Cambridge Assessment International Education

Cambridge International General Certificate of Secondary Education

BUSINESS STUDIES 0450/11

Paper 1 Short Answer / Structured Response May/June 2018
MARK SCHEME
Maximum Mark: 80

Published

This mark scheme is published as an aid to teachers and candidates, to indicate the requirements of the
examination. It shows the basis on which Examiners were instructed to award marks. It does not indicate the
details of the discussions that took place at an Examiners’ meeting before marking began, which would have
considered the acceptability of alternative answers.

Mark schemes should be read in conjunction with the question paper and the Principal Examiner Report for
Teachers.

Cambridge International will not enter into discussions about these mark schemes.

Cambridge International is publishing the mark schemes for the May/June 2018 series for most
Cambridge IGCSE™, Cambridge International A and AS Level and Cambridge Pre-U components, and
some Cambridge O Level components.

IGCSE™ is a registered trademark.

This syllabus is approved for use in England, Wales and Northern Ireland as a Cambridge International Level 1/Level 2 Certificate.

This document consists of 18 printed pages.

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Generic Marking Principles

These general marking principles must be applied by all examiners when marking candidate answers. They should be applied alongside the
specific content of the mark scheme or generic level descriptors for a question. Each question paper and mark scheme will also comply with these
marking principles.

GENERIC MARKING PRINCIPLE 1:

Marks must be awarded in line with:

• the specific content of the mark scheme or the generic level descriptors for the question
• the specific skills defined in the mark scheme or in the generic level descriptors for the question
• the standard of response required by a candidate as exemplified by the standardisation scripts.

GENERIC MARKING PRINCIPLE 2:

Marks awarded are always whole marks (not half marks, or other fractions).

GENERIC MARKING PRINCIPLE 3:

Marks must be awarded positively:

• marks are awarded for correct/valid answers, as defined in the mark scheme. However, credit is given for valid answers which go beyond the
scope of the syllabus and mark scheme, referring to your Team Leader as appropriate
• marks are awarded when candidates clearly demonstrate what they know and can do
• marks are not deducted for errors
• marks are not deducted for omissions
• answers should only be judged on the quality of spelling, punctuation and grammar when these features are specifically assessed by the
question as indicated by the mark scheme. The meaning, however, should be unambiguous.

GENERIC MARKING PRINCIPLE 4:

Rules must be applied consistently e.g. in situations where candidates have not followed instructions or in the application of generic level
descriptors.

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GENERIC MARKING PRINCIPLE 5:

Marks should be awarded using the full range of marks defined in the mark scheme for the question (however; the use of the full mark range may
be limited according to the quality of the candidate responses seen).

GENERIC MARKING PRINCIPLE 6:

Marks awarded are based solely on the requirements as defined in the mark scheme. Marks should not be awarded with grade thresholds or
grade descriptors in mind.

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Question Answer Marks Notes

1(a) What is meant by ‘market share’? 2

Clear understanding: e.g. percentage or proportion of the total market sales

[1] held by one brand or business [+1]

OR business sales/total market sales × 100

Some understanding [1] e.g. share of sales made / percentage of customers

a business has

1(b) Identify two aims of promotion. 2 Question must relate to Marketing Mix.
Do not award answers related to staff
Award 1 mark per aim. promotion.

Points might include:

• inform / raise awareness / introduce new products
• create brand image / improve image
• compete with competitors
• persuade / increase sales / attract customers
• customer loyalty

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Question Answer Marks Notes

1(c) Identify and explain two methods of market research that GKA could 4 Application marks may be awarded for
use. appropriate use of the following:
• use of numbers such as 300 or 100
Award 1 mark for each method identified (shops)
Award 1 mark for each explanation in context • food retailer
• food / breakfast cereal
Points might include: • toothpaste
• observation / visiting competition [k] other food retailers [app] • high income / low income areas
• questionnaires [k] about the low prices [app] • change its pricing strategy
• surveys [k] about the own-label products [app] • low prices
• interviews [k] about the new shops [app] • quality products
• experiments / free samples / test marketing [k] the cereal [app] • limited range (of products)
• access government statistics [k] • no promotion
• focus groups / consumer panels [k] • own-label products
• use market research agencies [k]
• loyalty card data [k] (TV) Internet / online on own
• articles / newspapers / magazines[k] (NAQ) Primary / Secondary / Field / Desk

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Question Answer Marks Notes

1(d) Identify and explain two ways in which GKA could keep costs low. 6 Application marks may be awarded for
appropriate use of the following:
Award 1 mark for each relevant way • use of numbers such as 300 or 100
Award 1 mark for each relevant reference made to this business (shops)
Award 1 mark for each relevant explanation • food retailer
• food / breakfast cereal
Relevant points might include: • toothpaste
• choose low cost locations [k] for all 100 sites [app] leading to lower • high income / low income areas
fixed costs [an] • limited range (of products)
• pay minimum wage [k] to shop workers [app] keep variable costs • no promotion
low [an] • low prices
• economies of scale [k] (only once) for its limited range of products • quality products
[app] leading to lower average costs [an] • own-label
• set lower marketing budget [k] as no money spent on market • market share increased 5%
research [app]
• profit increased by 40%
• replace workers with machinery / automation / reduce workforce [k]
• cheaper supplier [k] Do not award analysis for answers that
• close some locations [k] which would reduce electricity cost [an] clearly refer to manufacturing such as Lean
• set up online [k] production.
• reduce waste [k]
• Buy direct from manufacturer [k] so lower cost than buying from
wholesaler [an]

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Question Answer Marks Notes

1(e) Do you think GKA should change its pricing strategy as the business 6 Application marks may be awarded for
expands? Justify your answer. appropriate use of the following:
• use of numbers such as 300 or 100
Award 1 mark for identification of relevant point (s) (shops)
Award 1 mark for a relevant reference made to this business • food retailer
Award up to 2 marks for relevant development of point(s) • food / breakfast cereal
Award up to 2 marks for a justified decision made as to whether GKA should • toothpaste
change its pricing strategy as the business expands. • high income or low income areas
• limited range (of products)
Relevant points might include: • no promotion
• identification of a pricing strategy [k] • quality products
• actions of competitors [k] • low prices
• cost of new locations [k] in high income areas [app] may make it • try to keep costs low
hard to control costs [an]
• market share increased 5%
• diseconomies of scale [k] from extra 100 shops [app] leading to a
• profit increased by 40%
rise in average costs [an]
• economies of scale[k] may allow them to charge lower prices[an] Note: question should focus on whether
• current prices give the image of poor quality [k] because they are business should change its pricing strategy
low prices [app] so may not attract new customers [an] not just increase or decrease price.
• they would lose their USP if they change price [k] leading to a loss
of the current customer base [an] in areas where average incomes
are low [app]

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Question Answer Marks Notes

2(a) Identify two situations in which downsizing the workforce might be 2 Do not award answers discussing who
necessary. should be removed from the workforce e.g.
poor attendance
Award one mark per situation

Points might include:

• introduction of automation / new technology
• redesign work space / layout
• demand factors e.g. falling demand, changing tastes, end of
product life cycle, recession / economic slump, more competition,
less revenue
• factory closure
• relocation to another country
• business taken over / merger
• excess workforce / unnecessary workers
• financial problems e.g. lack of income, increase in costs, cash flow
issues, cannot afford the workers,
• changes in law
• delayering / restructuring

2(b) Identify two possible ethical issues that SJD might have to respond to. 2 Ethical issues raised must relate to SJD
Do not reward aspects covered by law
Award 1 mark per ethical issue.

Points might include:

• protecting the environment
• fair wages to workers / pay above minimum wage
• pay fair prices to suppliers
• charge fair prices to consumers
• not employing child labour.

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Question Answer Marks Notes

2(c) Identify and explain two possible problems for SJD if it decides to 4 Application marks may be awarded for
relocate its business. appropriate use of the following:
• cheap imports
Award 1 mark for each problem identified • steel
Award 1 mark for each explanation in context • iron
• high tax rates
Points might include: • ethical issues
• access to / cost of available space [k] for steel production [app] • 3500 or 9000
• legal controls / level of government support [k] in other countries • competitors plan to close factories
[app] • construction businesses
• access to suitable / cost of workers [k] for private sector business • (other) countries
[app] • private sector
• availability / cost of raw materials [k] such as iron [app] • factory
• access to / cost of infrastructure e.g. transport and energy [k]
• level of competition [k]
• exchange rates / currency issues [k]
• cultural issues e.g. different working hours [k]
• language / communication difficulties [k]
• trade restrictions / obtaining permits [k]

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Question Answer Marks Notes

2(d) Explain how each of the following factors might affect SJD’s business. 6 Application marks may be awarded for
appropriate use of the following:
Award 1 mark for each relevant point • steel
Award 1 mark for each relevant reference made to this business • iron
Award 1 mark for each relevant explanation • ethical issues
• 3500 or 9000
Relevant points might include: • competitors plan to close factories
• construction businesses
High business tax rates: • private sector
• reduces profit [k] so may need to make more workers redundant • producer
[app]
• (other) countries
• increase prices [k] so may lead to lower demand [an] from
• government support
construction businesses [app]
• employees redundant
• increases costs [k] leading to less profit [an] for this private sector
• relocation
business [app]
Do not award reference to cheap imports /
Cheap imports:
high business tax rates, as application. This
• reduced demand [k] for steel [app] as its customers are able to buy
is in the question.
from rivals [an]
• may reduce prices [k] so revenue is reduced [an]
• lower costs of production [k] as this is a producer [app] as raw
materials may be cheaper [an]
• reduce market share [k]

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Question Answer Marks Notes

2(e) Do you think the Government should help businesses like SJD? 6 Application marks may be awarded for
Justify your answer. appropriate use of the following:
• cheap imports
Award 1 mark for identification of relevant point (s) [max 1] • steel
Award 1 mark for a relevant reference made to this business • iron
Award up to 2 marks for relevant development of point(s) • high tax rates
Award up to 2 marks for a justified decision made as to whether the • ethical issues
Government should help businesses like SJD • 3500 or 9000
• competitors plan to close factories
Points for might include:
• construction
• protect jobs [k] as they plan to make 3500 redundant [app] which
• private sector
would increase unemployment [an] and the cost of paying
• producer
unemployment benefits [an]
• (other) countries
• protect the vital industry [k] of steel [app] to ensure supply in their
own country [an] • relocate
• impact on other businesses [k] who need the material for
Do not award government support as
construction [app]
application as referred to in the question.
• government could lose tax revenue if they fail [k]
Do not award answers which focus on how
Points against might include:
governments will help businesses
• there is an opportunity cost / helping businesses would require
money from the government [k] money spent on helping SJD will
reduce the money available for other projects [an]
• can obtain materials from other countries [k] as have access to
cheap imports [app]
• environmental impact of business [k] as industry creates pollution
[an]
• it is not the role of government [k] to help private sector business
[app]
• disincentive for businesses to be successful [k] this could lead to
them being inefficient [an]

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Question Answer Marks Notes

3(a) What is meant by ‘non-current liabilities’? 2 Do not award ‘long term liabilities’ as this is
the alternative name for the term
Clear understanding [2]: debts / loans repayable in more than 12 months [2]
Or Money owed for more than a year [2] Do not credit ‘liability’ as stated in question

Some understanding [1]: e.g. debts or money owed [1] Some understanding plus a relevant
Or repayable in more than 12 months [1] example can gain 2 marks. i.e. money owed
for example bank loan

3(b) Identify two reasons why a business might need finance. 2

Award 1 mark per reason.

Points might include:

• start-up / start a business venture
• cash flow problems / survive (BOD)
• pay creditors
• offer credit to customers
• fund expansion
• replace machinery / investment
• working capital/ day-to-day
• pay for advertising (promotion)

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Question Answer Marks Notes

3(c) Identify and explain two possible advantages to IBH of being a private 4 Application marks may be awarded for
limited company. appropriate use of the following:
• family (owned)
Award 1 mark for each advantage identified • want to expand
Award 1 mark for each explanation in context • shoes or related words such as
leather, children, women
Points might include: • competitive market
• can control who buys shares [k] so can keep control in this • needs finance
competitive market [app] • directors
• easier to raise finance / able to sell shares [k] as they want to
expand [app] Do not award private limited company as
• seen as more creditworthy to suppliers [k] so could be more willing application, as this is stated in the question.
to supply leather [app]
• limited liability [k] this keeps personal assets of family safe [app]
• incorporation / separate legal identity [k]
• no need to publish accounts [k]
• continuity [k]

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Question Answer Marks Notes

3(d) Identify and explain two advantages to IBH of using batch production 6 Application marks may be awarded for
appropriate use of the following:
Award 1 mark for each relevant advantage • want to expand
Award 1 mark for each relevant reference made to this business • shoes or related words such as
Award 1 mark for each relevant explanation leather, children, women
• competitive market
Points might include: • correct references to data in
• economies of scale [k] to reduce average costs [an] to increase the Table 1
profit above $120 000 [app] • needs finance
• allows variety of products [k] so easier to meet demand for different • directors
styles [an] of shoes [app] • private limited company
• flexibility / easy to switch production [k]
• limited quantity [k] so if children's tastes change [app] so not left The advantage needs to clearly relate to the
with unwanted stock [an] business not the worker
• variety of tasks for workers [k] which increase worker motivation
and output [an]
• production may not be affected if machinery breaks down [k]
• spread risk [k] as they are not reliant on one product for all sales
[an]

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Question Answer Marks Notes

3(e) Do you think IBH’s performance has improved in 2017? Justify your 6 Application marks may be awarded for
answer using profit margins. appropriate use of the following:
• want to expand
Award 1 mark for identification of relevant point • shoes or related words
Award 1 mark for relevant reference made to this business • correct use of data from Table 1
Award up to 2 marks for relevant development of point(s) • (use of $000 not required)
Award up to 2 marks for a justified decision made as to whether IBH’s • competitive market
performance has improved or not • directors
• private limited company
Points might include:
• revenue increased [k] by 80 000 [app] To gain analysis mark at least one profit
• non-current liabilities have increased [k] by 100 000 [app] margin must be calculated. % sign is not
• gross profit increased [k] by 80 000 [app] required.
• profit has remained the same [k]
• gross profit margin increased [k] from 60% [app + an] to 67% [an] Accept 66% or 67% for gross profit margin.
• gross profit margin increased [k] by 6–7% [app + an + an]
• (net) profit margin has fallen [k] from 30% [app + an] 25% [an]
• (net) profit margin fallen [k] by 5% [app + an + an]

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Question Answer Marks Notes

4(a) What is meant by ‘stakeholder group’? 2 Do not award examples as this does not
answer the question.
Clear understanding [2]: any group or person with a (direct) interest in the
performance / activities of a business Do not award affects/influences the
decisions
Some understanding [1]: someone affected by a business [1] or anybody
inside or outside the business who cares about its operations [1]

4(b) Identify two possible reasons why Ben’s business has remained small. 2 (TV) State of economy

Award 1 mark per possible reason

Points might include:

• personal wishes / owners objectives
• size of market / niche
• lack of finance
• avoid diseconomies of scale / communication issues / co-ordination
issues

4(c) Identify and explain two reasons why quality might be important for 4 Application marks may be awarded for
Ben’s business. appropriate use of the following:
• small (business)
Award 1 mark for each reason identified • gardening or related words such as
Award 1 mark for each explanation in context cutting grass
• (business) success
Points might include: • bonus
• help establish loyalty [k] which can help improve his business • recommendation
success [app] • 15 years ago
• increase sales / revenue / attract new customers [k] through more
recommendations [app]
• improve reputation / brand image [k] for his gardening business
[app]
• no need for rework [k]
• able to charge high prices [k]
• maybe his USP[k]

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Question Answer Marks Notes

4(d) Identify and explain two advantages to Ben’s business of having part- 6 Application marks may be awarded for
time workers. appropriate use of the following:
• small (business)
Award 1 mark for each relevant advantage • gardening or gardening related
Award 1 mark for each relevant reference made to this business words allowed once
Award 1 mark for each relevant explanation • (business) success
• bonus
Points might include: • hourly wage rate
• more flexible / help meet demand during busy times [k] can cover • recommendation
when full-time workers not available [app] so work is completed on • 15 years ago
time [an] • 4 (part-time), 2 (full-time)
• help retain experienced employees [k] who have worked there for a
number of years [app] so reducing his recruitment costs [an] Do not award answers which clearly
• can add more skills / experience to business [k] to increase confuse part-time with seasonal workers.
demand [an]
• help attract / easier to find workers [k] Do not award answers that suggest that
• do not have to pay holiday / sick pay [k] part-time are easier to dismiss
• may be more motivated [k] so productivity would rise [an]
• part-time workers don’t work as many hours [k] Ben pays an hourly Do not award answers such as cheaper
wage rate [app] therefore the total wage bill would be lower [an] unless explained as all paid an hourly wage
rate.

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Question Answer Marks Notes

4(e) Explain two ways Ben could improve employee motivation. 6 Application marks may be awarded for
Recommend which way Ben should choose. Justify your answer. appropriate use of the following:
• small (business)
Award 1 mark for identification of relevant point (s) • gardening or related words such as
Award 1 mark for relevant reference made to this business cutting grass
Award up to 2 marks for relevant development of point(s) • (business) success
Award up to 2 marks for a justified decision made as to which way Ben • service
should use to improve employee motivation. • customer recommendation
• seasonal (as gardening may not be
Points might include: needed all year)
• change method of payment / increased rate of pay [k] • ordered to do jobs
• training [k] so feel more valued [an] • 15 years ago
• involve workers in decision making [k] so workers feel more • 4 (part-time), 2 (full-time)
important [an] to the gardening business [app] • hourly wage rate
• change leadership style [k] Ben orders workers to do jobs [app] • employed for a number of years
• chance for promotion / become full time [k]
• job rotation [k] for the 6 employees [app] so employees are not Do not award bonus as knowledge
bored doing the same thing [an] (currently does offer this)
• job enlargement [k]
• job enrichment [k] For evaluation marks to be awarded two
• employee of the month [k] therefore workers feel like their hard relevant ways must have been explained
work is being recognised [an]
• praise [k] meeting employees esteem needs [an]
• team working / communication [k]
• fringe benefits [k]

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