Marketing analysis — 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

Perfik Plumbing (PP) PP is a plumbing business owned and managed by Navpreet. She set up PP as a sole trader three years ago when she quali…

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2(a)(i) Define the term ‘unique selling point (USP)’ (line 6). 2 Knowledge and Application Marks A correct definition 2 A partially correct definition 1 No creditable content 0 • A unique selling point is something that makes a product stand out from the competitors, such as a phone with a new feature that no other phones have. • It is a feature that none of the other businesses have and means the product can be sold for a higher price. 2(a)(ii) Briefly explain the term ‘internal growth’ (line 18). 3 Award one mark for each point of explanation: C Example or some other way of showing good understanding, 1 mark e.g. also known as organic growth B An idea of ‘growth’ – i.e. the increase in size of a business 1 mark A An idea of ‘internal’ – i.e. through the reinvestment of profits. 1 mark Increasing sales/stores/outlets Exemplar: Internal growth is when a business get larger through the use of retained profit. This is usually a slower way to grown compared to external growth. 2(b)(i) Refer to Table 2. Calculate the price elasticity of demand if Navpreet 3 changes her price from $24 to $30 per hour. Rationale Marks Correct calculation of the PED (no minus sign required) with or 3 marks without correct working Correct formula (may be implied through the use of figures) and 2 marks correct calculation of % change in price and correct calculation of % change in QD Correct formula or correct calculation of % change in price or 1 mark correct calculation of % change in QD No creditable content 0 marks Formula: % change in QD % change in P % change in QD = (–)20% % change in P = 25% PED = (–)0.8 Note: an inverted formula is one error repeated as long as there is working to support the answer 2(b)(ii) Explain one way in which PP could make use of price elasticity of 3 demand calculations. Level Knowledge and Application Marks 2 Explanation of one way PED calculations could be 3 (APPAPP) useful in context 2 (APP) Identification of one way PED calculations could be 2 useful in context 1 (K) Identification of one way PED calculations could be 1 useful 0 No creditable content 0 Answers could include: • Navpreet see that plumbing services are price inelastic. • Navpreet should increase her price – she may make more profit if she increases her prices. • Price is obviously not the most important factor when customers purchase plumbing services. • The inelastic response may be due to Navpreet’s USP. • $24 to $30 brings in same amount of revenue (but will probably increase profit. $30 to $36 increases revenue (and presumably profit). 2(c) Analyse one advantage and one disadvantage to Navpreet of taking out a 8 mortgage on her own home to finance PP’s expansion. Knowledge and Level Marks Analysis (4 marks) Marks Application (4 marks) Good analysis of one advantage AND one disadvantage to 4 Navpreet of taking out a mortgage to finance Shows understanding expansion in context of taking out a 2 3–4 mortgage to finance Good analysis of one expansion in context advantage OR one disadvantage to 3 Navpreet of taking out a mortgage to finance expansion in context Limited analysis of one Shows knowledge of advantage AND one mortgages and 2 disadvantage of a 2 expansion mortgage as a source of finance 1 Limited analysis of one Shows knowledge of advantage OR one sources of finance or 1 disadvantage of a 1 expansion mortgage as a source of finance Limited analysis in context: Marks limited to 4+2=6 Annotate advantages on the left and disadvantages on the right Analysis should be about the use of a mortgage NOT expansion Answers could include: Advantages • Would allow Navpreet to retain control of PP and raise sufficient finance for the lease • Long term source of finance so would allow Navpreet to repay the majority when the new shop is making a profit • Relatively (compared to loans) low rate of interest, would reduce repayment costs. Disadvantages • Navpreet may lose her house if she is unable to pay back the mortgage with earnings from the new shop • The bank may not allow Navpreet to take out a mortgage for the amount required • Navpreet must pay interest on the mortgage and she does not know if the new shop will be successful. 2(d) Evaluate promotional methods that PP could use to grow in the future. 11 Knowledge and Analysis and Evaluation Marks Marks Application (4 marks) (7 marks) Justified evaluation based on 7 argument(s) in context Developed evaluation based 6 on argument(s) in context An evaluative statement based on arguments in 5 context Shows understanding of Argument based on TWO TWO promotional 4 promotional methods in 4 methods in context context Shows understanding of Argument based on ONE ONE promotional method 3 promotional method in 3 in context context Shows knowledge of Limited analysis of TWO TWO promotional 2 2 promotional methods methods Shows knowledge of Limited analysis of ONE 1 1 ONE promotional method promotional method No creditable content Allow above and below the line as methods Answers could include: Above the line methods • Advertising – Plumbing is likely to remain a local business so national advertising is likely to cost too much and be inappropriate. Local TV, radio, newspapers and magazines may be appropriate and could be targeted to the appropriate market segments. Below the line methods • Word of mouth – Navpreet has been using this, but unpredictable and unlikely to help further growth • Sponsorship – Navpreet could sponsor a local team/programme etc.. May allow PP to become a more well-known brand • Direct mailing/Leaflets – relatively cheap and puts the contact details for Navpreet into potential customers homes for when needed. • Price promotions – would need to be communicated (perhaps through new shop if it goes ahead). • New shop could be a form of promotion – high street signage, repeat customers etc« • Promotional pricing – sales, discounts etc. 2(d) Branding • Navpreet has a USP and could build on this (perhaps with new shop) to make PP a household brand. Nature of the service is that it is not a day to day product, so a brand needs to be known for when it is needed. Packaging • Only appropriate for products sold through the shop. Could cross advertise using packaging.

Question 3

Clifford’s Supermarkets (CS) CS owns 28 supermarkets which sell food and non-food products. Each CS supermarket has a large product portfol…

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Question Answer Marks 1(a)(i) Define the term ‘cash flow’ (line 10). 2 Knowledge Marks A correct definition 2 A partial, vague or unfocused definition 1 No creditable content 0 Content The transfer/movement of money in and out of the business Exemplar Rationale Mark The transfer/movement of money in All areas covered 2 and out of the business The transfer/receiving of money in of Only one direction covered – 1 the business defining cash inflow The transfer/spending of money Only one direction covered – 1 within/out of a business defining cash outflow The movement of money/cash within No reference to direction (in 1 a business and out) The money made from selling goods No creditable content 0 1(a)(ii) Briefly explain the term ‘product portfolio’ (line 2). 3 Award one mark for each point of explanation: Knowledge Marks Example or some other way of showing good C 1 understanding B Sold by a business 1 A Range/catalogue of products/services 1 Content A product portfolio is the range of goods and services offered by a business. The portfolio of products that business sells can be analysed using the product life cycle. Exemplar Rationale Marks The range of goods and services sold by a business which can be used to All three elements met 3 analyse the best-selling products The variety of products the company No C mark 2 has to offer for the people The amount of different products a Amount is an oblique 2 business sells reference to range What the company uses to keep track Bod, inferring ‘sold’ by a 1 of all of its products business The data of a product including price, No creditable content 0 opinion, etc. 1(b)(i) Using Table 1 and any other relevant data, calculate the price elasticity of demand 4 for bottled water when the price was reduced. Rationale Marks Correct answer with or without correct working (minus sign not 4 required) Correct calculation of % change in QD AND % change in P 3 Formula AND calculation of both actual changes OR correct 2 calculation of % change in QD OR % change in P Formulae OR correct calculation of both actual changes 1 No creditable content 0 Content % changeinQD Formula: % changeinP 40000 − 20000 20000 = × 100 20000 20000 QD = = 100% $0.63 − 20000 $0.27 = × 100 $0.90 $0.90 P = = –30% 100% −30% = –3.33 Answer = –3.33 Common incorrect answers Answer Rationale Marks Correct final answer, no working (–)3.33 4 needed Correct answer, ignore minus, no 3 4 recurring needed 100 and 30 and wrong % change P over % change QD (wrong 3 final answer (0.3) way round) Formula and 0.27 and Formula and correct calculation of both 2 20 000 actual figures Correct calculation of both actual 0.27 and 20 000 1 figures 0.9 – 0.63 = 0.27 Calculation of only 1 actual figure 0 1(b)(ii) Explain how your answer to 1(b)(i) could be used by CS. 2 Level Knowledge and Application Marks 2 (APP) Explanation of a use of the answer to 1(b)(i) in context 2 1 (K) Identification of a use of PED 1 0 No creditable content 0 Note: Correct use of an incorrect answer to 1(b)(i) should be fully rewarded (own figure rule – OFR) Content • PED is elastic so VC should gain more revenue from the sales discount • VC should use more sales discount promotions because it shows an elastic response ARA and OFR Answer How it might be used The sales discount brought in less revenue but increased 0 to (–)1 – Inelastic sales The sales discount has not changed revenue but increased (–)1 – Unit elasticity sales The sakes discount brought in more revenue and increased (–)1 plus (elastic) sales 1(c) Using Table 2 and any other data, recommend which supermarket CS should close. 11 Justify your recommendation. Knowledge and Analysis and Evaluation Marks Marks Application (4 marks) (7 marks) A justified recommendation based on a developed argument on the 7 closure of both supermarkets A developed recommendation based on a developed argument 6 on the closure of both supermarkets Shows understanding of A basic recommendation/ the factors affecting judgement based on a developed 4 5 closure of supermarket A argument on the closure of both and supermarket B supermarkets Shows understanding of Developed argument based on the the factors affecting 3 closure of supermarket A and 4 closure of supermarket A supermarket B or supermarket B Shows knowledge of two Developed argument based on the or more reasons for 2 closure of supermarket A or 3 business closure supermarket B Limited analysis of supermarket A 2 Shows knowledge of one and supermarket B reason for business 1 Limited analysis of supermarket A closure 1 or supermarket B No creditable content 0 1(c) Content: 11 Supermarket A Pro Con • Higher Revenue • Higher rent • Higher Population – bigger • Higher unemployment – lower customer base level of average income? • Higher unemployment – lower • Making a loss employment odds? • Less established so easier to • Trend is that profit is increasing – close? will this continue? • Has it been given enough time to establish? Supermarket B Pro Con • Lower rent • Lower revenue • Lower unemployment – higher • Lower population – smaller level of average income? customer base • Making a profit • Lower unemployment – higher • More established – brand level of average income? recognition in the area • Trend is that profit is decreasing – will this continue? • Been open longer – is it possible to ‘turn it around’. An example of how an answer could develop and how it should be annotated. K APP AN ANAN EVAL However the larger CS should choose local population SM A (Basic Supermarket This could means there might recommendation) A’s rent is lead to worse be more long term $150 000 cash flow in potential to increase because it has higher than Supermarket revenue and more potential to Supermarket A balance out cash increase revenue B (APP) (AN – LHS) Low rent flow in the future in the longer term is an (DEV – LHS) (Developed important recommendation) Supermarket The lower indicator A’s rent of local (K) however it $400 000 is population Which means that it depends on $150 000 means that is never likely to be whether SM B’s higher than there is less as profitable as profit continue to Supermarket chance of Supermarket A fall B’s rent of increasing (DEV – RHS) (Justified $250 000 revenue recommendation) (APP APP) (AN – RHS) 1(d) Analyse how the closure of the supermarket that you have recommended in your 8 answer to 1(c) could affect two stakeholders of SC. Knowledge and Analysis Level Marks Marks Application (4 marks) (4 marks) Shows understanding of Developed analysis of the effect of the closure the closure of the 2b 4 4 on two stakeholders of supermarket on two CS stakeholders of CS Developed analysis of Shows understanding of the effect of the closure 2a the effect of the closure 3 3 of the supermarket on on one stakeholder of CS one stakeholder of CS Shows knowledge of and gives one or more Limited analysis of the 1b stakeholder examples 2 effect of closure on two 2 OR two examples of stakeholders stakeholders Shows knowledge of Limited analysis of the stakeholders (definition) 1a 1 effect of closure on one 1 OR one example of a stakeholder stakeholder 0 No creditable content 0 Content Customers – May have to go to another supermarket, or travel further to use CS Employees – those made redundant in the closed supermarket may be unemployed and have lower incomes, or may be transferred to another supermarket. Those who are not made redundant (in other supermarket) may be more motivated (if they feel lucky to be still working) less motivated (if they worry they are next). Owners – may have less profit as there are high redundancy costs. May eventually have higher profits as the business is more efficient. Managers – may lose their job or be transferred to another supermarket Banks/lenders – may worry about the future of CS and not lend for any future ventures Local community – increased unemployment in area of closed supermarket, lower average income, less choice of supermarket Government – increased unemployment, lower income tax revenue. ARA 1(d) 8 Examples of Examples of application/ Examples of possible analysis stakeholders context Customers Local customers will have May choose an alternative supermarket to travel further to get to a → which leads to increased travel time supermarket Employees Because of high May struggle to find another job → unemployment in the area Lead to a lower quality of life → affect the ability to look after their family/pay rent → lead to less emphasis on children’s education Local Supermarkets employ a lot Less tax paid → lowers the overall government/ of staff amount available for community projects council → increases taxes or reduction in services → affects the community negatively Suppliers Of bottled water Reduction in demand → increase in wastage → reduction in employees needed → increased unemployment in the local area Stating ‘employees of supermarket A’ is not enough for app – has to be linked to e.g. high levels of unemployment, etc.

Question 4

Veg Cans (VC) VC is a public limited company which produces canned vegetables. VC is supplied with fresh vegetables by 20 farms. VC process…

Accepted Answer

2(a)(i) Define the term ‘retained earnings’ (line 15). 2 Knowledge Marks A correct definition 2 A partial, vague or unfocused definition 1 No creditable content 0 Content A correct definition will include: • An idea that money has been kept by a business • An idea that it is profit Exemplar Rationale Marks The money remaining in the business Both elements 2 after it subtracts its expenses No idea of profit/earnings The money kept by a business 1 element Idea of keeping within the Earnings set aside for a later day 1 business (earnings taut) The profit made by the business An idea of profit 1 The money that the business owner To vague 0 saved 2(a)(ii) Briefly explain the term ‘public limited company’ (line 1) 3 Award one mark for each point of explanation: Knowledge Marks C Example or some other way of showing good 1 understanding e.g. Published accounts, LL, etc. B To the general public/through stock exchange/ 1 A Has shareholders/can sell shares 1 Content A public limited company has shareholders who can purchase shares through the stock exchange. It also has limited liability, continuity and a separate legal identify. Exemplar Rationale Marks Owned by shareholders with limited 3 liability and bought through the stock All points met exchange A PLC is a large company that sells 2 A and B shares to the public. Has shareholders and has limited 2 A and C liability Is owned by the government, has A and C, ignore the 2 shareholders and had limited liability incorrect govt. reference Has shareholders A only 1 Owned by the government Wrong 0 Is a large company Too vague 0 2(b)(i) Calculate VC’s working capital. 2 Rationale Marks Correct answer with or without working 2 Correct use of figures/formula 1 No creditable content 0 Content Current assets – current liabilities $5m – $4m = $1m Common answers Answer Rationale Marks $1m (with or without $) Correct answer 2 $5m – $4m = $1m Correct answer 2 5 – 4 = 1 No need for $ or M 2 $5m – $4m = $6m Correct use but wrong answer 1 Current assets – current liabilities Correct formula 1 $5m + $4m = $6M Incorrect use of figures 0 4/5 × 100 = 0.1 Incorrect formula 0 $4m – $5M = –$1M Incorrect formula 0 2(b)(ii) Explain two ways in which VC could improve its working capital. 4 Level Knowledge and Application Marks 2b (APP + Explanation of two ways to improve working capital in 4 APP) context 2a (APP) Explanation of one way to improve working capital in 3 context 1b (KK) Identification of two ways to improve working capital 1 1a (K) Identification of one way to improve working capital 1 0 No creditable content 0 Content Has to refer specifically to a current asset or a current liability (less than 12 months) Increase current assets: • Increase cash/money – retain more profit, sell fixed assets, sell shares, negotiate discounts, find cheaper suppliers etc. • Increase debtors – only if they are new sales that would not have been cash sales • Increase inventory – again only if this does not have a detrimental effect on cash at the same time Decrease current liabilities: • Replace short term debt (overdraft and creditors for example) with long term debt – will not improve WC if it is paying debt off with cash Possible context (APP) • Reduction of Current liabilities from $4m • Increase in Current assets from $5m • Increase their stock of veg/cans • Decrease their trade receivables (debtors) from customers/food retailers • Increase their trade payables (creditors) from suppliers of veg/cans 2(c) Analyse two methods of selection VC could use when choosing a new manager for 8 the factory. Knowledge and Analysis Level Marks Marks Application (4 marks) (4 marks) Shows understanding of Developed analysis of how VC could use two or 2b 4 two method of selection 4 more methods of in context selection Shows understanding of Developed analysis of 2a how VC could use one 3 one method of selection 3 method of selection in context Shows knowledge of two Limited analysis of two 1b or more methods of 2 or more methods of 2 selection selection Shows knowledge of one Limited analysis of one 1a 1 1 method of selection method of selection 0 No creditable content 0 Content • CV/application forms – look for experience in the industry, advantages and disadvantaged of using CVs. All on paper. Does not bring the candidate to life and show motivation or finance skills • Interviews – ask questions that shows knowledge and how the applicant would deal with situations e.g., employee relations • Tests – e.g., role play could be used as part of the selection process. This would have good advantages for VC – can see who has the best inventory management and finance skills • Trial period (probation) before formalizing any job offer. Advantages and disadvantages of this. ARA Examples of Examples of Examples of possible analysis methods application/context Minimises the number of CV/application Identify relevant experience applicants to be interviewed to forms of inventory management those who identify skills Allows for the selection of Ask questions relating to Interviews managers who can explain employee management problems or situations Work based tests of Can select manager with the best Tests inventory management and demonstrable skills which finance skills reduces mistakes Ensures that the manager isn’t Trial period Trial as factory manager exaggerating the truth and can do his job 2(d) Evaluate the usefulness of the product life cycle to VC when making marketing 11 decisions. Knowledge and Analysis and Evaluation Marks Marks Application (4 marks) (7 marks) A justified evaluation based on a developed argument of one or 7 more uses of the Product Life Cycle in context A developed evaluation based on a developed argument of one or 6 more uses of the Product Life Cycle in context A basic evaluation based on a developed argument of one or 5 more uses of the Product Life Cycle in context Shows knowledge of the Developed argument of two or product life cycle AND 4 more uses of the product life cycle 4 marketing decisions in in context context Shows knowledge of the product life cycle OR Developed argument of one use of 3 3 marketing decisions in the product life cycle in context context Shows knowledge of the Limited analysis of two or more product life cycle AND 2 2 uses of the product life cycle marketing decisions Shows knowledge of the Limited analysis of one use of the product life cycle OR 1 1 product life cycle marketing decisions No creditable content 0 Note: Full marks can be gained from only ONE use of the product life cycle; two DEV’s must still be awarded (pros and cons) 2(d) Content 11 • Can identify the varieties which may require extension strategies (i.e. develop product) • Can identify varieties which should be discontinued (in in decline) • Can identify where promotional spending should be – i.e. on varieties in growth stage • Can help to know which pricing strategies to use • Can help to know which distribution channels to use • Can help to introduce the new frozen veg into the market • Can help to manage a large portfolio of varieties/products An example of how an answer could develop and how it should be annotated. K APP AN ANAN EVAL Could The product lifecycle is identify Which could Which could very important for VC canned then be influence (Basic vegetables reformulated promotional recommendation) in their or rebranded activities Product mature/ to extend and because it means they lifecycle is decline their life spending can manage their the stages phase product lines and from birth/ maximise revenue invention (Developed Which could to death/ Can recommendation) Which may minimise decline manage a result in a the product large however it depends on reduction in range and portfolio of the quality of the product reduce canned information gathered duplication inventory products (Justified costs recommendation)

Question 5

Too Tasty (TT) TT is a brand of vegetable chips (crisps) owned by a large public limited company. The vegetables are thinly sliced, cooked,…

Accepted Answer

2(a)(i) Define the term ‘cash flow’ (line 21). 2 Knowledge Marks A correct definition 2 A partial, vague or unfocused definition 1 No creditable content 0 Content The movement of money (1) in and out of a business (1). Exemplar Mark Rationale The transfer/movement of money in and 2 All areas covered out of the business The receiving of money in to the 1 Only one direction business covered – defining cash inflow The spending of money within/out of a 1 Only one direction business covered – defining cash outflow The movement of money/cash within a 1 No reference to business direction (in and out) A businesses flow of cash 0 Tautological 2(a)(ii) Explain the term ‘brand’ (line 1). 3 Award one mark for each point of explanation: Rationale Marks C Example or some other way of showing good 1 understanding B An explanation that it distinguishes from competition 1 (unique) A An explanation of name/logo/design/feature etc. 1 Content A brand is a name, term, design, symbol, or other feature that distinguishes an organisation or product from its rivals in the eyes of the customer. Brands are used in business, marketing, and advertising. ARA Exemplar Mark Rationale A brand is the name (A) or logo that 3 All three aspects differentiates a product or service (B) from the competitors, like McDonalds golden arches (C) A brand, like Coke (C), helps a business 3 All three aspects distinguish itself (B) from competitors because people know to look out for the logo (A) A unique (B) feature (A) that is used to 3 All three aspects advertise a product (C) A logo (A) that makes a business unique 2 A and B marks (C) Something about a business that makes 2 Do not reward TT as it stand out (B) such as a name (A) like an example since Too Tasty we tell them it is a brand in the data (ie REP) A brand is a big business like Pepsi (C) 1 C mark as it is an example 2(b)(i) Refer to Table 2.1. Calculate the effect of a price increase to $1.10 on 3 the level of sales of the carrot variety of chips. Rationale Marks Correct answer with or without correct working or m 3 Correct calculation of percentage change in QD (–15%) 2 Formula* or correct calculation of percentage change in P (10%) 1 No creditable content 0 *Formula can be implied from the use of numbers Content % change in QD = PED % change in P % change in QD = − 1.5 10% So % change in QD = –15% So, change in QD = 2.55m units (a decrease of 0.45m units) – allow either 2(b)(i) OFR* Answer Mark Rationale –0.45 3 A correct answer Decrease of 0.45 (the change in QD)– working not required 2.55 3 Also a correct answer (the total QD after the price change) – working not required 0.45 2 Calculation correct but not identified the decrease. Allow, even without working (Change of) 15% 2 Correctly calculated –15% the percentage change, but not the change in level of sales. Allow, even without working $0.10 1 Correctly calculated × 100 = 10% the change in price $1 *OFR means the use of the own figure rule – this aims to reward a candidate for the stages of a calculation that are correct, even if an earlier stage or figure used is incorrect. An early mistake, for example, would create all following calculations to have wrong answers, but these are still rewardable (if correct when using a candidate’s own figures) Therefore the candidate cannot gain marks for the stage that was incorrect, but can gain all the subsequent marks 2(b)(ii) Explain one way in which the price elasticity of demand figures may be 3 useful to TT. Level Knowledge and Application Marks 2b (APP) Explanation of one use of PED figures in context 3 2a (K+K) Explanation of one use of PED figures 2 1a (K) Identification of one use of PED figures 1 0 No creditable content 0 Content Uses: • To predict the effect of price changes • To predict changes in revenue/profit • To decide how to change/set a price • To understand the effects of a sale/promotional pricing Context may include: • Should not increase the price of carrot or potato varieties – will lose revenue –could decrease (both PED elastic) • Should increase the price of beetroot and parsnip varieties – will gain revenue – should not decrease (both PED inelastic) ARA and OFR* Example of how responses should be marked Identification of a Explanation of a Explanation of a use (1 mark) disadvantage (2 disadvantage in marks) context (3 marks) To see what might If TT raises price and it For example the happen when prices is inelastic then they beetroot crisps are change (K) will gain more revenue inelastic (APP) (K) PED can inform TT An answer of more As seen with the carrot about the best price to than 1 means that they crisps (APP) set for their products should not increase (K) the price, but should decrease it (K) The carrot crisps are elastic, so the figures suggest they should not increase the price or they may lose revenue (APP) 2(b)(ii) *OFR in this case is if a candidate has used an incorrect answer from 2(b)(i) – if their explanation is correct using their own figures then ALL marks can be rewarded in this question. 2(c) Analyse one method of primary market research and one source of 8 secondary market research which the Marketing Director could use to help develop a new variety of vegetable chip. Level Knowledge and Marks Analysis (4 marks) Marks Application (4 marks) 2b Shows understanding 4 Developed analysis of 4 of one method of one method of primary and one primary and one source of secondary source of secondary market research in market research in context context 2a Shows understanding 3 Developed analysis of 3 of one method of one method of primary or one source primary or one source of secondary market of secondary market research in context research in context 1b Shows knowledge of 2 Limited analysis of 2 one method of one method of primary and one primary and one source of secondary source of secondary market research market research 1a Shows knowledge of 1 Limited analysis of 1 one method of one method of primary or one primary or one sources of secondary sources of secondary market research market research 0 No creditable content Note: Annotate marks for primary market research in the left -hand margin and secondary market research in the right-hand margin. 2(c) Content Primary methods: • Survey- could survey current customers about new varieties they might like • Questionnaires – Could ask about new possible varieties • Focus groups – ask a group to try the new varieties and give feedback on them • Observation – could observe what potential customers are buying from retailers – new varieties/flavours etc. • Testing – could hand out free samples for feedback Secondary sources: • Printed – trade magazines, research done by competitors • Paid for – from market research agencies, census etc. • Internet – demographics, new products in other markets etc. ARA A chain of analysis could come from an analysis of the benefits and costs of a method or source (See below). Example of a Examples of application/ Examples of possible method of context (APP) analysis (AN + DEV) primary market research (K) Questionnaire Asking parents about what Which could give TT varieties of chip their useful information about children like most. the new product so they can gain high sales (AN). However questionnaires are expensive to ask enough people to make them representative so this could increase TT’s costs (DEV) Example of a Examples of Examples of possible source of application/context analysis (AN + DEV) secondary (APP) market research (K) The internet To see what flavours of This would be a cheap vegetable chips TT’s way of finding out competition are selling secondary data which lowers the cost of the research (AN) however it will not tell TT about flavours which are in development so the research may be a waste of time (DEV) 2(c) Or a chain of analysis could come from the development of a benefit or a cost to TT (See below) Example of a Examples of application/ Examples of possible method of context (APP) analysis (AN + DEV) primary market research (K) Questionnaire Asking parents about what Which could give TT varieties of chip their useful information about children like most. the new product so they can gain high sales (AN) and make a bigger profit (DEV) Example of a Examples of Examples of possible source of application/context analysis (AN + DEV) secondary (APP) market research (K) The internet To see what flavours of This would be a cheap vegetable chips TT’s way of finding out competition are selling secondary data which lowers the cost of the research (AN) and therefore it is more likely that TT will be able to maintain their high profit margin (DEV) 2(d) Evaluate concerns that the factory manager might have about the joint 11 venture between TT and the supermarket group. Knowledge and Marks Analysis and Evaluation Marks Application (7 marks) (4 marks) Justified evaluation based on 7 argument in context Developed evaluation based on 6 argument in context An evaluative statement based 5 on argument in context Shows 4 Developed argument based on 4 understanding of two concerns/disadvantages of two concerns that the joint venture the factory manager might have about the joint venture Shows 3 Developed argument based on 3 understanding of one concern/disadvantage of one concern that the the joint venture factory manager might have about the joint venture Shows knowledge of 1–2 Limited analysis of two 2 joint ventures concerns/disadvantages of a joint venture Limited analysis of one 1 concern/disadvantage of a joint venture No creditable content 0 2(d) Note An answer that makes no reference to factory/operations concerns can only be awarded a maximum of 2+2, no matter how developed the argument is or whether it uses other (non-operations based) context Application (APP) marks are about applying the knowledge of a joint venture to the operations of the factory – the context can include: • On the production of chips • quality of chip production • TT use of flow production • TT’s specific production process (sliced, cooked, flavoured, packaged) • Different flavours produced each day • Capacity of factory – factory runs 24 hours a day, 5 days a week • Four flavours produced • New variety to be produced Content A joint venture involves two separate businesses working together but not becoming one business (ie it is not a merger or takeover) • Will the factory have capacity to produce the chips for the supermarket – currently running 24 hours a day, five days a week – would it require producing less TT branded chips? • Will the factory need to run at weekends – overtime payments? When would the machines be maintained/cleaned etc.? • Might the ‘own label’ chips damage the TT brand if people found out they were the same? • Would demand reduce for TT chips when the new supermarket chips are sold? • Will the supermarket continue to stock TT chips if the business does not agree to make the own label chips? • What will the profit margin be on the new chips? Would it make more profit to turn down the order and maintain the high profit margins? • Will this stop the new variety being produced and therefore jeopardise the expansion of the product portfolio? 2(d) ARA An example of how an answer could develop and how it should be annotated. K APP AN DEV EVAL TT will Which may This will And with a The biggest produce mean that increase lower profit concern is more crisps TT has to TT’s costs margin, TT likely to be for the open the (AN) may make a about supermarket factory for loss from having to to sell (K) six days a this joint open an week venture extra day instead of (DEV) each week five (APP) (EVAL) It may also Which may This might Which may which will mean that mean that lead to less damage mean more TT does not TT cannot sales in the TT’s profit strain on the concentrate produce the future (AN) (DEV) machinery as much on new variety (EVAL). it’s branded (APP) crisps However, in because the long they are term a making ones reduction in for joint profit could venture (K) be more of a concern, especially if it leads to the business shutting down (EVAL).

Question 6

Fuzz Buzz Ltd (FBL) FBL is a small private limited company with 10 shareholders. Its unique selling point is that its toys are handmade. Th…

Accepted Answer

2(a)(i) Define the term ‘unique selling point’ (line 1). 2 Knowledge and Application Marks A correct definition 2 A partial, vague or unfocused definition 1 No creditable content 0 Content • Different / differentiates about a business’s product / service • Factor or feature Exemplar Mark Rationale A factor that differentiates a product from 2 Full definition its competitors A feature that differentiates a product Implied 2 service competition A feature that sets you apart from 2 Full definition competitors No relation to A special feature of your product 1 competition No relation to Makes your product stand out 1 factor or feature 2(a)(ii) Explain the term ‘mass customisation’ (line 10) 3 Award one mark for each point of explanation: Example or some other way of showing good 1 mark C understanding, i.e. can involve the use of IT, low cost Pink solution to making etc. Understanding of ‘mass’, i.e. understanding of the use 1 mark B of production lines / flow production / assembly line Yellow etc. Understanding of customisation, i.e. the use of 1 mark A techniques to create differentiated products, unique Blue products, to customer orders etc. Note: the C mark is dependent on gaining both A and B marks first because otherwise a wrong understanding of mass customisation (e.g. mass production) could gain the majority of the marks. • Using production lines to make a variation in products. Using mass production techniques to produce differentiated products. • Can add value to a product by adding differences and customisation. • Make products unique to each customer but with low cost. Exemplar Mark Rationale Using a production line (B) to make differentiated products (A) often using 3 All three elements machinery (C) Where a business makes products which have are based on the individual customer requirements (A) but have been made on a 3 All three elements production line (B). This keeps the cost low for the business (C). Where lots of different types of products (A) 2 A and B mark are made using flow production (B). Making customised products for the A mark only – do customers which can be low cost. not allow the C mark unless both 1 A and B have been awarded (See NB) Making lots of products on a production line B mark only – which keeps the costs of the business low obvious confusion and means that the business can produce 1 with mass lots of products to sell production (See NB) 2(b)(i) Calculate the new quantity demanded of the Tommy Turner if FBL 4 increases the price by 10%. Rationale Marks Correct answer with or without correct working or units 4 Correct calculation of change in QD (24 000) with or without 3 direction Correct calculation of percentage change in QD (-20%) 2 Correct formula* 1 No creditable content 0 *Formula can be implied through the use of figures % change in QD = PED % change in P % change in QD = –2 10% So % change in QD = –20% So, change in QD = –24 000 units (a decrease of 24 000 units) –120 000 – 24 000 = 96 000 units Answer Mark Rationale 96 000 (no working) 4 Correct answer –96 000 3 One mistake 24 000 3 Calculation of change in QD –24 000 3 Calculation of change in QD –20% 2 Percentage change in QD Percentage change in QD (ignore lack 20% 2 of minus) Percentage change in QD (also –1/5 2 without –) % change in QD = PED 1 Correct formula % change in P 2(b)(ii) Explain one factor influencing the supply for the Tommy Turner. 2 Level Knowledge and Application Marks Explanation of a factor influencing supply in 2 (APP) 2 context 1a (K) Explanation of a factor influencing supply 1 0 No creditable content 0 Content may include: • Changing costs • Number of producers • Investment • Supply of a related good • Technology • Productivity • Taxes and subsidies • Weather • Availability of factors of production • Production time Context may include: • Capacity – FBL working at full capacity • Ability to invest – requires $100 000 • Productivity – can this be increased? ARA Example of how responses should be marked Explanation of a factor Explanation of a factor in context (1 mark) (2 marks) Productivity Tommy turners are hand made and labour-intensive work Availability of labour Highly skilled job 2(c) Analyse two methods FBL could use to extend the product life cycle of 8 the Tommy Turner. Knowledge and Analysis Level Marks Marks Application (4 marks) (4 marks) Shows understanding Developed analysis of of two methods to two methods to 4 4 extend the PLC in extend the PLC in context context 2 Shows understanding Developed analysis one method to extend 3 one method to extend 3 the PLC in context the PLC in context Shows knowledge of Limited analysis of two methods to extend 2 two methods to 2 the PLC extend the PLC 1 Shows knowledge of Limited analysis of one method to extend 1 one methods to 1 the PLC extend the PLC 0 No credible content Context / content Extension strategies extend the life of the product before it goes into decline may include: • Advertising – try to gain a new audience or remind the current audience • Extend range – add new designs / features to the current product e.g. other named characters (other than ‘Tommy Turner’) • Price reduction – more attractive to customers / favoured by Aninditad • Explore new markets – try selling abroad • New packaging – brightening up old packaging, or subtle changes such as changing the colour or font used or new name for the range 2(c) ARA Examples of Example of a Examples of possible application / context method (K) analysis (AN + DEV) (APP) Add new As it only spins could Parents could see this as an features (K) add animal sounds educational benefit (AN) to (APP) help their children recognise different animals by sound so more are likely to buy it (DEV) Suggest new The spinner could be A product in the maturity uses (K) marketed to an older age phase of the product life cycle group as a ‘stress has achieved peak growth reliever’ (APP) (AN) by marketing to older age groups (than 4–10 year olds) with a different use, such as stress relief, can help maintain or increase sales (DEV) 2(d) Discuss the likely impact on the morale and welfare of FBL’s 11 employees if supply of the Tommy Turner is increased. Knowledge and Analysis and Evaluation Marks Marks Application (4 marks) (7 marks) Justified evaluation based 7 on arguments in context Developed evaluation based on arguments in 6 context An evaluative statement based on arguments in 5 context Arguments (two-sided) based on the impact of an increase in supply on 4 FBL’s employees morale Shows understanding of and welfare staff morale and welfare in 3–4 context Argument (one-sided) based on the impact of an increase in supply on 3 FBL’s employees morale and welfare Limited analysis of the Shows knowledge of staff impact of an increase in 1–2 1–2 morale and welfare supply on employee’s morale and welfare No credible content 0 Employee morale and welfare would include job satisfaction, outlook, feelings of wellbeing, good work relationships, engaged / take pride in work, good workplace culture. One of the cornerstones of business which has been shown to have a direct effect on productivity. Low morale leads to reduced concentration, absenteeism, missed deadlines, fall in productivity, high staff turnover etc. 2(d) Context / content: Increased supply requires a production change to CAM, machinery rather than hand produced toys which would mean lower skilled work and could lead to a fall in morale. Also might change payment system. FB’s employees: • Take great pride in their work. • Very loyal to the company and their co-workers. • Most of the employees have been with the company for over 10 years. • Enjoy good relationships with all the directors. If morale falls employees might: • Look for other jobs • Find it hard to concentrate • Resent the directors for the change • Cause conflict with management and even co-workers • Produce less • Be absent more frequently • Lower quality of work Evaluation could include: • The fact that there are strong relationships within the company so employees could be persuaded that the change is good for all. • It’s possible that pay might increase. • Some employees might welcome learning new skills to operate the machinery. • The design team is still required so not as much change for them. • Management could consult and communicate benefits of change to employees so that they are comfortable with the changes. • Other toys might still be handmade. An example of how an answer could develop and how it should be annotated: 2(d) K APP AN Employee morale Employees at FBL are If employees feel job refers to job happy there as they satisfaction they will be satisfaction (K) and have worked for it for happy to work more welfare to a healthy 10 years / a long time hours to increase work environment (K) (APP) and take great supply (AN) and will pride in their work proud that they work (APP) for a successful firm (AN) Employees with low This might damage the Leading to conflict morale dislike their job existing good between workers and (K) and will lack relationship with the management (AN) and motivation to do well directors (APP) and employees may look (K) even between co- for jobs with workers who have competitors (AN) been loyal to each other (APP) 2(d) DEV EVAL FBL’s employees tare However, as there are highly skilled but if FBL good relationships introduces mass within the company the customisation their employees could be skills will no longer be persuaded that the required as the new positives of the change machinery will take outweigh the negatives over much of the (EVAL) and the production process increased profits could (DEV). They may be mean higher wages for happy that they will be the workers (EVAL) trained in other skills leading to an increase such as operating the in morale and feelings new machinery as this of job satisfaction will increase their skill (EVAL) set and provide greater job security (DEV) If the existing good Although the Tommy relationship between Turner may be employees and produced using mass directors is damaged, customisation there conflicts might occur may still be a need for which could disrupt other hand made toys production and reduce (EVAL) so the current output (DEV). Although employees could still not all employees are use their skills to make affected in the same these (EVAL) and new way, the design team employees could be are still needed to work recruited to work the on designs for future new machines so that products which could all current employees increase their job still enjoy their jobs satisfaction (DEV) (EVAL)

Question 7

UFilters (UF) UF is a public limited company selling to an industrial market. It manufactures air conditioning units. UF produces two sizes…

Accepted Answer

Question Answer Marks 1(a)(i) Define the term ‘industrial market’ (line 1). 2 Knowledge and Application Marks A correct definition 2 A partial, vague or unfocused definition 1 No creditable content 0 Answers could include: Consists of businesses that sell to other businesses (B2B). One business is the consumer and another business the supplier. Examples. 1(a)(ii) Explain the term ‘price elasticity of demand’ (line 24). 3 Knowledge and Application Marks Good explanation 2–3 Partial explanation/understanding 1 No creditable content 0 Answers could include: Measures the responsiveness of demand to a change in the price of a product. Can be elastic or inelastic. Formula or worked example. 1(b)(i) Refer to Table 1.1. Calculate the total revenue received by UF in 2019. 3 Correct answer. (3 marks) Right method but mistakes. (2 marks) Attempt (e.g. formula or identifies data). (1 mark) Answer $3 150 000 + $1 600 000 = $4 750 000 ($ not required) Formula TR = P × Q (1) Working $900 × 3500 = $3 150 000 (1) $2000 × 800 = $1 600 000 (1) 1(b)(ii) Explain one source of finance available to UF for purchasing new machinery. 3 Level Knowledge and Application Marks APAP Explanation of a source of finance in context 3 AP Identification of source of finance in context 2 K Identification of a source of finance 1 0 No creditable content 0 Context and content is likely to come from: • Any source of finance either external or internal for 1 mark but most likely share capital, leasing, bank loan, hire purchase Context likely to reflect UF is a plc so share capital or, because finance is required for a long-term asset – machinery - bank loan rather than overdraft, or leasing or hire purchase. 1(c) Recommend which of the two options in Table 1.2 UF should choose to 11 increase sales. Justify your recommendation. Knowledge and Analysis and Evaluation Marks Marks Application (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 the 4 Arguments (two sided) based 4 impact of each option on on of each option in context sales in context Shows understanding of the 3 Argument (one sided) based on 3 impact of one option on the advantages or sales in context disadvantages of one option in context Identifies two ways to 2 One piece of limited analysis of 2 increase sales the impact of two options on sales Identifies one way to 1 One piece of limited analysis of 1 increase sales one way to increase sales No creditable content 0 Context/content: Option 1 – reduce price • Customers might be happy as they complained about high prices, but will quality be compromised? • Price-inelastic demand will reduce revenue. If costs stay the same profits will fall so lower dividends for shareholders, possible redundancies if revenue falls. More price-competitive so could take business away from other firms but competitors may also reduce price and start a price war. Option 2 – PRP • Customer complaints about service so training would help address this issue but could be expensive. • Employees unhappy if monthly salary reduced but may be motivated to improve performance with PRP which would give them an increase of 15% in their monthly pay, but would targets be realistic? • If employees may resent the training or be unhappy with pay scheme so they may look for jobs with competitors taking their skills, experience and knowledge elsewhere. • Costs of training and PRP scheme will increase costs so decrease profits and potentially reduced dividends for shareholders. 1(d) Analyse two ways, other than the two options in Table 1.2, UF can improve 8 customer relations. Knowledge and Analysis Level Marks Marks Application (4 marks) (4 marks) 2 Shows understanding of 4 Developed analysis of two 4 two methods to improve methods to improve customer relationships customer relationships in in context context Shows understanding of 3 Developed analysis of one 3 one method to improve method to improve customer relationships customer relationships in in context context 1 Shows knowledge of 2 Limited analysis of two 2 two methods to improve methods to improve customer relationships customer relationships Shows knowledge of 1 Limited analysis of one 1 one method to improve method to improve customer relationships customer relationships No creditable content 0 Could choose any two of the 4Cs: Cost, Convenience, Communication, Customer solution Contextual analysis likely to come from: • Business to business so must be convenient to market and size appropriate to premises. • Are just two sizes appropriate for all premises? Maybe need another size? New product? • Responding to customer complaints on the website.

Question 8

Aashna’s Pies (AP) AP produces and sells high quality pies. Aashna set up AP five years ago when she spotted a gap in the market. AP is a p…

Accepted Answer

Question Answer Marks 1(a)(i) Define the term ‘shareholder’ (line 3). 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): • Owns part/a percentage • …of a company/limited liability business Exemplar Mark Rationale Owns a part of a limited 2 All elements met company Owns a percentage of a limited 2 All elements met liability business Owner of a limited company 1 Needs ‘PART’ owner Has share in/invests capital in 1 Shares is taut/all business a company structures require investment Control and ownership are not 0 Do not award for control the same thing 1(a)(ii) Explain what is meant by the term ‘flow production’ (line 16). 3 Award one mark for each point of explanation: Rationale Marks C Example or some other way of showing good 1 understanding B An understanding of it being a production process 1 A An understanding of flow 1 C based on A OR B Content Flow – a large number of standardised products / constantly produced Production process – the fact it is a process. 1(b)(i) Refer to Table 1.1. Calculate the total revenue gained from Vegetarian 3 Victory pies in 2019. Rationale Marks Correct answer with or without correct working or $ 3 Formula (can be implied) and correct calculation of 2019 3 sales Formula (can be implied) or correct calculation of 2019 1 sales No creditable content 0 Note: any relevant figure multiplied by the price implies the correct formula (i.e.5000 x $2.50) Content TR = Price × quantity 5000 – 10% = 4500 4500 × $2.50 = $11 250 Answer = $11 250 OFR Common answers Answer Mark Rationale 11 250 3 Correct answer – does not need $ (–) $1250 with 2 Worked out –10%, used the correct calculations formula but wrong final answer 1250 with no 0 Wrong answer calculations 1(b)(ii) Explain one way in which AP could use product portfolio analysis. 3 Level Knowledge and Application Marks 2b Explanation of a way AP could use product 3 portfolio analysis in context 2a Explanation of a way a business could use 2 product portfolio analysis 1 Identification of a way a business could use 1 product portfolio analysis 0 No creditable content 0 Content • To identify when to discontinue products – VV is in decline • To identify when to market products – FF is growing • To identify when to develop new products – what happens when FF reaches maturity? • To identify when to extend the PLC of products – MM or VV Examples Identification of Explanation Possible context a use Identify stage of Shows how well Such as meaty marvel in product life cycle the product is maturity doing Identify which So can plan a E.g. meaty marvel product is mature replacement 1(c) Analyse two economies of scale that AP might lose if the business 8 reduces the total number of pies produced. Knowledge and Analysis Level Application Marks Marks (4 marks) (4 marks) 2b Shows 4 Good analysis of 4 understanding of losing two (or more) two (or more) economies of scale in economies of scale context in context 2a Shows 3 Good analysis of 3 understanding of losing one economy one economy of of scale in context scale in context 1b Shows knowledge of 2 Limited analysis of 2 two (or more) two (or more) economies of scale economies of scale 1a Shows knowledge of 1 Limited analysis of 1 one economy of one economy of scale scale 0 No creditable content Content • Technical – capital intensive mass production • Specialisation/managerial – specialist workers make the fillings • Marketing – AP brand is growing in popularity • Purchasing – AP can bulk buy certain ingredients – pastry is shared across all pies and cheese is also used in FF • Financial – AP brand may make it easier/cheaper to fund any new product development/expansion Allow external economies of scale. 1(c) Example of an Examples of Examples of possible economy of application/context analysis (AN + DEV) scale (K) (APP) Specialisation Each filling e.g. VV Lose knowledge of flavour made by specialists profiles which may change the taste and lose custom Purchasing Vegetables for Miss out on bulk buy deals Vegetarian Victory which increases the variable costs of the pie 1(d) Recommend how AP could develop its products in the future. Justify 11 your recommendation. Knowledge and Marks Analysis and Evaluation Marks Application (4 marks) (7 marks) Justified recommendation 7 based on argument(s) in context Developed recommendation 6 based on argument(s) in context An evaluative statement/recommendation 5 based on argument(s) in context Shows understanding 4 Two or more arguments of two or more based on how AP could 4 elements of product develop its products in the development in context future Shows understanding 3 One argument based on how of one element of AP could develop its products 3 product development in in the future context Shows two or more Limited analysis of two or pieces of knowledge of 2 more impacts of product 2 product development development on a business Shows one piece of Limited analysis of one knowledge of product 1 impact of product 1 development development on a business No creditable content 0 1(d) Content • Reduce the meat in the MM to meet concerns over health risks. • Pies could be sold into sets of three pies to suit families. • Pies could be sold in variety packs so that it suits a family’s tastes and those who do not eat meat. • Could the pies be developed to have a longer ‘best before’ date or frozen to allow for a longer shelf life? • The price could be increased to allow for the development of a new product or to fund the redevelopment of an existing product. • The data suggests that the MM should be redeveloped to extend the PLC – could it have less meat to meet health concerns? • VV could be redeveloped now that it is in decline, to increase sales – or a new vegetarian product could be developed to replace the VV – importance of non-meat alternatives. Examples K APP AN DEV EVAL Longer Short BB Could be Improve Most shelf life date – eat stored for transport important within 2 longer economies of element is to days scale increase shelf life Increase As Attract new Increase as this number of consumers customer revenue/profits reduces vegetarian worried base wastage / pies about increases health range of risks of outlets, meat which leads to increased total sales

Question 9

Snappy Box (SB) SB is owned by Ralph who is a sole trader. The business prints photographs. Ralph has one shop on the main street of city D…

Accepted Answer

Question Answer Marks 1(a)(i) Define the term ‘fixed cost’ (line 19). 2 Knowledge Marks A correct definition 2 A partial, vague or unfocused definition 1 No creditable content 0 Indicative content AO1 Knowledge and understanding A cost that does not change – as output changes. Exemplar Marks Rationale Does not vary when the business 2 Both elements produces more covered It stays the same no matter how much 2 Both elements is produced covered Fixed costs do not change over time 1 One element – the point about fixed costs is that they do not change as output changes, not time They do not vary 1 One element Not linked to sales 1 One element – no idea of not changing but has the link to output Costs which are fixed 0 Do not reward ‘fixed’ as it is a tautology 1(a)(ii) Explain the term ‘profit margin’ (line 11). 3 Award one mark for each point of explanation: Rationale Marks C Application of a profit margin to a business through 1 an example or some other way of showing good understanding – i.e. a use of profit margins, or two different profit margins – gross, net, operating, etc. B Understanding of the concept of a profit margin (in 1 terms of a percentage or proportion) – assume knowledge of profit. A Understanding of profit. 1 Indicative content AO1 Knowledge and understanding • Profit – the difference between total revenue and total cost. • Profit margin – a profit margin is the difference between the revenue and costs / revenue minus costs expressed as a proportion of revenue / divided by revenue. A correct profit margin formula should be awarded the A and B marks. If the candidate gains the B mark, then it is assumed that they will also gain the A mark. AO2 Application Application of a profit margin, such as: • A use of a profit margin, e.g. used to determine/compare performance. • The comparison of two different profit margins. • A potential user of a profit margin, e.g. used by shareholders to see if they should invest, used by managers to make business decisions, etc. 1(a)(ii) Exemplar Mark Rationale Net profit/revenue x 100. It can be 3 A, B and C. If there used to compare business is knowledge of a performance profit margin, then assume the A mark It is the proportion of revenue that is 3 A, B and C profit. A 15% profit margin means that for every $1 of revenue, the business makes $0.15 profit Gross profit 2 A formula gains the (× 100) A and B marks. Revenue Could be expressed as a ratio, not percentage The proportion of revenue that is profit 2 Although there is not an explicit understanding of profit, if a candidate gains the B mark, then they also gain the A mark It is the difference between costs and 1 Understanding of revenue profit, but not the margin It is how much profit a business 0 No understanding of makes profit or the margin ARA 1(b)(i) Use Ralph’s estimate of the price elasticity of demand (line 10) to 3 calculate the percentage change in demand for printed photographs if the price is reduced by 10%. Rationale Marks Correct answer with or without correct working or % 3 Attempt made with correct use of figures 2 Formula 1 No creditable content 0 The formula can be assumed through an attempt using correct figures. Content % change in demand PED = OR % change in demand = PED × % change % change in price in price (1 mark) % change in demand –4 = OR % change in demand = –4 × –10% −10% (2 marks) –4 × –10% = (+) 40% (3 marks) OFR if an error is made earlier in the process. Common incorrect answers 1(b)(i) Answer Mark Rationale 40 (no working) 3 A correct answer. % sign is not required –10% × 4 2 The answer should not be negative, Change in demand = but this arises from only one error in –40% the use of figures. First mark for implied use of the formula. An error in the use of figures (4 instead of –4) and an OFR mark for the incorrect answer –40% (no working) 0 This is a wrong answer and with no working it cannot be rewarded −10% 2 A common mistake. The candidate = –4 has inverted the formula. There is an Demand attempt made with the correct figures, so 2 marks Change in demand = 2.5% 2.5% (no working) 0 If the candidate gives a wrong answer with no working to back it up, then award no marks $100 000 (no 0 An incorrect answer with no working working) to show how it was obtained OFR 1(b)(ii) Explain one way in which Ralph could use price elasticity of demand 3 when making pricing decisions. Level Knowledge and Application Marks 2b Explanation of one use of PED when making 3 (APP+AP pricing decisions in context P) 2a (APP) Identification of one use of PED when making 2 pricing decisions in context 1a (K) Identification of one use of PED 1 0 No creditable content 0 Do not reward knowledge of PED as it has been rewarded in the previous question. This question is about a use of PED. Also do not reward making pricing decisions, as this is in the question – there must be more (i.e. reducing price). Indicative content AO1 Knowledge and understanding Ways of using price elasticity of demand may include: • To know whether to increase or decrease the price to gain higher revenue. • To know whether to offer price discounts/promotions to gain more sales. • To understand if a business could survive/be profitable – could link to the break-even point. • To decide a pricing strategy. AO2 Application • Elasticity of -4 – an elastic response to price. • If Ralph decreases the price of photography printing by 10%, he may gain an increase in sales of 40% (OFR) – which means he makes more money/profit. • If Ralph increases the price by 10%, sales may fall by 40% (OFR) – which means he makes less money/profit. • Customers come into the SB shop – which means his estimate is likely to be more accurate. • Ralph’s main competition is online – which can change often, making his estimate less useful. Application (APP) is likely to come from the context, with developed application (APP+APP) from further use of that context. 1(b)(ii) Example of how responses should be marked. Identification of a Application Developed way (APP – 2 marks) application (K – 1 mark) (APP+APP – 3 marks) To see if he should In this case it has an which shows an elastic increase or decrease elasticity of -4 response the price To estimate the effect For a 10% fall, QD will which will make Ralph of a price drop change by 40% more money ARA 1(c) Analyse one advantage and one disadvantage to Ralph of introducing 8 job production. Level Knowledge and Marks Analysis (4 marks) Marks Application (4 marks) 2b Applies context to 4 Good analysis of 4 understanding of one advantage and one advantage and one disadvantage one disadvantage of introducing job of job production production in context 2a Applies context to 3 Good analysis of 3 understanding of one advantage or one advantage or one disadvantage one disadvantage of introducing job of job production production in context 1b Shows knowledge 2 Limited analysis of 2 of one advantage one advantage and and one one disadvantage disadvantage of job of introducing job production production 1a Shows knowledge 1 Limited analysis of 1 of one advantage one advantage or or one one disadvantage disadvantage of job of introducing job production production 0 No creditable content Annotate marks for the advantage in the left-hand margin and marks for the disadvantage in the right-hand margin. Indicative content AO1 Knowledge and understanding Knowledge of advantages may include: • high-quality • meets customer’s specific needs • greater job satisfaction • makes a unique product Knowledge of disadvantages may include: • high unit cost of production • labour/time intensive process • may require new equipment/training • may require job redesign 1(c) AO2 Application • SB currently uses batch production but based on individual customer photographs. • SB currently has a low-profit margin. • Idea to introduce framed individual photographs made by job production. • Frames can be made for any sized photograph or picture. • Variety of customer chosen materials. • Requires specialised equipment. • Equipment would cost $10 000. • Industry is more competitive (online competitors). • Reference to PED (OFR to Qbi). • Current process is capital intensive. AO3 Analysis Advantages may include: • high quality: may be particularly important in framing and to compete against lower priced competitors • meets customer’s specific needs: important because each frame will be different, and Ralph will be framing many sizes of photograph/picture • greater job satisfaction: Ralph is a sole trader and may desire a more challenging job • makes a unique product: may provide Ralph with a USP over other online competitors Disadvantages may include: • high unit cost of production: may make Ralph’s frames too expensive to compete with the flow-produced frames – may require Ralph to enter into a lease agreement • labour/time intensive process: may take a great deal of Ralph’s time (AN) – will he be able to produce at a rate that will be profitable? (DEV) • may require new equipment/training: requires the purchase/lease of new equipment • may require job redesign: may require Ralph to sell his photograph printing equipment – loss of current revenue 1(c) Examples of how an answer could develop and how it should be annotated. K APP AN DEV An advantage photo frames to This means that which could lead may be that fit any sized he can have a to more profit Ralph could photo (APP) higher profit and income for make unique (K) margin (AN) Ralph (DEV) A disadvantage because each This means that and he might will be the high frame will be Ralph will need lose customers, cost of tailor-made to charge a high decreasing his producing each using the price (AN) sales revenue frame (K) customer (DEV) chosen materials (APP) ARA 1(d) Recommend whether Ralph should use leasing or should sell his 11 photograph printing machine as a source of finance for the equipment to make frames. Justify your recommendation. Knowledge and Marks Analysis and Marks Application (4 marks) Evaluation (7 marks) Justified 7 recommendation based on argument in context Developed 6 recommendation based on argument in context An evaluative statement/ 5 recommendation based on argument in context Applies context to 4 Argument based on the 4 understanding of leasing use of leasing in context and applies context to and argument based on understanding of sale of sale of assets in context assets Applies context to 3 Argument based on the 3 understanding of leasing use of leasing in context or applies context to or argument based on understanding of sale of sale of assets in context assets Shows knowledge of 2 Limited analysis of 2 leasing and knowledge leasing and limited of sale of assets as a analysis of sale of assets source of finance Shows knowledge of 1 Limited analysis of 1 leasing or knowledge of leasing or limited sale of assets as a analysis of sale of assets source of finance No creditable content Annotate marks for the leasing in the left-hand margin and marks for the sale of assets in the right-hand margin. 1(d) Indicative content AO1 Knowledge and understanding Knowledge of the two required sources of finance, including: • Leasing is a way of financing the acquisition of assets without actually having to buy it. Leasing involves a finance company purchasing the asset for the business and the business pays a regular (monthly/yearly) fee for use of the asset. Leasing is similar to renting and usually the asset is not ever owned by the business. An external source of finance. • Sale of assets is when a business sells off its assets and the cash generated is used as a source of finance for the business. An internal source of finance. AO2 Application Application of leasing may include: • specialised equipment to frame individual photographs – may require maintenance which will be covered in a lease agreement • Ralph may still be able to continue printing photographs • five-year lease • $400 per month • $400 × 12 months = $4800 per year • $4800 × 5 years = $24 000 in total Application of sale of assets may include: • Sell photograph printing machine for at least $10 000 – based on an estimate of what he can sell it for. • Ralph will be unable to continue his current business of printing photographs. • Ralph would have full ownership of the specialised equipment, with no additional costs of ownership. • Ralph may need to pay for maintenance/breakdown of machine – whole business will be based on this. AO3 Analysis Analysis of leasing may include: • No upfront cost – but a monthly cost of $400 – may be particularly useful while Ralph is building up the business. • Fixed cost for five years – but it would work out significantly more expensive than outright purchase – $400 × 60 months = $24 000, compared to $10 000. • Maintenance and breakdown would be covered for the five-year term of the lease – reduces uncertainty for Ralph. • Ralph would be able to upgrade after five years – to better equipment which may allow him to increase his profit margin. 1(d) Analysis of sale of asset may include: • Cheaper ($10 000) than leasing ($24 000) – increases the overall profit of the business. • No longer able to provide photography printing – loss of current sales – far riskier. • Ralph would be responsible for maintenance and breakdown costs – may lead to unexpected costs and have an impact on profit. • Ralph may be unable to find a buyer for his photography printing machine, especially since the market has moved online – may mean this is an unsuitable source of finance. AO4 Evaluation • A recommendation about whether Ralph should choose leasing or sell his photography machine as a source of finance for the equipment to make the frames. • A judgement over the relative suitability of the chosen sources of finance. • Elements that the recommendation/judgement could depend upon, including the selling price of the photograph printing machine, the terms of the lease, the forecast demand for the frames, the forecast demand for printed photographs, the competition in the framing market, etc. • Weighing up of the impacts on Ralph of the recommended source(s) of finance. Examples of how an answer could develop and how it should be annotated. K APP AN DEV EVAL Leasing In this case That is a Because it Ralph should involves Ralph greater would be choose to sell his paying a would pay cost to $14 000 printing machine monthly fee $400 per Ralph than more, (EVAL) because (K) month for purchasing reducing the level of five years outright Ralph’s competition in his (APP) (AN) profit current market is (DEV) already increasing. There Selling the Which This is a However, it may be no photograph means much is $14 000 market for his printing Ralph can’t bigger risk cheaper so printing machine machine continue for Ralph he is able if he waits would his current than to make a (EVAL). It really mean he printing leasing bigger depends on how no longer business (AN) profit confident Ralph has it (K) (APP) (DEV) is about the likely success of the new business venture (EVAL) ARA

Question 10

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 11

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

Accepted Answer

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

Question 12

Great Resources (GR) GR is a business partnership that creates educational resources. It sells direct to schools and teachers via its own w…

Accepted Answer

1(a)(i) Identify one barrier to entrepreneurship. Indicative content Identification of a barrier may include:  Lack of finances  lack of a strategic plan  fear of failure  strong rules and regulations  lack of capacity Accept all valid responses. 1 Question Answer Marks 1(a)(ii) Explain the term partnership. 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 partnership may include:  Two or more owners of a business AO2 Application Limited application applies knowledge of a partnership one of the factors: Developed application + applies knowledge of a partnership to two of the factors  Unlimited liability  Unincorporated  Deeds of partnership  No shares  No continuity  No separation of legal personality  Shares profits Application can be made to the teachers/GR or any other scenario/context/business/person. Accept all valid responses. 3 Question Answer Marks 1(a)(ii) Exemplar and annotations Mark Rationale A business with 2 or more owners . For example, Sanjay, Rukmal and Boris will have created a deed of partnership to formally set out who invested what and what their returns are . 3 An answer which starts with the knowledge and then applies it to the case study. Where two or more owners directly share control of a business. A partnership does not limit the owners’ liability , and there is no continuity . 3 Again, knowledge first, followed by application to a decision (unlimited liability) and no continuity. It is an unincorporated business , and both partners will be liable for the debt because both partners share control and responsibility for the business . 3 A different way of answering the question. There is developed application to one element of a partnership (the liability) as well as clear knowledge of the concept by the end of the response. Where two or more owners directly share control of a business. A partnership does not limit the owners’ liability , so the owners could lose their personal assets in a bankruptcy. 2 Again, knowledge first, followed by application to a decision (unlimited liability) however the second point is a repetition. Two people share control of a business . For example, two people invest and share the responsibilities for running a business . 2 BOD knowledge. Some application of a choice, but not expanded. Two people owning a business . 1 Not a perfect definition, but enough to award the knowledge mark. No attempt to apply. When two people manage/run a business . 0 No ownership of a business mentioned. Question Answer Marks 1(b)(i) Refer to Table 1.1. Calculate GR’s market share by revenue. Indicative content Formula: Total sales of business Total market sales  100 (1 mark – formula) Total sales = 15000 500000  100 (1 mark – ID/use of correct figures) Total Sales = 3% (1 mark – correct answer, no % needed) Final answer for MS = 3 (%) (3 marks – no % or working needed) OFR applies Marks 3 marks Correct answer (3) Working and % do not matter. Must be three to denote the three marks. 2 marks EITHER  Correct formula AND  Correct identification of figures 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 identification of figures in an incorrect formula 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 factor which may influence the supply of GR’s products. AO1 Knowledge and understanding 1 mark AO2 Application 2 marks 2 marks Developed application of one relevant point to a business context. 1 mark Knowledge of one relevant point is used to answer the question. 1 mark Limited application of one relevant point to a business context. 0 marks No creditable response. 0 marks No creditable response. Indicative content AO1 Knowledge and understanding Knowledge of a factor that may influence the supply of products :  Knowledge of the impact of a lack of one or more of the factors of production (land, labour, capital and/or enterprise)  Price of the item (if the price is high, it will be supplied, if low then maybe not) (not demand)  The appropriateness of the sales platform  The choice of marketing media chosen  Cost of production  Government taxes/subsidies that affect suppliers  Advances in technology which affect the cost of production  Return on investment  Feasibility of market share 3 Question Answer Marks 1(b)(ii) AO2 Application Limited application , applies knowledge of one factor that influences supply to Sanjay, Rukmal and Boris (SRB)/GR once. Developed application + applies knowledge of one factor that influences supply to SRB/GR twice. Application of a factor may include:  OFD is a partnership including SRB: 3 only/enough to create enough resources/breadth of subject knowledge  GR has a low 3% market share in comparison to 60% EM so less competitiveness in advertising  Cost of developing/selling interactive digital materials may rise/reduce the incentive to produce  Lack of conversion to regular subscriptions may reduce the return on investment and cause a lack of motivation to write new/update materials  direct sales to schools on its own website/is the website/ increased cost of maintenance/ reduce profit margins  GR only has $5000 debt/potential to borrow more/invest in new software  Poor cashflow/banks may not see profitability/lack of opportunity to invest  Answer from Q1(b)(i) (OFR applies)  GR offers one month’s free membership but is unable to convert many to regular subscriptions  Revenue has not increased as much as hoped Accept all valid responses. Question Answer Marks 1(b)(ii) Exemplar and annotations Mark Rationale A factor would be the available capital , because free trials are not converting into subscriptions which means revenue is not increasing as much as hoped . 3 (Availability of) capital is a reasonable factor, explained in the specific context of SRB/GR by using the in-text data. GR may not be able to compete when advertising , as they only have 3% MS and GR has 60% and are well known and trusted . 3 Ability to compete is reasonable and there are two specific pieces of context based on this so two . 300 customers is not enough to make the business a success as EM spends 6 x more on advertising than GR makes in revenue so the amount of finance available may influence the ability to compete. 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 . Government taxes may make the cost of supply too high which is why they only have 300 customers . 2 The mention of taxes, although not in context, is still a factor that influences supply . The context of 300 customers linked to this is reasonable , but only one point of application. The level of expertise of the suppliers because if the output is poor and not well-regarded the business might ultimately fail . 1 Expertise is a factor (enterprise). The rest of the answer is not applying it to the context, so (Not Answering Question). EM is much larger than GR and has 4700 more customers which means that they have larger brand awareness and customers are more likely to trust them and choose them . 0 Although there is some relevant context, there is no knowledge of a factor, so no marks can be awarded. The answer is based on demand, not supply. Question Answer Marks 1(c) Analyse one advantage and one disadvantage to GR of using a bank overdraft. 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. *Advantage in the left hand side column, disadvantage in the right hand side column 8 Question Answer Marks 1(c) Indicative content AO1 Knowledge and understanding  An overdraft is a credit that the bank agrees that can be borrowed by a business/individual up to an agreed limit and as required. Knowledge of the advantages of using a bank overdraft (max 1 ), may include:  Flexibility  Amount used can vary from day to day  Allows a business to overdraw on its account  Can make payments of a greater value than the balance of an account  The maximum amount agreed in advance allows for financial planning/emergencies  Useful for short term lack of cashflow Knowledge of the disadvantages of using a bank overdraft (max 1 ), may include:  High interest charges  Can be withdrawn if the bank has concerns  Usually limited amounts  For short term cashflow issues only AO2 Application Max one for application in the first benefit and max one for application in the first disadvantage. Application of knowledge of bank overdrafts to GR (max 2 s), including:  OFD is a partnership  Sells to schools on its own website  Entrepreneurial teachers  Interactive digital resources  Subscription only  Online marketing campaign used penetration pricing, attracting 250 subscribers in the first six months of operation.  Start-up costs financed with a $5000 bank overdraft, which is GR’s only debt  Cash flow is poor  Recent sales promotion for one month’s free membership  Few have then taken out a regular subscription  Must now consider alternative promotion methods – advertising in an educational newspaper  EM also advertises in the ed paper, is well known and trusted  Any data from Table 14.1 Question Answer Marks 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  Flexible cashflow allows for flexibility in use. This can cover lower than expected cashflow – ensures that all payments can be made if the account is not in credit.  Lowers the cost of borrowing in the long term for investment which is designed to generate a quick return on investment – allows for increased profit margins. Disadvantages  High cost of borrowing can reduce profit margins – leaves less for future investment.  The withdrawal of the overdraft with short notice could mean there is not sufficient capital available for the planned advertising – alternative funding would have to be found which increases risk/time frame. Accept all valid responses. Exemplar and annotations AO1 Knowledge AO2 Application AO3 Analysis Useful for short term planning for periods of negative cashflow . As the recent sales promotion did not convert many free membership trials into regular subscriptions on the induction training. Which may not cover the costs of promotion which means there may not be enough money in the bank account to pay for new (newspaper) adverts . Overdrafts have high interest rates . Which places pressure on the already poor cashflow/partners . Which could make the business unprofitable and put the personal assets (of the partners) at risk . Question Answer Marks 1(d) Evaluate whether price or promotion is the most important element of GR’s marketing mix. Level AO1 Knowledge and understanding 2 marks AO2 Application 2 marks AO3 Analysis 2 marks AO4 Evaluation 6 marks 3 5–6 marks Developed evaluation in context  A developed judgement/conclusion is made in the business context.  Developed evaluative comments which balance some key arguments in the business context. 2 2 marks Developed knowledge of relevant key term(s) and/or factor(s) is used to answer the question. 2 marks Developed application of relevant point(s) to the business context. 2 marks Developed analysis that identifies connections between causes, impacts and/or consequences. 3–4 marks Developed evaluation  A developed judgement/conclusion is made.  Developed evaluative comments which balance some key arguments. 1 1 mark Limited knowledge of relevant key term(s) and/or factor(s) is used to answer the question. 1 mark Limited application of relevant point(s) to the business context. 1 mark Limited analysis that identifies connections between causes, impacts and/or consequences. 1–2 marks Limited evaluation  A judgement/conclusion is made with limited supporting comment/evidence.  An attempt is made to balance the arguments. 0 0 marks No creditable response. 0 marks No creditable response. 0 marks No creditable response. 0 marks No creditable response. Evaluative judgement (a definitive answer to the question) in the LHS margins Evaluative comments (however/the other side/a rebuttal) in the RHS margins 12 Question Answer Marks 1(d) Indicative content AO1 Knowledge and understanding Knowledge of the marketing mix (max 1 for knowledge of product OR price; 2 for knowledge of product AND price) including:  Knowledge of price  Can go up  Can go down  Can stay the same  Pricing strategies  (allow but not require knowledge of elasticity)  Knowledge of promotion  Digital promotion  Direct promotion  Sales promotion  Advertising  Above and below the line AO2 Application Limited application applies knowledge of price OR promotion information to GR Developed application + applies knowledge of price AND promotion information to GR.  creates educational resources  sells direct to schools and teachers via its own website  interactive, digital resources  GR is subscription only  online marketing campaign, which used penetration pricing  Reviews for GR’s products in teaching journals are positive but cash flow is poor  recent sales promotion for one month’s free membership and posted positive reviews  decided to advertise in an educational newspaper with a readership of half a million people  Any data in Table 1.1 Question Answer Marks 1(d) AO3 Analysis Limited analysis – candidate shows one link in the chain of analysis. Developed analysis – candidate shows two or more links in the chain of analysis. Price  The penetration pricing model attracted 250 subscribers in 6 months, which shows that customers are price sensitive – and will be attracted to a cheaper option  Subscription model may not be considered as a suitable pricing method by customers who do not like continuous cash outflows – especially if they do not have budgets – reduces demand  The price may be higher than /not as competitive as EM, the established competition – may be seen as better value – attracts a larger market share  The price charged covers the annual advertising spend, however, investment into a newspaper campaign will increase costs – will either reduce profits or increase the price Promotion  effective promotion grows the brand– increases brand loyalty  Without promotion customers will not know the brand exists – reduces cash inflows  Incorrect promotion wastes valuable resources – opportunity cost for product development 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.  Relative importance of price and promotion – are other issues more important? e.g. potential customer demand, marketing, qualities/skills of entrepreneurs in creating digital resources  Accuracy of promotion/price depends on GR market research and business knowledge/experience. External factors could impact the accuracy of the market research, such as existing contracts, available budgets and competitor materials  The impact of inaccurate customer predictions may be based on unrealistic expectations  A judgement on which factor is the most important of GR’s marketing mix (could be any of the 4 available). Accept all valid responses. Question Answer Marks 1(d) Exemplar and annotations Price can vary in relation to demand. . It is important to get price right as GR is challenging a well-known and trusted market leader. The information shows that price is important in the overall mix as penetration pricing attracted 250 out of 300 customers in the initial stages, however a regular price has only attracted a further 50 customers. This shows that customers are price sensitive and if the price/pricing model is incorrect, it would lead to GR’s cash flow and profitability remaining poor . The original online marketing campaign may have only advertised to a niche market while the educational newspaper reaches the mass market. As EM still uses this medium and is the market leader, a successful promotional piece could introduce their service to a wider customer base and increase the number of subscribers to their digital resource platform. Therefore, pricing is the most important element of GR’s marketing mix as even a great promotional campaign that sets the wrong price is unlikely to persuade potential customers to sign up to a costly subscription service . However, this also depends on whether GR has used the right place to advertise its interactive digital services as an educational newspaper may not be used by the technologically savvy teachers who would be GR’s target market and may consist of technologically illiterate teachers who may not use their service at any price. Therefore, while price is the most important element as price sensitivity seems to be high, GR must ensure it targets the appropriate market segment. *A judgement OR a comment is the bottom of the level/A judgement AND a comment is the top of the level ** A Judgement is a yes or no, a comment is anything weighing up the other side of the argument. AO1 – 2 marks AO2 – 2 marks AO3 – 2 marks AO4 – 6 marks TOTAL – 12 marks

Question	Answer	Marks	From
1	see sheet	30	9609/22 Feb/March 2017
2	see sheet	30	9609/23 Oct/Nov 2017
3	see sheet	30	9609/21 May/June 2018
4	see sheet	30	9609/21 May/June 2018
5	see sheet	30	9609/22 May/June 2019
6	see sheet	30	9609/23 May/June 2019
7	see sheet	30	9609/21 May/June 2020
8	see sheet	30	9609/23 Oct/Nov 2020
9	see sheet	30	9609/22 Oct/Nov 2021
10	see sheet	30	9609/23 May/June 2022
11	see sheet	30	9609/23 Oct/Nov 2022
12	see sheet	30	9609/21 May/June 2023

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

Questions13 pages

Mark scheme12 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 · Perfik Plumbing (PP) PP is a plumbing business owned and managed by Navpreet 9609/23 Oct/Nov 2017

Q3 · Clifford’s Supermarkets (CS) CS owns 28 supermarkets which sell food and non-food products 9609/21 May/June 2018

Q4 · Veg Cans (VC) VC is a public limited company which produces canned vegetables 9609/21 May/June 2018

Q5 · Too Tasty (TT) TT is a brand of vegetable chips (crisps) owned by a large public limited… 9609/22 May/June 2019

Q6 · Fuzz Buzz Ltd (FBL) FBL is a small private limited company with 10 shareholders 9609/23 May/June 2019

Q7 · UFilters (UF) UF is a public limited company selling to an industrial market 9609/21 May/June 2020

Q8 · Aashna’s Pies (AP) AP produces and sells high quality pies 9609/23 Oct/Nov 2020

Q9 · Snappy Box (SB) SB is owned by Ralph who is a sole trader 9609/22 Oct/Nov 2021

Q10 · Child Play (CP) Su is a sole trader who started a business called CP which operates a… 9609/23 May/June 2022

Q11 · Planting Pots (PP) Emily and Kabir are entrepreneurs 9609/23 Oct/Nov 2022

Q12 · Great Resources (GR) GR is a business partnership that creates educational resources 9609/21 May/June 2023