Edexcel GCSE Business - Presdales School...business (AO3a). h Avoiding bad publicity is vital to a fast food outlet, especially given the recent complaints about food quality, the

Edexcel GCSEBusiness

Mark SchemePaper 1a

Investigating small business

MARK SCHEME

Page 2 Edexcel GCSE Business Mark Scheme Paper 1a

©

Mark schemeSection AQuestionNumber

Answer Mark

1 (a) C (1)AO1a

QuestionNumber

Answer Mark

1 (b) B (1)AO1a

QuestionNumber

Answer Mark

1 (c) Award 1 mark for identification of an advantage, plus 2 further marks for explaining this advantage, up to a total of 3 marks.

Limited liability means that the owners (shareholders) can only lose the money invested in the business if it fails (1) because they are not responsible for all losses made by the business (1) which means they will not lose their personal possessions (1).

There is a distinction between the business and the individual (1) which means the owner (shareholder) is not liable for the debts of the business that cannot be settled (1) which means the risk of the investment is reduced (1).

Accept any other appropriate response. Answers that list more than one advantage with no explanation will be awarded a maximum of 1 mark.

(3)AO1a = 1AO1b = 2

QuestionNumber

Answer Mark

1 (d) Award 1 mark for identification of a disadvantage, plus 2 further marks for explaining this disadvantage, up to a total of 3 marks.

Interest payments on business loans are likely to increase (1), which means expenses increase (1), which could result in lower profits (1).

Consumers are likely to spend less (1), as the cost of borrowing money increases (1) which means sales of the business may fall (1).

Accept any other appropriate response. Answers that list more than one disadvantage with no explanation will be awarded a maximum of 1 mark.

(3)AO1a = 1AO1b = 2

©

Edexcel GCSE Business Mark Scheme Paper 1a Page 3

QuestionNumber

Answer Mark

2 (a) B, C (2)AO1a

QuestionNumber

Answer Mark

2 (b) A, E (2)AO1a

QuestionNumber

Answer Mark

2 (d) Award 1 mark for identification of a reason, plus 2 further marks for explaining this reason, up to a total of 3 marks.

To generate sales (1). This is because if the business understands customer needs and provides goods/services of the price/quality that customers want (1) customers are more likely to make a purchase (1).

To survive (1). This is because if the business provides the customer with choice/convenience (1) it is more likely to be able to generate sales (1).

Accept any other appropriate response. Answers that list more than one reason with no explanation will be awarded a maximum of 1 mark.

(3)AO1a = 1AO1b = 2

QuestionNumber

Answer Additional guidance Mark

2 (c) Substitution into correct formula:

(120 + 150 + 130 + 140) x £5 (1)

Answer: = £2,700 (1)

Award full marks for correct numerical answer without working.

Do not accept any other answer

(2)AO2


©

QuestionNumber

Answer Mark

2 (e) Award 1 mark for identification of one benefit, plus 2 further marks for explaining this benefit, up to a total of 3 marks.

Crowd funding can generate assistance (1) because investors may offer skills/experience (1), which means the business is more likely to be successful (1). Crowd funding may generate publicity (1) which means the business is more likely to generate sales (1) which means it is more likely to succeed (1).

Accept any other appropriate response. Answers that list more than one benefit with no explanation will be awarded a maximum of 1 mark.

(3)AO1a = 1AO1b = 2

QuestionNumber

Answer Mark

3 (a) C (1)AO1a

QuestionNumber

Answer Mark

3 (c) Award 1 mark for identification of a benefit, plus 2 further marks for explaining this benefit, up to a total of 3 marks.

Sales may increase (1), because customers will find it quicker and more convenient using card payments (1), this means they are more likely to come back and buy other things from the business (1).

Costs are reduced (1), because payments into the business can be made faster (1), reducing the need for an overdraft (1).

Accept any other appropriate response. Answers that list more than one benefit with no explanation will be awarded a maximum of 1 mark.

(3)AO1a = 1AO1b = 2

QuestionNumber


3 (b) Substitution into correct formula:Interest (on loans) = (£360 x 12 x 5) - £20,000 £20,000 (1)

Answer: 8.00 % (1)


Do not accept any other answer.

(2)AO2

©


QuestionNumber

Answer Mark

3 (d) Award 1 mark for identification of a reason, plus 2 further marks for explaining this reason, up to a total of 3 marks.

Because it is realistic (1) as a large number of start-up businesses fail (1) which means it needs to focus on making enough sales to cover its costs to allow it to continue to trade in the first year (1).

It might be entering a market with a lot of competition (1), which means there are many businesses competing for sales (1), which means it may be hard to make enough sales to cover costs in its first year of trading and therefore it must focus on survival (1).

Accept any other appropriate response. Answers that list more than one reason with no explanation will be awarded a maximum of 1 mark.

(3)AO1a = 1AO1b = 2

QuestionNumber

Indicative content Mark

3 (e) h Lack of complete ownership (AO1b).

h Franchises can be expensive to buy (AO1b).

h This means the franchisee may have to give up on some of their own business ideas because they do not have total control and they will be limited to what they can and cannot do, as they have to fit in with the franchise model (A03a).

h This means the franchisee may have to borrow more money than if they “went it alone” which may incur interest payments (A03a).

(6)A01b = 3A03a = 3

Level Mark Descriptor

0 No rewardable material

Level 1 1-2 h Demonstrate elements of knowledge and understanding of business concepts and issues, with limited business terminology used (AO1b).

h Attempts to deconstruct business information and/or issues, finding limited connections between points (A03a).

Level 2 3-4 h Demonstrates mostly accurate knowledge and understanding of business concepts and issues, including appropriate use of business terminology in places (AO1b).

h Deconstructs business information and/or issues, finding interconnected points with chains of reasoning, although there may be some logical inconsistencies (A03a).

Level 3 5-6 h Demonstrates accurate knowledge and understanding of business concepts and issues throughout, including appropriate use of business terminology (AO1b).

h Deconstructs business information and/or issues, finding detailed interconnected points with logical chains of reasoning (A03a).


©

QuestionNumber

Answer Mark

4 (a) Award up to 2 marks for linked points outlining one impact of location on the business. Award a maximum of 1 mark if points are not linked.

Customers are more likely to buy from the competition which are closer to the train station and therefore the market (1), which means sales are unlikely to increase and Chicken and Grill may not improve profit of the business (1).

The premises in their location are cheap and therefore will help to keep costs to a minimum (1) which would positively impact on profits(1).

Do not accept impacts of location that would not be appropriate for a fast food outlet business such as Chicken & Grill, for example the need to be close to raw materials.

(2)AO2

Section B

QuestionNumber


4 (b) h It will cost the business money to meet the requirements of relevant consumer legislation, for example in terms of ensuring food quality (AO2).

h Breaking the law can lead to increased costs for example fines or being sued by a customer, for example not meeting the food quality standards required (AO2).

h Meeting the requirements of consumer legislation can also have positive impacts such as helping the business gain a good reputation, for example ensuring food is as described and of the food quality expected (AO2).

h Meeting the requirements of consumer legislation will help the business avoid bad publicity and further complaints, for example if food is not as described the business may get bad reviews online or negative articles in the local press and even more complaints (AO2).

h These costs will need to be met by the business and may prevent it from improving profit of the business. This means Niya and Paul might not achieve the financial security for which they hoped (AO3a).

h Increased costs will need to be met by the business and may mean it is less likely to improve profit and the financial security wanted by the owners (AO3a).

h A good reputation is vital for a fast food outlet because customers want to feel confident with the food they purchase. If customers are satisfied, it is likely they will return which leads to an increase in sales and profit, key objectives of the business (AO3a).

h Avoiding bad publicity is vital to a fast food outlet, especially given the recent complaints about food quality, the article in the newspaper and number of competitors, which are better located. Customers may choose competitors, so sales decrease which can lead to lower profits (AO3a).

(6)AO2 = 3AO3a = 3

©




Level 1 1-2 h Limited application of knowledge and understanding of business concepts and issues to the business context (AO2).

h Attempts to deconstruct business information and/or issues, finding limited connections between points (AO3a).

Level 2 3-4 h Sound application of knowledge and understanding of business concepts and issues to the business context although there may be some inconsistencies (AO2).

h Deconstructs business information and/or issues, finding interconnected points with chains of reasoning, although there may be some logical inconsistencies (AO3a).

Level 3 5-6 h Detailed application of knowledge and understanding of business concepts and issues to the business context throughout (AO2).

h Deconstructs business information and/or issues, finding detailed interconnected points with logical chains of reasoning (AO3a).

QuestionNumber


5 (a) Award up to 2 marks for linked points outlining one benefit to Niya and Paul of operating Chicken & Grill as a partnership. Award a maximum of 1 mark if points are not linked.

Any losses which Chicken & Grill may incur would be shared equally by Niya and Paul (1), which means there is less financial risk for each partner which may give them more financial security - a key objective of the owners (1).

The partners were seeking equal ownership, which would reduce the stress of running a business (1) which would be quite high in the fast food market where there is clearly lots of competition (1).

Do not accept benefits that would not be appropriate for Niya and Paul, running Chicken & Grill as a partnership business.

(2)AO2

QuestionNumber


5 (b) Substitution into correct formula:Break even point in units =

£400 (£2.40 - £1.60 ) (1)

Answer: 500 meals (1)


Do not accept any other answer.

(2)AO2


©

QuestionNumber


5 (c) h Awareness of Chicken & Grill will be increased through social media, as it can be used as a promotional tool, for example direct advertising on social media sites, links to a website, and promotional interest use such as blogs or news type items. They could also have smartphone apps e.g. to order food (AO2).

h Promotion can be targeted as market research data can be gathered from users of social media sites (AO2).

h Not all potential customers will use social media so its use might restrict who gets the message about the new delivery service (AO2).

h There will be costs of setting up and running social media effectively to keep it up to date (AO2).

h This increases the likelihood of being visible to potential customers. This may attract more customers and increase sales, which is the reason why the service is being introduced (AO3a).

h This means promotion is more likely to be effective in attracting customers meaning the home delivery service is more likely to be a success and sales will be increased (AO3a).

h This may mean Chicken & Grill miss out on potential customers and sales, which is the main reason for introducing the service, and therefore profit will not be improved (AO3a).

h Increased costs might affect profit levels and any increase in costs will increase the number of meals (currently 400) the business would need to sell each week in order for the delivery service to break even. Any increase in costs may result in a need to charge higher prices, which may limit sales and profit (AO3a).

(6)AO2 = 3AO3a = 3









©


QuestionNumber


6(a)(i) (£430) Do not accept any other answer (1)AO2

QuestionNumber


6(a)(ii) £10,800 Do not accept any other answer (1)AO2

QuestionNumber

Answer Mark

6(b) Award 1 mark for stating a reason why Niya and Paul should be concerned about the cash-flow forecast.

Closing balance is falling each month (1).Closing balance is negative in March (1).Wages and raw materials rising faster than sales in February to March (1).

Accept any other appropriate response. Do not accept reasons that would not be appropriate for Niya and Paul as owners of Chicken & Grill when presented with this specific cash-flow.

(1)AO2

QuestionNumber


6(c) h Reducing prices may increase the amount of sales made because Chicken & Grill is located in an area with high levels of unemployment and wage levels below the national average although this may be risky as they are known for their food quality (AO2).

h Promotion would help Chicken & Grill to become better known and raise awareness of the new home delivery service and that could increase the number of customers (AO2).

h This is because potential customers have less money to spend, so are more likely to prefer a cheaper alternative and therefore respond to a price reduction which will increase the amount of sales made by the business, although it may put the food quality image at risk and further damage cash-flow (AO3a).

h This will mean that the amount of sales made by Chicken & Grill will increase and is likely to lead to an increase in profit that will help give Niya and Paul the financial security they desire. Cash-flow may also be improved (AO3a).

(9)AO2 = 3AO3a = 3


©





h Makes a judgement, providing a simple justification based on limited evaluation of business information and issues relevant to the choice made (AO3b).



h Makes a judgement, providing a justification based on sound evaluation of business information and issues relevant to the choice made (AO3b).


h Deconstructs business information and/or issues finding detailed interconnected points with logical chains of reasoning (AO3a).

h Makes a judgement, providing a clear justification based on a thorough evaluation of business information and issues relevant to the choice made (AO3b).

QuestionNumber


6(c)Cont.

h The most appropriate option would be to increase the amount they spend on promotion because a reduction in average price may put their quality image at risk and reduce the amount of sales (AO3b).

h The most appropriate option would be to increase the amount they spend on promotion to raise awareness of the business and its food quality. Increased promotion could also link to the launch of the new delivery service that could help to reduce the impact of their less favourable location and help increase the amount of sales, improve cash-flow and profit levels and the financial security of the owners. (AO3b).

AO3b = 3

©


QuestionNumber

Answer Mark

7 (a) Award 1 mark for stating one way in which Dave could segment the market for his business.

By location so he can target customers in his local area as research shows the area is becoming wealthier with house prices rising (1).By income so he can target customers with higher incomes as Dave believes he needs to charge £4000 for each job (1).

Accept any other response. Do not accept ways of segmenting the market that would not be suitable for a business such as Dave’s, for example gender.

(1)AO2

Section C

QuestionNumber

Answer Mark

7 (b) Award 1 mark for stating one element Dave should include in his business plan.

Target market (market research) can be identified/collected. For example, his research on how much people would be prepared to pay to fit bedroom furniture (1).Source(s) of finance can be identified and detailed. For example, Dave believes he may need a loan to start his business (1).

Accept any other appropriate response. Do not accept elements that would not be appropriate for a business such as Dave’s.

(1)AO2

QuestionNumber

Answer Mark

7 (c) Award up to 2 marks for linked points outlining one impact of the competition on Dave’s business. Award a maximum of 1 mark if points are not linked.

Competition, in the form of national furniture chains, is able to offer lower prices which means they may be less expensive than Dave who believes he would need to charge £4,000 per job (1) which may mean he cannot sell his high quality wooden furniture (1).

Do not accept any impact of competition that would not be appropriate for a business such as Dave’s.

(2)AO2


©

QuestionNumber


7 (d)Justify

h Dave has undertaken some primary research via informal discussion with his friends, calling at houses in the local area that are likely to be included in his target market. However, it is likely that he needs to undertake further research because his primary research is limited and only relates to product and price. Also for the data to be useful, it needs to be reliable. Figure 6 has 42 responses that would have some validity, however answers to questions might not be valid as there is no check they really would go ahead or pay the amount stated therefore Dave should undertake additional primary research (AO2).

h Some secondary data has been undertaken but only via websites, although it has provided some useful information re: competitor types. There is some informal data provided re: increased wealth and house prices in the area but it is vague and not sourced, so Dave may benefit from additional secondary research (AO2).

h Conducting further primary research means Dave could benefit from data that is specific to his business for example further questions about product requirements and payment options and ask about promotion and place. There is a role for social media here to collect data quickly and inexpensively which is important given Dave needs a loan and he is seeing the bank manager next week. This would inform his marketing mix which he could include in his business plan that will help in securing a loan. In addition, it reduces the risk of producing a marketing mix to which his customers will not respond therefore reducing the risk of business failure. It will also enable him to identify business opportunities that will increase his chance of generating sales and becoming successful (AO3a).

h Conducting further secondary research means Dave could benefit from data that has already collected. This would save him time and money reducing business costs, which is important given Dave is a start-up business with limited finance and has an appointment with the bank next week. He could find further information about the marketing mix of competitors that could inform his own mix which reduces the risk of business failure as it would meet the requirements of his customers. It will also enable him to identify business opportunities and improve upon what is already on offer in the market, increasing his chance of generating sales and being successful (AO3a).

(9)AO2 = 3AO3a = 3AO3b = 3

©


QuestionNumber


7 (d)JustifyCont.

h Although there is some primary market research it does not appear to be very detailed and only covers two elements of the marketing mix and reliability cannot be guaranteed. Research is there to identify gaps in the market, business opportunities and to reduce risk and it appears, in this case, that primary research would do this better than secondary research given the specific nature of the business and the information required. Therefore, for such a major decision Dave should undertake additional primary rather than secondary research (AO3b).

h Although he has collected some secondary market research, it is limited and reliability cannot be guaranteed. Further secondary research could be collected quickly and efficiently and provide vital information about the competitive environment increasing his chances of producing a marketing mix that generates sales and makes him successful. Therefore, for such a major decision Dave should undertake additional secondary rather than primary research (AO3b).





h Makes a judgement, providing a simple justification based on limited evaluation of business information and issues relevant to the choice made (AO3b).

Level 2 4-6 h Sound application of knowledge and understanding of business concepts and issues related to the business context although there may be some inconsistencies (AO2).

h Deconstructs business information and/or issues finding interconnected points with chains of reasoning, although there may be some logical inconsistencies (AO3a).

h Makes a judgement, providing a justification based on sound evaluation of business information and issues relevant to the choice made (AO3b).



h Makes a judgement, providing a clear justification based on a thorough evaluation of business information and issues relevant to the choice made (AO3b).


©

QuestionNumber


7 (e)Evaluate

h Entrepreneurs need to be prepared to take risks (AO1b).

h Entrepreneurs need to be able to make business decisions (AO1b).

h Dave has become more and more dissatisfied with the routine work he has been asked to carry out so is more likely to take the risk needed to make his business a success (AO2).

h Dave undertook some market research and made the decision to charge £4000 per job (AO2).

h This means that if Dave is prepared to take the risk and give up the security of a job he knows well with a large business, it will give him the best chance of starting a successful business and use his skills as a carpenter (AO3a).

h However, his market research suggests that only 7/42 or 16.7% (1 in 6) of those asked are prepared to pay the price Dave decided that he needs to charge. This means if Dave decides to go ahead and charge this price his business may not succeed (AO3a).

h This means Dave does have the entrepreneurial skills required to make the business a success because he is prepared to give up his job and take out a bank loan to start a business that he is confident will be a success (AO3b).

h This suggests that Dave does not have the entrepreneurial skills required to make the business a success because he is making a decision that is not backed up by market research (AO3b).

(12)AO1b = 3AO2 = 3AO3a = 3AO3b = 3



Level 1 1-4 h Demonstrates elements of knowledge and understanding of business concepts and issues, with limited business terminology used (AO1b).

h Limited application of knowledge and understanding of business concepts and issues related to the business context (AO2).

h Attempts to deconstruct business information and/or issues finding limited connections between the points (AO3a).

h Draws a conclusion, supported by generic assertions from limited evaluation of business information and issues (AO3b).

Level 2 5-8 h Demonstrates mostly accurate knowledge and understanding of business concepts and issues, including appropriate use of business terminology in places (AO1b).

h Sound application of knowledge and understanding of business concepts and issues to the business context although there may be some inconsistencies (AO2).


h Draws a conclusion based on sound evaluation of business information and issues (AO3b).

©



Level 3 9-12 h Demonstrates accurate knowledge and understanding of business concepts and issues throughout, including appropriate use of business terminology (AO1b).

h Detailed application of knowledge and understanding of business concepts and issues to the business context throughout (AO2).


h Draws a valid and well-reasoned conclusion based on a thorough evaluation of business information and issues (AO3b).

Documents

Edexcel GCSE Business - Presdales School...business (AO3a). h Avoiding bad publicity is vital to a fast food outlet, especially given the recent complaints about food quality, the