Business Studies · May / June 2025 · Paper 21 · Question 1
0450
As printed in the paper
Show the answer and mark scheme
1(a)[8]
Explain two advantages and two disadvantages to Philip of changing PF from a sole trader business to a private limited company. Award 1 mark for each advantage/disadvantage (max 2 advantages/2 disadvantages). Award a maximum of 1 additional mark for each explanation of the advantage/disadvantage applied to this context. Relevant advantages might include:
Limited liability – as the original investment of $100 000 as well as his personal possessions are safeMore capital / easier to raise finance – as he can sell shares to fund the building of the new factoryContinuity – if Philip decides to leave the shoe making business, then PF will still existMay be able to keep control – because he can decide whether to sell shares to expand the business Relevant disadvantages might include:He would not be able to keep all the profits/pay dividends – from the manufacture of rubber shoesNo privacy / will have to share some financial details – from his forecast statement of financial positionLegal restrictions in setting up the business – which he would not have when he set up the business 10 years agoOwner may not now have complete control / making all the decisions / being his own boss – such as where to locate the new factory For example: Will not be able to keep all the profit made (1)from selling the shoes he produces (app). Application could include: rubber shoes;
natural rubber raw material;
build a new factory;
sells in a mass market;
increase in taxes;
bank loan for the new factory;
sister wants to invest in the business;
$100 000;
wants to grow the business;
produce a new range of shoes;
operates in a very competitive market;
started 10 years ago;
information from Appendix 3.
1(b)[12]
Consider each of the following three methods PF could use to motivate its employees. Which method should PF use? Justify your answer.
Paying bonusesPiece-rateJob rotation Level Description Sound application of knowledge and understanding of relevant business concepts using appropriate terminology. Detailed discussion of two of more methods. Well-justified recommendation. Candidates discussing all three methods in detail, in context and with a well-justified recommendation, including why the alternative methods were 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 method. Judgement with some justification/some evaluation of choice made. Candidates discussing two or more methods 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 methods with little/no explanation. Simple judgement with limited justification/limited evaluation of choice made. Candidates outlining all three methods in context should be rewarded with the top marks in the band. 1–4 No creditable response. Relevant points might include: Paying bonusesMay be flexible in the way it is paid – higher pay if the production team increase output of shoes – ensuring that they each work harder so the team has an increased paymentMay bring pay up to the same rate paid by local businesses for similar work – employees less likely to leave – lowering PF’s recruitment costsMay cause disagreements if only some of the 20 employees are working hard – may be seen as unfair if all get the same bonus while not all the employees work as hard as each otherPaying a bonus is likely to mean profits for the business are lower than expected – may limit retained profit for expansionCan become expected and if not paid then employees become demotivated – reducing productivity Piece-rateWages paid to employees will increase if there is a higher output, so workers will be motivated to increase their output and produce more shoes in a shorter time – increasing efficiencyIf work is rushed to obtain more wages, then quality of the shoes might suffer – leading to a poor reputation for the business – fewer repeat customers – lower revenue in the futureMay be hard to calculate the contribution of each employee to the total number of shoes producedIt may be seen as unfair by employees if different jobs produce more output than others – then motivation may reduce rather than increase Job rotationProduction workers carry out one task for a period of time and then swap round to carry out another task using natural rubber to make the job more interesting and less boring – provides a greater variety of workMakes rotating the workers around the new factory easier – so can fill in for colleagues who are absent – means less likely to have hold-ups in production – output produced on timeMay require training for employees which increases costs – but once trained the employee should be more productive – a one-off cost that will not keep being paid Recommendation Justification might include:Paying a bonus is the best way to motivate the 20 employees as this will add extra to their wages for the work they do producing shoes and encourage them to work harder. Paying piece- rate may be difficult to calculate each week as employees do different jobs, and some may take longer than others. Job rotation may be difficult to introduce if the tasks are very different.Paying workers using piece-rate is the best way to motivate employees as this means that employees who work harder producing shoes will be rewarded with higher wages which will make them feel it is all worth the effort, based on Taylor’s theory of motivation.Job rotation is the best way to motivate employees as this is the only one which makes the job of producing shoes more interesting and less boring. Money motivates only for a short time and then the effects will decrease.
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