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Business Studies · May / June 2024 · Paper 22 · Question 3

0450

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  • 3(a)[8]

    Explain four reasons why profit is important to a business. Award 1 mark for each relevant reason (max 4). Award a maximum of 1 additional mark for each explanation. There are no application marks available for this question. Relevant reasons might include:

    It is the reward to the entrepreneur/owners/shareholders – and is the reward for them using their skills and qualities in the business
    It is a source of finance – to purchase non-current assets/for investment in long-term assets/development of new products
    May attract investors – if the business is expanding and raising capital by selling additional shares
    It is an indicator or measure of success - the higher the profit the more successful the business is likely to be
    Can indicate if a product should be withdrawn if it is not making a profit
    To measure the performance of managers For example: If the business makes a good profit, then it may attract investors (1)

    to help it raise capital by selling additional shares (1).

  • 3(b)[12]

    Consider the opportunities and threats of ecommerce for JJ. Which is likely to have the most effect on JJ? Justify your answer. Level Description Sound application of knowledge and understanding of relevant business concepts using appropriate terminology. Detailed discussion of the opportunities and threats. Well-justified conclusion. Candidates discussing the opportunities and threats in detail, in context and with a well-justified conclusion, including why the opportunities or threats had the least effect, 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 the opportunities or threats. Judgement with some justification/some evaluation of choice made. Candidates discussing the opportunities or threats in detail and applying them 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 opportunities or threats with little/no explanation. Simple judgement with limited justification/limited evaluation of choice made. Candidates outlining the opportunities and threats in context should be rewarded with the top marks in the band. 1–4 No Creditable Response Relevant points might include: Opportunities

    Websites can be used to promote JJ’s jewellery – reaches potential customers from other countries – cheaper than many other forms of promotion
    Orders can be taken directly by JJ over the internet – this means that intermediaries such as jewellery shops are not required – JJ’s profit margins are therefore not shared
    Customers may be encouraged to purchase more additional items of jewellery when buying one item – easier to link through to other products that make a matching set
    It is easier for JJ to order raw materials – quicker and cheaper than other communication methods such as phone calls
    Easier to change prices, if necessary, rather than having to reprint brochures – makes it cheaper to do this Threats
    High levels of competition from many other jewellery manufacturers which may also have websites – makes it harder to be the business that people choose to buy from
    Website maintenance costs and costs of updating the site - will increase expenses and total costs
    Cannot try on the jewellery, such as rings – to check if it fits and if it meets customers’ expectations – may be less likely to make a purchase if cannot see the products
    Delivery and return costs may be high
    The risk of hacking and losing customer data/increased security costs to keep the website safe from data being corrupted Conclusion Justification might include:
    Ecommerce will provide more opportunities than threats as 30% of JJ’s target customers are from countries outside of country X and having a website is a low-cost way to promote and sell their jewellery. There are many competitors but as long as JJ can keep attracting customers using the internet then this will mean the threats from increased competition may not be a concern.
    Ecommerce will provide more threats than opportunities as many competitors will also have websites and sell their jewellery online. There is no guarantee that people searching for items of jewellery such as bracelets will find JJ’s website and consumers could easily find a competitor’s website instead and not be aware of JJ at all.
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