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Business Studies · May / June 2025 · Paper 21 · Question 2

0450

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  • 2(a)[8]

    Explain one advantage and one disadvantage of PF selling its products in a mass market. Award 1 mark for each advantage/disadvantage of selling in a mass market (max 2). Award a maximum of 3 additional marks for each explanation of the advantage/disadvantage of selling in a mass market – one of which must be applied to this context. Relevant advantages might include:

    Total sales in the market may be very high – giving the potential for high revenue – possibly leading to high profits if costs are kept under control
    May be able to benefit from economies of scale – as production is on a large scale and so may benefit from purchasing economies – leading to lower costs per unit / lower average costs
    Risks are spread if several variations of the mass market product are produced – less likely to be affected by changes in consumer spending habits – so sales and revenue remain high even if the sales of one product fall
    Opportunities for the business to grow as high sales/large customer base/high demand
    Can produce a standardised product – production costs are lower than if many variations of the product are produced Relevant disadvantages might include:
    Likely to be high levels of competition between businesses selling similar products – may need to reduce prices to remain competitive / reduce costs – may lead to lower profit margins
    High costs of advertising and promotion – as need to attract a much wider market to see the adverts such as on TV – so advertise using many and varied types of promotion to ensure the product is seen
    The products are standardised so unlikely to meet the specific needs of all customers or potential customers – so some potential customers may not purchase the product – leading to a loss of potential sales
    May reduce opportunities if consumers are demanding more variety in the products they buy – preferring niche market products – so may lose out to sales from many smaller competitors For example: Total sales to the market may be very high (1)

    which is likely to give the potential for high revenue (1)

    from the high sales of shoes (app). Possibly leading to high profits if costs are kept under control (1). Application might include: rubber shoes;

    natural rubber raw material;

    building a new factory;

    rubber is grown locally;

    increase in taxes;

    bank loan for new factory;

    sister wants to invest in the business;

    $100 000;

    operates in a very competitive market;

    started 10 years ago;

    information from Appendix 3.

  • 2(b)[12]

    Consider the following three factors that may influence the location of PF’s new factory. Which factor is likely to be the most important when deciding on the location? Justify your answer.

    Availability of raw materials
    Transport links
    Government influence Level Description Sound application of knowledge and understanding of relevant business concepts using appropriate terminology. Detailed discussion of two or more factors. Well-justified conclusion. Candidates discussing all three factors in detail, in context and with a well-justified conclusion, including why the alternative factors 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 factor. Judgement with some justification/some evaluation of choices made. Candidates discussing two or more factors 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 factors with little/no explanation. Simple judgement with limited justification/limited evaluation of choices made. Candidates outlining all three factors in context should be rewarded with the top marks in the band. 1–4 No creditable response. Relevant points might include: Availability of raw materials
    Natural rubber is available locally then this will reduce the transport costs – reducing PF’s costs
    May make supplying extra raw materials at short notice easier – especially if an urgent order is taken – customer satisfaction more likely to be assured so customers may be more loyal – maintaining a regular source of revenue
    Forests are nearby then likely to have better relationship with suppliers – may be more willing to give trade credit Transport links
    If transport links are good, finished shoes are likely to reach the market more quickly – reducing transport costs for deliveries
    If transport links are good delivery vehicles will be less likely to be stuck in traffic/congestion which increases costs of paying the driver and the fuel for the vehicle – quicker to access raw materials especially if PF uses JIT
    May be easier for employees to get to work – less likely to be late / arrive on time for shift – more efficient production
    May be able to attract employees from a wider area if transport links are good – may be easier to recruit enough workers – making it easier to start production at the new factory Government influence
    Government grants may be available to businesses that locate in a particular area – which reduces the costs of setting up the new factory in that area
    Often offered in areas that have high levels of unemployment – so there may be many people willing and able to work so easier to find employees for the new factory
    Government grants may be given to help with training costs to produce shoes – so training costs may not be as high as expected
    There may be restrictions on the use of the land or emissions from the factory that may affect its operation Conclusion Justification might include:
    Availability of natural rubber as without raw materials PF cannot produce any output. So, it is essential that raw materials are nearby so the factory can always operate. Transport links are less important if the market is nearby as delays will not cause major problems if the journey is short. Government influence may only be important at the set-up stage of the factory so will not be helpful in the long run.
    Good transport links are essential as delays in deliveries of shoes to the market may lead to a decrease in customer loyalty.
    Government influence is most important as grants can significantly reduce the set-up and training costs for employees to manufacture shoes making it more likely to be a success.
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