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.

BKH is a large public limited company. It has 2000 employees across 18 locations. BKH sells a range of insurance products including house and car insurance. BKH’s shareholders want the 1 business to increase profit. The Managing Director knows increasing profit can conflict with the objectives of other stakeholder groups. She said: ‘Private sector businesses have different objectives to public sector organisations.’ BKH is also planning to expand by taking over another insurance company. Define ‘public sector’. (a) … … … … [2] Define ‘profit’. (b) … … … … [2] Identify four ways to measure the size of a business. (c) Way 1: … … Way 2: … … Way 3: … … Way 4: … … [4] Explain one way each stakeholder’s objectives might conflict with BKH’s objective to increase profit. (d) Customers objective: … … How this objective might conflict: … … … … Employees objective: … … How this objective might conflict: … … … … [6] Do you think economies of scale are the most important reason for taking over another business? Justify your answer. (e) … … … … … … … … … … … … [6]

1(a) Define ‘public sector’. Award 2 marks for a full definition. Award 1 mark for a partial definition. Government or state-owned businesses/organisations [2] OR Part of the economy controlled by state/government [2] Partial definition e.g. not owned by individuals [1] OR Provided/run by government [1] 2 1(b) Define ‘profit’ Award 2 marks for a full definition. Award 1 mark for a partial definition. Amount of money left after all costs have been subtracted from revenue. [2] OR Surplus after total costs deducted from sales revenue [2] OR (Total) revenue – total cost [2] OR Gross profit minus expenses [2] Partial definition e.g. revenue minus costs [1] 2 Do not credit answers such as money made by business. [TV] 1(c) Identify four ways to measure the size of a business Award 1 mark per way. Points could include: • Sales value / value of output / revenue • Volume of output / amount of services / amount of sales / number of customers • (Value of) capital employed / value of statement of financial position / market capitalisation • Market share • Number of employees • Number of outlets Other appropriate responses should also be credited. 4 Only award the first four responses given. Do not credit measures of success such as profit. 1(d) Explain one way each stakeholder’s objectives might conflict with BKH’s objective to increase profit. Award 1 mark for identification of each relevant way (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: Customers • May want low prices / value for money [k] when buying insurance [app] which could reduce revenue [an] • Desire high-quality customer service [k] which requires more than 2000 staff [app] increasing costs/expenses [an] • May want offices in more locations [k] than 18 [app] which could increase costs [an] Employees • May want high/regular pay [k] for its 2000 employees [app] which could lead to higher costs [an] • May require job security / contract [k] after the takeover [app] • Job satisfaction / motivation / training / promotion [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: • Insurance (of house or car) • 18 (locations) • 2000 (employees) • Public limited company • Shareholders • Takeover or expand. Other appropriate examples in context can be credited. 1(e) Do you think economies of scale are the most important reason for taking over another business? Justify your answer. Award up to 2 marks for identification of relevant issues. Award up to 2 marks for relevant development of points. Award up to 2 marks for justified decision as to whether economies of scale are the most important reason for taking over another business. Points might include: • Possible purchasing economies of scale / bulk buying [k] leading to lower average costs [an] which could allow for lower prices [an] • Reduces competition [k] which could increase market share / sales [an] and therefore increase revenue [an] • Economies of scale may not be possible to achieve [k] • A business can become too large and may experience diseconomies of scale [k] Other appropriate responses should also be credited. Justification might include: Possible purchasing economies of scale / bulk buying [k] leading to lower costs [an] which could allow for lower prices [an]. Removing a competitor maybe an alternative reason for the takeover [k]. It depends on the business’ objectives [eval] if it is a direct competitor increased market share maybe more important than possible economies of scale. [eval] 6 This is a general question so there are no marks for application. Two knowledge marks are available for examples of economies of scale. Lower average unit costs may be [k] or [an] but do not credit the same point twice.

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.

After identifying a gap in the soft drinks market, Jerome developed a low sugar drink. He borrowed $5000 from family and friends to start-up a business and to provide working capital. Jerome operates 1 as a sole trader. To promote his product, Jerome handed out free samples in the town centre. In the first year, Jerome’s business sold 10000 units. This is 200 units more than his break-even output. Jerome is considering ways to increase added value. Identify two features of a sole trader. (a) Feature 1: … … Feature 2: … … [2] Define ‘working capital’. (b) … … … … [2] Outline two ways that break-even information can help Jerome’s business. (c) Way 1: … … … … Way 2: … … … … [4] Explain how each of the following can help Jerome increase added value: (d) Change the packaging: … … … … … … Use cheaper materials: … … … … … … [6] Do you think giving out free samples is the best method of sales promotion for a business to use when promoting a new food product? Justify your answer. (e) … … … … … … … … … … … … [6]

1(a) Identify two features of a sole trader. Award 1 mark per feature. Points might include: • Keeps all the profit • Unlimited liability • Unincorporated / no separate legal identity • Takes all decisions / own boss • Has total ownership of business / owned by one person • Few legal requirements Other appropriate responses should also be credited. 2 Do not credit in private sector as this applies to many forms of business organisation. 1(b) Define ‘working capital’. Award 2 marks for a full definition. Award 1 mark for a partial definition. Amount of capital available to a business to pay its day-to-day expenses/costs [2] OR The capital needed to finance the day to day running expenses (and pay the short-term debts of the business) [2] OR Current assets – current liabilities [2] Partial definition e.g. funds used to buy inventory [1] 2 Do not credit examples. 1(c) Outline two ways that break-even information can help Jerome’s business. Award 1 mark for each relevant way. Award 1 mark for each relevant reference to this business. Points might include: • He knows the level of output needed to make a profit / cover costs [k] for his (low sugar) drink [app] • Helps planning/forecasting/decision-making [k] such as how best to increase added value [app] • Help apply for finance [k] as so far only borrowed from friends and family [app] • Can see what will happen if costs/prices change [k] • Helps identify the expected level of profit/loss at different levels of output [k] • Help identify the margin of safety [k] based on the 10 000 units sold [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: • (low sugar) drinks • 200 units above break-even • 10 000 / 9800 units sold • Added value • Family and friends Other appropriate examples in context can still be credited. Do not award points such as shows costs/sales/revenue/profit on own as this is too vague. 1(d) Explain how each of the following can help Jerome increase added value: • Change the packaging • Use cheaper materials Award 1 mark for identification of each relevant point (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: Change the packaging: • This will allow Jerome to be able to increase the price [k] of his drink [app] increasing the gap between price and costs [an] • Customers can perceive the product to be worth more [k] so may be prepared to pay more for the same product [an] Use cheaper materials: • This will help lower input costs [k] when making 10 000 units [app] increasing the gap between cost and price [an] • Lower costs [k] can lead to higher profit per unit sold [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: • (low sugar) drinks • 200 units above break-even • 10 000 units sold • 9800 (break-even) Other appropriate examples in context can still be credited. 1(e) Do you think giving out free samples is the best method of sales promotion for a business to use when promoting a new food product? 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 a justified decision as to whether free samples are the best method of sales promotion for a business to use when promoting a new (food) product. Points might include: Free samples: • Encourages potential customers to try something [k] which can persuade them to buy [an] • Trying is likely to be more effective than just telling someone about it [k] as the taste is an important part of the buying process [an] • Tempts existing customers to buy more [k] which can increase revenue [an] • Cost of providing samples [k] can decrease profit margin [an] • Way to use up inventory [k] • No guarantee people will buy [k] Other options could include: • Buy one get one free [k] would generate some income [an] • Point of sale displays [k] raise awareness of the product [an] Other appropriate responses should also be credited. Justification might include: • Encourages potential customers to try something new [k] which can persuade them to buy [an]. However, the cost of providing samples [k] can decrease the profit margin. [an] Free samples are the best method despite the cost [eval] as taste is important when buying food [eval]. 6 This is a general question so there are no marks for application. Candidates can discuss other options, but evaluation must focus on whether free samples is the best method of sales promotion to use.

SWB is in the secondary sector. It produces 150000 wooden bookcases each week using batch production. SWB sells all its output to one customer. Quality control is important. SWB has 240 1 employees, of which 100 are part-time workers. SWB’s managers use noticeboards around the factory and meetings with employees every month to help reduce communication barriers. The Operations Manager is considering introducing just-in-time inventory control to reduce the amount of waste. Define ‘secondary sector’. (a) … … … … [2] Identify two factors a business should consider when deciding whether to introduce just-in-time inventory control. (b) Factor 1: … … Factor 2: … … [2] Outline one advantage and one disadvantage to SWB of using quality control. (c) Advantage: … … … … Disadvantage: … … … … [4] Explain two possible communication barriers that might exist at SWB. (d) Communication barrier 1: … … Explanation: … … … … Communication barrier 2: … … Explanation: … … … … [6] Do you think it is a good idea for a business to have only one customer? Justify your answer. (e) … … … … … … … … … … … … [6]

1(a) Define ‘secondary sector’. Award 2 marks for a full definition. Award 1 mark for a partial definition. Firms that process and manufacture goods from natural resources [2] OR Manufacture goods using the raw materials provided by the primary sector [2] OR Uses manufacturing to transform the raw materials generated in the primary sector into a product [2] Partial definition e.g. makes products [1] 2 Do not award examples. 1(b) Identify two factors a business should consider when deciding whether to introduce just-in-time inventory control. Award 1 mark for each factor identified. Points might include: • Reliability of suppliers / time / speed of delivery / availability of inventory at suppliers / distance from suppliers • Whether there is steady production / predictable demand • Efficient system of ordering materials / good communication systems • Whether discounts are available for bulk purchases • Cost/availability of storage space Other appropriate responses should also be credited. 2 Only award the first two responses given. 1(c) Outline one advantage and one disadvantage to SWB of using quality control. Award 1 mark for each relevant advantage/disadvantage. Award 1 mark for each relevant reference to this business. Points might include: Advantages: • Tries to eliminate faults before customer receives products / reduces likelihood that customers get faulty products [k] as only has one customer [app] • Not all workers need to be trained (as inspectors employed to check quality) [k] which is important as has 240 employees [app] Disadvantages: • Cost/need to recruit inspectors/employees to check [k] the bookcases [app] • Does not find out how/where fault occurred [k] in each batch [app] • High cost if products must be scrapped / reworked / service repeated [k] which clashes with its objective to reduce waste [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 may be appropriate for this question: • 150 000 / bookcases or related words such as wood • Batch production • 240 employees / 100 or part-time employees / 140 full time • Factory • One customer • Just-in-time inventory control • Objective is to reduce waste Other appropriate examples in context can still be credited. 1(d) Explain two possible communication barriers that might exist at SWB. Award 1 mark for identification of each relevant communication barrier (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: • Technical language / jargon / different language spoken [k] so workers do not understand [an] so make wrong number of bookcases [app] • Lack of feedback / no opportunity for feedback [k] so do not know / cannot check if message received / understood (correctly) [an] so not able to help reduce waste [app] • Noise [k] so employees may not hear / mishear orders [an] in the factory [app] • Employees may not be at work [k] as 100 work part-time [app] so not able to obtain the information [an] • Too much information / detail [k] so not possible to absorb / take it all in [an] • Employees may not see/read message [k] on the noticeboard [app] • Not listening / not paying attention [k] in the meeting [app] • Wrong communication method/medium used [k] • Receiver may not trust the sender [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 may be appropriate for this question: • 150 000 / bookcases or related words such as wood • Batch production • 240 employees / 100 or part-time employees / 140 full-time • Factory • Reducing waste • Meetings (every month) • Noticeboards • Just-in-time inventory control Other appropriate examples in context can still be credited. 1(e) Do you think it is a good idea for a business to have only one customer? 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 a justified decision as to whether it is a good idea for a business to have only one customer. Points might include: • Only one source of revenue / sales [k] so if the customer does not buy, the business could fail / experience cash flow issues [an] • Can focus / specialise on the needs of that customer [k] increasing customer loyalty [an] • Can help planning / know what need to order [k] reduces amount of wastage [an] • No need to advertise [k] leading to lower marketing costs [an] • Can give customer too much power to influence prices [k] • Less administration (compared to several customers) [k] Other appropriate responses should also be credited. Justification might include: Having a single customer can make it easier to focus on the needs of that customer [k] so more likely to build customer loyalty [an.] However, can spread the risk if more than one customer [k] so if one stops buying they can rely on the other customers [an]. I think having a single customer is too high a risk as the business is totally dependent on one other business for its own success [eval] as it ties its success to the other business over which it has little control. [eval] 6 This is a general question so there are no marks for application. (a) To earn 2 marks, define the secondary sector as firms that process and manufacture goods from natural resources or raw materials provided by the primary sector. A partial definition, such as 'makes products,' earns 1 mark. (b) To earn 1 mark for each, identify two distinct factors a business should consider, such as supplier reliability, demand predictability, communication systems, bulk purchase discounts, or storage costs.