Business Studies · May / June 2025 · Paper 11 · Question 4

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PKN manufactures glass. Contributing to sustainable development is important to the business. PKN has factories in 30 countries. It has 27000 employees. The Managing Director knows PKN 4 has benefited from globalisation. She plans to expand the business using external growth. Retained profit is one source of finance a business could use to fund expansion. Some of PKNls directors are concerned about possible diseconomies of scale as the business grows.

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4(a)[2]
Identify two methods of external growth a business might use. Award 1 mark for each method (max 2). Points might include:
Horizontal integration
Forward integration
Backward integration
Conglomerate/diversification
Joint venture Other appropriate responses should be credited. 2 Only award the first two responses given. Can award below if no specific example given
Merger
Takeover/acquisition
Vertical integration
4(b)[2]
Identify two reasons for globalisation. Award 1 mark for each reason (max 2). Points might include:
Free trade agreements / economic trading blocs / reduction in trade barriers
Improved/cheaper transport/travel links
Improved communication networks/technology
Emerging/new markets are quickly expanding/rapid economic growth/rising income
Governments allow companies from other countries to set up operations in own country Other appropriate responses should be credited. 2 Only award the first two responses given.
4(c)[4]
Outline two ways PKN could contribute to sustainable development. Award 1 mark for each relevant way (max 2). Award 1 mark for each relevant reference to this business (max 2). Points might include:
Use renewable energy [k] in each of the 30 countries [app]
Use energy efficient/environmentally friendly methods [k] to make glass [app]
Use fewer resources/reduce output [k] in its factory/factories [app]
Recycle waste [k]
Use/develop new environmentally friendly products [k]
Avoid/reduce use of chemicals (that produce toxic waste) [k]
Use packaging made of recycled material [k]
Use packaging that can be recycled/reused [k]
Avoid unnecessary travel [k]
Use local supplier [k]
Replant trees [k]
Switching to environmentally friendly transport or examples [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:
Glass
Factory/factories
Manufacturer
30 countries
27 000 employees
Globalisation
Expand/external growth
Source of finance
Diseconomies of scale Other appropriate examples can be credited.
4(d)[6]
Explain two diseconomies of scale which might affect PKN as it grows. Award 1 mark for identification of each relevant diseconomy (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:
Low morale/motivation/lack of loyalty [k] leading to higher labour turnover / more workers leaving [an] among its 27 000 employees [app]
Poor communication [k] leading to mistakes [an] when making glass [app]
Weak/lack of co-ordination [k] leading to the wrong decisions [an] at the factory [app]
Lack of control [k] leading to higher average costs [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:
Glass
Factory/Factories
Manufacturer
30 countries
27 000 employees
Globalisation
Sustainable development
Source of finance Other appropriate examples can be credited. Some analysis points can be used for any diseconomy but only award once e.g. higher average/unit costs.
4(e)[6]
Do you think the advantages of using retained profits to fund business expansion 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 of using retained profits to fund business expansion are greater than the disadvantages. Points might include: Advantages:
No need to repay [k] so does not increase level of debt/liabilities [an]
No interest to pay [k] so no additional cash outflows/expenses [an]
Easy/quick to obtain [k] Disadvantages:
Takes time to generate sufficient funds [k] which could delay the expansion [an]
May not have sufficient/any funds [k] so must limit the size of expansion [an]
(Keep more profit in the business) reduces payment/reward to owners [k] which may deter further investment [an] Other appropriate responses should be credited. 6 This is a general question so there are no marks for application. Some analysis could apply to more than one point, but only award once. Guidance Justification might include: An advantage is there is no interest to pay [k] so no additional cash outflows [an]. However, it may take time to generate these funds [k] delaying expansion [an]. The disadvantages are greater because expansion is likely to need a large amount of finance which the business may not have [eval]. Delay could mean the opportunity is missed [eval].

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