Business Studies · Oct / Nov 2024 · Paper 12 · Question 2

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SNT is an ethical business. It manufactures a range of soft drinks using batch production. In 2023 SNT produced 300000 bottles of soft drinks each week. There are many factors which affect how 2 much inventory the business should hold. SNT’s directors are planning to expand the business into new markets in other countries by forming a joint venture. They are considering licensing as another way to help overcome the potential problems of entering these new markets.

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2(a)[2]
Define ‘licensing’. Award 2 marks for a full definition. Award 1 mark for a partial definition. Business gives permission for another company (in the new market being entered) to produce the branded/patented products (under licence) [2]
OR A business in one country permits a firm (in a foreign country) to produce its branded products (under licence) [2]
OR When a business gives the right to others to produce/sell its products (in another country) [2]
Partial definition e.g. allow someone else to make/sell your products [1]
2 For two marks need the idea of permission/rights given by one business to another business and idea of what i.e. produce/sell/operate for its products. Do not need to refer to other countries/new markets to gain two marks. Notes
2(b)[2]
Identify two factors which might affect how much inventory a business should hold. Award 1 mark per factor (max 2). Points might include:
Demand for product/amount of sales
Perishability/nature/type of product/durability
(Storage) space available
Cost of storage/warehouse
Delivery charges
Seasons/celebrations/festivals
Amount of money available (to buy inventory) / cost of inventory / finance
Lead time/reliability of supplier
Method of production / rate/quantity of output
Stock control system / JIT
Forecast/expected shortages Other appropriate responses should be credited. 2 Only award the first two responses given. Notes
2(c)[4]
Outline two benefits to SNT of using batch production. Award 1 mark for each relevant benefit (max 2). Award 1 mark for each relevant reference to this business (max 2). Points might include:
Flexible [k] helping the business adapt to the new markets in other countries [app]
Production may not be affected to any great extent if machinery breaks down [k] so can continue to make some soft drinks [app]
Range/variety of products [k] when making 300 000 (bottles per week) [app]
Can motivate workers [k] Other appropriate responses should be credited. 4 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:
Soft drinks
300 000 (bottles per week)
New markets (in other countries)/planning to expand
(How much) inventory is important
Ethical (business) Other appropriate examples can be credited. Comparative statements such as ‘More/ less’ can only be accepted when referring to an alternative method e.g. quicker than job production. Notes
2(d)[6]
Explain one advantage and one disadvantage to SNT of forming a joint venture when entering new markets in other countries. Award 1 mark for identification of each relevant advantage/disadvantage (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: Advantages:
Increase capital / share costs / share resources [k] when making its soft drinks [app] which can help the business reduce borrowing [an]
Access to shared knowledge/expertise [k] increasing productivity/efficiency [an] above 300 000 (bottles per week) [app]
Less need for market research [k] lowers (marketing) costs [an]
Avoid/reduce competition [k] increasing market share [an]
Share/lower (financial) risk [k] which reduces possible losses [an]
May be a legal requirement (in some countries) [k] Disadvantages:
Possible (management) conflict/disagreements/different ways of working [k] as other business may be less concerned about being ethical [app] which can slow down decision-making [an]
Mistakes will reflect on all parties [k] which can damage its reputation [an] reducing its ability to offer licensing [app] 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:
Soft drinks
300 000 (bottles per week)
Ethical business
Licensing
Batch production Other appropriate examples can be credited. Some points can be awarded as [k] or [an] but do not award the same point twice e.g. share risk. Notes
Must share profit [k] which may reduce motivation of each party [an]
It will take time/effort to find the right partner [k] which may delay the expansion [an] Other appropriate responses should be credited. Notes
2(e)[6]
Do you think the advantages to a business of being ethical are greater than the disadvantages? 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 advantages to a business of being ethical are greater than the disadvantages. Points might include: Advantages:
Good image/reputation [k] so can charge high(er) prices [an]
Good relations with customers [k] which can develop customer loyalty [an]
Increase demand/sales/customers / enter new market [k] increasing revenue [an]
Help motivate workers [k] leading to lower absenteeism / lower labour turnover / increased productivity [an]
Help recruit/attract employees [k]
Investors more likely to invest [k] which may make it easier to expand/grow the business [an]
Can help create better supplier relations [k] Disadvantages:
Limited/fewer materials available [k] leading to less output [an]
High(er) costs [k] could lead to higher prices [an]
May take time to source suitable/ethical supplies [k] which could delay production [an]
May have to pay more to suppliers / for materials [k] leading to higher variable costs/cost of goods sold / lower gross profit margin [an] 6 This is a general question so there are no marks for application. Some points could be awarded as either [k] or [an] but do not award the same point twice e.g. customer loyalty, increase prices. To access [eval], must discuss a valid advantage and a valid disadvantage. Accept problems of not being ethical e.g. damage reputation Notes Other appropriate responses should be credited. Justification might include: One disadvantage is the business may have higher cost of materials [k] leading to a lower gross profit margin [an]. The business may have a better reputation [k] so able to charge higher prices [an]. Being ethical is better because higher prices could increase its profit margin [eval] which could cover the additional costs of materials [eval]. Notes

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