Business Studies · May / June 2020 · Paper 12 · Question 4

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ALB is a large bank. It has 300 branches and 5000 employees. ALB provides a range of financial services to its business customers. As it operates in a competitive market, ALB aims to maintain 4 customer loyalty. Last year ALB’s profit decreased to $3000m. The Managing Director is analysing ways to reduce ALB’s costs. She also has to decide how new legal controls over employment issues might affect the business. The Government plans to improve protection of employees by changing laws on the minimum wage and health and safety.

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4(a)[2]
Define ‘profit’. Award 2 marks for a full definition. Award 1 mark for a partial definition. Profit is the amount of money that a business makes once costs have been subtracted from the revenue [2]
Total revenue minus total costs [2]. Partial definition e.g. money left after costs paid [1]
Note: For both marks must have idea that there is both sales and cost element to profit. 2
4(b)[2]
State two problems of using the number of employees to measure the size of a business. Award 1 mark per problem. Points might include:
Might use a lot of machines,
Difficult to count part-time employees Other appropriate responses should also be credited. 2
4(c)[4]
Outline two possible ways ALB can try to reduce its costs. Award 1 mark for each relevant way. Award 1 mark for each relevant reference to this business. Points might include:
Reduce number of employees [k] by making some of the 5000 employees redundant [app]
Close number of branches [k] from 300 [app]
Reduce amount of wastage [k] by using less paper when dealing with business customers [app] Other appropriate responses should also be credited.
4(d)[6]
Explain two ways ALB could improve customer loyalty. Award 1 mark for identification of each relevant method (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:
Communicate with customers e.g. newsletters, social media [k] so that they remember your business [an] when they next need financial services/help from bank [app]
Offer good quality service [k] so customers want to return [an] to the 300 branches [app]
Train staff [k] so all 5000 employees [app] are able to offer a good quality service [an]
Ask for feedback e.g. surveys [k] to find out how/what they need to do to improve [an]
Resolve complaints quickly [k] so that customers don’t change to another bank [an] as it is a competitive market [app]
Offer rewards/ loyalty programs [k] such as discounts for business customers who also use them for its personal banking [an]
Offer extra services such as online/mobile phone app [k] Other appropriate responses should also be credited. 6
4(e)[6]
Do you think changes in legal controls over employment issues will always reduce business profits? 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 changes in legal controls over employment issues will always reduce business profits. Points might include:
Health and safety changes could mean needing to provide more training [k] increasing costs [an] but leading to more motivated/more efficient employees [an]
Can depend on how much the minimum wage increases [k] as may already pay above the new rate so may not affect them [an]
Can depend on the type of business [k] as health and safety may be more of an issue if it is a manufacturing business [an] Justification might include:
Yes, because any changes in legal control are likely to result in the business at least having to do something even if it is only to check they are compliant, which will cost time and money to do. [eval] [eval] Other appropriate responses should also be credited. 6

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