RJJ manufactures women’s shoes. It sells the shoes to a niche market using e-commerce. RJJ is a public limited company and its shareholders benefit from limited liability. The Managing Director 1 is planning to expand the business. RJJ could take over a competitor. Last year profit decreased by $50 000. The Finance Director has to decide on a source of finance to fund the expansion. Define ‘limited liability’. (a) … … … … [2] Define ‘niche market’. (b) … … … … [2] Outline two opportunities for consumers of using e-commerce when purchasing RJJ’s products. (c) Opportunity 1: … … … … Opportunity 2: … … … … [4] Explain two factors RJJ’s Finance Director should consider when deciding on a source of finance for the expansion. (d) Factor 1: … … Explanation: … … … … Factor 2: … … Explanation: … … … … [6] Do you think a takeover of a competitor is the best way for a large business to grow? Justify your answer. (e) … … … … … … … … … … … … [6]

1(a) Define ‘limited liability’. Award two marks for a full definition. Award one mark for a partial definition. The liability of shareholders / owners in a company is limited to only the amount they invested [2] OR The shareholders in a limited liability company which fails only risk losing the amount they have invested in the company (and not any of their personal wealth) [2] OR Its owners are not liable (responsible) for a company’s debts – this means that owners can lose what they have invested (but not their personal possessions). [2] Partial definition e.g. Shareholder only loses what they have put in [1] OR Owners won’t lose their personal assets if the business fails [1] 2 Do not award ‘owners have a separate legal identity to the business’ as this does not explain the term. For 2 marks must have the idea of owners and the money invested. 1(b) Define ‘niche market’. Award two marks for a full definition. Award one mark for a partial definition. A small, usually specialised, segment of a much larger market [2] OR Involves selling goods to small clearly identifiable segments of a market [2] Partial definition e.g. selling to a small part / small segment of a (large) market [1] OR part of the market with specific needs / characteristics [1] 2 1(c) Outline two opportunities for consumers of using e-commerce when purchasing RJJ’s products. Award one mark for each relevant opportunity (max 2). Award one mark for each relevant reference to this business (max 2). Opportunities might include: • Convenience / no need to leave the house / products can be delivered to you / can order anytime / save travel costs [k] when buying shoes [app] • Better information / easy to compare prices and products between different websites / access to reviews to make more informed decisions [k] which may be important when it is a niche market [app] • Wider choice / consumers can easily access products from businesses in other countries [k] • Lower prices / avoids having to pay extra to allow for retailers’ profit margin [k] Other appropriate responses should also be credited. 4 To use words from the stem as application the reference must be appropriate (make sense) in relation to the point being made. The following words are likely to be appropriate for this question: • Women • Shoes • Niche market Other appropriate examples can still be credited. 1(d) Explain two factors RJJ’s Finance Director should consider when deciding on a source of finance for the expansion. Award one mark for identification of each relevant factor (max 2). Award one mark for each relevant reference made to this business (max 2). Award one mark for each relevant explanation (max 2). Points might include: • Amount of money required [k] as operate in a niche market [app] they may not have enough retained profits, so have to borrow / look for external sources [an] • Length of time / how long to repay / how long the finance is needed for [k] as a long-term project such as the takeover [app] would need to use a long-term source [an] • Level of existing borrowing [k] particularly as profit fallen by $50 000 [app] so if have a high level of debt lenders may not be willing to lend any more money [an] • Type of business [k] because they are a public limited company [app] may be seen as lower risk so offer lower interest rates [an] • Credit history / financial status / amount of assets the business has / liquidity [k] as lenders will want to know if you have the ability to repay [an] • Security / collateral [k] • Interest / cost of finance [k] • How quickly the business needs the money [k] Other appropriate responses should also be credited. 6 To use words from the stem as application the reference must be appropriate (make sense) in relation to the point being made. The following words are likely to be appropriate for this question: • Shoes • Niche market • Public limited company / limited liability • Takeover (a competitor) • Profit decreased / $50 000 Other appropriate examples can still be credited. Do not award purpose as [k] as this is stated in the question. 1(e) Do you think a takeover of a competitor is the best way for a large business to grow? Justify your answer. Award up to two marks for identification of relevant points. Award up to two marks for relevant development of points. Award up to two marks for justified decision as to whether the takeover of a competitor is the best way for a large business to grow. Points might include: • Possible economies of scale [k] leading to lower average costs [an] • Reduced / less competition / increase market share [k] so able to increase prices / revenue [an] • Access to new skills / expertise [k] • (Bad reputation as) may need to make some workers redundant / negative impact on employee motivation / job insecurity [k] lowering productivity [an] • High cost [k] which the business might not have / be able to afford [an] • Possible clash of management styles / different objectives [k] • Diseconomies of scale e.g. communication problems [k] leading to higher average costs [an] Other ways to grow can also be discussed such as: • Expand product range [k] which can help better control / manage speed of change [an] • Merger [k] • Joint venture [k] Other appropriate responses should also be credited. 6 This is a general question so there are no marks for application. Candidates can discuss other ways a business can grow but evaluation must focus on the question set. For both evaluation marks judgement must clearly relate to a large business. Do not award mirror answers. 1(e) Justification might include: Takeover will allow a business to reduce the number of competitors [k] which can increase market share [an]. However, as the business is already large there is a risk of diseconomies of scale as a result of a business growing too quickly [k] increasing average costs [an]. While internal growth is slower, it may be safer especially when the business is large as by being able to control the rate of growth could allow managers time to plan how they would reduce problems such as communication to help to increase the chances of success [eval] [eval]. (a) To earn marks, you must state that the liability of shareholders is limited to the amount they invested, or that owners only risk losing their investment and not personal wealth if the company fails. (b) To earn marks, you must define a niche market as a small, specialized segment of a larger market, or selling goods to small, clearly identifiable market segments.

Pamela is a sole trader. She started her successful photography business 30 years ago. She specialises in taking pictures of people and places for use in posters, calendars and fashion 1 magazines. It is a niche market. Pamela uses cost-plus pricing as part of her marketing mix. Offering a high quality service is important to Pamela and her 2 employees. Define ‘cost-plus pricing’. (a) … … … … [2] Define ‘marketing mix’. (b) … … … … [2] Outline two reasons why offering a high quality service might be important for Pamela’s business. (c) Reason 1: … … … … Reason 2: … … … … [4] Explain two advantages to Pamela of operating as a sole trader. (d) Advantage 1: … … Explanation: … … … … Advantage 2:… … Explanation: … … … … [6] Do you think operating in a niche market will help a small business have a better chance of success than operating in a mass market? Justify your answer. (e) … … … … … … … … … … … … [6]

1(a) Define ‘cost-plus pricing’. Award 2 marks for a full definition. Award 1 mark for a partial definition. The price is based on the cost of making a product and the addition of a fixed percentage for profit [2] OR The cost of manufacturing the product plus a (profit) mark-up [2] OR Formula e.g. [total cost / total number of units] + % mark up [2] Partial definition e.g. profit added to the cost [1] 2 First mark is for explaining what the ‘plus’ is e.g. profit. Second for reference to / description of mark-up. Price is based on / related to cost of product [0] (reordering only). 1(b) Define ‘marketing mix’. Award 2 marks for a full definition. Award 1 mark for a partial definition. All activities that go into the marketing of a product or service. These activities are often summarised as the four P’s – product, promotion, place and price [2] OR Four marketing decisions needed for the effective marketing of a product [2] OR The combination of product, price, promotion and place (distribution) that determines how a firm markets itself to its customers and potential customers [2] Partial definition e.g. (combine) price, product, promotion and place [1] OR Different strategies a business can use to help market / sell its products [1] 2 For 2 marks candidates must understand that it involves four elements AND what it is used for (e.g. help sell products / attract customers / make marketing decisions / market a product). Do not award answers such as 4P’s or 7P’s these do not define the term. 1(c) Outline two reasons why offering a high quality service might be important for Pamela’s business. Award 1 mark for each relevant reason. Award 1 mark for each relevant reference to this business. Points might include: • Increase sales / maintain sales / attract customers [k] of calendars / poster [app] • Helps maintain / increase customer loyalty [k] for this sole trader business [app] • Maintain reputation / improve brand image [k] built up over 30 years [app] • Set/maintain high prices [k] which helps as use cost- plus pricing [app] • Way to add value [k] as operates in a niche market [app] • To reduce complaints [k] for the 2 employees [app] • No need to replace faulty work [k] • Gain competitive advantage [k] which can help her business remain successful [app] Other appropriate responses should also be credited. 4 Note: To use words from the stem as application, the reference must be appropriate (i.e. make sense) in relation to the point being made. The following words are likely to be appropriate for this question: • Sole trader • 30 years • Photography / posters / calendars / (fashion) magazines / pictures / camera • Niche market • Cost-plus pricing • 2 employees • Successful business Other appropriate examples in context can still be credited. Do not award 2 employees as application where answer refers to sharing profit or using profit to pay wages. 1(d) Explain two advantages to Pamela of operating as a sole trader. Award 1 mark for identification of each relevant advantage (max 2). Award 1 mark for each relevant reference to this business (max 2). Award 1 mark for each relevant explanation (max 2). Points might include: • Keeps all the profit [k] from photography business [app] so has an incentive to (continue to) work hard [an] • Has complete control / makes all the decisions / does not need to consult with anyone [k] such as the 2 employees [app] so able to take decisions more quickly [an] • Own boss [k] • Freedom to choose her own holidays / schedule / work time [k] so can choose time off when the business is less busy so does not miss out on sales [an] • Able to keep (financial) information private / do not need to produce annual accounts [k] so competitors cannot use information to take away her customers / market share [an] which can help her stay successful [app] • Has close contact with customers / able to offer a more personal service [k] as it’s a niche market [app] which can help encourage customer loyalty [an] Other appropriate responses should also be credited. 6 Note: To use words from the stem as application, the reference must be appropriate (i.e. make sense) in relation to the point being made. The following words are likely to be appropriate for this question: • 30 years • Photography / posters / calendars / (fashion) magazines / pictures / camera • Niche market • Cost-plus pricing • 2 employees • High-quality (service) • Successful business Other appropriate examples in context can still be credited. Do not award points about start-up as business has been operating for 30 years e.g. quick/easy to set up [0], requires little capital [0], few legal requirements [tv] 1(e) Do you think operating in a niche market will help a small business have a better chance of success than operating in a mass market? Justify your answer. Award up to 2 marks for identification of relevant points. Award up to 2 marks for relevant development of points. Award 2 marks for justified decision as to whether operating in a niche market will help a small business have a better chance of success than operating in a mass market. Points might include: Niche market: • Able to focus more closely on customer’s needs [k] leading to customer loyalty / good customer relations [an] • Less competition [k] less pressure to lower prices / easier to attract customers [an] • May be able to set higher prices (for a high status, exclusive product) [k] so able to have high / increase profit margin [an] • Can become expert in the segment [k] • Small size of market means will not benefit from economies of scale [k] leading to higher average costs [an] • Less potential for growth / low potential demand [k] • Over dependence on single product / less able to spread risk / vulnerable to changes in consumer spending patterns [k] • Likely to attract competition if successful [k] 6 This is a general question so there are no marks for application. To access evaluation marks, candidates must identify points for both types of markets. To gain both evaluation marks, answer must clearly relate to a small business. Do not award definitions of terms as this is NAQ. Advantages of operating in one type of market can be presented as disadvantages of the other option but do not award the same point twice as mirror answers are not accepted. 1(e) Mass market • More (potential) customers/sales [k] leading to higher (potential) revenue [an] • Increased / high level of competition [k] so might have high level of customer loyalty [an] Other appropriate responses should also be credited. Justification might include: In a niche market a business can focus more closely on customer’s needs [k] leading to higher levels of customer loyalty [an]. In a mass market, there are more potential customers [k] which could mean higher revenue [an]. However, I do think a small business has a better chance of success in a niche market because it can continue to charge high prices [eval] as large companies will not see the market as worthwhile because of potentially low sales. [eval] (a) To earn marks, you need to define cost-plus pricing as setting a price based on the cost of making a product and then adding a fixed percentage for profit, or by providing a formula showing this calculation. A partial definition, such as 'profit added to the cost,' earns one mark. (b) To earn marks, you need to define the marketing mix as all activities involved in marketing a product or service, often summarized as the four P's (product, promotion, place, price), or as the four marketing decisions needed for effective marketing. A partial definition, such as listing the four P's, earns one mark.

WYP is a business partnership. Greg and his 3 friends started the business 7 years ago. WYP make eyeglasses (spectacles) which are only sold through its website. The price of each pair of 1 glasses is $95. This is $200 cheaper than its main competitor. Greg said: ‘It was difficult at the start as we could not get trade credit. We also knew it would take time to develop customer loyalty.’ Greg thinks choosing the right method of promotion is important to the success of any new product. Define ‘partnership’. (a) … … … … [2] Define ‘customer loyalty’. (b) … … … … [2] Outline two possible reasons why WYP could not get trade credit. (c) Reason 1: … … … … Reason 2: … … … … [4] Explain two possible problems for WYP of selling products at low prices. (d) Problem 1: … … Explanation: … … … … Problem 2: … … Explanation: … … … … [6] Do you think promotion is more important than product for a new business? Justify your answer. (e) … … … … … … … … … … … … [6]

1(a) Define ‘partnership’. Award 2 marks for a full definition. Award 1 mark for a partial definition. Two [or more] people who agree to jointly own a business together [2] OR An unincorporated business that has more than one owner [2] Partial definition e.g. 2 or more people create / start a business [1] 2 For 2 marks need idea of two or more people and ownership. Do not accept features e.g. unlimited liability. 1(b) Define ‘customer loyalty’. Award 2 marks for a full definition. Award 1 mark for a partial definition. Likelihood of previous customers returning to buy goods or services from a business. [2] OR Customers keep buying from a particular shop, business or buy one particular product, rather than use other shops or buy products made by other businesses [2] Partial definition e.g. keeps customers [1] OR Choose your business rather than competitors (even if cheaper) [1] 2 Do not credit answers such as ‘brand loyal’ on its own as it does not explain the term. Do not award answers which simply reorder the term e.g. having lots of customers who are loyal. 1(c) Outline two possible reasons why WYP could not get trade credit. Award 1 mark for each relevant reason. Award 1 mark for each relevant reference to this business. Points might include: • No previous experience [k] of selling eye glasses [app] • Seen as higher risk / lenders don’t trust them / lender unsure whether able to repay [k] especially as product is $200 cheaper (than main competitor) [app] • Could offer no security [k] when started 7 years ago [app] • Unproven product/idea [k] of selling only through a website [app] • No business plan [k] Other appropriate responses should also be credited. 4 Note: To use words from the stem as application, the reference must be appropriate (i.e. make sense) in relation to the point being made. The following words are likely to be appropriate for this question: • (Eye) glasses/spectacles • $95 or $200 • Started 7 years ago • Website • 3 friends • Customer loyalty • Partnership Other appropriate examples in context can still be credited. 1(d) Explain two possible problems for WYP of selling products at low prices. Award 1 mark for identification of each relevant problem (max 2). Award 1 mark for each relevant reference made to this business (max 2). Award 1 mark for each relevant explanation (max 2). Points might include: • Seen as cheap / seen as low quality [k] as $200 less [app] could lead to fewer sales [an] • Cash flow problems [k] as does not generate as much revenue per unit [an] when selling eye glasses [app] • Low profit margin [k] so harder / need to sell more to break even [an] • Can be difficult / less scope to use promotional pricing to encourage sales [k] Other appropriate responses should also be credited. 6 Note: To use words from the stem as application, the reference must be appropriate (i.e. make sense) in relation to the point being made. The following words are likely to be appropriate for this question: • (Eye) glasses/spectacles • $95 or $200 • Started 7 years ago • Website • 3 friends • Customer loyalty • Trade credit • Partnership Other appropriate examples in context can still be credited. Do not award $295 as analysis as this does not show any explanation. 1(e) Do you think promotion is more important than product for a new business? Justify your answer. Award up to 2 marks for identification of relevant points. Award up to 2 marks for relevant development of points. Award 2 marks for justified decision as to whether promotion is more important than product for a new business. Points might include: Promotion • Helps raise awareness / inform people [k] leading to more sales [an] therefore increase revenue [an] • Can help attract/persuade potential customers [k] • Can help create/build brand image [k] increasing customer loyalty [an] • Way to communicate with customers [k] • Help compete with competitor’s products [k] Product • This is what people buy / without a product there is nothing to promote / if dislike the product customers will not buy it [k] • A poor/bad quality product will not last long in the market [k] so time/money spent developing it would be wasted [an] • A good product will not necessarily sell itself [k] Other appropriate responses should also be credited. Justification might include: Promotion is important as it means that the more people are aware of your product, the more likely they are to buy, [k] leading to additional revenue [an]. It can also help build brand image [k] increasing customer loyalty [an]. However, the product is what people are buying so without a product there is nothing to promote. Overall, I think it does depend on the product – if product is unique, this is probably more important especially for a new business as there are no alternatives, so the business has a better chance of establishing itself in the market. [eval] [eval] 6 This is a general question so there are no marks for application. Some points could apply to either option or be awarded as [k] or [an] but do not award the same point twice e.g. increase sales can be [k] or [an]. To access evaluation marks, candidates must discuss both elements of the marketing mix. For both evaluation marks response must be linked to a new business. Do not award vague statements such as both are important, or that higher sales lead to higher profits.

ABA provides short-distance flights between 60 countries. It is a multinational company based in country X. ABA uses market segmentation when deciding on its pricing method. The marketing 2 department is carrying out market research to gain feedback on customer experiences. ABA is considering ways in which it can contribute to sustainable development. Define ‘market segmentation’. (a) … … … … [2] Identify two pricing methods. (b) Method 1: … … Method 2: … … [2] Outline two factors which could affect the accuracy of ABA’s market research. (c) Factor 1: … … … … Factor 2: … … … … [4] Explain two benefits to ABA of being a multinational company. (d) Benefit 1: … … Explanation: … … … … Benefit 2: … … Explanation: … … … … [6] Do you think using renewable energy is the best way for a tertiary sector business to contribute to sustainable development? Justify your answer. (e) … … … … … … … … … … … … [6]

2(a) Define ‘market segmentation’. Award two marks for a full definition. Award one mark for a partial definition. Dividing the whole market into segments by consumer characteristics and then targeting different products to each segment [2] OR An identifiable subgroup of a whole market in which consumers have similar characteristics or preferences [2] Partial definition e.g. Dividing the (whole) market into smaller groups [1] OR Part of the market in which consumers have similar characteristics / preferences / interests and choices [1] 2 For 2 marks need the idea of dividing the market and for characteristics / preferences. 2(b) Identify two pricing methods. Award one mark per pricing method (max 2). Points might include: • (Market / price) skimming • Penetration (pricing) • Cost-plus (pricing) • Competitive (pricing) • Promotional (pricing) Other appropriate responses should also be credited. 2 Only award the first two responses given. Candidates must identify, and not simply describe, the pricing method. 2(c) Outline two factors which could affect the accuracy of ABA’s market research. Award one mark for each relevant factor (max 2). Award one mark for each relevant reference to this business (max 2). Points might include: • Sample selected / type of sample / sample not representative of the population / how carefully sample drawn up [k] of consumers buying (short-distance) flights [app] • Wrong sample size / sample too small [k] • Type of market research / wrong method research chosen / who carried out the research [k] to collect feedback about customer experiences [app] • People may not answer truthfully / people say what you want to hear / may not (fully) answer questions [k] leading to the business choosing the wrong pricing method [app] • Wording of questions / wrong questions asked / poorly written questions / people do not understand the questions [k] so don’t gather views about sustainable development [app] • Way / how questions are asked by the interviewer [k] as may be used in 60 countries [app] • Where carry out market research [k] • Age of the information / data out of date [k] • Bias [k] • Time available [k] Other appropriate responses should also be credited. 4 To use words from the stem as application the reference must be appropriate (make sense) in relation to the point being made. The following words are likely to be appropriate for this question: • Flights or associated words such as airline/ planes • 60 countries • Customer experiences • Pricing method • Market segmentation • Sustainable development • Multinational company Other appropriate examples can still be credited. Do not award country X as application. 2(d) Explain two benefits to ABA of being a multinational company. Award one mark for identification of each relevant benefit (max 2). Award one mark for each relevant reference made to this business (max 2). Award one mark for each relevant explanation (max 2). Points might include: • Spreading risk [k] as not reliant on one market for all its sales / fall in sales in one country can be offset by increase in another [an] as operate in 60 countries [app] • Increase sales / access new markets / new customers [k] for its flights [app] to increase revenue [an] • Improve brand image / reputation [k] to help increase / maintain customer loyalty [an] • Access government support / grants [k] • Avoid barriers to trade [k] which could reduce costs [an] so may be able to change its pricing method [app] • Reduced tax liability / take advantage of favourable tax rates / lower taxes [k] Other appropriate responses should also be credited. 6 To use words from the stem as application the reference must be appropriate (make sense) in relation to the point being made. The following words are likely to be appropriate for all responses on this question: • Flights or associated words such as airline/ planes • 60 countries • Market segmentation • Customer experiences • Market research • Pricing method • Sustainable development Other appropriate examples can still be credited. Do not award country X as application. Do not award answers about the advantages of a being large e.g. economies of scale, easy access to finance. 2(e) Do you think using renewable energy is the best way for a tertiary sector business to contribute to sustainable development? Justify your answer. Award up to two marks for identification of relevant points. Award up to two marks for relevant development of points. Award up to two marks for justified decision as to whether using renewable energy is the best way for a tertiary sector business to contribute to sustainable development. Points might include: Renewable energy: • High cost (of installing environmentally friendly equipment) [k] which the business may not be able to afford [an] • May not provide sufficient power / not a reliable power source [k] leading to lost sales / revenue [an] • Retailer may not use a high amount of energy [k] Other options might include: • Recycle [k] but not all materials can be recycled [an] • Change to environmentally friendly packaging / stop using (single- use) plastic / disposable materials [k] but may have limited control over materials [an] • Reduce amount they purchase / use [k] so fewer resources are needed [an] • Only buy from suppliers who provide environmentally friendly products [k] • Reduce waste [k] which may help increase efficiency [an] and lower average cost [an] • Avoid unnecessary travel by promoting a work from home policy [k] • Not throw waste products down the drain / into the river [k] Other appropriate responses should also be credited. 6 This is a general question so there are no marks for application. Candidates can discuss other ways to contribute to sustainable development. Do not credit answers which clearly refer to a manufacturing business such as: • Change production methods • Reduce output • Restore land to nature when finished For both evaluation marks judgement must clearly relate to a business in the tertiary sector. 2(e) Justification might include: Renewable energy may be expensive to install [k] which the business may not be able to afford [an]. However, a tertiary sector business is unlikely to have much influence over products themselves [k] and not all the products / materials used in a tertiary sector business can be recycled which would have a limited impact [an]. Therefore, renewable energy is the best way for a tertiary sector business especially as the money and resources saved by using renewable energy can reduce long-term costs [eval] [eval]. (a) To earn marks, you must define market segmentation as dividing the whole market into segments based on consumer characteristics and targeting different products to each, or as an identifiable subgroup with similar characteristics/preferences. (b) To earn marks, you must identify two distinct pricing methods, such as market skimming, penetration pricing, or cost-plus pricing.

Tom started ALB 5 years ago making trainers (sneakers) out of sustainable materials such as wool. One of ALB’s objectives is to protect the environment. As part of his research, Tom calculated some 2 costs which he could use in his break-even analysis. An extract is shown in Figure 2.1. ALB uses retailers to distribute its products. Tom thinks a successful entrepreneur has to be a good manager. retailers’ costs manufacturers’ profit fixed costs variable costs 0 10 20 30 40 50 60 percent 50% 5% 15% 30% 5% 15% Fig. 2.1 Define ‘variable costs’. (a) … … … … [2] Identify two limitations of break-even analysis. (b) Limitation 1: … … Limitation 2: … … [2] Outline two possible advantages to ALB of using retailers to distribute its products. (c) Advantage 1: … … … … Advantage 2: … … … … [4] Explain one advantage and one disadvantage to ALB of trying to protect the environment. (d) Advantage: … … Explanation: … … … … Disadvantage: … … Explanation: … … … … [6] Do you think a successful entrepreneur has to be a good manager? Justify your answer. (e) … … … … … … … … … … … … [6]

2(a) Define ‘variable costs’. Award 2 marks for a full definition. Award 1 mark for a partial definition. Costs that change with the level of output produced / sales made [2] Costs which vary directly with the number of items sold or produced [2] Costs that change in direct proportion to output [2] Partial definition e.g. costs that change [1] 2 Do not accept examples. 2(b) Identify two limitations of break-even analysis. Award 1 mark per limitation. Two from: • Assumes all costs can remain constant / be represented with straight lines • Not easy to separate some costs into fixed or variable. • Assumes all output is sold / does not allow for inventory being held • Assumes selling price will remain same for all products sold • Assumes only one type of product is sold Other appropriate responses should also be credited. 2 Only award the first two responses given. 2(c) Outline two possible advantages to ALB of using retailers to distribute its products. Award 1 mark for each relevant advantage. Award 1 mark for each relevant reference to this business. Points might include: • Access to many customers / able to attract people passing by / high footfall / wide distribution is possible [k] which can help increase revenue for its trainers [app] • Lower storage costs / does not need large storage space / cost of holding inventories is paid (in part) by retailer [k] so has more space / funds for its wool [app] • Can act as promotion / retailer will pay for advertising and other promotion [k] which could help raise awareness about protecting the environment [app] • Can sell in large quantities to retailers [k] Other appropriate responses should also be credited. 4 Note: To use words from the stem as application, the reference must be appropriate (i.e. make sense) in relation to the point being made. The following words may be appropriate for this question: • Trainers/sneakers • Wool / sustainable materials or related words • Protecting the environment • 50% (retailers costs) Other appropriate examples in context can still be credited. 2(d) Explain one advantage and one disadvantage to ALB of trying to protect the environment. Award 1 mark for identification of each relevant advantage / disadvantage (max 2). Award 1 mark for each relevant reference made to this business (max 2). Award 1 mark for each relevant explanation (max 2). Advantages might include: • Better brand image / reputation [k] leading to higher sales [an] of its trainers/sneakers [app] • Can help attract customers [k] which may be important as does use retailers [app] could lead to an increase in revenue / increase market share [an] • May be able to set higher price [k] • Less likely for pressure group action / no consumer boycott / support from pressure groups [k] maintain sales [an] Disadvantages might include: • Higher / increase in costs [k] leading to lower profit margin / higher prices [an] • High variable costs [k] as suppliers who protect environment may charge higher prices [an] • Can be difficult to find materials [k] such as wool [app] leading to lower output [an] • Higher fixed costs [k] as may need to buy specialist equipment which produces less emissions [an] Other appropriate responses should also be credited. 6 Note: To use words from the stem as application, the reference must be appropriate (i.e. make sense) in relation to the point being made. The following words may be appropriate for this question: • Trainers/sneakers or related words • Wool / sustainable materials or related words • 5% profit margin • Retailers (for distribution) • 30% (variable costs) • 15% (fixed costs) Other appropriate examples in context can still be credited. 2(e) Do you think a successful entrepreneur has to be a good manager? Justify your answer. Award up to 2 marks for identification of relevant points. Award up to 2 marks for relevant development of points. Award 2 marks for justified decision as to whether a successful entrepreneur has to be a good manager. Points might include: Entrepreneur: • Must be creative / innovate / provide new / unique ideas [k] to help gain sales / attract customers [an] • Need to be willing to take risks [k] to benefit from the reward / profit generated from the business [an] • Perseverance / determination [k] as will need to be prepared to keep going when faced with problems / issues that any new business is likely to have [an] • Can hire someone to manage the business (if you don’t possess these skills) [k] but this will cost money [an] Manager: • Need to be able to organise operations [k] so able to get supplies / deliver on time to get repeat orders [an] • Must be able to plan [k] so production runs efficiently [an] • Ability to control employees [k] so they are all on task [an] • Help motivate employees [k] to maintain efficiency / reduce absenteeism / ensure retain employees [an] • Activities must be coordinated [k] so time is not wasted [an] • An ineffective manager can make the wrong decisions [k] which will cost money / damage reputation [an] Other appropriate responses should also be credited. 6 This is a general question so there are no marks for application. 2(e) Justification might include: An entrepreneur is someone willing to take risks [k] to benefit from the profit made by the business. [an] Being a good manager is important as planning is needed [k] so that production runs efficiently [an]. However, I think a successful entrepreneur does not have to be a good manager because they can always recruit someone if they cannot do this role [eval], and without taking the initial risk there is no business to manage. [eval] (a) To earn 2 marks, define variable costs as those that change directly with the level of output produced or sales made. A partial definition, such as 'costs that change,' earns 1 mark. (b) To earn 1 mark for each, identify two distinct limitations of break-even analysis, such as assuming constant costs, difficulty in separating fixed/variable costs, assuming all output is sold, or assuming a constant selling price.