Marketing mix — Paper 2 · IGCSE Business Studies (9-1) 0986

1 (a) Identify and explain one advantage and one disadvantage to SA of starting to sell new products in a niche market. Advantage: … … Explanation: … … … … … … Disadvantage: … … Explanation: … … … … … … [8] (b) Consider the following three roles of packaging for SA’s new products. Which is the most important role for the successful launch of these new products? Justify your answer. Protection: … … … … … … Brand image: … … … … … … Information about the product: … … … … … … Conclusion: … … … … … … … … [12]

20 marks

Mark scheme: Question Answer Marks 1(a) Identify and explain one advantage and one disadvantage to SA of 8 starting to sell new products in a niche market Knowledge [2 × 1] Award one mark for each relevant advantage/disadvantage Analysis [2 × 1] Award one mark for a relevant explanation for each advantage/disadvantage Application [2 × 2] Award two application marks for each advantage/disadvantage Answers are likely to include: Advantage • Higher price charged • Less competition • Meet specific needs of customers • Increase sales/market share • Spreads risk/diversification • Attracts new/different customers Disadvantage • More expensive to produce the product – uses batch rather than flow production • Increased costs e.g. product development, new marketing strategy needed • Limited size of market/limited potential sales • Smaller market segment • Higher price does not match existing brand image for low priced soap Indicative response: SA can sell specialist products that meets these specific customer needs (k) and SA wants to sell soap aimed at people with older skin. (ap) This means that there are likely to be few competitors in this market as it is smaller and less attractive for larger businesses making it easier to have a higher market share and higher profits. (an). As incomes are increasing in country Z, older people will be able to afford this soap. (ap) Possible application marks: Produces soap; existing soap sold in a mass market; bars or liquid soap; new factory/equipment will cost $15m; 50 workers in the new factory; country Z is a growing economy; older skin; luxury soap; baby soap; medicated soap; low priced soap. There may be other examples in context that have not been included here. 1(b) Consider the following three roles of packaging for SA’s new products. 12 Which is the most important role for the successful launch of these new products? Justify your answer. Relevant points might include: Protection • So the soap does not get damaged in transit – however this might increase the costs of packaging • Easier to pack and store the soap in warehouses before sale– however this may take up more storage space Brand image • Makes the soap stand out from other products on the shelves • Differentiates products from competitors’ products • Images on package reinforces brand Information • Legal requirement – government protection for about the consumer product • Customers need to know what is in the soap – may have a physical reaction e.g. allergies or ethical reaction e.g. animal testing Knowledge/Analysis/Evaluation – award up to 10 marks using the levels- based mark scheme below. Knowledge/Analysis/ Evaluation Level 3 At least 2 × Level 2 + 9–10 marks for well justified conclusion as which is the most important role of packaging to choose to successfully launch new products compared to the other roles. 7–8 marks for some limited judgement shown in conclusion as to which is the most important role of packaging to successfully launch new products. Level 2 4–6 marks Detailed discussion of the benefits and/or drawbacks of each role of packaging. Level 1 1–3 marks Outline of the benefits and/or drawbacks of each role of packaging. 1(b) Level 1 – 1 mark for each L1 statement (max of 3 marks) e.g. Information about the ingredients of the soap is necessary as some people might be allergic to the soap. Level 2 – 1 × L2 explanation can gain 4 marks and a further mark can be awarded for each additional L2 explanation (max 6 marks) e.g. Information about the ingredients of the soap is necessary as some people might be allergic to the soap. This might result in a poor reputation for the soap if customers put bad comments on social media about the soap giving them problems. If full information is provided then this should be avoided and only good comments about the soap should be posted. (L2 plus application for making reference to soap in the explanation) Level 3 – For L3 to be awarded there needs to be at least two L2 marks awarded and then a conclusion which is the most important role of packaging to successfully launch new products. Award up to 2 additional marks for relevant application. Possible application marks: produces soap; sold in a mass market; soap sold as bars or liquid soap; bottles; niche market soaps; allergies/allergic reaction; medicated soap; baby soap; soap for older skin; luxury soap; retailers; wholesalers. There may be other examples in context that have not been included here.

This question in 0986/21 May/June 2019

1 (a) Identify and explain one advantage and one disadvantage to WA of developing new products. Advantage: … … Explanation: … … … … … … Disadvantage: … … Explanation: … … … … … … [8] (b) Consider the following three possible business objectives for WA. Which objective is likely to be most important to WA in the long run? Justify your answer. Be an environmentally friendly business: … … … … … … Increase market share: … … … … … … Survival: … … … … … … Conclusion: … … … … … … … [12]

20 marks

Mark scheme: Question Answer Marks 1(a) Identify and explain one advantage and one disadvantage to WA of 8 developing new products. Knowledge – award one mark for each relevant advantage / disadvantage [2 × 1 marks] Analysis – award one mark for a relevant explanation for each advantage / disadvantage [2 × 1 marks] Application – award two application marks for each advantage / disadvantage [2 × 2 marks] Answers are likely to include: Advantage • New markets • Maintains image for fashionable designs • Remains competitive • Expansion • Wider range of products / diversification / spreading risk • Attract more customers / increase sales Disadvantage • New products might fail • May not be demanded if not liked by consumers • Increased costs – for example development costs / marketing / advertising / market research / storage or warehouse costs / wasted raw materials during development / training labour in new skills • Higher prices needed to recoup development costs Indicative response: WA will remain competitive (k) by ensuring the furniture is fashionable (ap). This will increase demand or at least maintain demand for its furniture (an) and may result in profit increasing again (ap). Possible application marks: Family owned ltd company; small business; started 10 years ago; furniture; wood from sustainable forests; uses batch production to make furniture; new fashionable designs each year; selling price $200; environmentally friendly business objective; reduced profit in 2018; chairs / tables 1(b) Consider the following three possible business objectives for WA. 12 Which objective is likely to be most important to WA in the long run? Justify your answer. Relevant points might include: Advantages Disadvantages Be an • Improved brand image • May have a higher environmentally – may attract ethical cost –higher price friendly customers – increase for furniture business sales • Less competitive • Less likely to break especially if government regulations competitors do not on environmental use sustainable damage wood • Employees may prefer to work for an ethical business • Avoids WA having to deal with pressure groups Increase • Increase sales – higher • Increased cost of market share revenue and profit marketing • More dominant in the • Marketing costs may market – more be higher than influence on price improvement in sales and revenue • Increase in WA sales may not increase market share if market is growing at the same rate Survival • Avoids making a loss – • Long term not good costs are covered as low / no retained • Easier to achieve than profit this is usually other objectives – just a short-term needs to aim to break- objective even • May need to borrow • Protects family externally if low investment profit Knowledge / Analysis / Evaluation Level 3 At least 2 × Level 2 + 9–10 marks for well justified conclusion as to which is the most important and why the other objectives will be less important in the long run. 7–8 marks for some limited judgement shown in conclusion as to which objective will be most important in the long run. Level 2 4–6 marks Detailed discussion of the advantages and/or disadvantages of each objective. Level 1 1–3 marks Outline of the advantages and/or disadvantages of each objective. Level 1 – 1 mark for each L1 statement (max of 3 marks) e.g. Improved brand image if aim to be environmentally friendly Level 2 – 1 × L2 explanation can gain 4 marks and a further mark can be awarded for each additional L2 explanation (max 6 marks) e.g. Improved brand image if aim is to be environmentally friendly and this may attract an increased number of customers who are concerned about environmental damage and want to support ethical businesses. However, this might be more expensive, for example when buying the wood and so prices may have to be increased. (L2 plus application for mentioning buying wood) Level 3 – For L3 to be awarded there needs to be at least two L2 marks awarded and then a conclusion of which objective will be most important in the long run. Award up to 2 additional marks for relevant application. Possible application marks: Family owned ltd company; small business; started 10 years ago; furniture; wood from sustainable forests; new fashionable designs each year; individually designed furniture produced using job production; selling price $200 and $250 per item; ethical business objective; reduced profit in 2018; chairs / tables; high cost of wood; uses cost-plus pricing; WA price is higher than competitors, 10% market share There may be other examples in context that have not been included here

This question in 0986/22 May/June 2019

1 (a) Identify and explain one benefit and one cost to MF of developing the new product. Benefit: … … Explanation: … … … … … … Cost: … … Explanation: … … … … … … [8] (b) Consider how the following three elements of the marketing mix could help to make the new product successful. Which do you think is the most important element for the success of the new product? Justify your answer. Price: … … … … … … Place: … … … … … … Promotion: … … … … … … Conclusion: … … … … … … … … [12]

20 marks

Mark scheme: Question Answer Marks 1(a) Identify and explain one benefit and one cost to MF of developing the 8 new product. Knowledge [2 × 1] – award one mark for each relevant benefit/cost Analysis [2 × 1] – award one mark for a relevant explanation for each benefit/cost Application [2 × 2] – award two application marks for each benefit/cost Answers are likely to include: Benefit: • Provides a USP • Allows diversification/spreads risk • Allows the business to expand into new markets/attracts new customers/accommodates changing customer needs • Allows the business to expand into existing markets/increases market share/improved competitive advantage • Increase revenue/increased sales Cost: • Costs of carrying out market research/product trials • Increased production costs – new equipment/training/recruitment costs/high cost of raw materials/high cost of waste removal • Increased marketing costs – to build customer awareness • If target market wrong, the company reputation may be damaged Indicative response: Provides a USP (1) if there are no other sugar-free ice creams in the market (ap). This will allow MF to increase sales revenue of the ice cream (1). This is a new market and MF is taking advantage of the trends for healthier foods (ap). Possible application marks: Sugar free ice-cream; MF has a large market share of the food markets; large variety of food products; objectives are growth and increased market share; new automated production line required; new skilled workers need recruiting; existing workers need to be retrained. There may be other examples in context that have not been included here. 1(b) Consider how the following three elements of the marketing mix could 12 help to make the new product successful. Which do you think is the most important element for the success of the new product? Justify your answer. Relevant points might include: • Price • Penetration pricing into existing dessert market • Cost-plus pricing as need to recoup development costs • Place • Distribute through wholesalers or large supermarkets to reach a mass market • Distribute through gyms or health food outlets to reach health conscious market • Promotion • Advertise in health and fitness magazines for the health conscious consumers • TV advertising as aimed at large market • Free samples to ensure potential consumers try the new dessert Knowledge/Analysis/Evaluation – award up to 10 marks using the levels-based mark scheme below. Knowledge/Analysis/ Evaluation Level 3 At least 2 × Level 2 + 9–10 mark for well justified conclusion of which element of the marketing mix will contribute the most to the success of the new product and why the other elements will contribute less. 7–8 mark for some limited judgement shown in conclusion of which element of the marketing mix will contribute the most to the success of the new product Level 2 4–6 marks Detailed discussion of how each element of the marketing mix can contribute to the success of the new product. A clear strategy needs to be explained, e.g. pricing method named and explained as to why it would be effective Level 1 1–3 marks Outline of how each element of the marketing mix can contribute to the success of the new product. Simple statement made, e.g. reduce the price to gain more customers 1(b) Level 1 – 1 mark for each L1 statement (max of 3 marks), e.g. place can be through wholesalers and supermarkets as they can sell a lot of the products to this large market. Level 2 – 1 × L2 explanation can gain 4 marks and a further mark can be awarded for each additional L2 explanation (max 6 marks), e.g. Place can be through wholesalers and supermarkets as they can sell a lot of the products to this large market. These outlets are where the most customers will buy desserts and so it will increase the chance of the new ice-cream being seen on the shelves and then purchased (L2 + application for referring to ice-cream in the answer). Level 3 – For L3 to be awarded there needs to be at least two L2 marks awarded and then a justified conclusion of which element of the marketing mix will contribute most to the success of the new product. Award up to 2 additional marks for relevant application. Possible application marks: Sugar free ice-cream; MF has a large market share of the food markets; objectives are growth and increased market share; 10% of adults should not be eating sugary foods; 40% of adults are overweight; other food businesses are planning the introduction of low sugar food products; health conscious consumers. There may be other examples in context that have not been included here.

This question in 0986/21 Oct/Nov 2019

2 (a) Explain four ways a business plan can be useful. Way 1: … … … … Way 2: … … … … Way 3: … … … … Way 4: … … … … [8] (b) ES has been considering the following three methods of promotion for its products in export markets. Which method should ES choose? Justify your answer. • Advertise on national television • Advertise on ES website • Display its products in shopping malls Advertise on national television: … … … … … … Advertise on ES website: … … … … … … Display its products in shopping malls: … … … … … … Recommendation: … … … … … … [12]

20 marks

Mark scheme: 2(a) Explain four ways a business plan can be useful. 8 Award 1 mark for each relevant way (maximum of four ways): Relevant ways might include: • Helps gain a bank loan – shows the business is likely to be profitable and repay the loan • Organises thoughts about resources needed – identify types of workers need to recruit • Can plan and budget for resources needed- e.g. to budget for new production machinery • Financial documents will help to show expected returns – to see if it will bring the return expected by shareholders Award a maximum of 1 additional mark for each explanation of the way a business plan can be used. For example: Forecast financial documents will show potential profit to be made (1) can see if it will give a satisfactory return on the investment. (1) 2(b) ES has been considering the following three methods of promotion for 12 its products in export markets. Which method should ES choose? Justify your answer. • Advertise on national television • Advertise on ES website • Display its products in shopping malls Level Description Marks Sound application of knowledge and understanding of relevant business concepts using appropriate terminology. Detailed discussion of two or more methods to promote ES’ products. 3 9–12 Well-justified recommendation. Candidates discussing the three methods in detail, in context and with well-justified recommendation including why the alternative methods were rejected should be rewarded with the top marks in the band. Sound application of knowledge and understanding of relevant business concepts using appropriate terminology. Detailed discussion of at least one method. 2 5–8 Judgement with some justification/some evaluation of choice made. Candidates discussing two or more methods in detail and applying it to the case should be rewarded with the top marks in the band. Limited application of knowledge and understanding of relevant business concepts. Limited ability to discuss the methods to promote the products with little/no explanation. 1 1–4 Simple judgement with limited justification/limited evaluation of choice made. Candidates outlining the three methods to promote the products in context should be rewarded with the top marks in the band. 0 No creditable response. 0 2(b) Relevant points might include: • Advert for scooters will go out to millions of people • Scooters can be shown in very favourable way • Can reach a target audience for scooters if shown during programmes likely to be watched Advertise on by these target customers e.g. sports national television programmes • Very expensive form of advertising • Younger consumers may not watch as much TV as older people so may not reach these consumers • Large amount of information can be posted • Cheap way to advertise • Can include videos of the scooters Advertise on ES • Internet searches may not highlight the website website at the start of the search list and therefore it is missed • Internet access may be limited in some countries where scooters are being exported • Provides a lot of information Display its • Can also be persuasive with scooter to look at products in and sit on shopping malls • Restricted to a relatively small number of consumers in the mall Justification might include: • National TV as the scooters will be seen by the mass market and will not be seen by many people in shopping mall displays. • Website useful for advertising when other forms of advertising have raised awareness of the scooters such as after the scooter has been Recommendation seen in a mall display. • Displays in shopping malls will be most useful as potential customers can sit on the scooters and see how comfortable they are. This may make people who have not even thought about buying a scooter consider them whereas advertisements in television and on websites may be ignored.

This question in 0986/22 May/June 2020

3 (a) Explain why liquidity and profitability are important to a business. Liquidity: … … … … … … … … Profitability: … … … … … … … … [8] (b) Consider the advantages and disadvantages of the following three sales promotion methods Gemma could use for the new shop. Recommend which method Gemma should choose to maximise revenue. Justify your answer. • Buy one, get 50% off second purchase • 10% off everything in the shop for one week after opening • Pay a celebrity to open the shop Buy one, get 50% off second purchase: … … … … … … 10% off everything in the shop for one week after opening: … … … … … … Pay a celebrity to open the shop: … … … … … … Recommendation: … … … … … … [12]

20 marks

Mark scheme: 3(a) Explain why liquidity and profitability are important to a business. 8 Award 1 mark for each relevant reason or explanation of the reason for liquidity and profitability: Relevant reasons might include: Liquidity: • Allows a business to see if it is able to pay back the short-term debts of the business • Measured by current ratio/acid test ratio • If it cannot pay the debts, then it will not be able to buy more inventory or raw materials • If the business becomes illiquid it may be forced to sell business assets to pay debts and will cease trading Profitability: • It measures how well profit is being made from sales or capital invested in the business • Could be used to reinvest into the business/use retained profits for expansion • Measured by gross profit margin/profit margin/ROCE • It can be a measure of efficiency • Can compare business performance over time/compare against other businesses • It helps investors or bank to decide whether to invest in the business or lend it money • Retain shareholders/pay dividends/return on investment for the owners Award a maximum of 3 additional marks for each explanation. This is a generic question, therefore there are no application marks available. For example: Profitability is a measure of performance (1) and can be used to show the bank so that it may give the business a loan for expansion. (1) It shows how efficiently the business is converting investment into profit (1) as shown by the percentage of profit to revenue or profit to investment in the business. (1) 3(b) Consider the advantages and disadvantages of the following three sales 12 promotion methods Gemma could use for the new shop. Recommend which method Gemma should choose to maximise revenue. Justify your answer. • Buy one, get 50% off second purchase • 10% off everything in the shop for one week after opening • Pay a celebrity to open the shop Level Description Marks 3 Sound application of knowledge and understanding of 9–12 relevant business concepts using appropriate terminology. Detailed discussion of the two or more methods of sales promotion. Well-justified recommendation. Candidates discussing all three methods in detail, in context and with well-justified recommendation including why the alternative methods were rejected should be rewarded with the top marks in the band. 2 Sound application of knowledge and understanding of 5–8 relevant business concepts using appropriate terminology. Detailed discussion of at least one method. Judgement with some justification/some evaluation of choice made. Candidates discussing two or more methods in detail and applying it to the case should be rewarded with the top marks in the band. 1 Limited application of knowledge and understanding of 1–4 relevant business concepts. Limited ability to discuss the methods with little/no explanation. Simple judgement with limited justification/limited evaluation of choice made. Candidates outlining all three methods in context should be rewarded with the top marks in the band. 0 No creditable response. 0 3(b) Relevant points might include: Buy one get 50% • Encourages customers to buy more jewellery - off second more sales to gain the second item at 50% purchase reduction • But this will reduce the gross profit on the second item of jewellery – lower profit overall • Customers may perceive this as lower quality jewellery 10% off • Encourages sales on all items of jewellery as everything in the reduction on all items shop for one • Less effect on gross profit than the 50% off (which week after will effectively be 25% reduction on each item) opening • However, slightly less gross profit on each item but this will also mean less gross profit paid to the franchisor Pay a celebrity to • Many people may visit the shop to meet the open the shop celebrity – increasing sales while people are in the shop • Gains full gross profit on each item as opposed to the two alternative options • If customers like the jewellery then may visit the shop again later and sales may continue to increase • Increased cost of paying the celebrity to visit the shop which can be very expensive • Improved the image of the shop – as the shop may be associated with the celebrity and the luxury nature of GJs jewellery 3(b) Recommendation Justification might include: • Revenue is likely to increase in all three options. However, buy one get 50% off second purchase of jewellery will attract customers to the make more than one purchase leading to the highest increase in revenue. The second option may only gain a small increase in revenue because a 10% reduction in price is a small discount and may not encourage much more than a 10% increase in sales. Although the celebrity may attract customers to the shop it is a one day promotion and will only increase sales and revenue for one day. • A price reduction of 10% may be the most effective in maximising revenue by encouraging increased sales of all items of jewellery. The loss in revenue from the price reduction of 10% could then be more than compensated for assuming a higher than 10% increase in the number of jewellery sales. • Paying a celebrity may increase revenue the most because many people will be made aware of the shop and be attracted to its opening. Many of these people may then make purchases of jewellery when at the new shop which would not otherwise have been made, therefore increasing revenue by the highest amount.

This question in 0986/21 Oct/Nov 2020

3 (a) Explain how one internal source and one external source of finance could be used by FO as it expands. Internal source of finance: … … Explanation: … … … … … … External source of finance: … … Explanation: … … … … … … [8] (b) Consider the advantages and disadvantages to FO of using a wholesaler, retailer or selling direct to the customer when distributing its products. Which channel of distribution should FO use? Justify your answer. Wholesaler: … … … … … … Retailer: … … … … … … Selling direct to customer: … … … … … … Recommendation: … … … … … … [12]

20 marks

Mark scheme: 3(a) Explain how one internal source and one external source of finance 8 could be used by FO as it expands. One mark for each suitable method of internal/external source of finance. Award a maximum of three additional marks for each explanation of the example of internal/external source of finance one of which must be in context. Internal • Retained profit – nothing to repay / no interest to pay – keeps expenses down • Sale of existing non-current assets – these might be unused equipment and not affect existing production levels • Sale of inventories to reduce inventory levels External • Bank loan – easier to obtain due to previous business success – repayments can be spread out over several years • New share issue – existing shareholders may be willing to increase their investment due to business success – may be able to attract more family and friends for investment in new capital • Grants and subsidies from the government – funds may be available from the government to support sustainable businesses – FO would qualify for these grants – do not have to be repaid • Debentures • Crowd-funding For example: Bank loan (1) is easier to obtain due to previous business success (1) over the last 20 years (app). Repayments can be spread out over several years (1). Application might include: FO is a private limited company, FO has been operating for 20 years, FO is a sustainable business, for many years’ shareholders have reinvested profits, FO recently took over two other furniture businesses, FO plans further takeovers, FO is quite a large business. 3(b) Consider the advantages and disadvantages to FO of using a 12 wholesaler, retailer or selling direct to the customer when distributing its products. Which channel of distribution should FO use? Justify your answer. Level Description Marks 3 Sound application of knowledge and understanding of 9–12 relevant business concepts using appropriate terminology. Detailed discussion of two or more channels of distribution. Well-justified recommendation. Candidates discussing all three channels of distribution in detail, in context and with a well-justified recommendation including why the alternative channels of distribution were rejected should be rewarded with the top marks in the band. 2 Sound application of knowledge and understanding of 5–8 relevant business concepts using appropriate terminology. Detailed discussion of at least one channel of distribution. Judgement with some justification / some evaluation of choices made. Candidates discussing two or more channels of distribution in detail and applying it to the case should be rewarded with the top marks in the band. 1 Limited application of knowledge and understanding of 1–4 relevant business concepts. Limited ability to discuss channels of distribution with little/no explanation. Simple judgement with limited justification / limited evaluation of choices made. Candidates outlining three channels of distribution in context should be rewarded with the top marks in the band. 0 No creditable response. 0 3(b) Relevant points might include: Advantages Disadvantages Wholesaler • Buys tables in large • Prices of chairs and quantities – fewer tables may be higher as deliveries needed – wholesaler needs to add reducing distribution their mark up costs • Wholesaler may not want • Saves storage space for to buy the full range of manufacturer products • Lower administration • May also sell costs as fewer orders to competitors’ products process • Longer chain of • May give advice to distribution – longer to manufacturer on what reach the customer furniture sells well • May undertake some of the marketing to retailers/customers – boost sales – reduce marketing costs for FO Retailer • Sell in large quantities of • No direct contact with tables to retailers customers of wooden • Reduced distribution furniture costs • Price is often higher – • Can promote the retailer will add their furniture – reducing mark up marketing costs for FO Direct to • Lower price of furniture • May have increased customer than if sold through other distribution costs for intermediaries tables and chairs as • Can use internet or mail selling to many order to sell products customers rather than • Have direct control over just a few with the other marketing methods • Develops a direct • Higher costs of relationship between the administration customer and the • Not all customers feel producer – easier to confident or are able to follow up with direct order online marketing to customer 3(b) Recommendation • Direct to customer should be chosen as FO sells furniture that is not bought in large quantities by customers and a higher price can be charged. Wholesalers may not convey the sustainable features of the furniture to smaller retailers so fewer sales. Retailer may take part of the profit margin reducing the profit for FO. • If FO use a wholesaler or a retailer to sell its furniture FO will need to discount the price so it will make less profit from these methods of distribution. • Customers pay a high price for furniture if sold direct to the customer so it will allow FO to make a high profit margin on each item of furniture.

This question in 0986/21 May/June 2021

3 (a) Explain four ways Yasin can advertise MB’s products. Way 1: … … … … Way 2: … … … … Way 3: … … … … Way 4: … … … … [8] (b) Consider the two options outlined in Appendix 2. Which option should Yasin choose? Justify your answer using appropriate calculations. Option 1: … … … … … … … … Option 2: … … … … … … … … Recommendation: … … … … … … … … [12]

20 marks

Mark scheme: 3(a) Explain four ways Yasin can advertise MB’s products. 8 Award 1 mark for each appropriate way (maximum of four). Award a maximum of 1 additional mark for each explanation in context. Relevant ways might include:  Local radio – as the bakery attracts only local people so many potential customers may hear the advert  Local newspaper/magazine – as a voucher could be included for money off bread  Posters – in the window of the bakery shop to attract customers passing by  Leaflets/fliers – can be handed out in the local town centre so that potential customers will know the location of the shop as it is new  Social media – emphasise that he uses imported ingredients  Packaging/carrier bags – emphasise the ethical image of the business  Website/online/internet – so if consumers are searching for local shops that sell bread so it can give information of the products and location of the shop  Billboards – can be placed in busy areas of the local town directing them to the bakery location  Sponsorship – local sports team may have shirts with the MB name to raise awareness of the bakery  Word-of-mouth – existing customers recommend good bread/tasty bread to their friends and family For example: Leaflets (1) can be handed out in the local town centre and to raise awareness of where the bakery shop is located (app). Application could include: bread; bakery; cakes; bakery shop; uses imported ingredients; ethical image; ingredients; fresh products; sustainable packaging; consumed by all age groups. 3(b) Consider the two options outlined in Appendix 2. Which option should 12 Yasin choose? Justify your answer using appropriate calculations. Level Description Marks 3 Sound application of knowledge and understanding of 9–12 relevant business concepts using appropriate terminology. Detailed discussion of both options. Well-justified recommendation. Candidates discussing both options in detail, in context and with a well-justified recommendation including why the alternative option was rejected should be rewarded with the top marks in the band. 2 Sound application of knowledge and understanding of 5–8 relevant business concepts using appropriate terminology. Detailed discussion of at least one option. Judgement with some justification / some evaluation of choice made. Candidates discussing at least one option in detail and applying it to the case should be rewarded with the top marks in the band. 1 Limited application of knowledge and understanding of 1–4 relevant business concepts. Limited ability to discuss the options with little/no explanation. Simple judgement with limited justification / limited evaluation of choice made. Candidates outlining both options in context should be rewarded with the top marks in the band. 0 No creditable response. 0 3(b) Relevant points might include: Option 1 – small  Sales are higher by 3900 per month (L1) cupcakes  Total cost is $5000 per month (L1)  Total revenue $8000 per month (L1)  Profit per month is $ 3000, $1000 more than Option 2 (L2)  Break-even output 2000 cupcakes a month (L2)  Forecast margin of safety is 2000 per month (L2) Option 2 – large  Total revenue $6000 (L1) birthday cakes  Total cost is $4000 per month (L1)  Profit per month is $2000 (L2)  Break-even output 60 large birthday cakes a month (L2)  Forecast margin of safety is 40 per month (L2) Recommendation Justification might include:  Option 1 is the better one to choose as it has the higher profit by $1000 than Option 2 and a higher margin of safety (as a proportion of sales). Option 2 may have a higher predicted growth of sales, but this is only a forecast and may not happen. It is better to choose the more certain higher profit now than the possibility of higher sales later.  Option 2 is better than Option 1 as the gross profit margin is 8.33% higher. However, the future growth of sales is forecast to be higher and may lead to higher profits in the future.

This question in 0986/21 May/June 2022

2 (a) Explain two advantages and two disadvantages of using external recruitment to find EP’s new manager. Advantage 1: … … … … Advantage 2: … … … … Disadvantage 1: … … … … Disadvantage 2: … … … … [8] (b) Consider the following three ways EP could use to increase the sales of its products. Which would be the best way for EP to use? Justify your answer. • Advertising using social media • Emailing special offers to existing customers • Setting up a website Advertising using social media: … … … … … … Emailing special offers to existing customers: … … … … … … Setting up a website: … … … … … … Recommendation: … … … … … … [12]

20 marks

Mark scheme: 2(a) Explain two advantages and two disadvantages of using external 8 recruitment to find EP’s new manager. Award 1 mark for each relevant advantage/disadvantage (max 2 advantages and max 2 disadvantages). Award 1 additional mark for each explanation of the advantage or disadvantage in context. Relevant advantages might include:  There will be new ideas in the business – which may make the business more competitive with other pottery manufacturers  There may be no rivalry between the new manager and existing employees – there will not be jealousy amongst the 7 marketing employees who did not get the promotion  The quality of the candidates may be high/more experienced/more skilled  Wider choice of applicants to choose from  There will be no new vacancy to replace the internal applicant Relevant disadvantages might include:  Recruitment may take longer – as advertisements are needed which may take time to be read and respond to applicants/interviewing applicants for the job of Marketing Manager  The person is not known to the business – risk of employing someone who does not have the skills and expertise required to understand the production of products such as cups and bowls  May be more expensive than internal recruitment  May be less effective for a time after first being employed – as the new person will take time to understand the tall organisational structure of EP  It may be demotivating for existing employees as not able to be promoted For example: There may be a wider choice of applicants (1) who have more experience in the production of pottery products (app). Application could include: pottery; cups; plates; bowls; high-quality products; private limited company; trading for 40 years; new Marketing Manager; Managing Director; want sales to increase; plastic or bamboo products; information from Appendix 2. 2(b) Consider the following three ways EP could use to increase the sales of 12 its products. Which would be the best way for EP to use? Justify your answer.  Advertising using social media  Emailing special offers to existing customers  Setting up a website Level Description Mark 3 Sound application of knowledge and understanding of 9–12 relevant business concepts using appropriate terminology. Detailed discussion of two or more ways. Well-justified recommendation. Candidates discussing the three ways in detail, in context and with a well-justified recommendation, including why the alternative ways were rejected, should be rewarded with the top marks in the band. 2 Sound application of knowledge and understanding of 5–8 relevant business concepts using appropriate terminology. Detailed discussion of at least one way. Judgement with some justification/some evaluation of choice made. Candidates discussing two or more ways in detail and applying them to the case should be rewarded with the top marks in the band. 1 Limited application of knowledge and understanding of 1–4 relevant business concepts. Limited ability to discuss the ways with little/no explanation. Simple judgement with limited justification/limited evaluation of choice made. Candidates outlining the three ways in context should be rewarded with the top marks in the band. 0 No Creditable Response 0 2(b) Relevant points might include: Advantages Disadvantages  Can target specific  Can easily be demographic groups ignored as there such as higher are a lot of adverts income earners on social media  Viral marketing/share  Can be expensive information with family for EP to pay for and friends enables pop-ups to ensure recommendations for its pottery is seen plates and cups to by a large group of be spread quickly and people to a large group of  Potential customers Advertising using potential customers may not use social social media  Potential customers media and will see an advert for therefore they will the shops to look for not be aware of EP’s pottery when EP’s products they go to sites such  Easier to leave bad as Facebook, which reviews can lead to increases awareness fewer purchases of of EP’s products cups and the bad  Social media widely reviews may be used by consumers – unfair if only a small large scale exposure proportion of reviews are bad  Low cost/cheaper way  Email may go into to get information to a spam and so be lot of existing pottery ignored customers  No guarantee the  Emails go direct to email address is existing customers, correct and who may be more therefore will not be likely to purchase seen by all EP’s EP’s products due to customers the high-quality  Existing customers Emailing special  May be used to direct of plates may see offers to existing customers to retailers’ this as annoying customers websites – by and get a negative including links in the view of EP email  Only sent to existing customers/some customers may not have email so not targeting new customers/may be less effective 2(b)  Makes information  Increased costs of about EP’s pottery paying for a more accessible to specialist to set up potential customers the website/ searching for its improvements products – makes  Cost of postage them more likely to and packaging purchase a set of  On-going costs of dinner plates maintenance of the  Have complete control website, e.g. over the way its updating prices of pottery is shown in plates Setting up a the adverts  Search engines website  Prices can be quickly may not bring up updated EP’s products on  Can include the first page of a interactive search unless EP adverts/videos, which pays for this which are more attractive to can be expensive customers  Relies on people  Website can be used finding the for online ordering – website/may be more accessible for relatively unknown customers living further away from retailers Justification might include:  Social media is the best way to choose as the advert for pottery is more likely to be seen than on a website, which has to be searched for and social media will appear immediately. Viral marketing means that people using social media can more quickly spread information than the website and emails to existing people about EP’s products and may not increase sales as these customers already have EP pottery.  Using emails is the best way to choose as an Recommendation email is less likely to be ignored and targets people who have already been a customer and therefore may be more likely to read the email and purchase additional products to match their existing pottery plates.  Setting up a website is the best way to choose as it can include a lot of information about EP’s high-quality products which the other two alternatives do not. It can include interactive sections that may be attractive to potential customers and therefore increase sales.

This question in 0986/21 May/June 2024

2 (a) Explain two benefits and two limitations for JJ of employing part-time workers in its factory. Benefit 1: … … … … Benefit 2: … … … … Limitation 1: … … … … Limitation 2: … … … … [8] (b) Consider the advantages and disadvantages of the following three ways JJ could promote its new product in country X. Which way should JJ use? Justify your answer. • Advertising in fashion magazines • Handing out leaflets in Main City • Point-of-sale displays in shops Advertising in fashion magazines: … … … … … … Handing out leaflets in Main City: … … … … … … Point-of-sale displays in shops: … … … … … … Recommendation: … … … … … … [12]

20 marks

Mark scheme: 2(a) Explain two benefits and two limitations for JJ of employing part-time 8 workers in its factory. Award 1 mark for each relevant benefit/limitation (max 4). Award a maximum of 1 additional mark for each explanation of the benefit/limitation in context. Relevant benefits might include:  The employees are more flexible in the hours they work – than the 60 full- time workers  Ask/more likely for the part-time workers to increase their hours – during busy times to meet demand for bracelets  Can/more likely increase operating hours in the factory when demand increases – as the 25 part-time workers may be willing to work extra hours  Part-time employees often do not need to take time off for appointments, such as to visit the doctor – less likely to cause disruption to the manufacture of rings  May be able to attract skilled employees who want to work reduced hours  May reduce business costs if pay lower wages than wage rates for full- time workers  It may be easier to make part-time workers redundant Relevant limitations might include:  If the employee sees the job as temporary, then they may be less committed to the business - produce less jewellery  Takes longer to recruit two part-time employees than one full-time employee – so less time to focus on selling in other countries  There may be an increase in induction and training costs – which may make it difficult to increase profit each year  More difficult to communicate with part-time employees  If the job is temporary then less likely to provide training for them For example: If the employee sees the job as temporary, then they may be less committed to the business (1) and produce fewer items of jewellery (app). Application could include: jewellery; set up 25 years ago; public limited company; objective to increase profit every year; to expand the business; sold directly to customers in other countries; 30% sold using ecommerce; 70% sold in jewellery shops; raw materials purchased locally; 60 full-time employees; 25 part-time employees; bracelets; rings; earrings. 2(b) Consider the advantages and disadvantages of the following three ways 12 JJ could promote its new product in country X. Which way should JJ use? Justify your answer.  Advertising in fashion magazines  Handing out leaflets in Main City  Point-of-sale displays in shops Level Description Mark 3 Sound application of knowledge and understanding of 9–12 relevant business concepts using appropriate terminology. Detailed discussion of at least two ways. Well-justified recommendation. Candidates discussing all three ways in detail, in context and with a well-justified recommendation, including why the alternative ways were rejected, should be rewarded with the top marks in the band. 2 Sound application of knowledge and understanding of 5–8 relevant business concepts using appropriate terminology. Detailed discussion of at least one way. Judgement with some justification/some evaluation of choice made. Candidates discussing at least two ways in detail and applying them to the case should be rewarded with the top marks in the band. 1 Limited application of knowledge and understanding of 1–4 relevant business concepts. Limited ability to discuss the ways with little/no explanation. Simple judgement with limited justification/limited evaluation of choice made. Candidates outlining all three ways in context should be rewarded with the top marks in the band. 0 No creditable response. 0 2(b) Relevant points might include: Advantages Disadvantages Advertising in  Read by target  Can be expensive to fashion market – more likely advertise in a fashion magazines to be seen by magazine – potential customers increases costs for – possibly increasing JJ – possibly sales lowering profit if  Can be shown in advertising is not colour with effective at photographs/images increasing revenue – may make the  Often only published jewellery look more once a month or attractive - more once a week – appealing to therefore may not be customers seen as often by potential customers  Only seen by people who read the fashion magazines, and these may not be the target market for JJ’s new jewellery product Handing out  A cheap method of  May not be looked at leaflets in Main advertising – keeps – so waste of money City down marketing – not effective costs advertising of either  Given out in the bracelets or rings street in Main City so  May be seen as junk may be handed out so thrown away – to many people – annoying to potential reaches a wide customers and may range of potential deter them from customers who may buying JJ’s products want to buy jewellery  Leaflets can be kept for future reference, especially if discount coupon included 2(b) Advantages Disadvantages Point-of-sale  Seen by potential  May not be noticed displays in shops customers when they so may not be enter the jewellery effective shop – may attract  Cost of displays and more customers to incentives to retailers buy JJ’s jewellery to put the point-of-  Makes JJ’s rings sale displays of the and bracelets stand new jewellery in out from competitors’ their shops products  Difficult to make a jewellery item stand out to potential customers as the jewellery items are small and can easily be missed Recommendation Justification could include:  JJ should choose to advertise in fashion magazines because these are purchased by potential customers who are more likely to see the adverts and therefore be more likely to buy JJ’s new jewellery product. Leaflets may not even be looked at and thrown away and point-of- sale displays are only seen if potential customers go into that retailer’s shop in the first place, therefore limiting the number of potential customers seeing the display.  JJ should choose to hand out leaflets in Main City because these will reach a wide range of people shopping in the city and will be more likely to attract people who have not previously been customers of JJ’s products, making them more likely to purchase JJ’s new jewellery.  JJ should choose to provide point-of-sale displays in jewellery shops as they will be seen by customers entering the shop and these will be people who are already interested in buying jewellery so may be the most effective promotion to use so may generate the most sales.

This question in 0986/22 May/June 2024

3 (a) Explain two advantages and two disadvantages to a business of using a bank loan as a source of finance. Advantage 1: … … … … Advantage 2: … … … … Disadvantage 1: … … … … Disadvantage 2: … … … … [8] (b) Consider the advantages and disadvantages of the following three methods of promotion PF could use for its new product range. Which is likely to be the best method for PF to use to increase sales? Justify your answer. • Leaflets handed out in the street • Billboards on the side of a main road • Discounts on first purchase Leaflets handed out in the street: … … … … … … Billboards on the side of a main road: … … … … … … Discounts on first purchase: … … … … … … Conclusion: … … … … … … [12]

20 marks

Mark scheme: 3(a) Explain two advantages and two disadvantages to a business of using a 8 bank loan as a source of finance. Award 1 mark for each advantage/disadvantage (max 2 advantages/max 2 disadvantages). Award a maximum of 1 additional mark for each explanation of the advantage/disadvantage. There are no application marks for this question. Relevant advantages might include: • Usually quick to arrange – if already a customer of the bank, then will already be familiar with the business’ bank records • Can be for a varying length of time – the monthly repayment will be lower if a longer period of time is taken to repay the loan • If interest rate is fixed when loan taken out, then this fixes the repayments / know repayments cannot be increased – expenses for loan repayments will not increase so easier to plan • Paid back in instalments usually monthly – so can budget for the repayments in the cash flow forecast • Keeps control of the business which will not be true if share capital is used instead to raise the finance required • Lower interest rates may be offered to larger businesses – as lower risk of not repaying so repayments will be lower Relevant disadvantages might include: • Interest will be added to the repayments – increasing expenses for the business • Security/collateral may be required – may lose personal assets if the loan is not repaid • The loan needs to be repaid – which could negatively affect cash flow / liquidity • If variable rate agreed, then interest rate may be increased during the repayment period – increasing expenses for the business For example: The loan can be for varying length of time (1) so the monthly repayment will be lower if a longer period of time is taken to repay the loan and therefore easier to afford (1). 3(b) Consider the advantages and disadvantages of the following three 12 methods of promotion PF could use for its new product range. Which is likely to be the best method for PF to use to increase sales? Justify your answer. • Leaflets handed out in the street • Billboards on the side of a main road • Discounts on first purchase Level Description Marks 3 Sound application of knowledge and understanding of 9–12 relevant business concepts using appropriate terminology. Detailed discussion of at least two methods of promotion. Well-justified conclusion. Candidates discussing all three methods of promotion in detail, in context and with a well-justified conclusion, including why the alternative methods of promotion were rejected, should be rewarded with the top marks in the band. 2 Sound application of knowledge and understanding of 5–8 relevant business concepts using appropriate terminology. Detailed discussion of at least one method of promotion. Judgement with some justification/some evaluation of choice made. Candidates discussing two or more methods of promotion in detail and applying them to the case should be rewarded with the top marks in the band. 1 Limited application of knowledge and understanding 1–4 of relevant business concepts. Limited ability to discuss the methods of promotion with little/no explanation. Simple judgement with limited justification/limited evaluation of choice made. Candidates outlining the three methods of promotion in context should be rewarded with the top marks in the band. 0 No creditable response 0 3(b) Relevant points might include: Advantages Disadvantages Leaflets • A cheap method of • May not be read – and handed out advertising shoes – just thrown away in the in the street keeps marketing budget street – wasted cost of costs lower producing the leaflets • Can be given out to a • May be seen as junk and wide range of people – can be annoying for may attract potential potential customer of customers who may not shoes – so ignore it and otherwise see the not make a purchase advertisement • May lead to litter and • Can be kept for future cause pollution in the reference – so are more streets leading to a bad likely to remember the reputation for PF details of the rubber shoes – and may therefore be more likely to make a purchase in the future Billboards • A permanent form of • Can easily be missed – on the side advertising for a period especially if the person is of a main of time – more likely to driving by and road be seen more than once concentrating on the and therefore attract the road/traffic attention of passers by • No detailed information • They can potentially be about the sustainable seen by a large number sources of raw of people – walking or materials can be driving past the billboard included in the billboard – may attract the – as only large writing attention of many can be seen, and so only potential customers brief general message can be on the billboard • Possibly higher cost of advertising compared to the other two for the shoe manufacturer 3(b) Advantages Disadvantages Discounts • Discounts make the • Business receives a on first shoes more affordable – lower price than purchase which can encourage otherwise would – lower potential customers to profit margin make the first purchase – • Unless the discount is may be tempted to buy quite high then may not when otherwise wouldn’t be sufficient to – increasing sales encourage potential • Lower price may make customers to purchase them more competitive – new shoes increasing sales of the new product in this competitive market Conclusion Justification could include: • Leaflets handed out in the street will be the most effective because they can be kept by potential customers and reminded of the shoes so a purchase can be made later. The name of the product and where it can be purchased will not be forgotten so sales are likely to increase. Billboards will be less effective as they can easily be missed as people go past them and a discount will only be effective if it is a large discount, which will significantly reduce PF’s profit margin. • Billboards on the side of the road will be the most effective way to increase sales because it will be seen every day by a large number of people passing by and if the billboard is attractive, it will draw the attention of many potential customers leading to higher sales of shoes. • Discounts on the first purchase will be the most effective way to increase sales because it will lower the price of the rubber shoes making them more affordable and encourage the customer to make the purchase. If they like the sustainability of the raw materials used, then they will come back and be a regular customer of the business.

This question in 0986/21 May/June 2025

2 (a) Explain two advantages and two disadvantages to LB of using primary market research. Advantage 1: … … … … Advantage 2: … … … … Disadvantage 1: … … … … Disadvantage 2: … … … … [8] (b) Consider the advantages and disadvantages of the two options LB could use to distribute its new product range in country X. Which channel of distribution should LB use? Justify your answer. • Selling to specialist retail shops • Selling directly to customers through LB’s website Selling to specialist retail shops: … … … … … … … … Selling directly to customers through LB’s website: … … … … … … … … Recommendation: … … … … … … … … [12]

20 marks

Mark scheme: 2(a) Explain two advantages and two disadvantages to LB of using primary 8 market research. Award 1 mark for each advantage/disadvantage (max 2 advantages/max 2 disadvantages). Award a maximum of 1 additional mark for each explanation of the advantage/disadvantage in context. Relevant advantages might include: • Is up to date – finds out about current trends in bathroom products • Relevant to the business as direct contact with potential customers – that produces basins and showers • Is first–hand information / planned and carried out by those who want the information – about this very competitive market • Effective at gathering information about a specific problem – as to which new designs to choose to produce • Not available to other businesses Relevant disadvantages might include: • Can be expensive to collect information – about sales through specialist retail shops • May take time to collect / not available immediately – for this company that has been operating for over 20 years • May not be accurate if people carrying it out are not experienced in this type of research / interviewer bias • Less accurate results gathered if sample does not represent the target market For example: The information is up to date (1) so the business will be aware of current trends in designs of bathroom products (app). Application might include: luxury bathroom products; baths/basins/showers; plan to produce a new range of bathroom products; started 20 years ago; sells in specialist retail shops; website contains information on product range; operates in a very competitive market; need to decide which new designs to produce. 2(b) Consider the advantages and disadvantages of the two options LB 12 could use to distribute its new product range in country X. Which channel of distribution should LB use? Justify your answer. • Selling to specialist retail shops • Selling directly to customers through LB’s website Level Description Marks 3 Sound application of knowledge and understanding of 9–12 relevant business concepts using appropriate terminology. Detailed discussion of both options. Well-justified recommendation. Candidates discussing in detail both options, in context and with a well-justified recommendation, including why the alternative option was rejected, should be rewarded with the top marks in the band. 2 Sound application of knowledge and understanding of 5–8 relevant business concepts using appropriate terminology. Detailed discussion of at least one option. Judgement with some justification / some evaluation of choice made. Candidates discussing in detail at least one option and applying it to the case should be rewarded with the top marks in the band. 1 Limited application of knowledge and understanding of 1–4 relevant business concepts. Limited ability to discuss the options with little/no explanation. Simple judgement with limited justification / limited evaluation of choice made. Candidates outlining both options in context should be rewarded with the top marks in the band. 0 No creditable response. 0 2(b) Relevant points might include: Advantages Disadvantages Selling to • May be able to sell • Have less control specialist retail bathroom products in over the way the shops larger quantities to basins and showers retailers – more likely are displayed to improve cash flow • Will be displayed • Reduces distribution alongside costs – if sell to a few competitors’ products large retail shops – may lead to fewer rather than direct to sales if luxury customers – fewer nature of products journeys for delivery is less obvious lorries • Price may be higher • Already has a after retail profit relationship with these margin added – shops – may be leading to fewer sales familiar with the quality • No direct contact with of the luxury customers – so may bathroom products – not be able to can pass this emphasise the information and advice luxury bathroom on to customers – products sales may be higher • Lower level of inventories – as some products are sent to the retailer • Retailer may pay for some of the advertising – may reduce marketing costs • Customers are already familiar with LB’s products being displayed in these specialist shops so may make it easier to sell a new range of products 2(b) Advantages Disadvantages Selling directly • Lower price can be • Delivery costs paid by to customers charged as no profit customers will be high through LB’s margin for the retailer as baths are large website included – may lead to and heavy – may higher demand – reduce sales increased sales and • May get damaged revenue when being delivered • Direct contact with to customers’ homes customers – may gain – increasing costs useful feedback on from repair or showers and baths – replacement of less market research products needed in the future • The luxury nature of • LB controls the way its the products cannot new bathroom range is be appreciated using described and online sales as information provided for customers cannot see customers – more or feel the luxury accurate than if sold bathroom products through a retailer – customers may not be willing to pay the higher price as do not appreciate the high quality • Storage costs will be higher – as products stored before being dispatched in small quantity to each customer • Increased cost of website being adapted to be able to take customer orders – also ongoing maintenance costs 2(b) Recommendation Justification might include: • LB should sell the new bathroom range to the existing specialist retail shops as it already has a good relationship with them, and their employees are likely to be familiar with LB’s products so can advise customers about their luxury nature encouraging customers to think paying the higher price is worth it. Selling directly to customers through its website will be a new way of distributing its products and may not be successful due to LB’s lack of experience. • LB should sell the new bathroom range directly to customers through LB’s website as it will allow LB to sell to a wider range of customers across a wider area than the current specialist retail shops and therefore have higher sales.

This question in 0986/21 Oct/Nov 2025