Business Studies · Oct / Nov 2022 · Paper 11 · Question 4

0450

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Following the end of a recession in country X, Beena wants to start up a hairdressing business. One option is to purchase a franchise from an established hairdressing business. Beena has $800 4 in savings and knows having enough working capital will be important for her business. She plans to use market research to help her decision-making. Beena knows there are many ways to segment a market.

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4(a)[2]
Define ‘recession’. Award 2 marks for a full definition. Award 1 mark for a partial definition. When there is a period of falling gross domestic product / GDP [2]
OR a sustained (over a period of time) reduction in GDP / national income / output [2]
Partial definition e.g.–fall in output / fall in GDP [1]
2 Do not award features of a period of recession. Notes
4(b)[2]
Identify two ways of segmenting a market. Award 1 mark per way. Points might include:
Age
Gender
Socio-economic group / social status / class
Geographical / region / location
Lifestyle
Ethnic group
Family characteristics
Education
Occupation
Use of product Other appropriate responses should also be credited. 2 Only award the first two responses given. Award :
Demographic–if age / gender / socio- economic group / social status/ethnic group not awarded
Psychographic if lifestyle, personality, and attitudes not awarded Notes
4(c)[4]
Outline two reasons why having enough working capital might be important for Beena’s business. Award 1 mark for each relevant reason. Award 1 mark for each relevant reference to this business. Points might include:
To pay for (day-to-day) expenses / short-term debts [k] of her hairdressing business [app]
Evidence to support loan applications [k] if she decides to take the franchise [app]
Use in an emergency / pay for unexpected expenses [k] in case she needs more than $800 [app]
To ensure the business has a good credit reputation [k] especially as her business is a start-up [app]
Ensures the business can take advantage of discount on bulk purchases [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:
Hairdressing or related words such as haircut or shampoo
Start-up / new business
Recession
Franchise
$800
Market research
(Market) segment Other appropriate examples in context can still be credited. Notes
4(d)[6]
Explain two possible advantages to Beena of buying a franchise. Award 1 mark for identification of each relevant advantage (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:
Established brand / well-known brand [k] therefore no need to spend on advertising [an]
Reduces risk of failure [k] especially after a recession [app]
Training / advice offered by franchisor [k] which saves costs [an] which is important for a start-up business [app]
Attracts customers [k] helping to ensure / increase revenue [an] for her hairdressing business [app]
Easier to obtain finance / bank more willing to lend [k] which may be necessary with savings of $800 [app]
Franchisor pays for advertising [k]
Stock control and accounting systems often provided by franchisor [k] which can help make business more efficient [an] and improve her working capital [app]
All supplies are obtained from a central source / the franchisor [k] which can help ensure quality [an]
Fewer decisions to be made (than an independent business) [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:
Hairdressing or related words such as haircut or shampoo
Start-up / new business
Recession
$800
Market research
(Market) segment
Working capital Other appropriate examples in context can still be credited. Note: [k] Points may sometimes be awarded [an] Notes
4(e)[6]
Do you think it is always better for a start-up business to use primary market research, rather than secondary market research, when making decisions? 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 it is always better for a start-up business to use primary market research rather than secondary market research when making decisions. Points might include: Primary market research:
Relevant / up to date data gathered [k] so should help you find out what you want to know [an]
High cost / time to collect information [k] which a new business might not be able to afford [an]
Only available to own business [k]
May find it difficult to find people that represent target market / population [k] Secondary market research:
May not be relevant / outdated [k] which can lead to wrong decisions [an]
Readily available [k]
Cheap [k]
Can collect wide range of information [k] Justification might include: Primary research collects business specific data [k] helping to find out what you want to know [an]. Secondary research is cheaper than primary to collect [k] which could help reduce costs [an]. As this is a start-up business finance may be limited therefore secondary research may be better for them. [eval]. However the information must be from a reliable source. [eval] 6 This is a general question so there are no marks for application. Some points could be awarded for different options, but do not award the same point twice. For evaluation to be awarded justification will usually follow on from relevant analysis of points. Note: Do not accept mirror arguments such as primary research is up to date and secondary research maybe outdated.

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