Business Studies · May / June 2025 · Paper 22 · Question 4
0450
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4(a)[8]
Explain two possible effects on TSE of the business cycle in country P moving into the recession stage. Award 1 mark for each relevant effect (max 2). Award a maximum of 3 additional marks for each explanation of the effects on TSE of the business cycle moving into the recession phase – one of which must be applied to this context. Relevant effects might include:
Makes it easier for TSE to recruit new employees – larger pool of unemployed people to choose from – may be more skilled people available for workMay make it easier to resist demand for higher wages from employees – with a high level of unemployment – there will be more competition amongst workers for jobs so willing to accept lower wagesMay lead to lower demand for TSE’s products – consumer spending is lower – as many people have lost their jobs – so incomes are lowerLower priced products produced by TSE may see an increase in demand – as consumers have less income available to spend on luxury high priced items – buy cheaper substitutesTSE may be less willing to invest – as future sales and therefore profit may not increase for some time in country P – making it more difficult to gain a return on investmentTSE may focus more on the export of its products to make up for the lower sales in country PLower revenue – may lead to lower profits For example: Makes it easier for TSE to recruit new employees (1)as there is a larger pool of unemployed people to choose from (1)
and there may be more skilled people available to work for TSE (1)
leading to an increase in the output of sports equipment (app). Application could include: sports equipment;
skilled and full-time workers;
plastic raw materials;
sells in more than 30 countries;
factories in 10 countries;
want to increase market share;
a well-motivated workforce is important;
uses new technology and automation for flow production;
unemployment is increasing.
4(b)[12]
Using Appendix 3 and other information, consider the extracts from the income statements for the two companies in country P. Which company should TSE take over? Justify your answer using suitable calculations. Level Description Sound application of knowledge and understanding of relevant business concepts using appropriate terminology. Detailed discussion of both companies. Well-justified recommendation. Candidates discussing both companies in detail, in context and with a well-justified recommendation, including why the alternative company was 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 one company. Judgement with some justification / some evaluation of choice made. Candidates discussing at least one company in detail and applying it 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 companies with little/no explanation. Simple judgement with limited justification / limited evaluation of choice made. Candidates outlining the two companies in context should be rewarded with the top marks in the band. 1–4 No creditable response. Relevant points might include: Simple statements:
Company B has twice as much revenue at $200mCompany A has less revenue than Company BCompany A has less than half the cost of sales, a difference of $50mCompany B has higher cost of sales at $90mThe expenses are less than twice as much for Company B at $60mLower revenue means that Company A is probably smaller than Company B Possible calculations:The gross profit of Company A is $60mThe gross profit margin of Company A is 60%The gross profit of Company B is $110mThe gross profit margin of Company B is 55%The profit of Company A is $20mThe profit margin of Company A is 20%The profit of Company B is $50mThe profit margin of Company B is 25% Justification might include:TSE should take over Company A because it has a 5% higher gross profit margin than Company B. This suggests that it is more efficient in its management of variable costs. It is a smaller competitor as its revenue is lower at $100m and therefore it could require a lower amount of capital to take over the company. It should not take over Company B as TSE may need to borrow a much higher amount of capital as the company appears to be larger.TSE should take over Company B because it has much higher revenue suggesting it is a larger competitor than Company A and will better help TSE to achieve the aim of increasing its market share and it has a 5% higher profit margin than Company A.
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