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Business Studies · May / June 2024 · Paper 21 · Question 3

0450

As printed in the paper

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  • 3(a)[8]

    Explain four reasons why consumer spending patterns for a product might change. Award 1 mark for each reason why consumer spending patterns may have changed (max 4). Award a maximum of one additional mark for each explanation of the reason. There are no application marks for this question. Relevant reasons might include:

    Changes in consumer tastes and fashions – increased/decreased demand for the products
    Products no longer meet customer needs – choose to buy alternative products instead
    Changes in incomes – now/no longer able to afford better quality products
    The price of a product changes – higher prices usually lead to lower sales
    Changes in the prices of competitors’ products – if competitors’ products are cheaper then customers will buy from them instead
    Spending on advertising and promotional activities – if effective then is likely to result in sales increasing for the successfully advertised product
    Changes in the population/age structure of the population – an increase in the number of older people in the population will increase demand for products that are popular with them
    New technology means new products become available – this will increase demand for these products/demand for old technology products decreases For example – There are changes in consumer tastes and fashions (1)

    so if a product becomes less fashionable then demand for these products will decrease (1).

  • 3(b)[12]

    Consider the following two ways EP could increase efficiency in its factory. Which would be the best way for EP to use? Justify your answer.

    Improving labour skills
    Introducing more automation and technology 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 choices 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 choices 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: Advantages Disadvantages Improving labour skills
    Increases motivation of the 50 production employees – made to feel more valued as training given to them – investment in the employees
    May enable employees to work more quickly – output of pottery is produced in a shorter time
    Output per worker increases – increases productivity – fewer inputs for a given output
    Employees may become more flexible – could cover for absent colleagues – keeps the factory running smoothly/fewer interruptions in output
    Increases skills of employees which decreases waste/ leads to fewer mistakes
    Increases costs from training the 50 production employees – in the short-term may reduce profitability – if increase in costs is greater than increase in revenue when the employees are being trained
    Output of cups may be reduced whilst employees are being trained – depends on whether it is off- the-job or on-the- job training
    Skilled employees may be tempted to leave and work for a competitor that makes high- quality products – then costs of training wasted – it takes time to recruit new employees reducing efficiency Advantages Disadvantages Introducing more automation and technology
    May require fewer full- time employees on the production line – reduces wage costs
    Output can be produced more quickly – reduces unit costs – may allow prices to be reduced – price of pottery products may be more competitive – increasing sales
    Changes in pottery design may be made more quickly – quicker to react to changes in customer preferences
    May result in redundancy payments – increases costs in the short-term – legal requirements for redundancy payments may be high
    Cost of purchasing equipment and maintenance costs of the technology may be high – increases total costs of making pottery products/may need to be updated – increases costs
    Increased training costs if employees need training how to use the equipment/may need to employ new skilled workers to operate the equipment – increased recruitment costs
    Could lead to a demotivated workforce - fear of change to job roles Recommendation Justification might include:
    Improving labour skills is the best way to increase efficiency at EP’s factory. The 50 production employees will learn more skills which will enable them to produce more output per worker than previously. This will motivate the employees to work harder and produce more output. Automation is very expensive and unless sales increase EP may find it difficult to raise sufficient funds for the investment.
    Introducing automation and technology in the factory to make pottery products such as plates is the best way to increase efficiency. Technology will mean fewer production workers will be needed so saving on wage costs and greatly increasing output for each remaining employee in the factory.
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