the factors and their relative influence on Tomas’ decision of sources of finance. Accept all valid responses.

Question 17

Fretter’s Music (FM) FM is a private limited company based in country Z. FM manufactures a range of musical instruments, such as guitars an…

Accepted Answer

1(a)(i) Identify one element of the marketing mix. Indicative content Identification of an element may include:  Place  Price  Product  Promotion Accept all valid responses. Question Answer Marks 1(a)(ii) Explain the term consumer market. AO1 Knowledge and understanding 1 mark AO2 Application 2 marks 2 marks Developed application of one relevant point to a business context. 1 mark Knowledge of one relevant point is used to answer the question. 1 mark Limited application of one relevant point to a business context. 0 marks No creditable response. 0 marks No creditable response. Indicative content AO1 Knowledge and understanding Knowledge of consumer market may include:  Somebody who buys goods or services.  For their own personal use/is the end user/final consumer. AO2 Application Limited application  applies knowledge of consumer market to a product OR business. Developed application +  applies knowledge of consumer market to a product AND a business. Application can be made to FM or any other scenario/context/business/product. Accept all valid responses. 3 Question Answer Marks 1(a)(ii) Exemplar and annotations Mark Rationale Sells products directly to consumers rather than businesses FM sells instruments to customers . 3 An answer which starts with the knowledge and then applies it to FM. Sell to the final user known as B2C , FM sell musical instruments to musicians and students who are the final users . 3 Again, knowledge first, followed by application to a business scenario (B2C) and to a product (musical instruments). Selling musical instruments to students not to other businesses as musicians and students are the final consumers . 3 A different way of answering the question. There is application of both elements of consumer markets (the product and businesses) as well as clear knowledge of the concept by the end of the response (final consumers) Goods sold to end user , not sold to other businesses . 2 Clear knowledge. Some application to businesses, but not a product. The buyers are the final consumers . 1 Not a perfect definition, but enough to award the knowledge mark. No attempt to apply. Market for consumers to buy something and uses branding to promote product to wholesalers . 0 Starts with a tautology. No knowledge of consumer market. Too vague. Question Answer Marks 1(b)(i) Refer to Table 1.1 and other information. Calculate FM’s labour turnover rate for 2022. Numbers leaving = 4 + 6 + 5 + 3 + 6 = 24 (1) Total staff = 108 Labour turnover = 24 / 108  100 (1) = 22.2%. Accept 22 (3) OFR Exemplar 3 marks Correct answer 22.2% allow 22 Working and % do not matter. Must be three to denote the three marks. 2 marks Two of the following:  Correct formula  Correct calculation of numbers left (24)  Correct identification of data 24/108 OR An incorrect answer with one mistake allowing OFR for final stage. To award two marks, there must be:  Two and a OR  One , one and one 1 mark One of the following:  Correct formula  Correct calculation of numbers left (24)  Correct identification of data 24/108 To award one mark, there must be:  One and two 0 marks No creditable content. To award zero marks, there must be:  One 3 Question Answer Marks 1(b)(ii) Explain one method of reducing FM’s labour turnover. AO1 Knowledge and understanding 1 mark AO2 Application 2 marks 2 marks Developed application of one relevant method to a business context. 1 mark Knowledge of one relevant method is used to answer the question. 1 mark Limited application of one relevant method to a business context. 0 marks No creditable response. 0 marks No creditable response. Indicative content Responses may include: AO1 Knowledge and understanding Knowledge of a method that may affect reduce labour turnover :  Financial methods e.g. commission, bonus etc.  Non-financial methods e.g. training, job enrichment etc.  Reference to theorists e.g. Taylor, Mayo etc. AO2 Application Limited application , applies knowledge to FM once. Developed application + applies knowledge to FM twice OR applies once to FM AND develops answer to explain a benefit of the method given.  Pay a major factor 25% of those leaving did so for higher pay at a competitor  Opportunities for promotion/job enrichment,5 left because of lack of opportunities and 4 for better jobs in another industry  Team working/job-redesign, as 3 unhappy at work 3 Question Answer Marks 1(b)(ii) Accept all valid responses. Exemplar and annotations Mark Rationale Non-financial methods such as job enrichment , e.g. one of the reasons employees left is lack of promotion job enrichment would improve their skills and increase their opportunity of promotion . 3 A non-financial method explained in the specific context of FM by using the information in Table 1.1 and develops answer to explain a benefit of the method. Increase employee salary , 6 employees left FM because of higher pay at a competitor if FM increase wages employees will be more satisfied and less likely to leave. 3 A financial method in this one and there is context from the data in Table 1.1, also how the method given is linked to the issue, so two . . Some workers are unhappy with the work environment . Group working could be used Group working will ensure a good communications environment . 3 Although the appears first, it cannot be awarded until the has been found. However, there is obvious , so you can go back and award the . Training for new processes because employees are having difficulties in adapting to the new production method . 2 Training is a non-financial method . The context of new production method linked to this is reasonable , but only one point of application. Increase employee salary because the more workers are paid the more motivated they become . 1 Knowledge of a method. The rest of the answer is not applying it to the context so (Not Answering Question). Labour turnover refers to the number of workers leaving over the total number of workers 4 people left for better jobs . 0 Although there is some relevant context, there is no knowledge of a method, so no marks can be awarded. Question Answer Marks 1(c) Analyse two impacts on FM’s costs if it enters international markets. 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 1(c) Indicative content Knowledge of impacts on costs (max 2 s), may include: AO1 Knowledge and understanding  Increased costs – labour, delivery, capital, documents, marketing, research etc.  Reduced costs – bulk buying, cheaper labour/land costs in other country. AO2 Application Max one for application for the first impact on costs and a second for application for the second impact on costs. Application of knowledge of an impact on costs to FM (max 2 s), including: Increased costs might occur, due to:  The change to mass customisation  Not a well-known brand in other countries  After sales customer service improvement as product tailored to customer wants  Import/export taxes  Translation of documents into other languages Reduced costs could come in the long term from:  Mass customisation  Increase in market size allowing economies of scale  Labour/land in another country cheaper than country Z 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.  Extra distribution costs – require extra delivery drivers  High costs in the short term – such as promotion costs  Lower in the long term – become established in new country allow reduced marketing  Mass customisation – benefit from economies of scale  High cost of investment – if take out a loan interest will add to costs. Accept all valid responses. Question Answer Marks 1(c) Exemplar and annotations AO1 Knowledge AO2 Application AO3 Analysis There will be an increase in costs . Annotations for the first impact should be placed in the left-hand margin. FM will deliver the instruments over a longer distance So, FM will need to pay more in delivery costs as the delivery driver will take a longer time and there will be higher fuel costs . It will increase labour costs Annotations for the second impact should be placed in the right-hand margin. For example, translation employees Because the firm may not understand other countries languages and will need advertising and documents in the language of that country . Question Answer Marks 1(d) Evaluate the impact on FM’s stakeholders of a change from batch production to mass customisation. Level AO1 Knowledge and understanding 2 marks AO2 Application 2 marks AO3 Analysis 2 marks AO4 Evaluation 6 marks 3 5–6 marks Developed evaluation in context  A developed judgement/conclusion is made in the business context.  Developed evaluative comments which balance some key arguments in the business context. 2 2 marks Developed knowledge of relevant key term(s) and/or factor(s) is used to answer the question. 2 marks Developed application of relevant point(s) to the business context. 2 marks Developed analysis that identifies connections between causes, impacts and/or consequences. 3–4 marks Developed evaluation  A developed judgement/conclusion is made.  Developed evaluative comments which balance some key arguments. 12 Question Answer Marks 1(d) Level AO1 Knowledge and understanding 2 marks AO2 Application 2 marks AO3 Analysis 2 marks AO4 Evaluation 6 marks 1 1 mark Limited knowledge of relevant key term(s) and/or factor(s) is used to answer the question. 1 mark Limited application of relevant point(s) to the business context. 1 mark Limited analysis that identifies connections between causes, impacts and/or consequences. 1–2 marks Limited evaluation  A judgement/ conclusion is made with limited supporting comment/ evidence.  An attempt is made to balance the arguments. 0 0 marks No creditable response. 0 marks No creditable response. 0 marks No creditable response. 0 marks No creditable response. Indicative content Responses may include: AO1 Knowledge and understanding Knowledge of one of the key terms (max 2 s), including:  Batch production – manufacturing process in which items or products are produced in groups.  Mass customisation – manufacturing process that combines the flexibility and personalisation of custom-made products with the low unit costs associated with mass production.  Stakeholders – A stakeholder is a person/organisation that has an interest in a company and can either affect or be affected by the business/ examples of stakeholders. Question Answer Marks 1(d) AO2 Application Limited application applies knowledge of batch/customisation/stakeholders of FM once. Developed application + applies knowledge of batch/customisation/stakeholders of FM twice.  Shareholders (a limited company)  Change of working practices/environment  Change in production methods  Move into international market  Increase in the volume of output 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. Employees:  Change of working practices – employees must learn new skills  Redundancies could be an issue – arising from the shift to mass customisation  Short term incomes could reduce – as profits may initially fall  Shareholders:  Forego dividends in the short term – due to the costs of the investment  Long-term gains – from increased profits  Risk increased – if the expansion fails and profits fall  Government:  Potential for more taxes – due to higher profits/output  Community:  Employees likely from the local area – if redundancies occur, it will increase unemployment in the community  Suppliers:  More business/more profits – but might need different suppliers  Customers:  Better choice – tailored to customer wants  Higher prices – due to increase in costs/quality of the product  Bank etc.:  Borrowing for investment – may require a bank loan Question Answer Marks 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.  Weighing up of risks v reward  Short term costs v long term costs  Costs v benefits  Judgement on stakeholder(s) it will most likely impact  Judgement on overall impact on a stakeholder(s) Accept all valid responses. Exemplar and annotations A change from batch production to mass customisation will have different impacts on FM’s stakeholders, such as customers, employees, suppliers, and shareholders . Shareholders are the owners of FM who invest their money in the company . They may benefit from mass customisation if it increases the sales and profits of FM by attracting more customers and creating a competitive advantage . Mass customisation may also increase the value and reputation of FM as a customer-oriented and innovative company . However, mass customisation may also reduce the returns and dividends for shareholders if it increases the cost and risk of production for FM . Mass customisation may also require more investment in research and development, technology, and marketing for FM , which may reduce the cash flow and liquidity for shareholders and may also result in a decrease their returns. To conclude, mass customisation can have both positive and negative impacts on FM’s shareholders. Therefore, FM should carefully weigh the benefits and costs of this change and implement it in a way that maximises the value, profits and dividends for the shareholders . AO1 – 2 marks AO2 – 2 marks AO3 – 2 marks AO4 – 6 marks TOTAL – 12 marks

Question 18

Pot Plants (PP) PP is a private limited company that grows and sells plants in pots. PP has 12 large shops in country Q and uses a variety …

Accepted Answer

Question Answer Marks 1(a)(i) Identify one promotion method. 1 Indicative content Promotion methods : • advertising/advertisement • sales • direct • digital • packaging • branding Accept only the answers above Do not accept examples of a method (i.e. social media or social media promotion), unless the method is specified (i.e. social media advertising). If more than one answer is given, only mark the first, reading from top left to bottom right. 1(a)(ii) Explain the term capital expenditure (line 16). 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. 1(a)(ii) Indicative content Definition of capital expenditure: the purchase of non-current assets that are expected to last for more than one year, such as buildings and machinery. AO1 Knowledge and understanding Knowledge of business expenditure , may include: • Purchasing • Buying • Spending money on • Investing in AO2 Application Explanation of capital expenditure may include: • Non-current assets • Fixed assets • Assets expected to last for more than a year/12 months Context applied to capital expenditure way , including: • Any example of capital expenditure, including: • Machinery • Property • Factories Accept all valid responses. Guidance in awarding marks Knowledge & understanding Knowledge of business expenditure 1 mark Explanation Application to capital expenditure 1 mark Context Applied to a business context/ business 1 mark environment 1(a)(ii) Exemplar and annotations Marks Rationale Buying non-current assets , like machinery 3 Knowledge of expenditure with explanation of capital and a valid example of something that can be bought using capital expenditure. When a business purchases things that are likely to be used 2 Knowledge of expenditure and or owned for more than 12 months explanation of what capital is. A vehicle is an example of capital that is purchased 2 An example followed by the knowledge of expenditure. Only award if the K is present. Capital expenditure is when a business purchases capital 2 Knowledge of purchasing and an items, such as a vehicle example. Buying day to day things like inventory 1 The knowledge mark for understanding of expenditure, but the rest of the answer is incorrect – this is revenue expenditure. Capital expenditure is when a business has expenditure on capital 0 This is a tautology. Although the items, like machinery. example is right, they cannot be awarded without K. 1(b)(i) Refer to Table 1.1. Calculate the labour turnover rate for PP in 2023. 3 Number of employees who left a business within a time period Formula:  100 (1) Total number of employees in a business OR 100 + 14  100 (1) 450 + 120 114  100 (1) 570 = 20% (3) If the candidate calculates each division’s labour turnover, award one mark for each correct answer, to a maximum of two marks in total. 100  100 = 22.22% (1) (accept 22.2 (recurring*), 22.2 and 22 i.e. any correct rounding) 450 14  100 = 11.67% (1) (accept 11.66 (recurring*), 11.67, 11.7 or 12 – i.e. any correct rounding) 120 Do not accept 11.6 or 11.66 (incorrect rounding) Answer of 0.2 should be awarded 2 marks with working. A recurring number can be shown as a dot above the recurring number i.e. 11.6 or three dots after the recurring number i.e. 22.2 1(b)(i) Examples and annotations Marks 3 marks Correct answer Working and % sign do not matter. 20% or 20 2 marks Both of the following: To award two marks, there must be • Formula • Two and a • Correctly calculated employees who left (114) OR AND correctly calculated total employees (570) • One , one and one OR An incorrect answer with one mistake allowing OFR for final stage. OR Candidate has correctly calculated the labour turnover for both divisions (Growing 22.22% and Retail 11.67%) OR An answer of 0.2 (candidate did not multiply by 100) with appropriate working. 1 mark One of the following: To award one mark, there must be: • Correct formula • One and two • Correctly calculated employees who left (114) AND correctly calculated total employees (570) OR Candidate has correctly calculated the labour turnover for one division (Growing 22.22% and Retail 11.67%) 0 marks No creditable content. To award zero marks, there must be • One 1(b)(ii) Explain one possible impact on PP of its employees being trade union members. 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 trade union involvement (max 1 mark), including: Positive, including: Negative, including: • collective bargaining • industrial action (strikes, work to rule etc.) • job security • loss of productive time • higher wages • increased costs • increased employee welfare • better working conditions • communication between employers and employees AO2 Application Explanation of why Trade Union involvement will have an impact on PP (max 1 mark), including: • collective bargaining; may mean higher wages for employees • job security; workers are less likely to leave • higher wages; avoid a strike 1(b)(ii) • increased employee welfare; which the business has to pay for • better working conditions; because of collective bargaining • communication between employers and employees; improving coordination Negative impacts, including: • industrial action (strikes, work to rule etc.); to improve working conditions • loss of productive time; reducing the businesses ability to manufacture products • increased costs; from increased wages. Context applied to an impact of trade union involvement at PP (max 1 mark), including: • The growing division has 100% trade union membership – which may mean more impacts (positive and negative) • The retail division has only 25% trade union membership – which may mean employees do not share the same impacts (positive and negative). • 450 employees from the growing division are trade union members – but only 30 employees from the retail division are trade union members. • In total 480 employees are trade union members – which is 84% (rounded) of the entire workforce. • The salary for the growing division may be higher – than the salary for the retail division. • PP is a private limited company • 12 large shops in in countryside within country Q with fields near the shops. • Outsourcing used in retail division, not (as far as is known) in farming division. Accept all valid responses. Guidance in awarding marks Knowledge & Knowledge of trade union involvement 1 mark understanding Explanation Explanation of an impact on PP from trade union involvement 1 mark Context Context linked to an impact on PP of trade union involvement 1 mark 1(b)(ii) Exemplar and annotations Marks Rationale An impact may be from collective bargaining , which may mean 3 An impact of trade union PP has to pay increased wages . This will have a big impact on membership is collective the Growing division which has 100% trade union membership bargaining, and this impact can increase wages for the explanation. The context is applied to this impact. One impact is that workers may insist on better working conditions 2 An impact identified and context for the 570 employees . applied to this. Collective bargaining could lead to higher wages . 2 Both higher wages and collective bargaining are their own impacts, but the candidate has linked the two together here, so they have identified and explained (but no context). 1 Four impacts here, but they are Impacts include a strike or workers picketing or better not linked at all and so the first is wages or increased costs . awarded, but the others are REP. Trade unions are a group of employees representing the interests 0 No impact here, so 0 marks. Not of its members. knowledge of Trade Union involvement – only a definition of a Trade Union 1(c) Analyse one advantage and one disadvantage to PP of outsourcing the manufacture of pots. 8 Level AO1 Knowledge AO2 Application AO3 Analysis and 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 • Application of two Limited analysis two relevant relevant points to a • Limited analysis that identifies connections points is used to business context. between causes, impacts and/or answer the • Application of one consequences of two points. question. relevant point to a • Limited analysis that identifies connections • Knowledge of business context. between causes, impacts and/or one relevant consequences of one point. point is used to answer the question. 0 0 marks 0 marks 0 marks No creditable No creditable response. No creditable response. response. 1(c) Indicative content AO1 Knowledge and understanding Knowledge of an advantage of outsourcing (max 1 mark – annotate on left) including: • Improved focus on the core business activities • Increased efficiency • Controlling/low costs • Increased capacity • Improve quality • Access to specific skills. Knowledge of a disadvantage of outsourcing (max 1 mark – annotate on right), including: • Loss of control over production process • Lack of control of quality • Reliance on an external stakeholder • Lack of flexibility • Delays/extra transportation may be inevitable. AO2 Application Context applied to an advantage (max 1 mark) and disadvantage (max 1 mark) of outsourcing to PP, including: • PP is a private limited company – limited liability, finance etc. • Sells potted plants in ceramic or clay pots – integral to product. • 12 large shops in countryside within country Q with fields near the shops. • Variety of pricing methods – requires a range of cheap to expensive priced products. • Outsourcing used in retail division, not (as far as is known) in farming division. • Use of Table 1.1 • CC is based in the same country as PP. • PP would like more variety from CC but CC does not want to afford the capital expenditure. • CC has a lead time of three days. • FF makes plastic pots in a large factory in country S (different country to PP). • FF uses mass customisation, producing any size and colour of pot. • FF has a lead time of one month. 1(c) AO3 Analysis Limited analysis – candidate shows one link in the chain of analysis. Developed analysis candidate shows two or more links in the chain of analysis or a two-sided analysis. Advantages of outsourcing, including: • Improved focus on the core business activities; lower costs – increased profit. • Increased efficiency; higher quantity of products – increased sales revenue. • Controlling costs (with CC); more cash available to overcome labour turnover problems in farming division. • Increased flexibility (with FF); better customer satisfaction – increased sales. • Improve quality; fewer defective pots – improved customer satisfaction. • Access to specific skills; better presentation of PP plants – increased sales. Disadvantages of outsourcing, including: • Loss of control over production process; may lead to poorer quality control – increased costs. • Reliance on an external stakeholder; relatively long lead times – reduced customer satisfaction. • Lack of flexibility; less able to respond to changes in customer demand – lower sales. • Delays may be inevitable (beyond the lead time); poor customer satisfaction – reduced sales revenue. • Likely to have a higher cost (due to having to cover CC or FF’s profit margin); increased prices – lower sales, Accept all valid responses. Exemplars and annotations AO1 Knowledge AO2 Application AO3 Analysis Outsourcing can reduce PPs to produce plastic and clay pots This allows PP to spend on other capital expenditure areas of the business such as marketing which could increase demand for its pots . The pots will need to be and FF is in another country . Which could increase PP’s costs transported to PP and lead to lower profits . 1(d) Evaluate the importance to PP of workforce planning. 12 Level AO1 Knowledge AO2 AO3 Analysis AO4 Evaluation and understanding Application 2 marks 6 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 Developed Developed Developed evaluation knowledge of application of analysis • A developed relevant key term(s) relevant that identifies judgement/conclusion is made. and/or factor(s) is point(s) to the connections • Developed evaluative comments used to answer the business between causes, which balance some key question. context. impacts and/or arguments. consequences. 1(d) 1 1 mark 1 mark 1 mark 1–2 marks Limited knowledge Limited Limited analysis Limited evaluation of relevant key application that identifies • A judgement/conclusion is made term(s) and/or of relevant connections with limited supporting factor(s) is used to point(s) to the between causes, comment/evidence. answer the question. business impacts and/or • An attempt is made to balance context. consequences. the arguments. 0 0 marks 0 marks 0 marks 0 marks No creditable No creditable No creditable No creditable response. response. response. response. Indicative content AO1 Knowledge and understanding Knowledge of the use and/or contents of a workforce plan (max 2 marks). Uses of a workforce plan, including: • analysing the current workforce, • determining future workforce needs, • identifying the gap between the workforce you will have available and your future needs, • implementing solutions so that an organisation can accomplish its mission, goals, and strategic plan. Contents of a workforce plan, including: • number of workers/employees required • skills required • skill gap analysis • likely future human resource (HR) requirements • action plan to achieve business human resource objectives • demographic changes • talent management 1(d) AO2 Application Context applied to knowledge of workforce planning to PP (max 2 marks), including: • PP is a private limited company. • Both the farming and retail divisions rely on human resources. • 12 large shops in in countryside within country Q with fields near the shops. • Variety of pricing methods – may increase skills needed in retail workers. • Outsourcing used in retail division, not (as far as is known) in farming division. May involve communication skills. • Use of Table 1.1. 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. • Analysing the current workforce; both divisions are likely to require skilled workers including; Farming – agricultural, chemicals, managerial, manual – all of which have a cost associated – reduced profitability. Retail – customer services, managerial, marketing – some of which may be in high supply in country Q – reduced wages – increased profitability. • Determining future workforce needs; to maintain market share in what is likely to be a competitive market. • Determining future workforce needs; both divisions are likely to be labour intensive (especially retail) – increases PP’s ability to operate in a competitive market. • Identifying the gap between the workforce you will have available and your future needs; farming division may require new product development – increased USP – increased sales. • Implementing solutions so that an organisation can accomplish its mission, goals, and strategic plan; to increase future growth/survival/profitability. 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 judgement over importance to PP of workforce planning. • Evaluation of the relative importance of different factors. • Elements that the evaluation/judgement might depend upon – cost of the labour as a proportion of the total costs of the product/sales, which division is being planned for, the labour market in country Q, dynamism of the potted plant market in country Q, the USP of PP, PP’s competitors. Accept all valid responses. Exemplars for awarding evaluation L1 (limited L2 (developed supporting L3 (developed supporting evidence supporting evidence) with context) evidence) Workforce planning is Workforce planning is very important to Workforce planning is very important to PP very important to PP. PP because it is a large business with because it is a large business with 570 many employees that are essential to the employees that are essential to the success of the business. success of the business. The importance of The importance of workforce planning The importance of workforce planning workforce planning depends on the local economy. For depends on the local economy. For depends on the local example, if there was high example if there was high unemployment economy. unemployment, then PP might easily near PP’s 12 retail shops, then PP might replace workers, without the need to easily replace workers, without the need to plan. plan.

Question 19

The Drink Company (TDC) TDC is a multinational carbonated drinks manufacturer with limited liability. TDC had budgeted that its annual reve…

Accepted Answer

2(a)(i) Identify one stage of the product life cycle. 1 Indicative content: Stages include: • Development/research/testing/initial design • Introduction/launch • Growth • Maturity/saturation • Decline. Accept only the answers above If more than one answer is given, only mark the first, reading from top left to bottom right. 2(a)(ii) Explain the term limited liability (line 1). 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. 2(a)(ii) Indicative content AO1 Knowledge and understanding Knowledge of limited liability (max 1 mark), including: • Limited liability is a legal status where a person’s financial commitment/responsibility is restricted to a fixed sum • Only a set amount of money invested is at risk • Personal assets are not at risk • Only business assets are at risk AO2 Application Explanation of limited liability (max 1 mark), including: • Protects shareholders/investors • Creates a separate legal identity (for a business) • Most commonly limited to the value of a person's investment • Can be linked to debt • Also applies to legal actions (i.e. suing a business) Context applied to limited liability (max 1 mark), including: • An example of a type of business that has limited liability, including: Private limited company (allow Ltd) Public limited company (allow PLC, Inc. or Corp) Limited liability partnership Incorporated business Accept all valid responses. Guidance in awarding marks Knowledge and Knowledge of limited liability 1 mark understanding Explanation Explanation of limited liability 1 mark Context Applied to a business context/business environment 1 mark 2(a)(ii) Exemplar and annotations Marks Rationale The most an owner could lose is the amount they invested 3 Clear knowledge of limited which protects investors within businesses such as private liability/risk, with the protection as limited company . explanation and a private limited company an example of a type of business that has limited liability. Shareholders personal wealth is protected because they can 3 The explanation comes first, only lose the sum of money that they invested , for example followed by the knowledge and an McDonalds has limited liability as a public limited company . example. TDC must be either a PLC or Ltd to have limited liability. Only 2 The example comes first, followed the amount invested is at risk . by the knowledge. Only the funds invested are at risk . 1 Knowledge only. Limited liability means that shareholders are protected in case of 0 There is no knowledge of limited financial difficulty. liability here, so no other marks can be awarded. 2(b)(i) Refer to Table 2.2 and other information. Calculate the variance between TDC’s budgeted revenue and actual 3 revenue for 2023. State whether the variance is favourable or adverse. Variance = actual revenue – budgeted revenue (1) $400m – $340m = $60m (1) Adverse (1) Answer = $60m adverse (3) $60m (award 2 marks – without adverse). Exemplar and annotations Marks 3 marks Correct answer Working, $ and millions (m) do not matter. $60m adverse (allow 60 adverse or 60 unfavourable or –60 adverse) Do not accept a minus sign (–) as adverse. 2 marks Correct calculation of size of variance (i.e. $60m To award two marks, there must be or –$60m) • Two and a OR OR • One , one and one An incorrect answer with one mistake allowing OFR for final stage. 1 mark One of the following: To award one mark, there must be: • Correct formula • One and two • Identification of numbers (i.e. 400 and 340) 0 marks No creditable content. To award zero marks, there must be • One 2(b)(ii) Explain one possible benefit to TDC of using budgets. 3 AO1 Knowledge and understanding AO2 Application 1 mark 2 marks 2 marks Developed application of one relevant point to a business context. 1 mark 1 mark Knowledge of one relevant point is used to answer the Limited application of one relevant point to a business question. context. 0 marks 0 marks No creditable response. No creditable response. Indicative content AO1 Knowledge and understanding Knowledge of a benefit of budgeting (max 1 mark), including: • Coordinates activities • To control finances/spending • To assist with planning • To monitor performance • Translate objectives into strategy. • Translate strategy into tactics. • Provide a record of organisational activities • Can improve communication • Improve resources allocation • Improve efficiency • Provides a tool for corrective action • Compare different areas of the business • To help achieve objectives. 2(b)(ii) AO2 Application Explanation of a benefit of using budgets (max 1 mark), including: • Coordinates activities; between functional areas of the business • To control finances/spending; by allocating appropriate resources to different areas of the business • To monitor performance; by doing a variance analysis • Translate objectives into strategy; to make sure the objective is met • Translate strategy into tactics; to make the strategy is implemented • Provide a record of organisational activities; for later comparison • Can improve communication/coordination; by giving financial targets • Improve resources allocation; by giving a quantitative target • Improve efficiency; by allocating finances to different areas of the organisation • Provides a tool for corrective action; when actual and budgeted are compared • Compare different areas of the business; to improve communication/coordination Context applied to a limitation of using budgets for TDC (max 1 mark) including: • Use of answer to Q2bi ($60m – OFR) • Revenue was $360m in 2023 compared with a budget of $400m. • TDC’s objective to reduce the cost of raw materials (by 2025) • TDC’s objective to increase market share by 10%.of B2C market (by 2025) • TDC’s product areas – VKola, Vtropical, VOrange and VLemon. • Use of Table 2.1 • Possible merger between HL and TDC • Use of Table 2.2 Accept all valid responses. Guidance in awarding marks Knowledge and understanding Knowledge of a benefit of using budgets 1 mark Explanation Explanation of a benefit of using budgets 1 mark Context Context linked to a benefit of using budgets 1 mark 2(b)(ii) Exemplar and annotations Marks Rationale A benefit of using a budget is that it allows a business to efficiently 3 A benefit showing knowledge and allocate its resources by allocating specific sums of money to then explained for the first APP. different products like TDC allocating money to VKola . The example is from the context so APP awarded. It helps TDC to monitor its own performance by doing a 3 A benefit showing knowledge and variance analysis to show adverse variances such as the then explained for the first APP. $60m revenue variance . The example is from the context so APP awarded. Provides a financial plan for each product like VOrange that 2 Knowledge and context, but no TDC produces explanation of how a financial plan is a benefit. Budgets can improve efficiency , and monitor performance and 1 There are three benefits here, but be used to help TDC achieve its objectives. all are only K. None are explained or contextualised. TDC has a $60m adverse variance when they did the budget. This 0 There is no knowledge of a benefit means that the revenue was lower than expected, which is bad for of budgets here, so the context TDC. cannot be awarded. 2(c) Analyse two ways in which TDC could use the Boston Matrix analysis in Table 2.1. 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 points to a business • Limited analysis that the question. context. identifies connections • Knowledge of one relevant • Application of one relevant between causes, impacts point is used to answer the point to a business context. and/or consequences of question. two points. • Limited analysis that identifies connections between causes, impacts and/or consequences of one point. 0 0 marks 0 marks 0 marks No creditable response. No creditable response. No creditable response. 2(c) Indicative content AO1 Knowledge and understanding Knowledge of uses of Boston Matrix , such as: • To analyse the breadth/specialisation of a business’s product portfolio • To manage/change its product portfolio • To Identify best/worst performing product • To identify opportunities for growth/investment • To identify opportunities for product development/new products • To allocate resources/budget effectively (between products) • To enable business to move ?/problem child to stars • To ensure business to move stars to cash cows • To enable business to launch new products • To enable business to avoid dogs • To help a business plan for the future sales/product development/achieve objectives The Boston Matrix is also referred to as the BCG Matrix. AO2 Application Context applied to a use of the Boston Matrix (max 2 marks), including: • Vkola – Star (high market growth, high market share) • VTropical – question mark/problem child (high market growth, low market share) • VOrange – Dog (low market growth, low market share) • VLemon – Cash Cow (low market growth, high market share) • Recent commissioned primary market research into TDC’s product portfolio • TDC’s objectives: to increase TDC’s profit margin by reducing the cost of raw materials to increase TDC’s market share of the business to consumer (B2C) market for carbonated drinks. • To provide data to HL about the business to facilitate the merger • Use of Table 2.2 • TDC is a multinational business 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. Annotate first way on left and second way on right) Analysis of using the Boston Matrix, including: • To analyse the breadth/specialisation of a business’s product portfolio; only four products within TDC’s portfolio, may mean the business will need to increase its product portfolio – to increase sales. • To analyse the breadth/specialisation of a business’s product portfolio; to identify dogs for withdrawal from the market – unlikely to add to business revenue. • To enable business to move? to stars; to focus marketing spend on increasing VTropical’s market share (to a star) – to increase revenue – to increase profit. • To ensure business to move stars to cash cows; to reduce marketing spend on Vkola (to a cash cow) as the market has lower growth – to reduce costs – to increase profitability. • To enable business to launch new products – to replace VTropical as it increases its market share – to increase sales – to increase profit. • To enable business to avoid dogs; suggest that VOrange may be a dog and TDC should reduce marketing spend (or discontinue the product) – to decrease overall costs of TDC – increase profit. Accept all valid responses. Exemplars and annotations AO1 Knowledge AO2 Application AO3 Analysis To see which products are For example VOrange is a dog . Which may lead to TDC performing poorly . discontinuing VOrange and replacing it with a product which may have a larger market share To identify stars Like VKola Which will require high levels of promotion which may mean they develop into a cash cow for TDC. . 2(d) Evaluate whether the planned merger with HL will enable TDC to achieve its objectives. 12 Level AO1 Knowledge AO2 AO3 Analysis AO4 Evaluation and understanding Application 2 marks 6 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 Developed Developed analysis Developed evaluation knowledge of application of that identifies • A developed relevant key term(s) relevant connections judgement/conclusion is made. and/or factor(s) is point(s) to the between causes, • Developed evaluative comments used to answer the business impacts and/or which balance some key question. context. consequences. arguments. 2(d) 1 1 mark 1 mark 1 mark 1–2 marks Limited knowledge Limited Limited analysis Limited evaluation of relevant key application that identifies • A judgement/conclusion is made term(s) and/or of relevant connections with limited supporting factor(s) is used to point(s) to the between causes, comment/evidence. answer the question. business impacts and/or • An attempt is made to balance context. consequences. the arguments. 0 0 marks 0 marks 0 marks 0 marks No creditable No creditable No creditable No creditable response. response. response. response. Indicative content AO1 Knowledge and understanding Knowledge of mergers , including: • A type of business acquisition that describes the consolidation of two or more businesses or the assets of those businesses, including the joining of two firms, acquisition of a firm’s assets (including intellectual capital), consolidations, tender offers, purchase of inventory, and management combination. • Benefits of a merger, including: Shared resources May reduce costs Avoids duplication of resources Speedy way to grow Removes competition. Knowledge of business objectives , including: • Business objectives are the specific and measurable, achievable, resourced and time-based results that businesses hope to reach. About giving a business a direction. Business strategy enables a business to reach its objectives. 2(d) AO2 Application Context applied to TDC and HL merging (max 2 marks), including: • Use of Table 2.1, including: Vkola – Star VTropical – question mark VOrange – Dog VLemon – Cash Cow • Recent commissioned primary market research into TDC’s product portfolio • TDC’s objectives: To increase TDC’s profit margin by reducing the cost of raw materials To increase TDC’s market share of the business to consumer (B2C) market for soft drinks. • Table 2.2 data, including: $340m revenue for TDC and $280m for HL – combined revenue of $620m. $23.8m profit (7% profit margin) for TDC and $14m (5% profit margin) for HL – combined $37.8m profit (6.01% combined profit margin– not 12% profit margin) Reduces TDC’s end of year profit margin (as a percentage) assuming no cost savings. Likely to be cost savings by merging production facilities. Different target market segments; TDC convenience shops, supermarkets (retail) whereas HL sells to restaurants, events and hotels (commercial). TDC B2C whereas HL B2B. 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 of the impact of a merger on the objectives of a firm, including: • Objective to increase profit margin: Reduce cost of sales – combining production facilities – shared product of soft drinks – increase profitability. Reduce marketing costs – although different target markets, so may not be possible. Reduce overlap of managerial positions – especially middle management – increase profitability. Combination of brand names – may further reduce marketing costs – increase profitability. Opens up a new market B2B for TDC – increase sales – increase profit (but not profit margin). However, also likely to increase costs, including the actual costs of the merger – reduce profitability (in the short run). Unlikely to increase profit by % by the end of 2024 – year almost over. Do not have information about the product portfolio of HL – likely to be some overlap which may reduce profitability. 2(d) • Objective to increase market share: HL is targeting the B2B market – opens new market opportunities for TDC beyond the B2C market. By focussing on a new target market, TDC is unlikely to increase market share – more likely to reduce market share (as market size increases. Reduces the level of competition within the soft drinks market. AO4 Evaluation Limited evaluation – unsupported judgement and/or a weak attempt at evaluative comment Developed evaluation – supported judgement and/or reasonable evaluative comment Developed evaluation in context – supported judgement in context and/or reasonable evaluative comment in context. • A judgement whether the planned merger with HL will enable TDC to achieve either or both objectives (reduce profit/profit margin and increase market share). Judgement must be linked to objectives and/or TDC’s specific objectives). • Evaluation of the likelihood of the merger reaching one of the objectives (over the other). • Elements that the evaluation/judgement might depend upon – external environment, economic conditions, competitive structure of the soft drinks market, timescale of the objectives, strategies already implemented by the Board of Directors, product portfolio of HL etc. Accept all valid responses. 2(d) Exemplars for awarding evaluation L1 (limited supporting L2 (developed supporting L3 (developed supporting evidence) evidence) evidence with context) Yes, the merger will help TDC Yes, the merger will help TDC Yes, the merger will help TDC achieve its objective achieve its objective by quickly achieve its objective by quickly increasing productive capacity increasing productive capacity enabling it to increase its sales. enabling it to increase its sales and market share. No, it won’t help TDC achieve its No, it won’t help TDC achieve its No, it won’t help TDC achieve its objective objective because the businesses objective of increasing market do not have the same target share because the businesses do market. not have the same target market. Whether the merger will help Whether the merger will help Whether the merger will help achieve the objectives depends on achieve the objectives depends on achieve the objectives depends on TDC having the finance to fund the TDC having the finance to fund the TDC having the finance to fund the merger. merger, such as the money to merger, such as the money to make some unnecessary make some unnecessary employees redundant. employees redundant, if the combined target market remains B2C, then some of HL’s sales employees might be redundant.

Question 20

Natalia’s Naturals (NN) NN is a small business owned by Natalia. NN produces and sells a range of natural skincare products. In 2020, Natal…

Accepted Answer

2(a)(i) Identify one internal stakeholder of a business. 1 AO1 Knowledge and understanding Indicative content Responses may include: • employees • owners • shareholders • managers • directors • investors Accept all valid responses. 2(a)(ii) Explain the term ‘distribution channels. 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 (max 1 mark), including: • stages/routes/path a good/service passes through to the final buyer/customer/consumer • how a product or service gets from the producer to the final customer/from supplier to consumer AO2 Application Explanation of distribution channels (max 1 mark), including: • can be direct/indirect/digital • help businesses access wider markets • efficient for getting products to customers • convenient for customers • reduce costs through specialisation • help gain brand recognition 2(a)(ii) Application for distribution channels (max 1 mark), including: • vary according to business type • business can use more than one channel such as selling through website and retail shop • examples of distribution channels such as: producer sells direct to the consumer involves intermediaries such as wholesalers/retailers/agents digital platforms/websites/apps/social media • example of a business distribution channel Accept all valid responses 2(b)(i) Refer to Table 2.1. Calculate the break-even level of output of the new face cream. 3 Indicative content formula: break-even output = fixed costs / selling price-variable costs (contribution per unit) (1) calculation of contribution per unit = $5 – $2 = $3 (1) calculation of output = 12 000/3 (1) = 4000 units Answer = 4000 (3) OFR applies 2(b)(ii) Explain one limitation to NN of break-even analysis. 3 AO1 Knowledge and understanding AO2 Application 1 mark 2 marks 2 marks Developed application of one relevant point to a business context. 1 mark 1 mark Knowledge of one relevant point is used to answer the Limited application of one relevant point to a business question. context. 0 marks 0 marks No creditable response. No creditable response. Responses may include: AO1 Knowledge and understanding – Knowledge of a limitation (max 1 mark), including: • may be based on unrealistic assumptions • price can change • fixed costs can change • variable costs do not always stay the same • some costs semi-fixed/variable • sales not the same as output • hard to calculate for a single product in a business. • does not take account of changes in the external environment 2(b)(ii) Dis AO2 Application Explanation of a limitation (max 1 mark), including: • leads to inaccurate analysis • assumes all units produced are sold • example of changing fixed costs such as rent/salaries/investments • example of changing variable costs • example of semi-fixed/variable costs • example of difference between sales and output such as unsold inventory/returns/discounts • products may have different profit margins Context applied to a limitation (max 1 mark), including: • answer to 2(b)(i) (OFR) • price of $5 • sells other products that contribute to fixed costs • use of table 2.2 • rents workshop • competitive market Accept all valid response 2(c) Analyse one advantage and one disadvantage to NN of being a small business. 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 context. • Limited analysis that identifies question. • Application of one relevant connections between causes, • Knowledge of one relevant point to a business context. impacts and/or consequences point is used to answer the of two points. question. • Limited analysis that identifies 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. Annotate the advantage in the left-hand margin and the disadvantage in the right-hand margin. 2(c) Responses may include: AO1 Knowledge and understanding Knowledge of an advantage (max 1 mark), including: • more flexible and adaptable to changing customer needs or market conditions • more personal and responsive customer service • lower overheads and operating costs • easier to control and manage • able to target niche markets or segments Knowledge of a disadvantage (max 1 mark), including: • lower economies of scale • high unit costs. • low bargaining power • difficult to be competitive • may not be able to fulfil all orders • smaller customer base • fewer distribution channels • limited funding opportunities AO2 Application Max one for application to an advantage and Max one for application to a disadvantage • needs to sell 4000 units of new product to break even (OFR from 2(b)(i)) • high fixed costs of one product such as the new face cream $12 000 • niche market for natural ingredients in skincare • competitive market with large chains/established brands • can quickly adapt products for different skin types • hand-made products • Natalia manages all tasks/no employees • Natalia works long hours/stressed and exhausted 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. Advantages, including: • can be more flexible and adaptable as a small business – such as by being able to modify its products/prices/promotions/places quickly and easily according to customer feedback or market trends. • increase customer satisfaction – leading to customer loyalty/retention. • reduced fixed costs – more profit Disadvantages, including: • small market and high costs – lead to a lower profit margin • less potential for growth – limited access to capital • difficult to compete in the market – less brand recognition • limited sources of finance – difficult to attract investors/obtain loans Accept all valid responses 2(d) Evaluate whether outsourcing is the most suitable way to increase NN’s production capacity. 12 Level AO1 Knowledge AO2 Application AO3 Analysis AO4 Evaluation and understanding 2 marks 2 marks 6 marks 2 marks 3 5–6 marks Developed evaluation in context • A developed judgement/conclusion is made in the business context. • Developed evaluative comments which balance some key arguments in the business context. 2 2 marks 2 marks 2 marks 3–4 marks Developed Developed Developed analysis Developed evaluation knowledge of application of that identifies • A developed judgement/conclusion is relevant key term(s) relevant point(s) to connections made. and/or factor(s) is the business between causes, • Developed evaluative comments used to answer the context. impacts and/or which balance some key arguments. question. consequences. 1 1 mark 1 mark 1 mark 1–2 marks Limited knowledge Limited application Limited analysis Limited evaluation of relevant key of relevant point(s) that identifies • A judgement/conclusion is made with term(s) and/or to the business connections limited supporting comment/evidence. factor(s) is used to context. between causes, • An attempt is made to balance the answer the question. impacts and/or arguments. consequences. 0 0 marks 0 marks 0 marks 0 marks No creditable No creditable No creditable No creditable response. response. response. response. 2(d) Responses may include: AO1 Knowledge and understanding – of outsourcing (max 2 s), including: • the process of contracting out a business activity or function to another business/organisation • pay other businesses to take on some tasks • can help reduce unit costs • a business can concentrate on what it does best • can reduce risks • specialists skilled in function • specialist facilities AO2 Application Limited application applies knowledge of outsourcing to NN once. Developed application + applies knowledge of outsourcing to NN twice. • growing demand for its products • small business • Natalia works long hours/stressed and exhausted • NN’s values/standards • Natalia’s passion and satisfaction as an entrepreneur • competitive market • loyal customer base • narrow distribution channels • organic ingredients • natural, handmade products • local suppliers • small, rented workshop • answer to 2(b)(i), required output/sales to break-even 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 or a two-sided analysis. Arguments for outsourcing: • outsourcing allows a business to scale up production – no need to invest in larger premises or equipment. • would free up time to focus on other tasks – like product development/marketing. • external manufacturers may have better equipment and processes – leading to improved efficiency/product consistency. • this could enhance reputation – supporting growth/sales Arguments against outsourcing: • could compromise product quality – resulting on dissatisfied customers • customers may perceive outsourced products as less personal – reducing demand • may conflict with values – especially if the external firm does not share the same environmental standards. • may involve high initial costs or long-term contracts- risky for a small business with limited financial resources. 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. Outsourcing could help NN expand production and reduce Natalia’s workload, but it also poses risks to quality, brand identity, and cost control. A hybrid approach may be more suitable – Natalia could outsource part of the production while maintaining control over key processes. This would allow NN to grow sustainably while preserving its unique brand values. Other points might include: • depends on various factors – such as her objectives, resources, capabilities, market conditions • judgement over the most important/influential factor affecting growth of NN • elements that the judgement could depend upon, such as losing control over the quality and consistency of the products, compromising on the natural and organic ingredients used in the products, or damaging the reputation and image of NN • judgement on the implications for cost and NN’s ability to compete with big brands • weighing up of the factors and their relative influence on NN’s options Accept all valid responses

Question	Answer	Marks	From
1	see sheet	30	9609/22 Feb/March 2017
2	see sheet	30	9609/22 Oct/Nov 2017
3	see sheet	30	9609/23 Oct/Nov 2018
4	see sheet	30	9609/22 Feb/March 2019
5	see sheet	30	9609/21 May/June 2019
6	see sheet	30	9609/23 Oct/Nov 2019
7	see sheet	30	9609/21 May/June 2020
8	see sheet	30	9609/23 May/June 2020
9	see sheet	30	9609/22 Oct/Nov 2020
10	see sheet	30	9609/23 Oct/Nov 2020
11	see sheet	30	9609/22 Feb/March 2021
12	see sheet	30	9609/23 May/June 2021
13	see sheet	30	9609/21 May/June 2022
14	see sheet	30	9609/23 May/June 2022
15	see sheet	30	9609/23 Oct/Nov 2022
16	see sheet	30	9609/22 Feb/March 2023
17	see sheet	30	9609/23 May/June 2023
18	see sheet	30	9609/22 Oct/Nov 2024
19	see sheet	30	9609/22 Oct/Nov 2024
20	see sheet	30	9609/21 Oct/Nov 2025

The marketing mix — Paper 2 · A Level Business (for first examination in 2016) 9609

Questions20 pages

Mark scheme20 answers

Another paper, or another topic

Questions as text

Q1 · Clean and Tidy (CT) CT is an employee-owned business that specialises in cleaning homes 9609/22 Feb/March 2017

Q2 · Nearly New (NN) NN sells second-hand computers 9609/22 Oct/Nov 2017

Q3 · Ontime Taxis (OT) OT is a taxi business 9609/23 Oct/Nov 2018

Q4 · Sadiq’s Social Restaurant (SSR) SSR is a small social enterprise located in a low-income… 9609/22 Feb/March 2019

Q5 · Planet Internet (PI) PI is a public limited company 9609/21 May/June 2019

Q6 · U-LEARN (UL) Nadia graduated, last year, with a degree in business management 9609/23 Oct/Nov 2019

Q7 · Hannah’s Handbags (HH) Hannah started HH six years ago 9609/21 May/June 2020

Q8 · Super Heroes (SH) SH is a leisure (theme) park aimed at 10–18 year olds 9609/23 May/June 2020

Q9 · Gemini Theatre (GT) GT is a private limited company fully owned by the Gemini family 9609/22 Oct/Nov 2020

Q10 · Braid Runner (BR) Lewis is a hairdresser 9609/23 Oct/Nov 2020

Q11 · Flora’s Fitness (FF) Flora is a self employed personal trainer and she trades as Flora’s… 9609/22 Feb/March 2021

Q12 · Belted Up (BU) Belted Up (BU) is a manufacturer of hand-made leather belts for clothing 9609/23 May/June 2021

Q13 · Priya’s Bookshop (PB) Priya lives in town R which is situated in beautiful countryside… 9609/21 May/June 2022

Q14 · Child Play (CP) Su is a sole trader who started a business called CP which operates a… 9609/23 May/June 2022

Q15 · Pop-up Movies (PM) PM is a private limited company that was set up five years ago 9609/23 Oct/Nov 2022

Q16 · Wedding Gifts (WG) WG is owned by Tomas who is a sole trader 9609/22 Feb/March 2023

Q17 · Fretter’s Music (FM) FM is a private limited company based in country Z 9609/23 May/June 2023

Q18 · Pot Plants (PP) PP is a private limited company that grows and sells plants in pots 9609/22 Oct/Nov 2024

Q19 · The Drink Company (TDC) TDC is a multinational carbonated drinks manufacturer with… 9609/22 Oct/Nov 2024

Q20 · Natalia’s Naturals (NN) NN is a small business owned by Natalia 9609/21 Oct/Nov 2025