Business Studies · Oct / Nov 2021 · Paper 11 · Question 3

0450

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SBG makes a range of products including specialist paints. It has 6 factories and 700 employees. All SBG’s employees are encouraged to be involved in decision-making. SBG’s products are 3 exported to 16 countries using wholesalers as its main channel of distribution. The Managing Director said: ‘Our objectives are to grow and make a profit.’ He also recognises that all business activity creates externalities for SBG’s stakeholder groups.

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3(a)[2]
Define ‘externalities’. Award 2 marks for a full definition. Award 1 mark for a partial definition. Third party effects arising from production or consumption of goods and services for which no appropriate compensation is paid [2]
OR Advantages or disadvantages that fall on third parties that are not directly involved in the production process [2]
OR The effect of business activities on unrelated parties [2]
Partial definition e.g. effect on third party or society [1]
2
3(b)[2]
Define ‘stakeholder groups’. Award 2 marks for a full definition. Award 1 mark for a partial definition. Any person or group with a (direct) interest in the performance/activities of a business [2]
Partial definition e.g. An individual or group which has an interest in a business [1]
OR Someone affected by what a business does [1]
OR Anybody inside or outside the business who cares about its operations [1]
2 Notes
3(c)[4]
Outline two reasons why profit might be important to SBG. Award 1 mark for each relevant reason. Award 1 mark for each relevant reference to this business. Points might include:
Source of finance [k] as its objective is to grow [app]
To ensure survival of the business / avoid closure [K] protecting jobs of its 700 employees [app]
Measure/indicator of success of the business [k] in each of the 16 countries [app]
Measures the performance of managers [k] in the paint business [app]
Reward for risk-taking [k]
Decide whether to continue making or selling a product [k]
Attract investors [k] 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:
Paint
6 factories
700 employees
16 countries
Growth (is the objective)
Employees are encouraged to be involved in decision-making. Other appropriate examples in context can still be credited. Do not credit payment of day-to-day expenses. Notes
3(d)[6]
Explain two ways SBG can involve its employees in decision- making. Award 1 mark for identification of each relevant way (max 2). Award 1 mark for each relevant reference to this business (max 2). Award 1 mark for each relevant explanation (max 2). Points might include:
Delegation [k] as workers in the 6 factories [app] will make the decisions themselves [an]
Democratic leadership [k] encourages employees to offer ideas [an] about developing new products [app]
Encourage team working / kaizen [k] for its 700 employees [app]
Meet with employees/surveys [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:
Paint
6 factories
16 countries
700 employees
Developing new products
Channel of distribution Other appropriate examples in context can still be credited. Notes
3(e)[6]
Do you think using wholesalers is the best way for a large business to distribute its products? 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 a justified decision as to whether wholesalers are the best channel of distribution for a large business to use. Points might include:
Transport costs to the retailer is paid for by the wholesaler [k] so reduces costs to manufacturer [an]
Can help sell goods to a larger market [k] leading to higher revenue [an]
Wholesalers buy in large quantities [k] reducing distribution costs [an]
Wholesalers will advertise and promote products [k]
Another middleman will take some of the profit [k]
Producer loses some control over the marketing [k] Other options could include:
Selling direct to customers [k] ensures more control over the marketing mix [an]
Using a retailer [k] Justification might include:
Wholesalers will pay slightly lower prices [k] which will reduce the businesses profit margin. [an] By selling direct to customers [k] this will give the firm more control over marketing. [an] Selling directly to customers maybe the best way to protect its brand image. [eval] For a large business image is likely to have a big impact on in their sales. [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 large business. Candidates can discuss other options, but evaluation must focus on whether wholesalers are the best way for a large business to distribute its products. Notes

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