International Advanced Certificate in Purchasing and Supply ANALYSING THE SUPPLY MARKET. A6/Nov10 LEVEL 4 MARKING SCHEME. November 2010.

Transcription

1 International Advanced Certificate in Purchasing and Supply ANALYSING THE SUPPLY MARKET A6/Nov10 LEVEL 4 MARKING SCHEME November 2010 SuperShave

2 SECTION A Questions 1-10 are multiple choice questions. For each question, select ONE correct answer from A to D and write it in the space provided in your answer booklet. You are advised to spend approximately 30 minutes on this section. Q1 What does the abbreviation GDP stand for? (2 marks) A. General Discount Purchasing B. Good Documentation Practice C. Gross Domestic Product D. Gaining Domestic Percentage. Q2 Which of the following best describes the pricing policy known as cost plus pricing? (2 marks) A. A price which includes the cost of production and distribution, and the profit margin B. A price in line with that being charged by competitors C. A low price set to gain market share and increase volumes from new customers D. A high price with an administration charge. Q3 Which of the following best describes an economic market with a few main suppliers in it? (2 marks) A. Duopoly B. Oligopoly C. Monopoly D. Perfect Competition. Q4 Which of the following best describes the term 'marketing mix'? (2 marks) A. The range of products or services that a company provides B. The range of transportation channels that a company may use for distribution C. The range of business activities in relation to product, price, place and promotion D. The range of products that a company may mix together in a single advertisement. Q5 Which of the following is a category of economic system? (2 marks) A. Planned economy B. Derived economy C. Standardised economy D. Thriving economy. A6 /Nov10/Supershave/KS Page 2 of 12

3 Q6 Which of the following best describes the concept of marketing? (2 marks) A. Meeting the needs of the managers B. Meeting the needs of the suppliers C. Meeting the needs of the customers D. Meeting the needs of finance markets. Q7 Which of the following is a disadvantage of a free market economy? (2 marks) A. It produces poor quality B. There is a lack of innovation C. It ignores social costs D. It will cause over production. Q8 Which of the following best describes the term 'factor market'? (2 marks) A. Resources are bought and sold B. Money is provided to help organisations grow C. Goods and services are sold to consumers D. Only new products are marketed to consumers. Q9 Which of the following best describes a small change in demand as a result of a large change in price? (2 marks) A. Implicit B. Elastic C. Explicit D. Inelastic. Q10 Which of the following best describes the term 'monetary policy'? (2 marks) A. The control of total net production B. The control of wealth distribution C. The control of taxation and money spent by government D. The control of the amount of money in circulation and the cost of borrowing. SECTION A MARK SCHEME Answer A D MARKS Answer A D MARKS Q1 C 2 Q6 C 2 Q2 A 2 Q7 C 2 Q3 B 2 Q8 A 2 Q4 C 2 Q9 D 2 Q5 A 2 Q10 D 2 A6 /Nov10/Supershave/KS Page 3 of 12

4 SECTION B Questions are short-answer questions. You are advised to spend approximately 60 minutes on this section. Q11 State FIVE influences on product availability. (5 marks) Q11: MARK SCHEME Syllabus Reference(s): 3.1 Five from: Demand Supply Weather Distribution Price Reduction in trade barriers Changes in exchange rates Tariffs/quotas Valid alternatives will be awarded appropriate marks Up to 1 mark for each influence stated Q12 Explain TWO benefits for a buyer of analysing supply markets. (5 marks) Q12: MARK SCHEME Syllabus Reference(s): 1.1 To be aware of price movement, to be aware of supply threats or any opportunities. Marks will be awarded for any other reasonable point at the assessor's discretion. 2.5 marks for each up to 5 marks max. A6 /Nov10/Supershave/KS Page 4 of 12

5 Q13 (a) Explain why buyers might benefit from receiving a supplier cost break down. (3 marks) Q13 (a): MARK SCHEME Syllabus Reference(s): 3.1 To have a clear understanding of the cost base in order to make a vfm assessment, to help with a future negotiation by understanding the cost base, in order to assess profit levels in an industry, in order to help future price escalation discussions through clarity of cost base etc. Assessors should award any reasonable points made at their discretion Total 3 marks (b) Explain why suppliers may be unhappy with supplying a cost breakdown. (2 marks) Q13 (b): MARK SCHEME Syllabus Reference(s): 3.1 It may make the profit aspects visible, they may not have a detailed cost breakdown themselves!, it may make achieving higher price points difficult in the future, in may expose poor procurement on their behalf with their supply chain etc. Assessors should award any reasonable point made at their discretion. Total 2 marks Q14 Describe TWO non-financial aims that may be included in a company's strategy. (5 marks) Q14: MARK SCHEME Syllabus Reference(s): 1.3 Beside profit maximisation firms may have many other aims: Prestige supplier status Growth maximisation Product diversification Empowerment of staff (preferred employer) etc Any reasonable point will be credited at the discretion of the assessor. 2.5 marks each up to 5 marks max. To achieve 2.5 marks on each candidates must state and describe the aims not just state them (1.5 marks for stating, 1 additional mark for description) A6 /Nov10/Supershave/KS Page 5 of 12

6 Q15 (a) Define the term 'structural unemployment'. (3 marks) Q15 (a): MARK SCHEME Syllabus Reference(s): 2.1 Structural = mismatch of skills needed in the business and skills held by the labour force (up to 3 marks) Total 3 marks (b) List TWO other classifications of unemployment. (2 marks) Q15 (b): MARK SCHEME Syllabus Reference(s): 2.1 Cyclical/seasonal, frictional, (1 mark for each up to 2 marks) Total 2 marks Q16 Outline TWO advantages of a free market economy. (5 marks) Q16: MARK SCHEME Syllabus Reference(s): 1.4 Gives freedom of choice, encourages innovation, ensures quality, rewards efficiency (up to 2.5 marks) A6 /Nov10/Supershave/KS Page 6 of 12

7 SECTION C Questions require full answers, with examples where appropriate. You are advised to spend a minimum of half an hour on each question. Q17 (a) Discuss FIVE key economic indicators which businesses need to consider when planning for the future. (10 marks) Q17 (a): MARK SCHEME Syllabus Reference(s): 2.1 Key indicators include exchange rates, inflation, interest rates, unemployment, recession/boom although any other reasonable indicator will be credited. Key is the command word discuss. Candidates to only get one mark up to a max of 5 for outlining indicators Candidates are expected to identify the indicator, discuss the context and why businesses need to be aware of them for their future planning to score higher marks Marks will be awarded at the discretion of the assessor up to 10 marks max Total 10 marks (b) Describe FIVE stages of 'the spiral of economic recession'. (5 marks) Q17 (b): MARK SCHEME Syllabus Reference(s): 2.1 Fall in consumer confidence Fear for jobs and future prosperity Fall in demand (pressure on business) Fall in prices and profit margins Long term investment is cut) As the spiral is a cycle it can start and finish anywhere within the cycle. Candidates will therefore be awarded marks for ensuring that the cycle follows in logical order regardless of starting position. 1 mark for each up to 5 marks max A6 /Nov10/Supershave/KS Page 7 of 12

8 Q18 World Trade Organisation The extract below is taken from the World Trade Organisation (WTO) website: 'The economic case for an open trading system based on multilaterally agreed rules is simple enough and rests largely on commercial common sense. But it is also supported by evidence The data show a definite statistical link between freer trade and economic growth. Economic theory points to strong reasons for the link. All countries, including the poorest, have assets human, industrial, natural, financial which they can employ to produce goods and services for their domestic markets or to compete overseas. Economics tells us that we can benefit when these goods and services are traded. Simply put, the principle of comparative advantage says that countries prosper first by taking advantage of their assets in order to concentrate on what they can produce best, and then by trading these products for products that other countries can produce best. In other words, liberal trade policies policies that allow the unrestricted flow of goods and services sharpen competition, motivate innovation and breed success. They multiply the rewards that result from producing the best products, with the best design, at the best price." TASKS World Trade Organisation website, 2009 ( (a) Explain FOUR reasons why some countries do not share the WTO s views on liberal trade policies. (8 marks) Q18 (a): MARK SCHEME Syllabus Reference(s): 1.5 Candidates are expected to explain a range of alternative aims that countries other then world trade maximisation e.g. Military or strategic considerations Protecting domestic infant industries Prevents 'dumping' National security Cultural differences Economic self interest Up to 4 marks max for simply outlining barriers 4 additional marks for setting in context with short explanation of 4 barriers Total 8 marks A6 /Nov10/Supershave/KS Page 8 of 12

9 (b) Discuss TWO factors which might encourage countries to open up trade with other countries. (5 marks) Q18 (b): MARK SCHEME Syllabus Reference(s): 1.5 Some sample factors: Economic rationale e.g. David Ricardo s model of comparative advantage Trade Agreements (e.g. Treaty of Rome 1957, WTA) Reciprocal benefit e.g. need for a scarce item Political Groupings (e.g. G8) (2 factors up to a max of 2.5 marks each) Any other reasonable points made shall be awarded at the assessors discretion (c) Identify the means by which the value of a country s import and export transactions are recorded. (2 marks) Q?18(c): MARK SCHEME Syllabus Reference(s): 1.5 They are recorded via its balance of payments yearly account this includes both a current account and a capital account. Candidates will be awarded up to two marks at the assessors discretion but will score full marks for simply stating through it Balance of Payments or through its Capital and Current Account Total 2 marks A6 /Nov10/Supershave/KS Page 9 of 12

10 Q19 Super Shave Super Shave has been producing quality men's razors, as well as other associated products, for nearly 40 years. It has achieved steady growth, decade on decade, since the 1970's. In the last few years it has seen not only a decline in sales, but also a challenge to its market share, with more competitors entering the market place. Super Shave has always had a generous marketing budget and has tried to create a brand image of quality and durability. Whilst remaining a fashionable brand, it believes it should keep its existing customers and target new customers. The company is extremely well known nationally. Super Shave's leading product is the 'A100' a very low-cost disposable razor that has been in production since the company's inception. This is sold via national retail stores. Super Shave has been contacted by a sales representative from Force Six, an organisation that claims that it can market the A100 more effectively than Super Shave s existing advertising agency. The sales representative has proposed that Force Six could develop a new direction for Super Shave and that the cost would be about half that of its existing agency spend, but with higher resultant sales. The sales representative claims that Force Six has expertise in dealing directly with national retail stores to obtain higher levels of orders via various buyer and end-user promotions. TASKS (a) Draw a typical product lifecycle and identify where Super Shave's A100 sits within that cycle. (5 marks) Q19 (a): MARK SCHEME Syllabus Reference(s): 3.1 Development Growth Maturity Decline (sales transition) 4 marks Few competitors fight for market share maintain market share drop off/ It is in the maturity/decline stage (either acceptable) 1 mark A6 /Nov10/Supershave/KS Page 10 of 12

11 (b) Explain TWO reasons why Super Shave may have been targeted by Force Six. (2 marks) Q19 (b): MARK SCHEME Syllabus Reference(s): 3.1 Force Six should be aware of the value of Super Shave s business Force Six should be aware that there has been a declining market share Super Shave appears to be a very well known organisation Super Shave appear to need a new direction for sales promotion Force Six believe that it can work on the account and achieve profitable business for both organisations One mark for each relevant explanation from above or similar Total 2 marks (c) Describe TWO typical sales promotions that Force Six may suggest when targeting national retail stores. (5 marks) Q19 (c): MARK SCHEME Syllabus Reference(s): 3.2 Price reduction (1 mark only, as simple price reduction is not in the spirit of promotion) Price reduction linked to volume or value of sales Retrospective discount based on volume or value of sales Free issue stock (eg: Buy one case, get one case free) Sales competition with incentives for retailer Supported advertising or specific retailer advertising Point of sale materials Extended credit period In-store demonstrations and promotional gifts Any two recognised promotional methods will be accepted/credited as long as they fit the business described and retailer centred activity. 2.5 marks for each up to 5 marks (1 mark for just listing buying motivators) A6 /Nov10/Supershave/KS Page 11 of 12

12 (d) Discuss the advantages and disadvantages for Super Shave of accepting the proposal from Force Six. (8 marks) Q19 (d): MARK SCHEME Syllabus Reference(s): 3.2 This question is designed to stimulate a thorough discussion from candidates to achieve the highest marks. Candidates should provide a roughly even balance between the advantages and disadvantages of accepting the proposal within their answers. Some possible answers Advantages: Force Six experience/expertise The appeal of a new direction now in maturity/decline stage of product life cycle Potential VFM savings Disadvantages Has an established supplier relationship and has been successful to date Risk of change at a crucial stage As a large brand with large budget could be just targeted by Force Six without substance for ability to deliver Candidates are therefore to either thorough discuss 2 advantages and 2 disadvantages to score full marks. If they discuss less thoroughly a range of disadvantages/advantages (3 or 4 min) they can score higher marks still, depending on the quality of discussion Candidates should be rewarded for any reasonable point, at the assessor s discretion. Total 8 marks END OF MARK SCHEME A6 /Nov10/Supershave/KS Page 12 of 12