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Cambridge Assessment International Education

Cambridge International General Certificate of Secondary Education

BUSINESS STUDIES 0450/12

Paper 1 Short Answer/Structured Response October/November 2019
MARK SCHEME
Maximum Mark: 80

Published

This mark scheme is published as an aid to teachers and candidates, to indicate the requirements of the
examination. It shows the basis on which Examiners were instructed to award marks. It does not indicate the
details of the discussions that took place at an Examiners’ meeting before marking began, which would have
considered the acceptability of alternative answers.

Mark schemes should be read in conjunction with the question paper and the Principal Examiner Report for
Teachers.

Cambridge International will not enter into discussions about these mark schemes.

Cambridge International is publishing the mark schemes for the October/November 2019 series for most
Cambridge IGCSE™, Cambridge International A and AS Level components and some Cambridge O Level
components.

This syllabus is regulated for use in England, Wales and Northern Ireland as a Cambridge International Level 1/Level 2 Certificate.

This document consists of 19 printed pages.

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Generic Marking Principles

These general marking principles must be applied by all examiners when marking candidate answers. They should be applied alongside the specific
content of the mark scheme or generic level descriptors for a question. Each question paper and mark scheme will also comply with these marking
principles.

GENERIC MARKING PRINCIPLE 1:

Marks must be awarded in line with:

• the specific content of the mark scheme or the generic level descriptors for the question
• the specific skills defined in the mark scheme or in the generic level descriptors for the question
• the standard of response required by a candidate as exemplified by the standardisation scripts.

GENERIC MARKING PRINCIPLE 2:

Marks awarded are always whole marks (not half marks, or other fractions).

GENERIC MARKING PRINCIPLE 3:

Marks must be awarded positively:

• marks are awarded for correct/valid answers, as defined in the mark scheme. However, credit is given for valid answers which go beyond the
scope of the syllabus and mark scheme, referring to your Team Leader as appropriate
• marks are awarded when candidates clearly demonstrate what they know and can do
• marks are not deducted for errors
• marks are not deducted for omissions
• answers should only be judged on the quality of spelling, punctuation and grammar when these features are specifically assessed by the question
as indicated by the mark scheme. The meaning, however, should be unambiguous.

GENERIC MARKING PRINCIPLE 4:

Rules must be applied consistently e.g. in situations where candidates have not followed instructions or in the application of generic level descriptors.

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GENERIC MARKING PRINCIPLE 5:

Marks should be awarded using the full range of marks defined in the mark scheme for the question (however; the use of the full mark range may be
limited according to the quality of the candidate responses seen).

GENERIC MARKING PRINCIPLE 6:

Marks awarded are based solely on the requirements as defined in the mark scheme. Marks should not be awarded with grade thresholds or grade
descriptors in mind.

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Question Answer Marks Guidance

1(a) What is meant by ‘public corporation’? 2 Do not award answers that refer to public
companies
Clear understanding [2]: A business that is owned and controlled by the
government/state

Some understanding [1]: E.g. run by government/state

1(b) Identify two economic objectives of country X’s government. 2 Do not award answers which refer to other
government objectives such as increase
Knowledge [2 × 1] award 1 mark per economic objective investment, protect the environment/reduce
greenhouse gases
Points include:
Do not award examples of methods to improve
• Low(er) unemployment/full employment/create jobs balance of payments, e.g. reduce imports
• Economic growth OR increase in GDP OR improve standards of living
• Low inflation/price stability
• Improve balance of payments

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Question Answer Marks Guidance

1(c) Identify and explain two ways a pressure group might try to influence the 4 Application marks may be awarded for
actions of GOP. appropriate use of the following:

Knowledge [2 × 1] – award 1 mark for each way identified • public corporation

• oil
Application [2 × 1] – award 1 mark for each explanation in context • 200 km OR pipeline
• planning permission
Points might include: • 2000 OR skilled/construction jobs
• less need for businesses to import
• create negative publicity OR publish information OR write to • private sector
newspaper [k] about the pipeline [app]
• organise customer boycotts [k] of its oil [app] Note: can award responses which refer to
• demonstrations or protests OR rally opposition [k] against this public trade unions asking for higher pay or better
corporation [app] conditions
• lobby OR petition OR send letters to government [k] to prevent planning
permission [app] Do not award references to strikes unless in
• demand interview with company [k] context of trade unions
• take legal actions [k]

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Question Answer Marks Guidance

1(d) Identify and explain two ways in which the objectives of GOP might be 6 Application marks may be awarded for
different if it was in the private sector. appropriate use of the following:

Knowledge [2 × 1] – award 1 mark for each relevant way • public corporation

• oil
Application [2 × 1] – award 1 mark for each relevant reference made to this • 200 km OR pipeline
business • planning permission
• 2000 OR skilled/construction jobs
Analysis [2 × 1] – award 1 mark for each relevant explanation • less need for businesses to import
• pressure group
Relevant points might include: • economic objectives of country X’s
government
• May look to maximise profit [k] from its pipeline [app] whereas in public
sector the objective may be social/to provide social welfare/to offer Note: Analysis can be awarded either for
services/products for free or at a low price [an] comparing the difference in objectives between
• May look to increase market share [k] making it difficult for other the two sectors OR relevant development of a
businesses to survive [an] which could conflict with government private sector objective
economic objectives [app]
• May look to increase revenue [k] for its oil [app] whereas the public Note: Due to the wording of the question,
sector may offer subsidised prices [an] private sector objectives on own can be
• Protecting jobs may be more important in the public sector [k] whereas accepted as [k]
private sector firms may look to reduce costs [an]

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Question Answer Marks Guidance

1(e) Do you think the Government should allow GOP to build the pipeline? 6 Application marks may be awarded for
Justify your answer. appropriate use of the following:

Knowledge [1] – award max 1 mark for identification of relevant point(s) • public corporation
• oil
Application [1] – award 1 mark for a relevant reference made to this business • 200 km
• planning permission
Analysis [2] – award up to 2 marks for relevant development of point(s) • 2000 OR skilled/construction jobs
• less need for businesses to import
Evaluation [2] – justified decision made as to whether the Government • pressure group
should allow GOP to build the pipeline
Do not award pipeline as application as
• Creates jobs [k] as 2000 jobs created [app] helping reduce stated in question
unemployment [an] but jobs may disappear after work finished [an]
• Protect vital industry [k] reducing the number of imports [app] helping Note: the answer should be focused on the
country become self-sufficient [an] impact to the country, not GOP
• Could help develop infrastructure/build new roads [k]
• Pollution [k] which is why pressure groups are concerned [app]
• Uses up natural resources [k] as produce oil [app] meaning fewer
resources available for future generations [an]
• Could conflict or help Government with other objectives [k] as this is a
public corporation [app]
• Reduce the need for oil imports [k] so a positive balance of payments
[an]

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Question Answer Marks Guidance

2(a) What is meant by ‘franchise’? 2 For both marks must have idea of payment and
using the name/products of existing business
Clear understanding [2]: A business based upon the use of the brand names,
promotional logos and trading methods of an existing successful business. Do not award examples
The franchisee buys the licence to operate this business from the franchisor.

A business system where entrepreneurs buy the right to use the name, logo
and product of an existing business.

Some understanding [1]: Using the name or logo of another business

2(b) Calculate Samira’s forecast weekly revenue if she lowered the price of 2
her products.

Good application [2]: 900

Some application [1]: 300 × 3 OR price times number of customers

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Question Answer Marks Guidance

2(c) Identify and explain two reasons why revenue is important for Samira’s 4 Application marks may be awarded for
business. appropriate use of the following:

Knowledge [2 × 1] – award 1 mark for each reason identified • franchise

• takeaway
Application [2 × 1] – award 1 mark for each explanation in context • successful business
• (fried) food
Points might include: • delivery service
• increased competition
• Pay its day to day expenses [k] of producing/selling (fried) food [app] • lower prices
• Measure of success/size of business [k] against increased competition • revenue fell
[app] • 2 OR part time workers
• Need it to generate profit OR breakeven [k] for her takeaway [app] • market research OR secondary research
• Steady amount can help gain credit/support loan application [k] OR focus group
• correct use of data from table, e.g. 200
OR 300 customers

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Question Answer Marks Guidance

2(d) Identify and explain two factors Samira should consider before starting a 6 Application marks may be awarded for
delivery service. appropriate use of the following:

Knowledge [2 × 1] – award 1 mark for each relevant factor • franchise

• takeaway
Application [2 × 1] – award 1 mark for each relevant reference made to this • (fried) food
business • 2 OR part time workers
• increased competition
Analysis [2 × 1] – award 1 mark for each relevant explanation • revenue fell
• successful business
Relevant points might include: • lower prices
• market research OR secondary research
• Cost OR finance OR examples, e.g. have to buy/hire vehicle for OR focus group
deliveries [k] of takeaways [app] as may not be able to afford it [an] • correct use of data from table, e.g. 200
• Labour issues, e.g. access to workers [k] as she only has 2 part time OR 300 customers
employees [app] would they be willing or able to do the extra work [an]
• Demand issues, e.g. as are there enough customers interested in the Note: can accept two different costs if they are
service [k] from her market research [app] otherwise may not generate clearly different and explained
sufficient extra revenue [an]
• Does she have capacity/space/equipment to provide for the new service
[k]
• Actions of competitors, e.g. how many competitors offer this service [k] as
already facing increased competition from the franchise [app]

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Question Answer Marks Guidance

2(e) Do you think Samira should use secondary research or a focus group 6 Application marks may be awarded for
to gather market research information? Justify your answer. appropriate use of the following:

Knowledge [1] – award max 1 mark for identification of relevant point(s) • franchise
• takeaway
Application [1] – award 1 mark for a relevant reference made to this business • (fried) food
• delivery service
Analysis [2] – award up to 2 marks for relevant development of point(s) • 2 OR part time workers
• revenue fell
Evaluation [2] – justified decision made as to which of the two methods of
• increased competition
market research Samira should use.
• lower prices
Points might include: • correct use of data from table, e.g. 200
OR 300 customers
Secondary market research:
• Low cost way to gain information [k] so money saved can be used for
other purposes [an]
• Readily available [k] so decisions can be made quickly [an] about
whether to increase prices [app]
• May be out of date [k] which means the information may not be relevant
[an]

Focus group
• Highly detailed responses OR chance to ask for explanations/follow up
questions [k] which could allow her to make more informed decisions [an]
such as whether to offer the delivery service [app]
• Competitors do not have access to this information [k]
• Some group members can influence what others say [k] leading to
unreliable results [an]
• High cost [k] which is not helpful at a time when revenue has fallen [app]
• Time consuming to set up/carry out [k]

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Question Answer Marks Guidance

3(a) What is meant by ‘induction training’? 2 Do not accept answers which refer to training
in general
Clear understanding [2]: Introduction given to new employees explaining the
businesses activities, customs and procedures and introducing them to
other workers

A training programme to help new recruits become familiar with their

workplace, the people they work with and the procedures they need to
follow

Some understanding [1]: Training for new employees

OR give introduction about the business to employees

OR training given to employees before they are employed so they know

what to do

3(b) Identify two reasons why it is important for LBM to satisfy customer 2
needs.

Application [2 × 1] – award 1 mark per reason

Points might include:

• increase sales OR increase revenue OR increase customers OR increase

market share
• build customer relations OR way to build customer loyalty OR maintain
sales
• help it remain competitive
• reduce complaints
• improve brand image OR reputation

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Question Answer Marks Guidance

3(c) Identify and explain two problems for LBM of having a wide range of 4 Application marks may be awarded for
products available to customers. appropriate use of the following:

Knowledge [2 × 1] – award 1 mark for each problem identified • online retailer OR (no) shops
• clothing OR examples
Application [2 × 1] – award 1 mark for each explanation in context • revenue increased OR 25% OR $600 m
• customer service
Points might include: • induction training
• 3500 OR new styles (a week)
• Lack expertise OR unable to focus on single product OR less specialised • 18–35 years OR target market
[k] which could damage customer service [app] • social media networks
• Increased warehouse space OR increased cost of storage [k] for the new
styles [app] Do not award answers related to production
• Lots of competitors [k] as others may focus on specific age groups as this is a retail business
between 18–35 [app]
• Additional cost of purchasing items [k] Answers must be linked to the business and
• Increased risk of obsolescence [k] especially as trends in clothing can not customers
change quickly [app]

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Question Answer Marks Guidance

3(d) Identify and explain one advantage and one disadvantage to LBM of 6 Application marks may be awarded for
opening its own shops. appropriate use of the following:

Knowledge [2 × 1] – award 1 mark for each relevant advantage/disadvantage • online retailer

• clothing OR examples
Application [2 × 1] – award 1 mark for each relevant reference made to this • revenue increased OR 25% OR $600 m
business • customer service
• induction training
Analysis [2 × 1] – award 1 mark for each relevant explanation • wide range of products OR additional
inventory
Relevant points might include: • 3500 OR new styles (a week)
• 18–35 years OR target market
Advantages • social media networks
• Able to attract passing trade OR increase sales [k] for its clothing
[app] to increase revenue [an] Do not award shops as application as stated in
• Can help advertise/promote [k] its new styles [app] increasing question
awareness OR interest in the business [an]
• Able to have personal contact with customers [k] so able to provide a Do not award answers which refer to
better customer service [app] which can help maintain customer loyalty advantages and disadvantages to customers
[an]

Disadvantages
• Increase costs OR requires additional finance [k] for this online
retailer [app] as need to pay rent [an]
• No guarantee of additional sales [k] as promotion is through social
media [app]
• Increased number of employees needed [k] to provide the customer
service [app] increasing labour costs [an]

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Question Answer Marks Guidance

3(e) Explain two suitable sources of finance that LBM could use to purchase 6 Application marks may be awarded for
additional inventory. Recommend which source of finance LBM should appropriate use of the following:
use. Justify your answer.
• online retailer OR (no) shops
Knowledge [1] – award max 1 mark for identification of relevant point(s) • clothing OR examples
• revenue increased OR 25% OR $600 m
Application [1] – award 1 mark for a relevant reference made to this business • customer service
• induction training
Analysis [2] – award up to 2 marks for relevant development of point(s) • wide range of products
• 3500 OR new styles (a week)
Evaluation [2] – justified decision made as to which source of finance LBM
• 18–35 years OR target market
should use for the additional inventory.
• social media networks
Points might include:
Retained profit can be accepted as [k] in this
• Overdraft or short-term loan [k] which will have to pay interest on [an] instance as the question does not specifically
increasing its expenses or cash outflows [an] refer to short-term sources of finance
• Ask suppliers for trade credit [k] for the 3500 styles [app] which will allow
them time to sell its products before need to repay [an] Do not award answers such as sale of assets,
• Cash reserves [k] bank loan (on own), mortgage, share issue or
owners savings as these are not appropriate as
short-term finance

Do not award sources such as factoring,

asking customers to pay quicker as not
appropriate

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Question Answer Marks Guidance

4(a) What is meant by ‘exchange rate’? 2

Clear understanding [2]: Value/price of one currency in terms of another

Accept textbook definition [2]: The rate at which one country’s currency can
be exchanged for that of another

Some understanding [1]: The change OR buying of one country’s currency

with another country’s currency

4(b) What is meant by ‘capital employed’? 2

Clear understanding [2]: Value of shareholders’ funds OR equity + non-

current liabilities

Accept textbook definitions [2]: Total value of capital used in the business

OR value of all long term finance invested in a business

Some understanding [1]: Money invested in the business

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Question Answer Marks Guidance

4(c) Identify and explain two ways NBV’s managers could use its financial 4 Application marks may be awarded for
accounts to help make decisions. appropriate use of the following:

Knowledge [2 × 1] – award 1 mark for each relevant way • multinational company

• capital employed OR $144 bn
Application [2 × 1] – award 1 mark for each explanation in context • 18 countries
• 400 000 (workers)
Possible points might include: • diseconomies of scale
• building products OR bricks
• Help measure financial performance OR profit over time [k] to see how • raw materials (are bought in country of
business achieved $144 bn [app] operation)
• Help compare its performance with its competitors [k] who also make • factory
bricks [app]
• Help decide which source of finance to use OR whether to borrow money Note: candidates can be credited for both
or able to afford to borrow [k] profitability and liquidity as separate points as
• Help make investment decisions [k] such as the new factory [app] they relate to different financial statements
• Decide how much dividend to pay [k]
Do not award answers which refer to
operational decisions, whether to stop
production, increase price, etc.

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Question Answer Marks Guidance

4(d) Identify and explain two diseconomies of scale that NBV might 6 Application marks may be awarded for
experience. appropriate use of the following:

Knowledge [2 × 1] – award 1 mark for each diseconomy of scale identified • multinational company
• capital employed OR $144 bn
Application [2 × 1] – award 1 mark for each relevant reference made to this • 18 countries
business • 400 000 (workers)
• building products OR bricks
Analysis [2 × 1] – award 1 mark for each relevant explanation • raw materials (are bought in country of
operation)
Points might include: • factory

• Low morale/motivation/lack of commitment [k] for its 400 000 Accept slow decision making as [k] as stated in
employees [app] leading to higher labour turnover/more workers textbook
leaving [an]
• poor communication [k] in factory [app] leading to the wrong products
being made [an]
• lack of/weak co-ordination/control [k]

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Question Answer Marks Guidance

4(e) Do you think NBV’s decision to set up a factory will only bring 6 Application marks may be awarded for
drawbacks to other businesses in country B? Justify your answer. appropriate use of the following:

Knowledge [1] – award max 1 mark for identification of relevant point(s) • multinational company
• capital employed OR $144 bn
Application [1] – award 1 mark for a relevant reference made to this business • 18 countries
• 400 000 (workers)
Analysis [2] – award up to 2 marks for relevant development of point(s) • diseconomies of scale
• building products OR bricks
Evaluation [2] – justified decision made as to whether NBV’s decision to set • raw materials (are bought in country of
up a factory will only drawbacks for other businesses in country B operation)
Points might include: Note: answers should refer to the impact on
other businesses, not the country or NBV
Drawbacks
• Use up scarce resources [k] to make bricks [app] so fewer resources Note: increased competition [k] can also create
available for other uses [an] benefits to other businesses so relevant
• Increased competition [k] so local businesses may make a loss OR be development of advantages of this for other
forced out of business [an] as local businesses cannot compete against businesses can be credited
(possible) lower prices [an]
• Could lead to a potential shortage of suitable applicants for other
businesses [k] as people may prefer to work for a multinational company
[app] reducing the competitiveness of local businesses [an]

Benefits
• Lead to improvements in infrastructure/better transport links [k] which
can also speed up delivery times for other businesses [an]
• Increased sales for local suppliers [k] as all raw materials are purchased
from the country [app] leading to higher revenue [an]
• Access to wider range of materials for other local businesses [k]

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