Business Studies · Oct / Nov 2022 · Paper 12 · Question 4

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TYA is a limited company which manufactures 300000 cars a year. It has 600 employees. TYA has high fixed costs. The Managing Director wants to improve efficiency in the factory. He said: 4 ‘Globalisation is changing how businesses operate. Many manufacturing businesses are considering whether to relocate their operations to other countries.’

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4(a)[2]
Define ‘globalisation’. Award 2 marks for a full definition. Award 1 mark for a partial definition. Increase in worldwide trade and movement of people and capital between countries [2]
OR Increasing trend for businesses to trade across international boundaries and for people to live/travel to countries that are not their own [2]
OR The process by which countries are connected with each other because of the trade of goods and services [2]
Partial definition e.g. (increase in) trade of goods and service [1]
2
4(b)[2]
Identify two examples of fixed costs. Award 1 mark per example (max 2). Points might include:
Rent/rates
Electricity / gas / heating and lighting / water
Insurance
Loan repayments/interest payments
Storage costs
Marketing costs
Salaries Other appropriate responses should also be credited. 2 Only award the first two responses given. Notes
4(c)[4]
Outline, with reference to TYA, the difference between a limited company and an unincorporated business. Award 1 mark for a relevant point (max 1). Award 1 mark for outlining the difference between the two types of business organisation (max 1). Award 1 mark for each relevant reference to this business (max 2). Points might include:
A limited company has separate legal identity [k] so assets such as the factory [app] and the 600 cars [app] are owned by the business rather than the individual, whereas the owners and the business are the same for an unincorporated business [k]
An unincorporated business has unlimited liability [k] whereas the risk for shareholders/owners of a limited company is limited to the amount invested [k] in the car business [app] so they may be less concerned about the high fixed costs [app]
A limited company can sell shares [k] whereas for an unincorporated business it can be difficult to raise a large amount of finance [k]
A limited company has continuity [k] Other appropriate responses should also be credited. 2 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:
Factory
600 (employees)
300 000
Cars
High fixed costs
Improve efficiency
Relocate
Globalisation Other appropriate examples in context can still be credited. Notes
4(d)[6]
Explain two methods TYA could use to increase efficiency. Award 1 mark for identification of each relevant method (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:
Increase in capital intensity / automation / introduce new technology [k] increasing output / faster production [an] of cars [app]
Training [k] its 600 employees [app] so they can work faster / make fewer mistakes / better quality [an]
Introduce just-in-time inventory control [k] to reduce amount of space needed [an] in the factory [app]
Kaizen [k] helps reduce waste (of resources) [an] may help lower high fixed costs [app]
Improve layout of machines [k] so saves time moving between areas [an]
Improve motivation or examples e.g. bonuses [k]
Cell production [k]
Improve quality / quality assurance [k] Other appropriate responses should also be credited. 6 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:
Factory
600 (employees)
300 000 (units)
Cars
High fixed costs Other appropriate examples in context can still be credited. Notes
4(e)[6]
Do you think legal controls are the most important factor for a manufacturing business to consider when deciding which country to locate its operations in? 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 legal controls are the most important factor for a manufacturing business to consider when deciding which country to locate its operations in. Points might include: Legal controls:
May restrict/not able to locate in certain places [k] so no output [an]
Business may have to change its production methods [k] which would increase costs [an]
May restrict amount of goods they can export/import [k] reducing potential sales [an] Other location factors discussed could include:
Access to suppliers / cheaper sources of materials [k] would increase transport costs [an] decreasing profit margin [an]
Access to/cost of labour [k] which could lower variable costs [an]
Access to/cost of land [k] as may need a large space [an] increasing fixed costs [an]
Access to transport networks / access to power [k] as poor transport links could delay deliveries / so production may be delayed/stopped [an]
Availability of government grants/subsidies [k] Other appropriate responses should also be credited. 6 This is a general question so there are no marks for application. For evaluation to be awarded justification will usually follow on from relevant analysis of points. Some points could be awarded for different options, and some could be presented as either [k] or [an] but do not award the same point twice. Notes Justification might include: Legal controls could mean the business may not be able to locate in certain places [k] which means no output [an]. Another factor is access to labour [k] helping lower variable costs [an]. However, legal controls are likely to be most important as the law will stop the factory being built whereas there are ways to overcome problems caused by access to employees [eval] which may increase costs but will still ensure that production can take place. [eval]

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