Business Studies · Oct / Nov 2023 · Paper 11 · Question 1

0450

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Desmond wants to be a successful entrepreneur. He has decided to leave his office job to start up a gardening business cutting grass and planting flowers. It will be an unincorporated business. 1 Desmond is aware that a new business is at greater risk of failure than an established business. He has identified his business objectives for the first year. Desmond has calculated he will need $750 for his start-up capital.

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1(a)[2]
Define ‘unincorporated business’. Award 2 marks for a full definition. Award 1 mark for a partial definition. A business that does not have a separate legal identity [2]
Partial definition e.g. owner is/are responsible for business debts/unlimited liability [1]
2 Max 1 for features of an unincorporated business e.g. business ends if an owner leaves.
1(b)[2]
Identify two objectives a new business might have. Award 1 mark per objective (max 2). Points might include:
Survival
Break-even
Make a profit
Become known in the market/create good reputation
Generate sales/gain customers
Encourage customer loyalty
Offer good customer service
Create added value
Social responsibility/ethical
Growth/expansion/increase market share Other appropriate responses should also be credited. 2 Only award the first two responses given. Notes
1(c)[4]
Identify four characteristics of a successful entrepreneur. Award 1 mark for each relevant characteristic (max 4). Points might include:
Risk-taker
Problem solver
Decisive
Creative
Innovative
Hard-working
Perseverance/determined/focused/(self-)motivated
Resourceful/adaptable
Optimistic
Self-confident/esteem
Independent
Effective communicator
Organised
Multi-skilled
Results driven/ambitious
Leadership
Team player
Good at networking/prepared to learn from others Other appropriate examples should be credited. 4 Only award the first four responses given. Notes
1(d)[6]
Explain two reasons (other than lack of finance) why Desmond’s new business might be at greater risk of failure than an established business. Award 1 mark for identification of each relevant reason (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:
Inadequate/no market research [k] about gardening [app] so may not offer what customers want [an]
Providing wrong/poor quality [k] service [app]
Lack of experience/poor decision-making/skills [k] as only worked in an office [app] so more likely to make mistakes [an]
Difficult to compete with competitors/lack of customers/insufficient sales [k] for this unincorporated business [app] leading to less revenue [an]
Poor planning/no business plan [k] despite setting objectives [app] so does not have time/opportunity to resolve problems [an]
No reputation/brand image/poor marketing [k] therefore potential customers do not trust him [an]. 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:
Gardening or examples such as cutting grass/planting flowers
Service
Entrepreneur
$750
Office job
Unincorporated business
Business objectives Other appropriate examples can be credited. Some answers could be awarded as either [k] or [an] but do not award the same point twice. Notes
1(e)[6]
Do you think owner’s savings are the most suitable source of finance for a start-up business? 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 owner's savings are the most suitable source of finance for a start-up business to use. Points might include: Owner's savings:
No need to repay/no debt [k] helping to reduce/keep cash outflows low/less risk [an]
No interest payable [k] therefore not increasing cost [an]
May not have enough/any savings [k] delaying/stop their plans [an]
Immediately available [k] Crowdfunding [k]
No initial fees payable (to the crowdfunding platform) [an]
Allows public‘s reaction to the new business venture to be tested [an]
Crowdfunding platform might reject the entrepreneur’s proposal [an]
Publicising could allow competitors to copy the idea [an] leading to fewer sales [an] Bank loan [k]
Could provide all the finance (at once) [an] but must be repaid [an]
Interest payable [an] increases expenses [an]
Quick to arrange [an] Borrow from friends and family [k]
May give longer time/better terms to repay [an] 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. Advantages of one source can be presented as disadvantages of another but do not award the same point twice as mirror answers are not accepted. Do not award 'issue shares' or 'profit' as these are not appropriate for a start-up business. Notes Government grant [k]
No need to repay/no interest [an]
May be conditions attached [an] Microfinance [k] Overdraft [k] Other appropriate responses should also be credited. Justification might include: Owner’s savings may not provide enough funds [k]. Another option is a bank loan [k] although interest must be paid [an] increasing expenses. [an]. The best option is a bank loan because plans are not delayed through lack of finance [eval]. By the time the owner has saved enough, they might have missed out on the business opportunity [eval]. Notes

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