Business Studies · Oct / Nov 2024 · Paper 11 · Question 2

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Mitchell is an entrepreneur. He wants to start up a business selling books. As part of his business plan Mitchell has carried out some market research. An extract is shown in Fig. 2.1. Mitchell will 2 use microfinance as a source of finance. He wants to know whether the opportunities of using ecommerce for a new business are greater than the threats. Chart 1: Type of people reading books Extract from Mitchell’s market research data for 2023 Chart 2: Book sales by type (million Adults 20% lder people 27% Students 18% Children 35% Electronic books Audio books Paperbacks Hardbacks 60 50 40 30 20 10 0 Fig. 2.1

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2(a)[2]
Define ‘entrepreneur’. Award 2 marks for a full definition. Award 1 mark for a partial definition. A person who organises, operates and takes the risk for a new business venture [2]
OR An individual who takes the (financial) risk of starting a new business [2]
OR A person who combines factors of production to start a business [2]
OR An individual who takes the risk by combining factors of production [2]
Partial definition e.g. a person who starts/sets up a business [1]
2 Do not award: Answers such as managing a business or answers which identify the skills of an entrepreneur on its own. Notes
2(b)[2]
Define ‘business plan’. Award 2 marks for a full definition. Award 1 mark for a partial definition. A document containing the business aims/objectives and important details about the operations, finance and owners of a business. [2]
OR A detailed written document outlining the purpose and aim of a business which is often used to persuade lenders or investors to finance a business proposal. [2]
OR States aims and/or objectives and show how business plans to achieve them. [2]
Partial definition e.g. a document stating the aims of the business [1]
OR A document containing details about the operations, finance and owners of a business.[1] Notes
2(c)[4]
Outline one advantage and one disadvantage to Mitchell of using microfinance as a source of finance. Award 1 mark for each relevant advantage/disadvantage (max 2). Award 1 mark for each relevant reference to this business (max 2). Points might include: Advantages:
Do not need a good credit record/history [k] for this retailer [app]
Less paperwork/no business plan required [k] for this new entrepreneur [app]
No need to provide security/collateral [k] which can help as it is a start-up business [app] Disadvantages:
Only for a small amount [k] so cannot buy many books [app]
Usually high interest rates (as low/poor credit rating) [k] Other appropriate responses should be credited. 4 To use words from the stem as application, the reference must be appropriate (make sense) in relation to the point being made. The following words are likely to be appropriate for this question:
Business plan – can be used as [k] or [app]
but not both
New/start-up business
Books
Ecommerce
Entrepreneur
Retailer Other appropriate examples should be credited. Notes
2(d)[6]
Explain how the market research data in Chart 1 and Chart 2 in Fig. 2.1 could help Mitchell when making decisions. Award 1 mark for identification of how the data in each chart can be used when making decisions (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: Chart 1:
Decide the target market [k] as children read the most [app] which could help increase sales/revenue [an]
Decide where to advertise [k] to attract most customers [an] Chart 2:
Decide which type to sell [k] as only 15 million hardbacks are sold [app] which could help reduce the amount of unsold inventory [an]
To decide how many of each type of book he will sell [k] therefore he must have more of these in stock [an] Other appropriate responses should 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:
Allow book/books once as application. Chart 1:
27%/Older people
35%/Children
20%/adults
18%/students Chart 2:
Audio /10 million
Paperback/50 million
Hardback/15 million
Other 20 million Other appropriate examples can be credited. Do not award: Answers which simply state what chart shows e.g. ‘Type of books are sold’ as this is repetition. Notes
2(e)[6]
Do you think the opportunities of ecommerce for a new business are greater than the threats? 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 the opportunities of ecommerce for a new business are greater than the threats. Points might include: Opportunities:
More potential customers/sales/widen market [k] which can increase market share [an]
No/fewer shops needed [k] so less rent/lower fixed costs [an] which increases its profit margin [an]
Fewer employees needed [k] lower labour/wage costs [an]
Easy to update [k] Threats:
Increased competition [k] so may have to spend more on advertising / have to set lower prices [an]
Potential customers do not trust online business / risk of fraud/hacking [k] therefore they are less likely to purchase [an]
Not everyone has access to the internet [k] which could reduce potential customer base [an]
Lack of personal service/no face-to-face contact [k] so difficult to maintain customer loyalty [an]
Increased costs of postage/distribution [k] which could lead to higher prices [an]
Cost to set up/maintain website [k] which business might not be able to afford [an] 6 This is a general question so there are no marks for application. Lower costs may be [k] or [an] but allow only once. Notes Other appropriate responses should also be credited. Justification might include: One opportunity is more potential customers [k] increasing market share [an]. However, there may be increased competition [k] increasing promotional costs [an]. The opportunity is greater because more customers could increase revenue which is likely to cover the additional costs [eval] increasing the chances of a new business being successful. [eval] Notes

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