Business Studies · May / June 2021 · Paper 11 · Question 4

0450

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Economic growth in country X has created many opportunities for new businesses such as TGH. TGH manufacture a range of personalised mobile (cell) phone cases using job production. Quality 4 assurance is important to all 8 employees. TGH operate in a niche market. The Marketing Manager uses e-commerce as TGH’s channel of distribution. She is considering ways to build customer relationships.

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4(a)[2]
Define ‘economic growth’. Award 2 marks for a full definition. Award 1 mark for a partial definition. When a country’s GDP increases / more goods and services are produced than in the previous year [2]
Partial definition e.g. increases in a country’s spending/income/output [1]
OR Increase in GDP [1]
2 For 2 marks the answer must relate to a country not individual business. High GDP [0]
4(b)[2]
Define ‘quality assurance’. Award 2 marks for a full definition. Award 1 mark for a partial definition. Checking for quality standards throughout production process / at every stage [2]
Partial definition e.g. checking work done [1]
2 Do not credit answers such as check at end or check final product as this defines quality control. Do not credit explanations of why it is done e.g. manufacturer wants product to be perfect. Notes
4(c)[4]
Outline two reasons why building customer relationships might be important to TGH. Award 1 mark for each relevant reason. Award 1 mark for each relevant reference to this business. Points might include:
Increase sales [k] of phone cases [app]
Customer loyalty/retention [k] when using e-commerce [app]
Help build reputation / brand image / act as free advertising [k] for this new business [app]
Opportunity for feedback / help identify customer needs [k] as operate in a niche market [app]
Provide a competitive advantage [k] as other businesses may also set up because of economic growth [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:
Personalised
(Mobile/phone) cases
New business/start-up
Economic growth
Niche market
E-commerce
8 employees Other appropriate examples in context can still be credited. Do not award phones as application as business does not make them only the covers. Notes
4(d)[6]
Explain one advantage and one disadvantage to TGH of using job production. Award 1 mark for identification of each relevant advantage/disadvantage (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: Advantages:
Unique / meet exact customer needs [k] for its phone cases [app] can help brand loyalty [an]
Workers likely to make fewer mistakes [k] which helps ensure quality assurance [app] so less need for rework [an]
More varied work (leads to higher motivation) [k] helping retention / lower absenteeism [an] in this new business [app]
Can charge a higher price [k] in a niche market [app]
High quality products [k] which are personalised [app]
Flexible [k] Disadvantages:
Skilled labour can cost more [k] for the 8 employees [app] which increases labour costs [an]
No economies of scale (likely) [k] leading to higher average cost [an]
Production can take a long time [k] causing lower output / efficiency / productivity [an]
Costs are higher as it is labour intensive [k]
Mistakes can be expensive to correct [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:
Personalised
(Mobile/phone) cases
E-commerce
New business
Niche market
8 employees
Quality assurance Other appropriate examples in context can still be credited. Do not award phones as application as business does not them only the covers. Notes
4(e)[6]
Do you think cost-plus is the best pricing method for a new business to use when selling products to a niche market? 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 cost-plus pricing is the best pricing method for a new business to use when selling products in a niche market. Points might include: Cost-plus
Know cost can be covered [k] and can make a profit per item [an]
Simple and easy to calculate [k] so saves time when setting prices [an]
Prices may be higher than competitors [k] leading to a fewer sales [an]
Little incentive to control costs [k] Other pricing methods might include:
Penetration pricing [k] as setting a lower price than competitors should attract customers [an]
Competitive pricing [k] but the business will have limited or no control over the price [an] so may not be able to recover its costs [an]
Price skimming [k] customers may expect / be willing to pay more in a niche market [an]
Promotional pricing [k] Other appropriate responses should also be credited. Justification might include: Cost plus pricing is simple and easy to calculate [k] so saves time when setting prices [an]. Although penetration pricing [k] setting a lower price than competitors should attract customers [an]. Cost plus pricing is the best pricing method as covering costs is important for a new business [eval]. Although the price maybe slightly higher this is less important in a niche market where there are likely to be fewer alternatives [eval]. 6 This is a general question so there are no marks for application. To gain both evaluation marks response must clearly relate to a new business operating in a niche market.

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