GCSE Business Studies

GCSE Business Studies 413001 Setting up a Business Final Mark scheme 4130 June 2017 Version/Stage: v1.0

Mark schemes are prepared by the Lead Writer and considered, together with the relevant questions, by a panel of subject teachers. This mark scheme includes any amendments made at the standardisation events which all associates participate in and is the scheme which was used by them in this examination. The standardisation process ensures that the mark scheme covers the students responses to questions and that every associate understands and applies it in the same correct way. As preparation for standardisation each associate analyses a number of students scripts. Alternative answers not already covered by the mark scheme are discussed and legislated for. If, after the standardisation process, associates encounter unusual answers which have not been raised they are required to refer these to the Lead Writer. It must be stressed that a mark scheme is a working document, in many cases further developed and expanded on the basis of students reactions to a particular paper. Assumptions about future mark schemes on the basis of one year s document should be avoided; whilst the guiding principles of assessment remain constant, details will change, depending on the content of a particular examination paper. Further copies of this mark scheme are available from aqa.org.uk Copyright 2017 AQA and its licensors. All rights reserved. AQA retains the copyright on all its publications. However, registered schools/colleges for AQA are permitted to copy material from this booklet for their own internal use, with the following important exception: AQA cannot give permission to schools/colleges to photocopy any material that is acknowledged to a third party even for internal use within the centre.

Marking Guidance for 9 Mark Questions In order to help clarify the marking of these questions for new and existing examiners please note the following points: 1. Changes to the marking grid In each of the grids for the 9 mark questions you will find additional detail/clarification for the Evaluation Level 2 (E2) descriptors as follows: one very well explained reason in context or two or more reasons with at least one well explained 5 marks one reason well explained in context or two valid reasons explained in context 4 marks (default) one valid reason for the judgement explained in context 3 marks Reasons might include justifying why other options have not been chosen. ( I did not choose option B because.. ). These do not replace your professional judgement but are typical examples of how marks can be awarded. Please note that the default E2 mark is 4 marks. 2. Treatment of Quality of Written Communication (QWC). This can be seen as a nudge mark and the level criteria are defined below. E1: Ideas communicated in simple way/limited use of business terms. There are noticeable errors in accepted conventions of written communication. E2: Ideas are communicated with structure/correct use of business terms. There are occasional errors in accepted conventions of written communication If the QWC is considerably weaker than would be expected at the appropriate evaluation level then the mark should be reduced to 1(E1) or 3 or 4 (E2). Please note that the level of response should not be determined by QWC nor should it be seen as a bonus mark as the expected QWC level is embedded into the default mark. 3. Annotation It is essential that Levels are indicated in the body of the answer both for Knowledge / Application and Analysis (L1/L2/L3) and for evaluation (E1/E2). These are available as pre-set annotations and must be used. Failure to do so could, and has resulted in markers not being allowed to continue marking as it is unclear why they have allocated the marks that they have awarded. 4. Styles of response and where to find the judgement Not all students make their judgement at the end of the 9 mark questions. Often what might appear to be a brief judgement may only be summary statement of an answer that has been evaluative throughout following the initial judgement. Having reached the end of marking a 9 mark question it is essential to go back to the beginning to make an accurate judgement on the evaluation mark. Equally some candidates may start with a supported judgement that they contradict in looking at alternative options. This is unlikely to reach beyond the bottom of the E2 mark range unless a further well developed evaluation is provided at the end of the answer. Students who have made clear efforts to support their judgements must be awarded E1 marks 3 of 14

1 (a) Explain one way in which Charlie could measure the success of his business. [2 marks] Possible measures could be: how much profit/sales he makes (1) he will need to make enough money to live on (1) how many customers/recommendations (1) or how much market share he has these will need to grow to make the business realistic (1) whether his business survives (1) - in its first year a key measure as many fail (1) aims and objectives, need not be stated feedback from customers (1+1) NB Watch out for two separate points not explained NB Do not accept cash flow forecast as a measure of success 1 (b) Explain two benefits to Charlie of having a website. [4 marks] Possible benefits include: advertising he identifies this as a weakness as he relies on recommendations at present e-commerce customers could buy his paintings through online sales can provide display suitable for his paintings provides customer information such as process, delivery costs and contact details as a new business this would be needed. (1x1) twice Has to be a benefit to Charlie and not his customers Watch for re-wording of first point in second point 4 of 14

1 (c) Using Item A, explain why Charlie might need to change the types of painting he produces. [4 marks] Possible answers could include: customers mainly buy pictures of local views but the small paintings do not produce much profit he makes more profit from the larger local view paintings but does not sell as many the abstract paintings which he prefers to paint make the most profit but do not sell very well. Can be any data and not specifically to the table of sales figures Context does not automatically take it to L2 Level 2 example answer: Charlie likes to paint abstract pictures but Table 1 shows these do not sell very well (L1). It looks like he should concentrate on small pictures of local scenes as these are the ones that seem to sell the best (L2). 2 Explains relevant point(s) in the context of Charlie s possible business eg sales data. 4 3 AO2 1 Identifies relevant point(s). 2 1 0 No valid response. 0 AO1 5 of 14

1 (d) Charlie wants to research how he can sell more paintings and how much he should charge for them. Advise him on the best way to carry out this research. Give reasons for your advice. [9 marks] Possible areas for discussion: customer research what would they be prepared to pay? All paintings might be different? different customers may think paintings are worth different prices. research competitors how much to they charge? Is their product comparable? website research could refer to more famous/well known artists? Are the sales areas comparable? Level 2 example answer: Charlie could give out questionnaires where he would ask possible customers (L1) by showing him possible paintings/pictures (L2). Level 3 example answer: If Charlie used the Internet this would not cost very much (L1). This could be helpful as he does not have a lot of money to spend on research (L2) and he could see how much other painters are charging for similar and competing products (L3). NB Does not have to include both to achieve full marks 3 2 Analyses method of establishing possible price/sales in context. Explains/describes method of establishing possible price and/or increase sales in context. 4 3 AO3 2 AO2 1 States relevant point. 1 0 No valid response. 0 AO1 6 of 14

In addition, and separately, award marks for evaluation using the grid below. Students should evaluate/recommend which method Charlie should use. Possible Evaluation in context: Charlie s best solution would be to discuss with customers how much they are prepared to pay as each painting would be very individual. You cannot really compare with other painters as their work might not be as good and the customers might not like what they produce. (E2) Charlie would be best advised to work out how much it costs him to produce the painting including money for his time and some profit. If he does not do this he could be selling paintings at a loss. (E2) Unsupported judgements or no judgement should only be awarded 1 mark maximum (for QWC). Notes: AO3 also assesses students quality of written communication. When deciding on the AO3 level to be awarded, consider the degree to which the student orders and communicates his/her ideas. Offers advice with clear justification. E2 E1 Ideas communicated with structure/correct use of business terms. There are occasional errors in accepted conventions of written communication. Offers advice with limited support. Ideas communicated in simple way/limited use of business terms. There are noticeable errors in accepted conventions of written communication. 5 3 2 1 AO3 and Quality of Written Communication 7 of 14

2 (a) State and explain two advantages to Sheds-U-Like Ltd of using job production. [4 marks] Possible advantages include: products are individual/made to measure so customers more satisfied usually quality is higher can charge higher prices workers are more motivated as involved in a greater part of the production process. (1x1) twice 2 (b) Explain two possible solutions to Sheds-U-Like Ltd s cash flow problems. [6 marks] Possible solutions include: delay payments eg purchasing raw materials using credit reduce payments this could relate to making staff redundant, not making too much stock and stop renting the warehouse overdraft/loan but already near their overdraft limit gain payment in advance ensure payment is at point of order rather than delivery. charge for delivery/shipping costs diversify to other products relating to sheds Level 2 example answer: Sheds-U-Like Ltd could cut down on costs (L1) this would reduce the money going out of the business (L1). As sales have reduced they could make some of the workers redundant which would reduce the money spent on wages each week (L2). Apply grid below twice. 2 Explains how the solution would improve cash flow for Sheds-U-Like Ltd. 2/3 AO2 1 Identifies possible cash flow solution. 1 0 No valid response. 0 AO1 NB Context in one implies context in both 8 of 14

2 (c) Explain one benefit to Sheds-U-Like Ltd of being a private limited company. [5 marks] Possible benefits of being a Private Limited Company shareholders will be protected by limited liability (L1) so will be more willing to invest. This might be helpful to the business as they need more cash flow at the moment (L2) there is continuity for the business so if a shareholder wants to give up being an owner the business will continue to exist (L1). Level 2 example answer: The business can sell shares to family and friends (L1) which means they can raise extra funds if they need money such as to buy more equipment (L2). This would easier and cheaper than getting a bank loan (L2). Level 3 example answer: Being a private limited company would benefit the business as shareholders would have limited liability. This means that they could lose the money that they had invested (L2). This would encourage investors to buy shares in Sheds-U-Like Ltd which could enable them to raise more funds to help them with their cash flow problems (L3). 3 Explains how being a Private Limited Company would benefit Sheds-U-Like Ltd 5-4 AO2 2 Explains possible benefits without context 3-2 1 Identifies possible benefit 1 AO1 0 No valid response 0 Note: For L3 the benefits should be from the point of view of the business or the shareholders. 9 of 14

2 (d) The manager of Sheds-U-Like Ltd wants to increase the motivation of the workers. She is considering: a small increase in financial rewards giving the workers more responsibility. Recommend the best method of increasing the motivation of the workers. Give reasons for your recommendation. [9 marks] Possible areas for discussion: Increasing financial rewards money is a good motivator but the business has falling profits could link the additional reward to increased performance/production so the extra costs would be recovered workers are low paid so a small increase might be effective. Providing additional responsibilities would make the job more interesting/fulfilling but workers might expect to be paid more and have additional training which will be expensive not all workers might want additional responsibilities current jobs are low skilled. Level 3 example answer: If Sheds-U-Like Ltd provides some extra money this would be effective as pay is a key motivator (L2). This would work well as the workers are only paid minimum wage. (L3). This will however increase the costs of the company (L2) and they might not be able to afford this as they already have falling profits (L3). Other methods of motivation can be considered in the recommendation 3 Analyses benefit(s)/drawback(s) of option(s) in context. 4 3 AO3 2 Explains/describes option(s) in context. 2 AO2 1 States relevant point. 1 0 No valid response. 0 AO1 10 of 14

Possible evaluation in context: Sheds-U-Like Ltd should pay a small financial reward as this would work well as the workers are on minimum wage and could be self-financing as the workers would produce more efficiently and at a better quality (E2) Sheds-U-Like Ltd should provide the workers with more responsibility as this need not cost them any more money. This is the cheapest option and the business cannot afford to pay any more because it has falling profits and cash flow problems (E2). Unsupported judgements or no judgement should only be awarded 1 mark for QWC. Notes: AO3 also assesses students quality of written communication. When deciding on the AO3 level to be awarded, consider the degree to which the student orders and communicates his/her ideas. Offers judgement with supported justification. E2 Ideas are communicated using a logical structure, with some appropriate use of technical terms. There are occasional errors in accepted conventions of written communication. Offers judgement with limited justification. 5 3 AO3 and Quality of Written Communication E1 Ideas are communicated with some structure evident with occasional use of technical terms. There are noticeable errors in accepted conventions of written communication. 2 1 11 of 14

3 (a) Explain two ways in which consumer protection would apply to customers if they rented bikes from NE Cycles. [4 marks] Possible answers may include: the bikes should be as described, eg if it says gent s bike it should be a gent s bike bikes should be fit for their purpose, eg brakes should work if bikes do not meet the legal criteria then customer is entitled to their money back. Health & Safety, eg providing helmets If a customer books a bike with NE Cycles it should be available on the date and at the time agreed (1). If the bike does not work properly then the customer can have his money back (1). (Two marks in total) (1+1) twice Note: students do not to need to name specific consumer legislation. 3 (b) They plan to have 10 bikes. Katie thinks they should charge 10 a day per bike. They expect to rent each bike for an average of 25 days a month. Katie has calculated the costs for maintenance and the delivery service to be a total of 750 a month. Calculate NEW Cycles expected monthly profit. [4 marks] Correct answer = 1750 (4 marks) No units given = 1750 (3 marks) Calculates up to final amount = 2500-750 (3 marks) Calculation of monthly revenue = 2500 (2 marks) or 25 x 100 = 2500 Calculation of daily revenue = 100 (1 mark) Monthly revenue per bike 10 x 25 = 250 (1 mark) Some understanding of calculations involved (1 mark) Note: allow own figure rule, ie one mistake can still earn 3 marks. For full marks the sign has to be included in the final answer 12 of 14

3 (c) Katie and David disagree about when the business should start. Using Item C, advise them on when the best time to start would be. Give reasons for your advice. [9 marks] Katie s arguments for waiting include: they have not done enough planning and research starting now would be very risky they need to arrange a 5000 loan. David s arguments for starting straight away include: there is currently a gap in the market. this might not exist if they wait if they start now there will be more trade as more bikes are used in the summer they already have the small business grant to buy the bikes they would need to reapply for the grant. Level 3 example answer: Katie has a valid argument as without a business plan and reliable market research the business would be very risky (L2). This would be worse as they need a 5000 loan and the bank might want to see their planning and research before agreeing (L3) and as they are likely to be a partnership they will have unlimited liability if they go bankrupt (L3). 3 2 Analyses benefit(s)/drawbacks of starting now/delaying. In context. Describes benefit(s)/drawbacks of starting now/delaying in context. 4 3 AO3 2 AO2 1 States relevant point(s). 1 0 No valid response. 0 AO1 Don t need both to achieve full marks 13 of 14

In addition, and separately, award marks for evaluation using the grid below. Students are evaluating which start date is better for the business. They may just evaluate one option which can still earn full marks. Possible evaluation in context: Waiting would be best as it would be least risky (E1). This would allow them time to undertake research, produce a business plan and arrange a bank loan. This would be particularly sensible as they are likely to have unlimited liability (E1). Or It would be best to start straight away. They already have the grant (E1) and with summer sales available they are more likely to secure a loan because revenue would be better (E2). Even if it was a bit more expensive, they make their profits quicker which would make up for the extra costs (E2). Unsupported judgements or no judgement should only be awarded 1 mark maximum (for QWC). Notes: AO3 also assesses students quality of written communication. When deciding on the AO3 level to be awarded, consider the degree to which the student orders and communicates his/her ideas. Offers judgement plus clear justification. 2 1 Ideas are communicated using a logical structure, with some appropriate use of technical terms. There are occasional errors in accepted conventions of written communication. Offers judgement plus limited justification. Ideas are communicated with some structure evident with occasional use of technical terms. There are noticeable errors in accepted conventions of written communication. 5 3 2 1 AO3 and Quality of Written Communication 14 of 14