Unit 3: Building a Business (GCSE Business Studies) Sample Past Paper 2 (Mark Scheme)

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1 PART A: 1a) AO1 = 1 A (1) b) AO1 = 1 Unit 3: Building a Business (GCSE Business Studies) Sample Past Paper 2 (Mark Scheme) Lower costs More competitive c) AO1 = 1 AO2 =2 Possible reasons include: Training better trained workers are more productive Better equipment workers will be more productive, improving equipment or replacing equipment will improve productivity More effective work practices improve how people work e.g. reorganise workers d) AO1 = 1 AO2 = 1 AO3 = 1 For 3 marks, there will be one method identified and two clearly identifiable strands of explanation between the statements. These may contain connective words such as, this leads to because etc. development will clearly show why borrowing from a bank can be a problem. Possible ways include: Improved purchasing change suppliers & get a lower price/ get a supplier that provides a higher quality product/ buy in bulk to reduce costs/ negotiate a lower price with current suppliers Relocation to reduce costs, costs of land and buildings may be lower, taxes may be lower, workers may be paid less Better design use fewer or better quality or designed materials, a new design may be easier to make so reducing labour costs Cutting overhead costs overhead costs are costs not related to production e.g. R & D programmes, marketing etc.

2 2a) AO1 = 1 C (1) b) A01 = 1 Maternity rights Paternity rights Anti discrimination regulations Working time directives Accept any appropriate response c) AO1 = 1 AO2 = 1 AO3 =1 For 3 marks, the description will make three relevant points associated the advantages of EU import protection measures which may include an explanation of a measure i.e. tariffs or quotas. The points will clearly show the advantage of protection measures for UK businesses. Two marks are awarded for the points and 1 mark is awarded for the use of context Domestic firms are protected from imports into the market Import protection is designed to reduce imports being bought from abroad Tariffs are taxes on imported goods Quotas are limits on the physical number of goods that can be imported over a period of time High tariffs discourage consumers from buying imported goods Possibly increases domestic firms sales as goods are relatively cheaper than foreign imports Keeps businesses operating Domestic firms face less competition Accept any appropriate response d) AO1 = 2 1 mark for each appropriate response Member countries follow regulations therefore generally better conditions for workers, safer products Goods can be traded freely between member countries single or common market Easier to sell products/ buy products from member countries Easier to hire workers from member countries

3 e) AO1 = 1, AO2 = 1, AO3 = 1 For 3 marks, there will be three clearly identifiable strands of explanation between the statements. These may contain connective words such as, this leads to because etc. development will clearly show why there may not be a trade off for companies between behaving ethically and earning more profit. Possible answers include Customers prefer businesses to act ethically so it increases sales revenue good marketing tool Motivator for workers, if they feel they are part of an ethical business they will work harder helps to reduce costs If working conditions are good and regulations are followed workers may work harder - increases productivity 3. a) AO1 = 1 C (1) bi) AO1 = 2 1 mark for each appropriate response Function Cost Appearance bii) AO1 = 1, AO3 = 2 For 3 marks, the description will make three relevant points associated with how a business may differentiate its product. This may include a definition and an appropriate example which is more than simply giving the name of a business. Making one product different from another in some way Design, formulation and function, different characteristics, features Name, used to create a brand image Packaging, to differentiate your product colours, designs to attract customers use of logo on packaging

4 ci) AO1 = 1 1 mark for each appropriate response Share capital Venture capitalist Retained profits Asset sales Accept any appropriate response THC plc cii) AO1 = 1, AO2 = 1., AO3 = 1 For 3 marks, it will be clearly explain the disadvantages associated with this choice of finance for THC. Within the answer there will be at least three clearly identifiable strands of explanation. These may contain connective words such as, this leads to because etc Share capital can issue new shares on the stock exchange, may create a conflict of interest with current shareholders as dividends may be reduced profits of the company will be divided between more people Venture capitalist may have to give up some control of the business, may decrease the share of the profits for the current owners and shareholders Retained profits money could be used to make the financially stronger, a safety net if expansion is not successful, risk involved or shareholders may not want the profit to be used for expansion preferring to receive dividends conflict of interest Asset sales assets e.g. buildings, equipment, land - business must be sure it no longer requires these assets as they could be more expensive to buy again in the future, risk involved

5 4. a) AO1 = 1, D (1) b) AO1 = 2 Business does not have a need for a full time worker if there is not enough work for the worker then the business saves money Businesses will not have to pay as much National Insurance Contributions and possibly other benefits such as a pension contribution, holiday pay will be less Could be more beneficial to have a few part time workers rather than full time as workers may be more motivated Accept any appropriate response c) AO1 = 1, AO2 = 1, AO3 = 1 For 3 marks, there will be three clearly identifiable strands of explanation between the statements. These may contain connective words such as, this leads to because etc. development will clearly show why there may not be a trade off for companies between behaving ethically and earning more profit. Destocking means reducing the level of stocks held in a business. This is achieved by selling the stock off at a lower price. The lower prices should increase demand and therefore sales. This causes cash inflow for the business. It also lowers the cost of storing the stock. d) AO2 = 2, AO3 = 4 The aim here is for candidates to make a judgement as to whether changing price or negotiating better trading terms with suppliers is best to improve the cash flow situation. There is no right answer and the candidate can argue that either method is best, depending on the circumstances. Candidates might consider the following possible ideas as part of their answer: Changing prices: Decreasing prices increasing sales Attract new customers, regular customers may come more often Offer a price promotion e.g. 10% discount between 7pm & 9pm ( Happy Hour ) Negotiating with suppliers: Negotiate lower prices with current suppliers reducing costs and improving cash flow Negotiate better trade credit with current suppliers giving the business more time to pay suppliers and so help its cash flow situation (could delay paying its invoices) Ordering less from suppliers perhaps changing contracts thus reducing costs

6 To be evaluative candidates may suggest the impact changing prices will have on the business. Price is closely linked to quality and the restaurant could be perceived as of a low quality if price is low. This may have an impact on the restaurant s reputation. Evaluate the economic climate recession if the economy picks up Gismos may have damaged its reputation and may find it difficult to put prices back up. The recession is most likely impacting suppliers also and so this option may not be possible. Could damage the relationship between Gismos and its suppliers

7 PART B: 5ai) AO1 = AO2 = 1 AO3 = 1 For 3 marks, the description will make three relevant points associated with how Parcelforce can increase revenue. This may include a definition Sales revenue is the number of products sold times their average price (T = P x Q) 5aii) AO1 = 2 The business could change its price lowering its price should result in an increase in sales volume which should increase overall sales revenue Improve its marketing, advertise more, increase awareness & increase customers Increase the range of services it offers to customers Profit occurs when the revenues of a business are greater than its costs over a period of time b) AO1 = 1, AO2 = 1, AO3 = 1 For 3 marks, the explanation will what effective customer service might involve for Parcelworld. There will be one mark for identifying one aspect of effective customer service and at least two clearly identifiable strands of explanation in context. These may contain connective words such as, this leads to because etc On time service - making sure that deliveries are on time keep customers satisfied encourages repeat purchase builds reputation of reliability Create a competitive advantage exceed customers needs and expectations e.g. letting the customer follow a parcel through online tracking be innovative e.g. delivery cards can be easily read by people with sight problems or by those who do not speak English as a first language Listening to customers and dealing with complaints- after-sales service ensuring that any problems are dealt with courteously and promptly, adapt to changing customer needs e.g. concern over the environment Accept any appropriate answers c) AO2 = 4 AO3 = 4 This question has a 2 x 4 mark split. There is one mark for identifying a disadvantage. The remaining 3 marks are for the explanation which will show how the disadvantage affects Parcelworld. Within the answer there will be at least three clearly identifiable strands of explanation and reference to context. These may contain connective words such as, this leads to because etc Will have a negative impact on sales, may result in lower sales and eventually lower profits Repeat purchases will be lower Customers may switch to competitors, may eventually force the business to close down

8 6. ai) AO1 = 1 Trade Descriptions legislation makes businesses liable for prosecution and fines if products are sold in a misleading way. aii) AO1 = 1 Compare sales revenues from previous years Get customer feedback Accept any appropriate answers. b) AO1 = 1, AO2 = 2 For 3 marks, the explanation will show how legislation may affect the business. There will be one mark for identifying the effect and at least two clearly identifiable strands of explanation in context. These may contain connective words such as, this leads to because etc The business must know the law. The business may need to employ someone specifically for this, a legal expert, which increases costs. The business must stay up to date with any changes in legislation. The business must comply with legislation. There are costs involved with this, e.g. having to give refunds, making sure all products are safe for selling. Could face prosecution if they do not comply with the laws. Can build a reputation of following all the legislation correctly e.g. refunding and actually offer customers more rights than legislation entitles them to and therefore hopefully increase sales and thus revenues and profits.

9 c) AO2 = 4, AO3 = 4 The aim here is for candidates to consider two possible advantages Parcelworld has over competitors. The question asks the candidate to assess, so the candidate must develop some evidence of balance within the answer. Possible advantages: Customer service meeting and exceeding customers expectations, adapting to changing customers needs e.g. those with sight difficulties. Knowing its target market. Especially important in the services sector to differentiate themselves. Customer likely to return, repeat purchase and also recommend the business to others, word of mouth promotion. Taking account of environmental concerns, offering the option of carbon offsetting. Developing its corporate social responsibility. Appealing to the ethical side of customers, showing awareness & adapting to the increasing concern with the environment, may attract new customers and maintain old ones as consumers are becoming increasingly conscious and concerned about their impact on the environment. Well developed organisational structure, allows the business to operate efficiently and enables effective communication which should allow for improvements to be made within the business and any complaints or issues to be dealt with quickly. Chain of command should be clearly established, tasks clearly defined and allocated to the appropriately skilled worker. It is likely that evaluation will be demonstrated by considering how important these advantages are in creating a competitive advantage for the business. Candidates may link to the advantages of having a competitive advantage. No mark 0 Non-rewardable material. No mark is to be awarded if the candidate just re-states the question. Level Reference to one advantage is given with some weak development or two advantages are given with limited or no development of either. If there is just a simple judgement/value attached to one of the benefits, 1 mark should be awarded. If this judgement/point has some simple support, the response should be placed at the top of this level. The quality of written communication will be poor with frequent spelling, punctuation, style and grammar errors. Level Reference to two advantages are given, with some development of at least one at the lower end. A judgement/point is given at the lower end of the level with some development/support, which includes at least one reason/cause/consequence etc. At the middle of the level this analysis will be relevant and linked to the judgement/point made. Answers at the middle of this level will tend to assume that the judgement/point made will work (i.e. the advantage will have no downsides). At the top of the level there will be some evidence of balance to the point/judgement in the form of advantage/disadvantage, cost/benefit, pro/con or some counterbalancing factor. At the top of the level, candidates will attach some value/importance to one of the advantages. There will be a good level of quality of written communication with few mistakes in spelling, punctuation and grammar. The quality of the language used will be appropriate for the subject matter. Level Reference to two advantages is given with development of each. A judgement/point is given with some development which includes at least two reasons/causes/consequences etc. and the use of the it depends rule. Some balance will be given in the form of advantage/disadvantage, pros/cons, costs/benefits. At this level, candidates will attach some value/importance to both of the advantages and may make a judgement about which of the advantages is more important/valuable to Parcelforce. The quality of written communication will be of a high standard with few, if any, errors in spelling, punctuation and grammar. The style of writing and the structure of the response will be appropriate and of a high standard and there will be clear evidence that the candidate has structured their answer clearly and coherently, using appropriate terminology.

10 PART C: 7. AO1 = 2 2 marks for an accurate definition. If an accurate definition is not given award 1 mark or 0 marks depending on quality or getting part of the definition correct. Elaboration of the answer to indicate what this means raises the answer to 2 marks. This could take the form of an additional clarifying sentence or an example. Product trial is the way businesses persuade customers to try out a new product. 8. AO1 = 2 1 mark for each appropriate type stated. Primary e.g..surveys, focus groups, interviews. Secondary e.g. market research companies, websites, Government statistics, books, newspapers Also allow students who identify examples of both quantitative and qualitative research 9. AO2 = 3, AO3 = 3 The aim here is for candidates to consider two possible benefits of having a branded range of products. The question asks the candidate to discuss, so the candidate must develop some evidence of balance within their answer. This could take the form of considering the drawbacks and costs of and whether or not it outweighs the benefits. Equally the route to evaluation could be achieved by considering which benefit will be more valuable. Candidates may also evaluate the increased competition faced by brands from own brands particularly apparent in relation to own branded supermarket food products now available. Possible benefits: Premium pricing strong branding means that a business may be able to charge a premium price. This is a price that is higher than those of competitors. Quality of the product is usually higher. Repeat purchase Sales are likely to be higher. Customers are more likely to make repeat purchases of branded products. This helps maintain sales, it also means that firms are able to increase their market share. Kelloggs has a range of products as part of its total product mix. This is because different consumers want different products. Kelloggs can sell more and make more profit by satisfying different consumers wants. Each brand can be targeted at different market segments. This allows the company to increase its overall market share. Can retain customer loyalty by updating their products, can bring out new variants of an existing products, adapt to changing customer tastes Customer recognition, brands tend to be advertised heavily, consumers more aware of the advantages of the product. Brand loyalty leading to repeat purchases Accept any appropriate responses

11 10. AO2 = 4, AO3 =6 The aim here is for candidates to make a judgement as to whether product trials are effective in generating repeat purchase. The evaluative skill will be present through candidates making a value judgement as to whether or not they are. Possibly effective: Essential as it gets customer to try the product e.g. a very successful advertising campaign creates awareness and informs customers about the product without this first step repeat purchase would not be possible. Offering free samples brings the consumers into direct contact with the product, this can be followed up by a promotional price or lower price trials once the customer has tried the product a number of times they should hopefully become loyal to it Building up customer loyalty through product trials may lead to repeat purchase. Useful for established brands to trial new products, customers are most likely to trust an established brand and be more willing to try a new product them rather than a less well known brand if the business has done its market research and the product is meeting customers needs then loyalty should be established.

12 Possibly ineffective: Close substitutes available from competitors, customers not interested in brand but price and will switch when the product trial is over Difficult to predict consumers behaviour Can be very expensive for businesses e.g. advertising costs and may be successful, product may not be a long term success Product trials are not enough in generating repeat purchases, businesses must focus on building customer loyalty and establishing a strong brand image Product may not be what customers want, may not be meeting customers needs, therefore regardless of product trials customers may not repeat purchase Needs to be followed up with future promotions such as special offers & competitions. The discursive/evaluative element could come through considering drawbacks of product trials or considering the importance of other factors in generating repeat purchase. Candidates may discuss the current economic climate and how consumers are becoming increasingly concerned with price, possibly reducing their customer loyalty to brands. Candidates may discuss the importance of retaining customers as this often costs less than attracting new customers.

13 product trial and product trial and