Business Studies · May / June 2021 · Paper 22 · Question 4
0450
As printed in the paper
Show the answer and mark scheme
4(a)[8]
Explain four reasons why the level of inventory is important to TT. Award 1 mark for each relevant reason (maximum of four reasons). Award a maximum of 1 additional mark for each applied explanation of the reason why the level of inventory is important to TT. Relevant reasons might include:
To earn revenue from sales – of nursery equipmentTo ensure demand can be met to avoid losing customers – for pushchairs/strollersWithout inventory there are no products for customers to see – so no toys will be soldTo meet unexpected increases in demand – for products aimed at babies up to teenagers/toys are often fashionable and children will not want to waitTies up cash unnecessarily – if too much inventory of toys cars is heldToo much inventory increases risk of out of date / theft / damage – for nursery furnitureMay take up too much storage space – in the toy shopMay allow a variety of different products to be soldToo little inventory could damage the reputation of the businessTo avoid losing customers to competitorsTo avoid running out of certain items of inventory in the shopLong delivery / lead time – because some toy manufactures take 4 weeks for deliveryAllows quick replacement of faulty goodsToo high inventory may indicate a product not selling well For example: To ensure demand can be met to avoid losing customers (1)for pushchairs/strollers (app). Application could include: toys, nursery, toy shop, toy manufacturer, shop manager, 5 sales assistants, administration tasks, pushchairs/strollers, nursery furniture, well known brands of toys, target market is higher income groups, products aimed for all ages of children from babies to teenagers, meeting demand is seen as important, start-up business, accessories.
4(b)[12]
Consider how the following three legal controls will affect TT. Which legal control will have the greatest effect on TT? Justify your answer.
No misleading promotionAll goods must be safe for the consumerRestrictions on the type of packaging allowed Level Description Sound application of knowledge and understanding of relevant business concepts using appropriate terminology. Detailed discussion of two or more legal controls. Well-justified conclusion. Candidates discussing all three legal controls in detail, in context and with a well-justified conclusion including why the alternative legal controls were rejected should be rewarded with the top marks in the band. 9–12 Sound application of knowledge and understanding of relevant business concepts using appropriate terminology. Detailed discussion of at least one legal control. Judgement with some justification / some evaluation of choices made. Candidates discussing two or more legal controls in detail and applying them to the case should be rewarded with the top marks in the band. 5–8 Limited application of knowledge and understanding of relevant business concepts. Limited ability to discuss legal controls with little/no explanation. Simple judgement with limited justification / limited evaluation of choices made. Candidates outlining all three legal controls in context should be rewarded with the top marks in the band. 1–4 No creditable response. Relevant points might include: No misleading promotionToys cannot be described as performing a particular function and then not being able to do this, for example a toy car advertised as being suitable for up to a certain weight of child when the toy car is not strong enough to hold that weightPrice cannot be advertised as being reduced when it has not been previously sold at the higher price – so any price reductions at the toy shop must be genuine reductions – or TT could be sued/finedToys cannot be advertised as suitable for babies when the toy has small parts that could choke a baby and are therefore unsuitable – may limit some of the claims made in TT advertisements – need to make sure any claims about toys are correct – takes time and effort to check up on facts from toy manufacturersMay increase costs if have to change current advert/promotion All goods must be safe for the consumerToys sold must be safe for children as if a child is injured whilst playing with a toy sold by TT then could be sued for damages – increases costs / TT will gain a poor reputation with consumers – lose salesIf a toy car easily breaks, then TT will incur higher costs of having to replace the toy car – then return these to the manufacturerMay need to find new supplier – higher unit costs / time taken to find new supplier Restrictions on the type of packaging allowedHigher cost for toy manufacturers – may be passed on to TT as higher cost price – higher price to customers – reduced demand – lower sales/revenueToys may be more easily damaged if less packaging used – increased cost for TT of replacement toysToys may be less attractive if there is no attractive packaging used – lower sales for TT / TT may need to change to other types of toys ConclusionAs TT is a toy shop it will need to make sure its advertising of toys is not misleading because it may gain a bad reputation if claims about the toys it sells are not true, so this is the most important legal control for TT. It can easily make sure it does not advertise lower price sales when the prices have not been reduced. Packaging is likely to be provided by the toy manufacturer and so is unlikely to affect TT. As TT sells branded goods then these are all likely to have been tested and are safe for children.Toys being safe will have the greatest effect on TT if this legal control is not followed as TT could be sued for damages and this will raise its costs and result in a bad reputation leading to lower sales at the toy shop.Restrictions on the type of packaging will have the greatest effect on TT as the toy manufacturer may have to increase its prices to TT and therefore TT may need to raise its prices leading to lower demand and revenue.
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