Business Studies · Oct / Nov 2022 · Paper 12 · Question 1
0450
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EQR owns 150 cafes. It sells a range of drinks including coffee. Being ethical is important to EQR. The Managing Director has been analysing EQR’s statement of financial position. The business 1 has the objective to increase its 6% market share. The Managing Director plans to grow the business by selling franchises for $85000. She is also considering ways to increase added value.
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1(a)[2]
Define ‘market share’. Award 2 marks for a full definition. Award 1 mark for a partial definition. Percentage of total market sales held by one brand/business [2]
OR The revenue of a business expressed as percentage of total market revenue [2]
OR Percentage of total sales that a firm achieves in a market [2]
OR Business sales / total market sales × 100 [2]
Partial definition e.g. share of all sales made [1]
OR Percentage of customers/sales a business has [1]
1(b)[2]
Define ‘statement of financial position’.
Award 2 marks for a full definition. Award 1 mark for a partial definition. Shows the value of a business’ assets and liabilities at a particular point in time [2]
OR
An accounting statement that records assets, liabilities, and owners’
equity/capital of a business at a particular date [2]
Partial definition e.g. shows assets and liabilities (of a business) [1]
OR What a business owns and owes [1]
1(c)[4]
Outline two ways EQR could increase added value.
Award 1 mark for each relevant way (max 2).
Award 1 mark for each relevant reference to this business (max 2).
Points might include:
Increase prices [k] at its cafes [app]Reduce material/variable costs [k] of coffee [app]Branding/change packaging [k] which can also help when selling its franchises [app]Excellent/better service [k]Additional product features/improve design [k]Convenience [k]Other appropriate responses should also be credited.
1(d)[6]
Explain two advantages to EQR of selling franchises as a way to grow its business.
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:
Franchise fee must be paid / licence has to be bought [k] for a cafe [app] providing funds for investment [an]Can expand at a faster rate [k] which can help increase its market share [an] above 6% [app]Receives royalties / share of (franchisee) profit [k] as well as the $85 000 [app]Not/franchisees responsible for day-to-day management [k] so have time to focus on other issues [an] such as increasing added value [app]Increase brand awareness [k] of it being ethical [app] increasing sales [an] Other appropriate responses should also be credited.1(e)[6]
Do you think a business being ethical will always lead to lower profits? Justify your answer.
Award up to 2 marks for identification of relevant points.
Award up to 2 marks for relevant development of points.
Award up to 2 marks for a justified decision as to whether a business being ethical will always lead to lower profits.
Points might include:
Enhance reputation/brand image [k] helps attract customers [an]Customers may pay higher prices [k] increasing revenue / which could help cover the costs [an]Can help motivate employees [k] increasing productivity / reduces absenteeism / lowers labour turnover [an]Can increase costs [k] leading to higher prices [an] which may lead to fewer customers / sales [an]May not be sufficient materials / difficult to find ethical suppliers [k] reducing output [an]Ethical suppliers may have higher prices / unethical suppliers may be cheaper [k]Other appropriate responses should also be credited.
Justification might include:
Some customers may be prepared to pay extra for ethical products [k] this can help offset the increase costs of trying to be ethical [k] so overall profit margin may not change [an] and the better reputation gained could result in additional sales [an]. Therefore, being ethical can benefit a business as in the long term this may increase revenue [eval] which could result in higher profit overall [eval].
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