Business Studies · Oct / Nov 2023 · Paper 21 · Question 1
0450
As printed in the paper
Show the answer and mark scheme
1(a)[8]
Explain two advantages and two disadvantages of PH being a public limited company. One mark for each advantage/disadvantage (max of 4). Award a maximum of 1 additional mark for each explanation of the advantage/disadvantage of being a public limited company in the context of PH. Relevant answers might include: Advantages:
Can sell shares to the public – which may be attractive to prospective shareholders as this business has a long history of producing high quality productsLimited liability – giving protection to the assets of shareholders when the business is expanding in other countriesContinuity – if shareholders die their shares will be passed on to others which has allowed the company to exist for over 50 yearsAs it has a higher status it may find it easier to borrow from banksRapid expansion may be possible/can raise large amounts of capitalIncorporated identity/separate legal identity Disadvantages:Legal formalities – for this business that manufactures protective hatsAccounts have to be published – which may be viewed by competitors that want to become the market leader instead of PHDivorce between ownership and control/potential conflict between managers and shareholdersThe company may be at risk of a takeover/no control over who buys sharesDirectors' decision making may be influenced by major investors when seeking to satisfy their own objectives For example: A public limited company can sell shares to the public (1), and this makes it easier to raise capital for investment in new factories to produce its protective hats (app). Application could include: protective hats;construction sites;
construction workers on building sites;
mining workers;
plan to expand by opening factories in other countries;
remain the market leader;
has a long history of producing high quality products;
been in business for 50 years;
becoming a multinational company.
1(b)[12]
Consider the following two ways PH could ensure quality production. Which way should PH choose? Justify your answer.
Quality controlQuality assurance Level Description Sound application of knowledge and understanding of relevant business concepts using appropriate terminology. Detailed discussion of both ways. Well-justified recommendation. Candidates discussing both ways in detail, in context and with a well-justified recommendation, including why the alternative way was rejected, should be rewarded with the top marks in the band. 9–12 Sound application of knowledge and understanding of relevant business concepts using appropriate terminology. Detailed discussion of at least one way. Judgement with some justification / some evaluation of choice made. Candidates discussing at least one way in detail and applying it to the case should be rewarded with the top marks in the band. 5–8 Limited application of knowledge and understanding of relevant business concepts. Limited ability to discuss the ways with little/no explanation. Simple judgement with limited justification / limited evaluation of choice made. Candidates outlining both ways in context should be rewarded with the top marks in the band. 1–4 No creditable response. Relevant points might include: Quality Method Advantages Disadvantages Quality controlProducts checked at the end of the production line tries to eliminate faults and errors before the customer receives the protective hatsLess training is required for the 100 workers as inspectors check the quality of the hats before they leave the factoryIt raises costs as inspectors need to be employedIdentifies faulty hats at the end of the process but does not identify where the fault has occurredIf PH does not identify the fault, then it does not eliminate the faulty process – higher costs if protective hats need to be scrapped/reworkedEmployees may be demotivated as quality checks are not their responsibility and so do not feel trusted – possibly making more careless errors when carrying out their tasks Quality Method Advantages Disadvantages Quality assuranceProducts checked at every stage of the production process to try to eliminate faults or errors at each stage of production before passing to the next stage - reducing faults at the endThere are fewer customer complaints of faulty protective hatsReduced costs of wastage as fewer hats are scrapped due to being faultyCan make workers feel trusted and may improve motivationCan be expensive to train employees to check the quality of their own workThe reliability of employees is important, and they need to be committed or quality assurance will not be effectiveTakes longer to produce protective hats as each worker needs to do their own check for faultsComponents and raw materials need to be of an approved standard to comply with quality assurance - may restrict the suppliers that can be used - possibly increasing costsEmployees may expect to be paid more to carry out the quality checks as they are currently only on the minimum wage Quality Method Advantages Disadvantages Recommendation Justification may include:If the process to produce protective hats is simple, then quality control may be most suitable as inspectors may just carry out a simple check at the end of the production line. The 100 production workers do not need to be trained to check their own work, reducing training costs, which they would have to do if quality assurance was used. This makes the production process faster than if quality assurance is used as production workers would need to keep checking the hats at each stage of the production process.Quality assurance is best because each stage of production can be checked so it is less likely for a faulty product to go to customers than if quality control is used. It keeps a good brand image and reputation for PH products which is very important for protective hats. It will ensure faults do not need to be repaired, reducing cost of faulty products being scrapped.
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