Cambridge IGCSE™

BUSINESS STUDIES 0450/21

Paper 2 Case Study May/June 2020
MARK SCHEME
Maximum Mark: 80

Published

Students did not sit exam papers in the June 2020 series due to the Covid-19 global pandemic.

This mark scheme is published to support teachers and students and should be read together with the
question paper. It shows the requirements of the exam. The answer column of the mark scheme shows the
proposed basis on which Examiners would award marks for this exam. Where appropriate, this column also
provides the most likely acceptable alternative responses expected from students. Examiners usually review
the mark scheme after they have seen student responses and update the mark scheme if appropriate. In the
June series, Examiners were unable to consider the acceptability of alternative responses, as there were no
student responses to consider.

Mark schemes should usually be read together with the Principal Examiner Report for Teachers. However,
because students did not sit exam papers, there is no Principal Examiner Report for Teachers for the June
2020 series.

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

Cambridge International is publishing the mark schemes for the June 2020 series for most Cambridge
IGCSE™ and Cambridge International A & AS Level components, and some Cambridge O Level
components.

This document consists of 14 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.

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

1(a) Explain four characteristics that make Simon a successful 8

entrepreneur.

Award 1 mark for each relevant characteristic (maximum of four):

Relevant characteristics might include:

• Self-confident – decision to leave full-time job 6 months ago

• Creative – created new drinks to attract additional customers
• Independent – willing to go with own ideas to produce new types of
drinks
• Hard worker – prepared to do all the work himself by making all the
drinks at his home and selling them at a market stall
• Risk taker – gave up a well-paid job and risked losing personal assets
• Effective communicator – persuades others to buy his new drinks when
he is selling them on a market stall
• Optimistic – think positively about new business and wants to rapidly
expand it
• Innovative – creating a healthy alternative to mass produced drinks

Award a maximum of one additional mark for each application of the

characteristic to the context.

Indicative response:

Simon is a risk taker (1) as he risked giving up his well-paid job to start his
own business (app).

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Question Answer Marks

1(b) Explain the three main methods of production FJ could use to produce 12
its products in the factory. Which method should FJ use? Justify your
answer.

Level Description Marks

Sound application of knowledge and understanding of

relevant business concepts using appropriate terminology.

Detailed discussion of two or more methods.

3 Well-justified recommendation. 9–12

Candidates discussing three methods in detail, in context

and with well-justified recommendation including why the
alternative methods were rejected should be rewarded
with the top marks in the band.

Sound application of knowledge and understanding of

relevant business concepts using appropriate terminology.

Detailed discussion of at least one method.

2 Judgement with some justification/some evaluation of 5–8

choice made.

Candidates discussing of two or more methods in detail

and applying it to the case should be rewarded with the
top marks in the band.

Limited application of knowledge and understanding of

relevant business concepts.

Limited ability to discuss the methods with little/no

explanation.
1 1–4
Simple judgement with limited justification/limited
evaluation of choice made.

Candidates outlining three methods in context should be

rewarded with the top marks in the band.

0 No creditable response. 0

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Question Answer Marks

1(b) Relevant points might include:

Advantages Disadvantages

• Suitable for one-off • Skilled labour may

drinks be required – higher
• Needs exact wages – higher
requirements of costs
customers • Costs higher as
Job • Higher price charged labour intensive and
for product specially ordered
fruits used
• Production takes
longer than other
two methods

• Flexible way of • Can be expensive if

working – can easily semi-finished drinks
change to produce need moving around
different drinks the factory
• Still some variety for • Machines have to be
workers in their jobs reset between
• More variety of batches
products produced – – delay in
Batch
consumers will have production
more choice – lower
productivity
• Warehouse space
needed for fruits
and finished batches
of drinks – cost of
space

• High output of • Can be boring for

standardised drinks workers – less
• Cost to make each motivated
drink is low • Storage costs may
• Easier for capital be high unless use
intensive production JIT
methods to be used • Capital costs of
• May use lower setting up production
Flow skilled workers as line are high
machines can be • If one machine
used in the breaks down, then
production line the whole production
• May benefit from line may have to be
economies of scale halted with no fruit
as may buy the 2 drinks produced
types of fruit
ingredients in bulk

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Question Answer Marks

1(b)
Justification might include:

• Batch will be the best as different types of

healthy drinks will be produced but not in large
enough quantities to make flow production
viable until the business has grown significantly.
Recommendation
• Flow production will allow more automated
machinery to be installed in the factory which will
reduce unit costs than if job or batch production
is used. Lower prices for the fruit drinks may
then be charged leading to higher demand. Also
supply to the additional market stalls can easily
be met and the business can expand quickly.

Question Answer Marks

2(a) Explain one advantage and one disadvantage to Simon of using 8

crowd-funding as a source of finance for FJ.

Award 1 mark for each relevant advantage/disadvantage (maximum of two):

Relevant advantages might include:

• May have no initial fees to be paid to the crowd-funding platform

• Allows public reaction to the new business venture to be tested
• Can be a fast way to raise substantial sums of money
• May be used when other more ‘traditional’ sources are not available

Relevant disadvantages might include:

• Crowd-funding platforms may reject Simon’s proposal if it is not well

thought through
• If total amount required is not raised, then the finance promised will
have to be repaid
• Interest from the public will need to be generated to increase the chance
of successfully raising the amount required
• May allow competitors to steal the idea and reach the market first

Award a maximum of 3 additional marks for each explanation of the

advantage and disadvantage of using crowd-funding. – one of which must
be applied to this context.

For example:

Crowd-funding will allow large amounts of capital to be raised (1) so Simon can
start producing a large output of fruit drinks quickly (app). This will allow
Simon to enter the new market before competitors can copy his drinks (1)
and he will not have to pay back the money, unlike a bank loan. (1)

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Question Answer Marks

2(b) Consider the following three methods of market research Simon used. 12
Which do you think is the best method to use when deciding which
product to produce? Justify your answer.

• Online questionnaire
• Accessing government population data
• Focus group

Level Description Marks

Sound application of knowledge and understanding of

relevant business concepts using appropriate
terminology.

Detailed discussion of two or more methods of market

research.
3 9–12
Well-justified conclusion.

Candidates discussing the three methods in detail, in

context and with well-justified conclusion including why
the alternative methods were rejected should be rewarded
with the top marks in the band.

Sound application of knowledge and understanding of

relevant business concepts using appropriate
terminology.

Detailed discussion of at least one method.

2 5–8
Judgement with some justification/some evaluation of
choice made.

Candidates discussing two or more methods in detail and

applying it to the case should be rewarded with the top
marks in the band.

Limited application of knowledge and understanding of

relevant business concepts.

Limited ability to discuss the methods of market research

with little/no explanation.
1 1–4
Simple judgement with limited justification/limited
evaluation of choice made.

Candidates outlining the three methods of market

research in context should be rewarded with the top marks
in the band.

0 No creditable response. 0

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Question Answer Marks

2(b) Relevant points might include:

• Faster with quicker replies than other forms of

survey
• Cheaper to collect quantitative data about
customer purchases of drinks than interviews
Online • Can collate results about customer consumption
questionnaire of healthy drinks saving Simon time
• But with no interviewer questions may not be
understood and answers less valid
• May not gain a wide range of views if people do
not have the internet

• Quicker to collect than primary sources

• Gives an idea of age groups in the local area and
total size of the market for fruit drinks
Accessing
• But this does tell Simon which fruit juices
government
people will like
population data
• May be out of date
• Data is available to all drink’s businesses
including competitors

• Qualitative data so opinions on different fresh fruit

drinks can be gathered
• Questions can be explained so opinions on which
fruits to include in drinks is more reliable
• Quicker and cheaper than individual interviews
Focus group
• Primary research is up to date and relevant
• But expensive and time consuming to collect
• Discussion could be biased if some of panel
members have strong opinions on which fruits
to include in drinks

Justification might include:

• If opinions are required, then focus group or
online questionnaire may be better as gain this
data directly from potential customers. Also, if the
budget for market research is high then a focus
group will gather more qualitative data that may be
more useful in developing the most successful
new fruit drinks.
• If only data on the total market is required, then
accessing government population data might be
Conclusion
best as it is cheap to collect and readily available
giving details of the total size of the market for
fruit drinks. It also does not take much time to
collect unlike a focus group that will need to be set
up, participants selected and invited to attend.
Then the focus group will need to be led by an
experienced market researcher or the data may
be less accurate. An online questionnaire will still
also need to have a suitable sample of
respondents for it to be useful.

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Question Answer Marks

3(a) Explain four ways an increase in government spending may affect a 8

business.

Award 1 mark for each relevant way (maximum of four ways).

Relevant ways might include:

• Government may increase purchases from other businesses –

increasing demands for its products
• May lead to higher inflation - increase business costs
• May reduce unemployment - increase consumer spending
• May lead to a need to increase taxes - reducing consumer spending

Award a maximum of 1 additional mark for explanation of how an increase in

government spending may affect a business.

For example:

Government may increase purchases from other businesses [1] increasing the
revenue of these businesses [1].

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Question Answer Marks

3(b) Referring to Appendix 2, consider the suitability of the three applicants 12

for the position of manager. Which applicant should Simon select?
Justify your answer.

Level Description Marks

Sound application of knowledge and understanding of

relevant business concepts using appropriate terminology.

Detailed discussion of two or more applicants.

3 Well-justified recommendation. 9–12

Candidates discussing all three applicants in detail, in

context and with well-justified recommendation including
why the alternative applicants were rejected should be
rewarded with the top marks in the band.

Sound application of knowledge and understanding of

relevant business concepts using appropriate terminology.

Detailed discussion of at least one applicant.

2 Judgement with some justification/some evaluation of 5–8

choice made.

Candidates discussing two or more applicants in detail

and applying it to the case should be rewarded with the
top marks in the band.

Limited application of knowledge and understanding of

relevant business concepts.

Limited ability to discuss the applicants with little/no

explanation.
1 1–4
Simple judgement with limited justification/limited
evaluation of choice made.

Candidates outlining all three applicants in context should

be rewarded with the top marks in the band.

0 No creditable response. 0

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Question Answer Marks

3(b) Relevant points might include:

• Inexperienced as only worked part-time

• Doesn’t want to work long hours so may not
work hard for Simon
• Has experience of the food and drink industry
Joe
and already trained in hygiene regulations so
saving time and money
• But cheapest at $6 hourly wage of the three so
costs will be lower

• Experience of management – may be skilled to

manage the market stalls without training
• No qualifications so may not have much ability
to learn – training less effective
• Ambitious so may be keen to do well and impress
Zabeen
Simon
• But the most expensive at $15 per hour to
employ so costs will be higher
• May leave if better job comes along to higher
costs of recruitment as need to replace her

• Has experience of the food industry and

already trained in hygiene regulations so
saving time and money
• Enthusiastic and wants to do more
Jim challenging work – will work hard to impress
Simon
• Has already worked as a manager so no need
to train him in what to do – do the job quicker and
cheaper

Justification might include:

• Joe is probably youngest and cheapest (at $6
per hour) of the three applicants to employ but
has the least experience and Simon needs
someone reliable to make the stall successful.
• Zabeen most experience but not on a food or
drinks stall. Also has no formal qualifications and
is the most expensive of the three applicants to
Recommendation
employ. As FJ is a new business it will need to
keep costs down.
• Jim has hygiene certificate and so lower costs
than Zabeen as training not required. Has more
experience than Joe of working in a food and
drinks establishment. He is ambitious so will try
hard and more likely to help make the market
stall successful.

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Question Answer Marks

4(a) Explain two reasons why profit is important to FJ. 8

Award 1 mark for each relevant reason (maximum of 2).

Relevant reasons might include:

• Return on investment
• Source of retained profit for investment
• Attracts business partners
• Enables Simon to pay a bonus to employees

Award a maximum of 3 additional marks for each explanation of why profit is

important to FJ – one of which must be applied to this context.

For example:

As a return on his investment (1) as Simon gave up his job and risked his
own money in starting FJ (app). If no profit is made, then Simon could have
put his money elsewhere and gained a return on it (1) and he may decide to
close down FJ and start up another business. (1)

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Question Answer Marks

4(b) Consider the two products outlined in Appendix 3. Which product 12

should FJ produce? Justify your answer using relevant calculations.

Level Description Marks

Sound application of knowledge and understanding of

relevant business concepts using appropriate
terminology.

Detailed discussion of both products.

3 9–12
Well-justified recommendation.

Candidates discussing both products in detail, in

context and with well-justified recommendation
including why the alternative product was rejected
should be rewarded with the top marks in the band.

Sound application of knowledge and understanding of

relevant business concepts using appropriate
terminology.

Detailed discussion of at least one product.

2 5–8
Judgement with some justification/some evaluation of
choice made.

Candidates discussing both products in detail and

applying it to the case should be rewarded with the top
marks in the band.

Limited application of knowledge and understanding of

relevant business concepts.

Limited ability to discuss each product with little/no

explanation.
1 1–4
Simple judgement with limited justification/limited
evaluation of choice made.

Candidates outlining both products in context should

be rewarded with the top marks in the band.

0 No creditable response. 0

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Question Answer Marks

4(b) Relevant reasons might include:

• Selling price is $3.00 higher than Drink B

• Targeted at higher income consumers so
may be willing to pay the higher price
• Revenue = $10 000
• Total cost = $8500
• Profit = $1500 per week
• Gross Profit $2000
Drink A
• Gross profit per drink = $1.00
• GPM = 20%
• PM = 15%
• Average cost = $4.25
• Highest quality with more fruits in the drink
• More variety of drinks available as uses 6
different fruits

• Revenue = $10 000 same as Drink A

• Total cost = $5500
• Profit = $4500 per week
• Gross profit = $5000
• Gross profit per drink = $1.00
• GPM = 50%
• PM = 45%
Drink B
• Average cost = $1.10
• Only two fruits in each drink will make the
drink lower quality
• Highest sales - forecast demand is 3000
higher than Drink A
• Break-even = 500 same as break-even for
Drink A = 500

Justification might include:

• Choose Drink A as although Drink B will give
the highest profit of the two drinks it is the
lowest quality of drink with only two fruits. As
incomes increase customers may prefer the
higher quality drinks and so drink A may
become more popular and drink B lose sales.
The sales figures are only predictions anyway
and may be different.
Recommendation • Drink B may be best to choose as it has the
highest gross and profit margins and also
makes the highest profit per week. Even though
incomes are rising, and it targets lower
income customers, they may still have high
sales as customers may just buy more of these
drinks. Also, more likely to have higher sales
than Drink A which will make it easier to
expand and sell the drinks after opening more
fruit drink market stalls.

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