Cambridge International General Certificate of Secondary Education

0450 Business Studies June 2019

Principal Examiner Report for Teachers

BUSINESS STUDIES

Paper 0450/11
Short Answer/Structured Response

Key messages

Candidates had clearly covered the syllabus content and practised making appropriate use of the data
provided within their answers. Candidates would benefit from learning precise definitions for key terms.
Marks were lost by a number of candidates in part (a) and (b) of each question due to imprecise definitions
and formulas.

Candidates should be reminded to use a variety of pieces of information from the data provided in each
answer. Answers which repeatedly use a single point of application can only be rewarded once for that piece
of application.

A key focus for development remains the evaluation requirement within part (e) of each question. Very few
candidates gained all of the marks available for demonstrating this skill.

General comments

Misunderstanding of key terminology and formula hindered the ability of candidates to score high marks
particularly in Questions 1(a),1(d), 3(a), 4(a) and 4(b). A significant number of candidates imprecisely
thought that competitive pricing meant charging a price much lower than competitors.

Candidates should be reminded that in part (c) of each question two marks are available for application to
the business outlined in the question. Explanations that do not make use of the information provided in the
question are unlikely to score highly. Within this paper, a number of candidates struggled to show suitable
application within Questions 3(c) and 4(c).

Evaluation marks continue to be an issue. These marks were rarely awarded because candidates did not
make a decision, or the decision made was not linked to the knowledge and analysis presented. Frequently
the concluding statement either repeated the information within the rest of the answer or provided a decision
without justification. This was a particular issue on Questions 2(e) and 4(e).

There are a number of considerations that might be helpful in enabling candidates to achieve higher marks
by using their knowledge to develop answers in a better way.

Candidates should be encouraged to:

• Learn precise definitions and calculations.

• Use a different piece of application for each new point identified.
• In part (e), candidates should be reminded of the importance of drawing reasoned and appropriate
conclusions.

Comments on specific questions

Question 1

(a) Many candidates were able to give clear and precise definitions of this term or a correct formula. A
common error was to omit the word total in front of either revenue or costs. Such responses gained
one of the two marks available.

© 2019
 Cambridge International General Certificate of Secondary Education
0450 Business Studies June 2019
Principal Examiner Report for Teachers

(b) The majority of candidates were able to correctly calculate the figure. A number of candidates
correctly calculated revenue per day but then continued their calculation to either divide, or
multiply, by seven. Although such candidates were not penalised in this examination they maybe in
future sessions, as their final calculation illustrated a lack of understanding.

(c) A large number of candidates were able to gain full marks on this question by stating relevant
objectives and then showing how each could be applied to a bus company. A common error was to
explain the objective with no reference to the business outlined in the case material. Such answers
gained a maximum of two marks.

(d) This question caused some confusion. Weaker candidates explained methods used to pay
employees not pricing methods for bus customers. The most commonly given correct answer was
competitive pricing. A number of candidates correctly explained dynamic pricing. Although this is
not a method required on the syllabus it is a valid method in this situation and so was rewarded.

(e) There was some confusion as to whether paying the same wage as competitors would be a pay
rise or a pay cut. A number of candidates therefore answered from the wrong point of view. The
strongest answers focused upon the potential improvements to motivation of a pay rise and the
problems for the bus company of being able to afford this increase in costs. A number of very good
answers used the figures provided to thoroughly analyse the potential impact on profit and loss.
The weakest answers focussed upon alternative ways to motivate workers, often with no reference
to bus drivers. Such answers could not be credited as they did not answer the question set.

Question 2

(a) The term was generally well understood by candidates. Incorrect answers often stated that an
entrepreneur was an investor in a business.

(b) Stronger candidates were able to identify the points from the mark scheme, with high risk and a
lack of collateral being the most common answers. Weaker candidates often stated that the
business was not well known or had no capital and therefore did not answer the question asked.

(c) This topic was well understood by the majority of candidates who were able to explain why this
entrepreneur had made the choice. The most common correct answers being the first two in the
mark scheme. A significant number of candidates incorrectly stated ‘to be famous’ or ‘earn more
money’ and gained zero marks as these are not reasons for starting a business.

(d) Candidates generally understood the idea of market segmentation but struggled to explain the
benefits of this to the clothing business outlined. A common mistake was to identify that
competition would be reduced and sales would rise. Although this may be true in certain
circumstances, such as if the segment was a niche, candidates often did not explain this and could
therefore not be rewarded. Candidates who focussed their answer around market research or
elements of the marketing mix tended to perform well.

(e) This was one of the more challenging questions for candidates. There was a tendency to provide
answers that were quite descriptive rather than analytical. Judgements repeated earlier knowledge
rather than supported evaluations. The most common answer was that leaflets would not be read
but thrown away. Stronger candidates were able to explain why this would mean the money spent
on such advertising would be wasted. Such candidates often then explained why an alternative
method would be more suitable for this clothing business.

Question 3

(a) This term was not well understood. Strong answers gave precise definitions often supported by the
correct formula. A number of candidates were confused and explained that this would be profit per
person employed.

(b) The majority of candidate gained both of the marks available for this calculation. Those who did not
gain both marks often managed to correctly calculate Y.

© 2019
 Cambridge International General Certificate of Secondary Education
0450 Business Studies June 2019
Principal Examiner Report for Teachers

(c) This was one of the most challenging questions for candidates on the paper. Many candidates
were unable to show understanding of the document. A common error was to state that it could be
used to calculate profit or loss. Only the very strongest candidates made use of the figures
provided in Table 2. Such answers often explained that the improving closing balance could be
used to identify areas where the business had improved, such as by raised inflow.

(d) Candidates clearly understood the concept of exporting and there were some very good answers to
this question. Such answers often explained the potential impacts of tariffs, quotas or exchange
rates on the exports of paint. Weaker answers focussed upon general problems that could apply to
both domestic sales and/or export sales, such as the risk of damage or transport costs. Such
answers, by not focusing upon problems linked only to export sales, could not be credited.

(e) Most candidates identified a correct point of knowledge and applied this to the information supplied:
The most common answer being that the quality of the paint would reduce. A number of
candidates incorrectly stated that the business could become uncompetitive as a result of the
legislation. These answers showed a lack of awareness that laws apply to all businesses.

Question 4

(a) This term was generally understood. A common error was to state that this was training out of
working hours. A number of candidates confused off-the-job with induction training.

(b) A generally well-answered question. A small number of candidates incorrectly stated that this was
total expenses ignoring variable costs.

(c) This question was the most challenging question for candidates. Although candidates were clearly
aware of this structure very few could identify the advantages to the organisation. Those that were
able to identify advantages were generally unable to provide correct application. The best answers
focussed upon the benefits of a narrow span of control and opportunities for promotion for workers
within this book retailing organisation.

(d) The majority of answers focused upon the benefits of access to greater capital through a wider
share issue and the problems of having to publish financial data. Generally, the advantages of
becoming a PLC were more clearly understood than the disadvantages. An incorrect answer given
by many candidates was that the business would benefit from limited liability. Such answers failed
to recognise that the business was currently a private limited company and therefore already had
this benefit. A significant number of candidates confused public limited companies with public
sector or government owned organisations.

(e) Candidates had clearly studied this topic area and were able to provide detailed answers that often
showed knowledge of the benefits of takeovers. Stronger candidates explained the potential
benefits of economies of scale and problems of likely diseconomies of scale for this book retailer. A
supported judgement usually focussed upon the likely long term benefits of reduced competition.

© 2019
 Cambridge International General Certificate of Secondary Education
0450 Business Studies June 2019
Principal Examiner Report for Teachers

BUSINESS STUDIES

Paper 0450/12
Short Answer/Structured Response

Key messages

Candidates should try to use the information contained in the stem of each question to help answer the
questions set, especially as this provides the basis for application. Application marks could not always be
awarded because candidates did not refer to the scenario for parts (c), (d) and (e). The lack of effective
evaluation continues to be an area of weakness. Of those who did attempt an evaluative statement, most
were unable to provide reasoned statements to back up their choice. Candidates would benefit from greater
guidance in how to produce an evaluative answer to part (e) questions.

General comments

The questions requiring definitions and knowledge such as part (a) and (b) of each question were generally
well attempted. However, a number of candidates struggled to provide a precise definition to Question 2(b).

There were areas of the syllabus that some candidates were less familiar with, particularly the disadvantages
of part-time employees. A significant number of candidates had clearly misread Questions 2(e) and 3(c).

Candidates should refer directly to the information within the stem of the question throughout their answers
to ensure that points raised are appropriate to the business.

Candidates must also ensure that a different point of application is used for each separate point made. In
parts (d) and (e) of each question it is important to explain the effect of points identified on the business
described in the stem of the question.

Candidates should be reminded that for evaluation there must be a justified decision that follows from the
points raised in the answer not a repetition of points already explained.

Comments on specific questions

Question 1

(a) Only the strongest candidates were able to give a clear and precise definition of this term. Many
understood that it had social objectives or that profit was not its main objective. Common errors
were to confuse a social enterprise with a public sector organisation, a not for profit organisation or
an entrepreneur.

(b) Generally well answered. The majority of candidates recognised that fixed costs did not change.
The best answers made the link to output or sales. A common error was to confuse the term with
variable costs. Such answers could not be credited.

(c) Well answered by most candidates. A common error was to incorrectly calculate total costs by
omitting one element or miscalculating total variable costs. Some incorrectly assumed that total
revenue was the same as profit.

(d) This question produced a range of responses. Most candidates could identify at least one method
of promotion. Stronger candidates were then able to link points made to the context of this food
retailer. Only the best responses were able to explain how methods such as advertising could help
increase sales. Instead of analysis, weaker candidates simply stated it would increase sales
without explaining how the chosen method identified would achieve this. In terms of knowledge,

© 2019
 Cambridge International General Certificate of Secondary Education
0450 Business Studies June 2019
Principal Examiner Report for Teachers

there were two common errors. Some identified two different methods of advertising or pricing
promotion which could only be awarded once. The other common error was to simply state
discounts which was not rewarded unless the notion of short term was attached.

(e) Good knowledge was evident in most responses with many candidates showing good use of the
source material to support their answer. Better answers developed points such as cheaper
ingredients could lead to lower quality which could damage PLK’s reputation resulting in lower
sales. Only the best responses attempted a justified decision. Instead of development, weaker
responses were characterised by simple statements such as ‘able to gain more customers’ without
showing how or why this might be an issue. Evaluation was not attempted in most responses. A
number of candidates misinterpreted the stimulus and assumed the business was offering training
courses to everyone, rather than selling food.

Question 2

(a) The majority of candidates understood that products in a mass market had a large number of sales.
Only the stronger candidates recognised that this referred to the sales of a single product. A
common error was to confuse the term with mass production. Others incorrectly defined market
share or a competitive market.

(b) The term ‘job enrichment’ was generally not well understood. A lack of precision in the use of
terminology meant that a large number of candidates failed to gain marks on this question. Many
candidates offered vague statements such as ‘adding more tasks’ which could apply to a range of
methods including job rotation or job enlargement. Others simply stated why it was used which did
not answer the question set.

(c) This question differentiated well between candidates. Most candidates could identify at least one
way. Only the best responses gained both the application marks available by using different points
from the scenario to support their answers. Some candidates misread the question and incorrectly
answered it from the viewpoint of JNK rather than the employees so identified points such as
higher output and more productivity. Such answers could not be rewarded.

(d) This question proved to be a good discriminator. The strongest candidates made good use of the
information provided to explain appropriate ways the business might increase output. These
answers recognised that because the employees were unskilled, training could enable them to
work quicker or that changing to flow production from batch production would allow for continuous
production. Weaker candidates restated the same analysis or application. Others gave vague
answers such as ‘increase motivation’ without identifying a specific method to show how this would
be achieved. Answers such as higher pay were not accepted as this does not necessarily result in
increased output. A few candidates misunderstood the question and incorrectly assumed it was
about how to improve sales so focused on advertising or pricing strategies which were not
rewarded.

(e) A number of candidates confused ethical with legal issues. Good knowledge and application were
evident in many answers but weaker candidates were not able to sufficiently develop the points to
gain the analysis or evaluation marks. The strongest answers analysed the risk to reputation and
compared this to the benefits of lower costs. These candidates made good use of the case material
to support their final decision. Some candidates misread the question and outlined ways a business
could become more ethical. A number of candidates did not attempt this question.

Question 3

(a) Many candidates understood that gross domestic product (GDP) referred to output. To gain the
second mark the candidates needed to make clear reference to the value of output in order to give
a precise definition. A number of candidates confused the term with concepts such as gross profit
or GDP per capita. Others incorrectly assumed it referred to imports and exports or linked it to the
output of an individual business.

(b) This question produced a range of responses. The strongest candidates identified effects such as
lower sales or lower profits. Some considered the effects on the whole economy rather than
businesses so gave answers linked to unemployment or taxation. Another common error was to
restate the same point for both answers. A small number of candidates misread the question and

© 2019
 Cambridge International General Certificate of Secondary Education
0450 Business Studies June 2019
Principal Examiner Report for Teachers

incorrectly assumed Gross Domestic Product was increasing so gave the opposite answers to
those required.

(c) This question was generally not well answered. A number of candidates misread the question and
failed to recognise they needed to identify a change so simply repeated words from the case
material such as recession or falling GDP which reflected the current situation rather than identify
any reason why business objectives might change. The most successful candidates were able to
identify relevant reasons such as increased economic growth or changes in consumer demands
and were able to link these points to show the impact on this carpet making business.

(d) Many candidates found this question challenging. Many candidates gained marks for identifying the
change in the ratios and linking their answer to the scenario. For the acid test ratio 0.1 or 0.2 was
accepted as application due to the layout of Table 2. Even the most successful candidates
struggled to provide effective analysis for both points. A common error was to explore the causes
of the changes rather than the effect on REW of the changes. Stronger candidates could make the
connection and discussed the possible constraints on the liquidity for the acid test and then the
need to lower costs or increase prices for the profit margin. Weaker candidates commented that
the numbers had changed but did not indicate the direction of change. Some incorrectly linked their
answer to profit rather than profit margin. Such answers could not be awarded. A number of
candidates did not attempt this question.

(e) Good knowledge of issues was evident in most responses. Stronger answers used the application
well to support points made. For example some recognised the need to spread risk due to the
current economic problems in REW’s home country or the fact that the business had won many
awards could help build their reputation in new markets which could lead to higher sales. Only the
best responses attempted a justified decision. Weaker candidates identified a number of points but
did not develop them. A number of candidates misread the question and discussed whether the
business should relocate rather than simply sell its products in other countries.

Question 4

(a) Well answered by most candidates.

(b) Generally well answered. The most common answers were bank loan and own savings. Some
ignored the fact that this was a new business so examples such as retained profit and sale of non-
current assets were not appropriate. Similarly, sources of finance suitable for a company such as
sale of shares and debentures were not allowed. A few candidates did not understand the question
and provided examples of costs instead.

(c) Candidates were clearly familiar with the concept of building good customer relationships. Most
candidates could identify at least one reason with increased sales and better reputation being
typical responses. Only the strongest answers gained both the application marks available by using
different points from the scenario to illustrate points made.

(d) The advantages and disadvantages of part-time employees is an area of the syllabus that many
candidates find difficult. Many confuse part-time employees with temporary or seasonal workers.
Some incorrectly assumed that such workers are always cheaper without explaining why this would
be the case or would be paid at a lower wage rate. Others stated that because they work fewer
hours that they would automatically be better motivated and more efficient or that all part-time
employees must be unskilled, which is not necessarily true. Such answers could not be credited.
Better candidates recognised that part-time employees provide flexibility which could result in
higher sales or that they may be less committed to the business which could lead to additional
recruitment costs.

(e) Candidates had clearly studied this topic area and were able to identify the benefits and drawbacks
of operating as a franchisee. A common error was to include lots of knowledge points but not
develop them. Most candidates were able to link their answers to the scenario. The strongest
answers made good use of the case material to help develop points made before coming to a
conclusion as to whether George should buy the franchise. For example some recognised that
while George had worked in a flower shop he lacked management experience while others
discussed the possible impact of him not liking the autocratic leadership style in his old job so
questioned whether he would be willing to follow the rules set by the franchisor. Weaker answers
did not make a decision or if they did it was not justified.

© 2019
 Cambridge International General Certificate of Secondary Education
0450 Business Studies June 2019
Principal Examiner Report for Teachers

BUSINESS STUDIES

Paper 0450/13
Short Answer/Structured Response

Key messages

Candidates should try to use the information contained in the stem of each question to help answer the
questions set, especially as this provides the basis for application. Application marks could not always be
awarded because candidates did not refer to the scenario for parts (c), (d) and (e). The lack of effective
evaluation continues to be an area of weakness. Of those who did attempt an evaluative statement, most
were unable to provide reasoned statements to back up their choice. Candidates would benefit from greater
guidance in how to produce an evaluative answer to part (e) questions.

General comments

The questions requiring definitions and knowledge such as part (a) and (b) of each question were generally
well attempted. However, a number of candidates struggled to provide a precise definition to Question 1(a),
2(a) and 4(a). There were areas of the syllabus that some candidates were less familiar with, particularly
tariffs and cash flow forecasts. A significant number of candidates had clearly misread Questions 1(e) and
3(e).

Candidates should refer directly to the information within the stem of the question throughout their answers
to ensure that points raised are appropriate to the business.

Candidates must also ensure that a different point of application is used for each separate point made. In
parts (d) and (e) of each question it is important to explain the effect of points identified on the business
described in the stem of the question.

Candidates should be reminded that for evaluation there must be a justified decision that follows from the
points raised in the answer not a repetition of points already explained.

Comments on specific questions

Question 1

(a) Only the strongest candidates were able to give a clear and precise definition of the term. Some
provided vague statements stating that economies of scale were advantages of being a large
business or offered examples. Such answers could not be awarded as they did not explain the
term.

(b) Many candidates understood that quality control involved checking the work done. Better
candidates were able to provide a clear and precise definition. There were two common errors.
Some confused the term with quality assurance. Others outlined why quality control was used
rather than define the term.

(c) Most candidate could identify one reason. Typical answers included level of output and flexibility.
Only the best responses gained both the application marks available by using different points from
the case to illustrate points made. Weaker responses simply restated words from the case material
without identifying a reason. A number of candidates incorrectly identified reasons for using flow
production.

© 2019
 Cambridge International General Certificate of Secondary Education
0450 Business Studies June 2019
Principal Examiner Report for Teachers

(d) This question proved challenging to some candidates. The most successful candidates made good
use of the information provided and explained how knowledge of Maslow’s Hierarchy of needs
could be used to help motivate employees in this tea factory. Many candidates were able to identify
ways but were not able to develop the point to show the link between the way and the appropriate
level of Maslow’s theory. Instead, they simply restated the question by saying it would increase
motivation. Others were not able to apply their answer to the scenario.

(e) This question caused some confusion. Better answers developed points made and were able to
use the case material to support their answer. The strongest responses identified one or two ways
and then discussed the potential advantages and disadvantages of using the approach before
coming to a justified conclusion as to an appropriate way. Introducing new technology and training
were the most popular options. Weaker candidates identified a range of ways without developing
their answer to show why it might be suitable to use. A number of candidates misread this question
and identified ways which were not appropriate.

Question 2

(a) The term wholesaler was not generally well understood. Few candidates were able to provide a
clear and precise definition. A common error was to assume that they sold in bulk rather than
breaking into bulk. Others confused the term with a manufacturer who sold direct to retailers or
customers.

(b) Well answered by most candidates.

(c) The impact of an import quota was the better understood term in this question. Most knew this
involved a limit on the number of goods which could be brought into the country. Of those that
attempted to apply their answers, some repeated the same application for both points which can
only be awarded once. Weaker candidates struggled to provide a clear effect of a tariff on exports
as points such as ‘lose money’ or ‘costly’ were too vague to be credited. A number of candidates
did not attempt this question.

(d) The majority of candidates could identify either an advantage or disadvantage, but many were not
able to fully develop their answers. Better candidates did attempt to apply their answer to the
scenario. The best responses were able to show how points such as entering new markets or the
cost of additional market research could be helpful or not to this toy making business. Instead of
development, weaker answers simply repeated the knowledge point or restated the same
application for both points.

(e) This question proved challenging for a number of candidates. Good knowledge was evident in
many responses. Better answers used the information well to support points made. These
responses recognised that as the business operated in a competitive market the lack of marketing
promotion was likely to result in fewer sales especially if competitors continued to advertise during
this time. Weaker candidates identified a number of points but did not develop them. Some
candidates did attempt to make a decision but were not always able to offer supporting reasons to
back up the statement made. Some misread the question to focus on alternative ways to meet the
increase in demand or discussed the merits of developing new products. Such responses could not
be credited as they did not answer the question set.

Question 3

(a) Most candidates could identify one feature of a sole trader business. A common error was to
identify features which could apply to any private sector business.

(b) Well answered by most candidates.

(c) This question produced a range of responses. Some candidates understood that that the ability to
repay was likely to be an important factor for a supplier to consider when deciding whether to offer
trade credit. Only the strongest responses attempted to link their answer to the scenario. Many
repeated the same factor for both points.

© 2019
 Cambridge International General Certificate of Secondary Education
0450 Business Studies June 2019
Principal Examiner Report for Teachers

(d) This question differentiated well between candidates. The most successful candidates were able to
identify relevant ways that a new gift shop might use a business plan. Only the best answers were
able to develop points as outlined in the mark scheme to show how having a business plan might
be beneficial. Weaker candidates struggled to apply their answer. Instead of development others
simply repeated the knowledge point already identified.

(e) Cashflow is a topic of the syllabus that continues to be misunderstood by candidates. Although
many candidates were aware of relevant factors only the most able candidates were able to
develop points, such as inaccurate data or cash inflows are increasing, to show why such issues
were important when deciding whether to start up the new business. Evaluation was generally
weak or not attempted. The weaker answers simply described Table 1 and noted points of increase
and decrease. Such answers gained two marks. Others incorrectly assumed that the cashflow
forecast estimated changes in profit. A number of candidates did not attempt this question.

Question 4

(a) Very few candidates were able to provide a clear and precise definition of this term. Some answers
recognised one element such as it was formed by people with a common interest. A common error
was to identify the actions a pressure group might take. Others confused the term with trade union
or incorrectly assumed a pressure group had the power to introduce new legal controls. A number
of candidates did not attempt this question.

(b) Most candidates could identify one advantage of selling to a mass market. A common error was to
repeat the same instead of identifying two separate advantages.

(c) Many candidates were comfortable with the concept of stakeholder. The strongest answers
identified two relevant stakeholder groups and were able to link their answer to the context. Weaker
answers repeated the same application point or provided general answers which could apply to any
business. A number of candidates did not attempt this question.

(d) The concept of communication was clearly understood. Better candidates were able to effectively
show why methods such as phone call and email might be appropriate for a business to use with
suppliers based in other countries. Weaker candidates did not attempt to apply their answer to the
scenario. There were three common errors. Some candidates did not identify a specific method
and discussed verbal or written methods in general. Others included disadvantages which the
question did not require. Instead of development, a small number of candidates used vague
statements such as ‘cheaper’ and ‘quicker’. Such points could not be awarded.

(e) Many candidates showed good knowledge of issues and were able to apply their answers to the
scenario. Better answers tried to develop points to show the possible impact of issues such as
lower inventory costs and different quality standards. For example different standards might
increase costs as quality needed to be checked. Weaker answers identified points but did not
develop them. The strongest candidates concluded that the negative impact on reputation was
probably not worth the risk as the loss of sales from being associated with unethical suppliers could
outweigh the benefits gained from lower costs. Often evaluation marks were not awarded as
candidates often simply made an unsupported decision or restated points previously made in their
answers.

© 2019
 Cambridge International General Certificate of Secondary Education
0450 Business Studies June 2019
Principal Examiner Report for Teachers

BUSINESS STUDIES

Paper 0450/21
Case Study

Key messages

Candidates should be reminded that throughout this paper they are expected to apply their business
knowledge and understanding to an unseen case study or business scenario. This will ensure that
responses are appropriate for each given situation.

To do well in this paper, candidates must make clear reference, or application, to the accompanying case.
Specific marks are allocated throughout the mark scheme in both parts (a) and (b) for application. In this
particular case study, candidates were expected to refer to a soap manufacturer, SA, which produces low-
priced soap for the mass market.

Candidates should try to give a full explanation of positive and negative consequences of a business
decision. Responses require developed reasoning rather than simple description; listed points generally only
gain Level 1 credit whereas an explanation of a point could move the answer to Level 2.

Some of the questions on this paper ask the candidates to make a justified recommendation. It is important
to offer a decision based on balanced argument. The recommendation should compare and explain why the
alternative options were rejected as well as justifying the option that was chosen, without full repetition of the
previous analysis.

General comments

Candidates had generally been well-prepared for this examination. The context of SA manufacturing soap for
the mass market and possibly expanding to niche markets provided an accessible scenario for candidates.
Those who were able to use the information in the insert to contextualise their answers accessed the highest
marks.

The standard of written English was excellent. Candidates made themselves fully understood and are to be
congratulated on the high quality of spelling, punctuation and grammar. There is no penalty for the wrong
spelling of words or incorrect punctuation.

There is a requirement that candidates should be able to handle numerical data. Examination preparation
should include learning how to calculate financial ratios so that valuable marks can be gained from
demonstrating good numeracy skills.

Comments on specific questions

Question 1

(a) Most candidates made a good start by demonstrating sound knowledge of niche markets.
Frequently answers referred to the advantage of a niche market being less competitive and
targeting a specific group of customers willing to pay higher prices. Conversely, the disadvantage
of a niche market that was most often outlined was its smaller size and limited sales revenue.
Some of the marks rewarded here were given to application in the context of SA. Good use was
made of references to medicated soap and baby soap, for example, which would be aimed at
customers in specific segments of the soap market.

© 2019
 Cambridge International General Certificate of Secondary Education
0450 Business Studies June 2019
Principal Examiner Report for Teachers

(b) This question tested candidates’ knowledge of packaging as a key factor in launching a new soap
at SA. Strong responses considered protecting the soap from damage as it was being transported
to wholesalers and retailers. Packaging is important to convey the quality brand image of the new
luxury soap, making it distinctive from competitors’ soaps. The discussion about the importance of
listing ingredients and advising on the use of the soap to prevent customers from having an allergic
reaction was well done by many candidates. To earn Level 3 credit candidates were expected to
make a clear judgement about the most important role of packaging in the product launch. Good
answers related to the significance of packaging the new soaps of the niche market very differently
to the cheap soaps that SA is so well known for in the mass market.

Question 2

(a) This question provided an opportunity for candidates to identify the impact of SA on two different
stakeholder groups, shareholders and the local community. In the first section, answers usually
explained that shareholders might be asked to make a further investment in the business, even if it
was risky. To earn the marks available for application the answer could have included the fact that
SA was already a public limited company with many shareholders and $15 million was required to
support the new venture. There was some confusion amongst some candidates about the impact
on the local community. Responses sometimes discussed the customer having extra choice in
buying soap. Customers and the local community are different stakeholder groups. The impact on
the local community should have focused on the creation of fifty new jobs or the potential of
pollution from the soap factory.

(b) The focus of this question was to consider the benefits of well-motivated employees and the impact
they might have on increasing profit. Good responses linked the three sections of the answer to
either reducing costs or increasing sales. Both would have a positive outcome on improving profit
levels for SA. There was no need to offer a two-sided approach here. Only benefits should have
been discussed, as directed by the question. To earn Level 3 credit the answer should have been
concluded with a justified decision of which benefit would be the most likely to increase profit for
SA. There is no additional credit given for repetition of an earlier point nor for suggesting they
would all increase profit. Answers should include a balance of arguments with a weighing up of
relative size of profit increase before judging the benefit with the most impact.

Question 3

(a) A number of candidates appeared to be unfamiliar with lean production. Those candidates who did
have sound knowledge were keen to offer answers explaining how Just in Time and Kaizen could
bring about improvements in operations and therefore cuts in costs for SA’s business. Answers that
referred to reducing storage of soap ingredients or making a better layout of the flow production
were rewarded with extra application marks.

(b) This question tested candidates’ knowledge of leadership styles. It was apparent that this topic had
been well taught and the majority of answers confidently identified democratic, autocratic and
laissez-faire styles. Level 2 credit was awarded to answers which discussed the impact of the
leadership style on the decision-making at SA, with many considering control by management and
motivation of employees. The recommendation at the end of the answer was expected to judge
which of the three styles of leadership would lead to most improvement in decision-making. The
best answers recognised that some of SA’s managers think they are never involved in decision-
making and that by using a democratic approach it would be likely to engage and motivate all
employees in the business.

Question 4

(a) To answer this question successfully candidates needed to focus on the topic of globalisation and,
in particular, its impact on businesses in country Z. Some answers discussed macro-economic
issues of exchange rates, Balance of Payments and economic growth but they did not answer the
question. Good responses highlighted opportunities for businesses to export goods to new
markets, taking advantage of the new trade agreement, or the possible threat to businesses of
having to increase wage rates to match the pay offered by multinational corporations.

© 2019
 Cambridge International General Certificate of Secondary Education
0450 Business Studies June 2019
Principal Examiner Report for Teachers

(b) This was the opportunity for candidates to demonstrate their numeracy skills by comparing the
balance sheets for 2017 and 2018 at SA. There was a clear direction in the question to use liquidity
ratios. Candidates who used the financial information and correctly set out the calculations of
current ratio and acid test ratio for 2018 were rewarded with Level 2 credit. This allowed them to
make a meaningful comparison with the ratios for 2017 and to make a judgement about whether
the bank manger should give a loan for the new factory. A justified decision, based on the liquidity
ratios, would have earned Level 3 credit.

© 2019
 Cambridge International General Certificate of Secondary Education
0450 Business Studies June 2019
Principal Examiner Report for Teachers

BUSINESS STUDIES

Paper 0450/22
Case Study

Key messages

Candidates should be reminded that throughout this paper they are expected to apply their business
knowledge and understanding to an unseen case study or business scenario. This will ensure responses are
appropriate for each given situation.

• To do well in this paper, candidates must make clear reference, or application, to the accompanying
case. Specific marks are allocated throughout the mark scheme in both parts (a) and (b) for application.
In this particular case study, candidates were expected to refer to WA, a small private limited company
that makes high-quality wooden furniture.
• Candidates should try to give a full explanation of positive and negative consequences of a business
decision. Responses require developed reasoning rather than simple description; listed points generally
only gain Level 1 whereas an explanation of a point could move the answer to Level 2.
• Several questions on this paper ask candidates to make a justified recommendation or conclusion. It is
important to offer a decision based on balanced argument. The recommendation or conclusion should
compare and make reference as to why the alternative options were rejected as well as justifying the
option that was chosen, without full repetition of the previous analysis.

General comments

Candidates had been well prepared for this examination. The context of WA making high-quality wooden
furniture using wood from sustainable sources provided an accessible scenario for candidates. Those who
were able to use the information in the insert to contextualise their answers accessed the highest marks.

The standard of written English was excellent. Candidates made themselves fully understood and are to be
congratulated on the high quality of spelling, punctuation and grammar offered in their responses. There is
no penalty for the wrong spelling of words or using incorrect punctuation.

There is a requirement that candidates should be able to handle numerical data. Examination preparation
should include learning how to calculate various costs so that valuable marks can be gained from
demonstrating good numeracy skills.

Comments on specific questions

Question 1

(a) Candidates made a good start to the paper by demonstrating sound knowledge of the advantages
and disadvantages of developing new products. The most popular advantages were more variety,
entering new markets, diversification, and greater number of sales. Increased costs from
developing new products relating to research and advertising and the risks if the new products
were not popular were the main disadvantages given. However, lack of application was the main
reason why the highest marks were not achieved. Where application was awarded it tended to be
for reference to the product being high quality wooden furniture, being made using wood from
sustainable forests and requiring skilled employees.

(b) In this question candidates were asked to consider the three possible business objectives; an
environmentally friendly business, increasing market share, and survival, and candidates had to
suggest which one was the most important to WA in the long run. The first option of being
environmentally friendly was generally well answered as many candidates recognised that this may

© 2019
 Cambridge International General Certificate of Secondary Education
0450 Business Studies June 2019
Principal Examiner Report for Teachers

make the business popular with ethical consumers. However weak candidates only talked about
brand image without knowing that the objective was already part of WA’s operations. In addition it
may increase manufacturing costs leading to an increase in the price of furniture. Candidates often
responded to Market share by focusing on how this could be achieved rather than why it may be an
objective. Even strong candidates did not often go beyond stating that this would lead to higher
sales and probably profits. Better answers did include the disadvantage of this objective; that it may
well lead to lower profits in the short run as prices may have to be lowered to increase market
share but in the long run the business would have more control over the market, and hence prices,
leading to higher profit. A minority of weak responses confused market share with company shares
and discussed the share price of WA. The majority of candidates did not realize the advantages of
survival as being able to protect the family investment or being able to cover costs. Responses
confused survival with continuous existence of the business, with some settling on survival as a
long term objective. Most realised that WA had already passed the survival stages after being in
business for 10 years. Again weaker answers focused on how the objective could be met rather
than why a business might set this objective. The majority of candidates recognised that survival
was not suitable for the long run. To gain the highest marks answers should have included a
balance of arguments as to which business objective was the most important and why the other
two were less or not important in the long run.

Question 2

(a) The majority of candidates could name two tertiary sector businesses that WA might use. Transport
was the most popular example and identified from the insert but furniture retailers, banks and
advertising agencies were also often identified. How these businesses could help WA was also
often present and applied to WA. Weaker answers failed to show how they helped WA to be
successful. The majority of answers did not gain all the available application marks. A minority of
candidates named manufacturing or primary sector businesses such as logging or services
provided by WA. A small number of candidates identified schools, restaurants and hotels and
although these are tertiary sector businesses they are not services used by WA.

(b) Candidates were very familiar with the advantages and disadvantages of introducing computers in
manufacturing and design and improving employee skills. The majority of candidates explained
how both these ways increased productivity. There was often reference to issues such as faster,
more efficient, fewer mistakes, less wastage for the introduction of computers and better answers
also identified the possible savings on labour costs. The disadvantages seen most frequently
involved the high initial capital cost of machinery and the likelihood of breakdowns and power cuts.
For employee skills better answers identified the cost of training, loss of output during training,
demand for higher wages but also the benefits of having higher skilled or multi-skilled staff.
Recommendations varied but the majority were for the use of computers in manufacturing and
design. Better candidates also included justifications as to why the alternative option was rejected,
such as their employees were already highly skilled so the benefits gained from more training may
be limited. However, application was not always present, even in strong responses. Some answers
did not link the recommendation to the best way to increase profit and therefore did not access the
highest marks.

Question 3

(a) Candidates clearly understood stakeholder groups and could name two suitable examples with the
most popular being employees, shareholders/owners, bank, suppliers, government. It was common
for answers to include the possible effect of falling profits, such as fear of redundancies, reduction
in dividends, less tax revenue, low orders and risk of failure to service loans. Application was
present where reference was made to the product being furniture and it was often mentioned that
there were 20 production employees at WA. However, there were many generic answers. A
minority of answers did not name a stakeholder, it appeared as though these candidates confused
stakeholder in the question with shareholder.

(b) This question considered ways to increase employee motivation and was generally well answered.
The first part, changing the payment system to piece-rate from hourly pay was clearly understood
and answers often could identify that output would be likely to increase leading to higher pay for
employees but that quality may be reduced due to workers rushing to gain higher pay. Better
responses also included the consequences of this for WA. Giving shares away to workers was not
always clearly understood and weaker candidates thought that workers would have to pay for these
shares and therefore be unlikely to motivate workers. Weaker answers that identified workers may

© 2019
 Cambridge International General Certificate of Secondary Education
0450 Business Studies June 2019
Principal Examiner Report for Teachers

be feeling more involved in the business or more trusted were not often developed further. Job
rotation was well understood and answers usually identified that this would be less boring and
better answers went on to consider that it might be quite difficult for workers who had specialised
skills to be able to carry out other tasks without costly training. They also recognised that
productivity might fall or there may be errors in production as the workers moved between jobs
where their skills were less suited. There were good recommendations that made clear justification
for each of the three methods being chosen. However, justification for why the alternatives were
rejected tended to be weak and often not worth credit. Vague answers such as ‘These methods
would be less motivating’ with no further explanation did not achieve Level 3 credit.

Question 4

(a) (i) Many candidates correctly calculated the total cost of $16000 but the most common mistake was to
not multiply the variable cost per unit cost by output giving an answer of $6100.

(ii) As ‘Own figure rule’ was applied to this question many candidates gained credit for this part even
when they incorrectly calculated total cost. As long as candidates applied the correct formula i.e.
used the incorrect total cost from (i) in the correct formula, for example giving $61, they could gain
both marks for (ii), and many did.

(iii) Weaker answers did not go beyond saying that if output increased then so would total cost. Better
candidates recognised and calculated that average cost would fall. It was possible to gain marks
for explaining that average cost would fall without the calculation. Calculations of the new total cost
figure to compare with the change from the lower output also gained credit.

(b) The majority of candidates could include at least some explanation of how the three changes might
affect WA. Strong candidates realised the business was already environmentally friendly and may
have very little waste to deal with. Very few candidates recognised that all businesses would be
paying this cost to remove waste and so the increase would not apply to WA alone. Better
responses did recognise that WA already paid 10% above the minimum wage and made the link
that this may mean WA did not need to increase wages unless they needed to maintain the wage
differential. Weaker candidates took a simplistic view of increasing wages by 15% or simply stating
that wage costs would rise. Quite a large number of candidates thought the change in tax was on
corporation tax not income tax and so answered in the context of decreasing profits for WA. Better
candidates recognised that this would affect customers, as they would have less disposable
income and therefore reduce demand for expensive furniture leading to lower sales for WA. If
candidates understood the effect of increased income tax then the recommendation often scored
higher marks and included consideration of why the alternative changes had less impact on WA.
However, if the effect of higher income tax was not understood often the recommendation scored
few marks as answers tended to focus on falling profits for WA. Many answers were applied and
often included reference to WA already paying 10% above the minimum wage, WA producing high
priced, high quality wooden furniture, WA already being an environmentally friendly company or
there being 20 employees which are highly skilled.

© 2019
 Cambridge International General Certificate of Secondary Education
0450 Business Studies June 2019
Principal Examiner Report for Teachers

BUSINESS STUDIES

Paper 0450/23
Case Study

Key messages

Candidates should be reminded that throughout this paper they are expected to apply their business
knowledge and understanding to an unseen case study or business scenario. This will ensure responses are
appropriate for each given situation.

• To do well in this paper, candidates must make clear reference, or application, to the accompanying
case. Specific marks are allocated throughout the mark scheme in both parts (a) and (b) for application.
In this particular case study, candidates were expected to refer to a business that changes vans and
large cars into specialist vehicles.
• Candidates should try to give a full explanation of positive and negative consequences of a business
decision. Responses require developed reasoning rather than simple description; listed points generally
only gain Level 1 whereas an explanation of a point could move the answer to Level 2.
• Several questions on this paper ask candidates to make a justified recommendation. It is important to
offer a decision based on balanced argument. The recommendation should compare and make
reference as to why the alternative options were rejected as well as justifying the option that was
chosen, without full repetition of the previous analysis.

General comments

Candidates had generally been well prepared for this examination. It is good to see that many candidates
are developing a strong examination technique and clearly understand what is expected of them. The
context of VC providing services to change vans and large cars into specialist vehicles provided an
accessible scenario for candidates. Those who applied their skills to the context of VC boosted their marks
much further.

The layout of the examination paper provides side headings in the response areas to prompt candidates in
their answers. This seems to work well. Candidates must be reminded to take careful note of how many
marks are awarded for each question so they are clear about the extent of developed detail that is required
for each answer. The majority of candidates showed good knowledge and understanding of the full range of
the syllabus that was assessed, but in a handful of cases it was clear that some topics were not well
understood. Candidates should ensure they are prepared to respond to questions on the whole syllabus.
They could earn basic marks by defining business terms and using them confidently.

There has been some improvement recently in the ability of candidates to handle numerical data. Centres
are reminded that examination preparation should include some focus on numeracy skills so that valuable
marks can be gained.

Candidates should be aware of the importance to contextualise their responses and not provide generic
textbook answers. They must be able to utilise the information provided in the case study and use it in their
responses if they are to access the highest marks. For example, in Question 4(a) the question asked
candidates to ‘Identify and explain one advantage and one disadvantage to VC of using job production’.
Information was presented in the case study that highlighted the fact that VC makes each order to the
customers’ individual design. There was also mention that every vehicle conversion is different. These were
ideal points to include in the answer to this question.

© 2019
 Cambridge International General Certificate of Secondary Education
0450 Business Studies June 2019
Principal Examiner Report for Teachers

Comments on specific questions

Question 1

(a) The majority of candidates made a good start to the paper and answered this question well. The
most popular answers were that the government wanted to reduce unemployment, to increase
economic growth and to increase competition. However, many answers did not go beyond generic
answers, with no application to the case, and therefore did not move into the higher mark range for
this question. Answers could have included application such as Peter had lost his job and was
unemployed, Peter had an objective to expand his business so jobs will be created, vans are
converted into motorhomes and the government supported new businesses by provided grants and
free training.

(b) The majority of candidates showed a clear understanding of penetration and cost-plus pricing
methods. However, price skimming was sometimes confused with competitive pricing. Better
candidates identified the pricing method and then went on to explain the advantages and
disadvantages of each method, such as penetration pricing would set a much lower price than
competitors in order to attract consumers to try the new product but this would result in lower, or
no, profit per product. Weaker responses did not include how the pricing methods should be used
but instead gave vague answers such as ‘this would be a good method to attract consumers’
without any indication of how the method would be effective. Application was often omitted and
where it was included it was usually for identifying the product as motorhomes or the conversion of
vans and large cars. The recommendation could have justified any of the three pricing methods but
often weak justification for the rejection of the alternative pricing methods meant the response did
not gain the highest marks.

Question 2

(a) The majority of candidates answered this question well. They identified that the business failed due
to poor management of finance of the business. Application was often present as candidates
included that the previous employer lacked management experience and was unable to pay its
suppliers of car parts. Some candidates gave other likely reasons for the failure of the business
such as over-expansion and failure to plan to adapt to change in the market. Application was often
gained in this question but candidates did not always fully explain why the reason resulted in the
failure of the business and therefore their marks were lower than they might have been. Weaker
answers just ended with ‘and so this meant the business failed’. This is not an explanation of the
reason. Better candidates did develop their answer and fully explained the reason in context to gain
full marks.

(b) Generally a well answered question. Candidates used the information provided in Appendix 2 and
identified that the recruitment agency will cost a lot more to use than the job vacancy website.
Candidates usually stated that asking family and friends was the cheapest of the three ways and
they would be likely to suggest someone who would be trustworthy but not a wide range of
candidates would be available and they would be unlikely to have the skills required. Weaker
candidates thought the job vacancy website was set up by Peter and that people would routinely
tell lies about their skills. Better responses stated that a wider range of people than family and
friends would be likely to see the advertisement, but that it may not be seen by people with suitable
skills amongst the many job advertisements on the website. The recruitment agency was the best
explained of the three ways and the majority of candidates identified that it was the most
expensive, included figures from Appendix 2 and included that they assured WA that they could
provide suitable candidates for the three job vacancies. The recommendation often selected the
recruitment agency as the most suitable given that the employees needed to possess many skills
to undertake job production.

Question 3

(a) Again well answered by the majority of candidates although lack of application was the main
reason for candidates not achieving full marks. The most popular answers were increasing
customer loyalty, identifying customer wants so they could be satisfied and so that satisfied
customers would spread the word to others leading to an increase in sales. There was often at
least some application from the inclusion of the van conversions into motorhomes and identifying
that job production was being used.

© 2019
 Cambridge International General Certificate of Secondary Education
0450 Business Studies June 2019
Principal Examiner Report for Teachers

(b) This question proved more difficult for weaker candidates. Vague answers such as ‘the business
needs to consider sample size to ensure it gets accurate results’ were often given which did not
answer the question. There were many answers that remained at Level 1 due to a lack of
explanation as to why sample size, location and questions asked could cause questionnaire data to
be inaccurate. Weaker responses stated that the sample was how long the questionnaire was or an
actual sample of the product. The recommendation sometimes did not choose which of the three
was most important and therefore did not answer the question. The most popular factor was the
questions themselves as better candidates concluded that, even if the sample size was small or the
location did not cover the target market, if the questions were clear and well-constructed then
useful data would be gathered. Although there were also rewardable recommendations that argued
that sample size or location was the most important in gathering accurate data.

Question 4

(a) Generally a well answered question. The majority of candidates identified an advantage such as
the vehicle will meet the exact needs of the customers and therefore increase their satisfaction with
the business. Popular disadvantages included, being time consuming, a more expensive
production method or labour needing to be more skilled and therefore needed to be paid a higher
wage. A minority of candidates incorrectly thought this was where jobs were specialised such as
those in flow production and that the jobs were boring. Making reference to vehicles, vans and cars
in answers was credited with application. However, only more able candidates included more than
simple application.

(b) Better candidates could calculate the gross profit margin, profit margin and return on capital
employed and then draw conclusions based on the figures calculated. A minority of candidates
tried to calculate liquidity, which was not possible from the figures in Appendix 3. Weaker
responses just made comparisons of the figures between the two years, such as revenue
increased by $5000, but could not go beyond this to calculate profit or profitability, hence these
answers remained in Level 1. Recommendations did not often go beyond stating that profitability
had fallen and Peter should be worried.

© 2019