Mark scheme (Results)

Summer 2018

Pearson Edexcel GCE A Level

In Business (9BS0)
Paper 2 Business activities, decisions and
strategy
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Summer 2018
Publications Code 9BS0_02_1806_MS
All the material in this publication is copyright
© Pearson Education Ltd 2018
General Marking Guidance

• All candidates must receive the same treatment. Examiners

must mark the first candidate in exactly the same way as they mark
the last.
• Mark schemes should be applied positively. Candidates must
be rewarded for what they have shown they can do rather than
penalised for omissions.
• Examiners should mark according to the mark scheme not
according to their perception of where the grade boundaries may
lie.
• There is no ceiling on achievement. All marks on the mark
scheme should be used appropriately.
• All the marks on the mark scheme are designed to be awarded.
Examiners should always award full marks if deserved, i.e. if the
answer matches the mark scheme. Examiners should also be
prepared to award zero marks if the candidate’s response is not
worthy of credit according to the mark scheme.
• Where some judgement is required, mark schemes will provide
the principles by which marks will be awarded and exemplification
may be limited.
• When examiners are in doubt regarding the application of
the mark scheme to a candidate’s response, the team leader must
be consulted.
• Crossed out work should be marked UNLESS the candidate
has replaced it with an alternative response.
Question
Answer Mark
Number
Knowledge 1, Application 2, Analysis 1
1 (a)
Knowledge: 1 mark for understanding of internal finance,
finance generated within the business/owner’s capital,
personal savings, retained profit or giving a reason for using
internal finance e.g. retain control

Application: up to 2 marks for contextualized examples

e.g.
• Mumtaz is a private limited company owned entirely by
the Akbar family
• High sales revenue and growth of ready meals
indicates the business can use retained profits as a
source of finance
• Sales revenue of around £25m and ready meals part of
the business is growing by 15-20% per year

Analysis: 1 mark for developing a reason e.g.

• Internal finance is cheaper as there are no borrowing
costs, such as interest payments
• Internal finance enables the Akbar family to retain
(4)
control of the business
Question
Answer Mark
Number
Knowledge 1, Application 3
1 (b)
Quantitative skills assessed:
QS5: calculate cost, revenue, profit and break even
QS9: interpret, apply and analyse information in written,
graphical and numerical forms

Knowledge: 1 mark for

Understanding of the margin of safety: the difference
between the actual output and the break-even output

Margin of safety = sales volume – break-even output

Application: up to 3 marks for:

• Calculation of unit contribution: £5-£2 = £3
• Calculation of break-even output: 3 = 1m units
3
• Margin of safety = 1.5m – 1m = 500,000 units
Can accept 0.5 million

NB: Award 4 marks if the candidate only states 500,000

units
Award only 3 marks if candidate states/calculates 0.5 (4)
Question
Indicative content
Number
1 (c) Knowledge 2, Application 2, Analysis 3, Evaluation 3

Indicative content
• Organic growth occurs when a business expands
internally and does not involve another business taking
over or merging with it

Reasons for organic growth:

• Mumtaz Foods retains control especially as it is a family
owned business
• It maintains its existing management/structure/culture
• It enables the business to plan for and control growth
e.g. the decision to enter the ready meals and halal baby
food market plus to open its own restaurants and
factories

Possible counterbalance:
• Organic growth is slower e.g. Mumtaz Foods has existed
since 1979 and has only gradually grown to its current
size
• Organic growth is limited, for example the business has
only expanded in the Asian food market
• Limited finance available to fund organic growth e.g.
Mumtaz has only used internal finance

Potential judgement
• Organic growth is the right decision because it enables
the business to maintain control, which is especially
important because Mumtaz is a long established business
that has always been owned by the Akbar family
• Organic growth is not the right decision because the
business may have been slower than its competitors to
grasp the opportunities offered by the growing ready (10)
meals market
Level Mark Descriptor
0 A completely inaccurate response.
Level 1 1–2 Isolated elements of knowledge and understanding –
recall based.
Weak or no relevant application to business examples.
Generic assertions may be presented.
Level 2 3–4 Elements of knowledge and understanding, which are
applied to the business example.
Chains of reasoning are presented, but may be assertions
or incomplete.
A generic or superficial assessment is presented.

Level 3 5–6 Accurate and thorough knowledge and understanding,

supported by relevant and effective use of the business
behaviour/context.
Analytical perspectives are presented, with chains of
reasoning, showing cause(s) and/or effect(s).
An attempt at an assessment is presented, using
quantitative and qualitative information, though unlikely to
show the significance of competing arguments.

Level 4 7–10 Accurate and thorough knowledge and understanding,

supported by relevant and effective use of the business
behaviour/context.
A coherent and logical chain of reasoning, showing
cause(s) and/or effect(s).
Assessment is balanced and well contextualised,
using quantitative and qualitative information, and
shows an awareness of competing
arguments/factors leading to a supported
judgement.
Question
Indicative content Mark
Number
1 (d) Knowledge 2, Application 2, Analysis 4, Evaluation 4

Marks for application and analysis include up to 2 marks for

quantitative skills

QS9: Interpret, apply and analyse information in written,

graphical and numerical forms

• Economic growth is an increase in the output of goods

and services produced in an economy over time
• Inflation measures the general rise in aggregate prices
• Unemployment measures the % of the working
population who are without a job and actively seeking
work
• The £/$ exchange rate measures how many dollars can
be exchanged for one pound

Impacts:

• Rising unemployment could negatively affect Mumtaz’s

restaurants due to customers cutting back on
meals out, given lower disposable income
• Rising inflation (from 1.2% to 2.7%) may add to
Mumtaz’s costs, such as energy, which may result in a
fall in profit margins
• A weaker £ (a fall of 24 cents between 2016 and 2020)
could result in higher import costs especially for
ingredients if they are priced in dollars

Possible counterbalance
• Rising unemployment may benefit the ready meals
business as customers may prefer to stay at home and
choose an ‘affordable treat’ rather than eating out
• Rising inflation may be passed on in the form of higher
prices, which could have little impact given that Mumtaz
Foods sells premium products
• A weaker £ could benefit Mumtaz’s export sales,
especially as its ready meals products are sold in more
than 40 countries

Potential judgement
• The unemployment rate is forecasted to increase from
4.8% to 6.5%, which may have a negative impact on
 the restaurant business because it is a luxury good and
people may need to make economies.
• Rising unemployment may have a positive impact
because of the greater availability of workers especially
for Mumtaz’s new factory in Bradford
• The impact may be negative for the restaurants because
demand is likely to be more income elastic but positive
for ready meals. Overall impact on Mumtaz may depend
upon which part of the business is bigger (12)

Level Mark Descriptor

0 A completely inaccurate response.
Level 1 1–2 Isolated elements of knowledge and understanding – recall
based.
Weak or no relevant application to business examples.
Generic assertions may be presented.
Level 2 3–4 Elements of knowledge and understanding, which are applied to
the business example.
Chains of reasoning are presented, but may be assertions or
incomplete.
A generic or superficial assessment is presented.

Level 3 5–8 Accurate and thorough knowledge and understanding, supported

by relevant and effective use of the business
behaviour/context.
Analytical perspectives are presented, with developed chains of
reasoning, showing cause(s) and/or effect(s).
An attempt at an assessment is presented, using quantitative
and/or qualitative information, though unlikely to show the
significance of competing arguments.
Level 4 9–12 Accurate and thorough knowledge and understanding, supported
throughout by relevant and effective use of the business
behaviour/context.
A coherent and logical chain of reasoning, showing cause(s)
and/or effect(s).
Assessment is balanced, wide ranging and well contextualised,
using quantitative and/or qualitative information, and shows
an awareness of competing arguments/factors leading to a
supported judgement.
Question
Indicative content Mark
Number
Knowledge 4, Application 4, Analysis 6, Evaluation 6
1(e)
Arguments for producing own label ready meals for
supermarkets

• The ready meals market grew by 2% in volume and value in

2016
• Supermarket ‘own label’ ready meals have a combined
market share of 68%, with Tesco owning 18%
• Mumtaz already supplies Tesco, Asda and Morrisons
• ‘own label’ ready meals can be used by supermarkets to
meet a wide range of customer needs and specific tastes
• Mumtaz has increased its production capacity enabling it
to meet the potential increased demand from
supermarkets
• Increased demand may enable the business to benefit
from economies of scale and higher levels of capacity
utilisation, resulting in lower unit costs
• Higher sales and lower unit costs may result in greater
profitability and further expansion for Mumtaz Foods

Arguments for selling more Mumtaz premium brand name

products

• There is a trend amongst consumers to prefer premium

ready meals
• It is predicted that future success may be for innovative new
products – Mumtaz’s successful Halal baby food range proves
that it is capable of developing successful new products
• Ansoff would classify this strategy as market penetration,
which carries the least risk
• Porter would classify this strategy as ‘differentiation’ enabling
Mumtaz to gain a competitive advantage through a USP of
quality and authenticity
• ‘Own label’ relies heavily on price discounts and promotional
offers – focusing on selling Mumtaz products would avoid this
and enable the business to charge higher prices

Possible recommendations
• Mumtaz should choose the option of supermarket ‘own
label’ ready meals because supermarkets own 68% of
the market. Supermarkets have a greater distribution
 which might therefore enable Mumtaz to sell more of
their products and enable them to achieve the aim of
becoming the UK’s market leader in Asian ready meals
• Mumtaz should choose to sell more Mumtaz premium
brand name products because it is an established brand
that is already growing rapidly in UK supermarkets and
abroad. This strategy is less risky as it is not dependent
on a few supermarkets and enables the business to
maintain competitive advantage through differentiation

Example of possible ‘MOPS’ recommendations

Market – the market is the ready meals market. It is a growing

market which is dominated by supermarket own brands.
Consequently, in order to achieve the aim of market leader,
focusing on producing ‘own label’ ready meals would appear to
be the best option.

Objectives – Mumtaz aims to be the market leader in Asian

ready meals. It already has an established reputation for
premium products and supplies the big supermarkets (e.g.
Tesco 18%) with its own products. Consequently, selling more
Mumtaz premium brand products would be the best option.

Product – Mumtaz is innovative e.g. the new Halal baby food

range. The introduction of new product ranges is an important
factor in driving sales. Retailers offer different recipes which
enable them to meet a wide range of consumer tastes.
Consequently, the supermarket ‘own label’ option should be
chosen because it offers Mumtaz more opportunities to sell a
wider range of products enabling it to achieve its aim of
becoming market leader.

Situation – Mumtaz is an expanding business with the ready

meals part of the Group growing by 15-20% a year. It is also
exporting to over 40 countries and planning to manufacture
ready meals in Asia. Consequently, the best option would be to
focus on premium brand products so they could establish
Mumtaz as a global brand and achieve its aim of becoming
market leader.
(20)
Level Mark Descriptor
0 A completely inaccurate response.
Level 1 1–4 Isolated elements of knowledge and understanding.
Weak or no relevant application of business examples.
An argument may be attempted, but will be generic and
fail to connect cause(s) and/or consequence(s)/effect(s).
Level 2 5–8 Elements of knowledge and understanding, which are
applied to the business example.
Arguments and chains of reasoning are presented, but
connections between cause(s) and/or consequence(s)/
effect(s) are incomplete. Attempts to address the question.
A comparison or judgement may be attempted, but it will
not successfully show an awareness of the key features of
business behaviour or business situation.
Level 3 9–14 Accurate and thorough knowledge and understanding,
supported throughout by relevant and effective use of
the business behaviour/context.
Uses developed chains of reasoning, so that cause(s)
and/or consequence(s)/effect(s) are complete, showing an
understanding of the question. Arguments are well
developed.
Quantitative or qualitative information is introduced in an
attempt to support judgements, a partial awareness of the
validity and/or significance of competing arguments and
may lead to a conclusion.
Level 4 15–20 Accurate and thorough knowledge and understanding,
supported throughout by use of relevant and effective use
of the business behaviour/context.
Uses well-developed and logical, coherent chains of
reasoning, showing a range of cause(s) and/or effect(s).
Arguments are fully developed.
Quantitative and/or qualitative information is/are used well
to support judgements. A full awareness of the validity and
significance of competing arguments/factors, leading to
balanced comparisons, judgements and an effective
conclusion that proposes a solution and/or
recommendation(s).
Question
Answer Mark
Number
2(a) Knowledge 1, Application 2, Analysis 1

Knowledge: 1 mark for understanding of an internal cause of

business failure e.g. machinery breakdown, cash flow problems

Application: up to 2 marks for contextualized examples

• Failure to produce new and improved models

• High production costs of the ‘Mini’

Analysis: 1 mark for developing a cause e.g.

• Failure to produce new and improved models may lead to
poor sales as customers prefer superior cars from foreign
rivals
• High production costs resulting from poor efficiency may
lead to poor profit margins (4)
Question
Answer Mark
Number
Knowledge 1, Application 3
2 (b)
Quantitative skills assessed:
QS1: calculate, use and understand ratios, averages
and fractions
QS9: interpret, apply and analyse information in
written, graphical and numerical forms

Knowledge: 1 mark for:

Understanding of labour productivity: Output per month

Number of workers

Application: up to 3 marks for correct calculating labour

cost per car

• Monthly labour productivity: 20,000/400 = 50 cars per

worker
• Labour cost per car = £2,000/50
• = £40

Or

• Total monthly labour costs: 400 x 2,000 = 800,000

• Labour cost per car: 800,000/20,000
• = £40

NB: Award 4 marks if the candidate only states £40/40 (4)

Question
Indicative content Mark
Number
2(c) Knowledge 2, Application 2, Analysis 3, Evaluation 3

• Employee legislation ensures that businesses comply

with laws such as national minimum wage, rights for
redundancy, equal opportunities and health and safety

Potential negative effects:

• VW is cutting 30,000 jobs as a result of having to reduce

costs due to the $15bn fine caused by the cheating
emissions scandal. This may have led to significant
redundancy costs
• VW is creating 9,000 new jobs as it shifts to self-driving
cars. It will need to ensure that it implements correct
recruitment and selection procedures in order to avoid
being accused of discrimination. This may make the
procedure longer and more expensive
• Increased costs of having to comply with legislation such
as health and safety, by ensuring safe working conditions
in VW’s factories

Possible counterbalance:

• VW may be able to restore its reputation by being seen as

a good employer
• VW may gain favourable publicity and attract better
quality candidates for vacancies
• By complying with health and safety legislation, VW may
gain benefits such as fewer industrial accidents and
improved employee morale

Potential judgement
• In the long term, by complying with legislation, VW
may gain positive effects, enabling it to restore its
reputation with both employees and customers (10)
Level Mark Descriptor
0 A completely inaccurate response.
Level 1 1–2 Isolated elements of knowledge and understanding –
recall based.
Weak or no relevant application to business examples.
Generic assertions may be presented.
Level 2 3–4 Elements of knowledge and understanding, which are
applied to the business example.
Chains of reasoning are presented, but may be assertions
or incomplete.
A generic or superficial assessment is presented.

Level 3 5–6 Accurate and thorough knowledge and understanding,

supported by relevant and effective use of the business
behaviour/context.
Analytical perspectives are presented, with chains of
reasoning, showing cause(s) and/or effect(s).
An attempt at an assessment is presented, using
quantitative and qualitative information, though unlikely to
show the significance of competing arguments.

Level 4 7–10 Accurate and thorough knowledge and understanding,

supported by relevant and effective use of the business
behaviour/context.
A coherent and logical chain of reasoning, showing
cause(s) and/or effect(s).
Assessment is balanced and well contextualised,
using quantitative and qualitative information, and
shows an awareness of competing
arguments/factors leading to a supported
judgement.
Question
Indicative content Mark
Number
2(d) Knowledge 2, Application 2, Analysis 4, Evaluation 4

Reasons for issuing AA shares (a long-term approach):

• It provides Toyota’s managers with more time to develop
new cars because ‘Model AA’ shares must be held for five
years
• Toyota aims to raise $4 billion for long-term investment in
the car of the future, including areas such as R+D,
technology and staff development
• Toyota’s shareholders could benefit from sustained
profitability, for example ‘Model AA‘ shareholders are paid
a guaranteed dividend each year

Possible counterbalance:
• Some shareholders may demand more immediate
rewards. This may force managers to work more
efficiently because Toyota need to satisfy their
demands
• Some shareholders may encourage managers to
respond more quickly to market changes e.g. rise in
demand for hybrid and electric cars and criticisms of
diesel cars in order to generate immediate returns
• Shareholders own the business and may expect good
dividends and a rising share price each year

Potential judgement
• Toyota is in a highly competitive/dynamic market and
needs to respond quickly to market changes and
consumer preferences. This supports meeting the
needs of short-term investors
• Toyota requires long-term investors because it needs
to invest in assets such as robotics and plant, in order
to maintain competitiveness in a market known for
innovation and technological.
• Ultimately a long-term investment will only work if
shareholders are prepared to be patient and accept
(12)
this strategy
Level Mark Descriptor
0 A completely inaccurate response.
Level 1 1–2 Isolated elements of knowledge and understanding –
recall based.
Weak or no relevant application to business examples.
Generic assertions may be presented.
Level 2 3–4 Elements of knowledge and understanding, which are
applied to the business example.
Chains of reasoning are presented, but may be assertions
or incomplete.
A generic or superficial assessment is presented.

Level 3 5–8 Accurate and thorough knowledge and understanding,

supported by relevant and effective use of the business
behaviour/context.
Analytical perspectives are presented, with developed
chains of reasoning, showing cause(s) and/or effect(s).
An attempt at an assessment is presented, using
quantitative and/or qualitative information, though unlikely
to show the significance of competing arguments.
Level 4 9–12 Accurate and thorough knowledge and understanding,
supported throughout by relevant and effective use of the
business behaviour/context.
A coherent and logical chain of reasoning, showing cause(s)
and/or effect(s).
Assessment is balanced, wide ranging and well
contextualised, using quantitative and/or qualitative
information, and shows an awareness of competing
arguments/factors leading to a supported judgement.
Question
Indicative content Mark
number
2 (e) Knowledge 4, Application 4, Analysis 6, Evaluation 6

Arguments for developing a new range of self-driving

cars:

• The market for self-driving cars is predicted to grow – VW

hope to exploit this through its partnership with Gett
• Consumers may prefer self-driving cars because of their
greater convenience
• Diesel cars are becoming less popular – by shifting to
self-driving cars VW is moving away from a declining
market
• Ansoff would classify this strategy as new product
development – VW may be able to gain a competitive
advantage over its rivals

Arguments for improving productivity:

• Improving productivity may reduce unit costs by spreading

the fixed costs of labour or machinery over more units
• Lower unit costs may enable VW to charge more
competitive prices and/or increase profit margins
• Car production is capital intensive, improved productivity
may be achieved by investment in new technology
• VW is cutting 30,000 jobs – so it may need to improve the
labour productivity of its existing workforce in order to
meet demand

Potential recommendation
• VW should choose to develop a new range of self-driving
cars because it could help restore its brand image and
attract more customers to increase its revenue more than
the increase of costs
• VW should choose to improve its productivity because
lowering unit costs is essential for improving profitability
given the competitiveness of the car industry and the
possible high numerical value of PED
• In the short term, improving productivity is more
important because the business needs to quickly improve
its profitability after the diesel emissions scandal. In the
long term, developing a new range of self-driving cars is
more important, due to the predicted changes in the car
industry.
 Example of possible ‘MOPS’ recommendations

Market – the car market is dynamic e.g. the rising popularity

of electric and self-driving cars. Volkswagen need to keep up
with changing customer tastes. Consequently, self-driving
cars should be developed to increase sales/market share in
order to achieve its aim.

Objectives – Volkswagen is suffering from weak profitability

and needs to become more efficient as a result.
Consequently, it should improve productivity in the short
term in order to achieve its aim.

Product – Volkswagen’s current diesel cars are losing

popularity. As such, it needs to be more innovative and
develop cars that meet changing consumer tastes.
Consequently, it should develop a new range of self-driving
cars in order to achieve its aim.

Situation – Volkswagen ‘needs a real shake-up’ as it has high

labour costs and a complex organizational structure. In the short
term it needs to improve its productivity first in order to generate
(20)
the profits required for developing the new self-driving cars.
 Level Mark Descriptor
0 A completely inaccurate response.
Level 1 1–4 Isolated elements of knowledge and understanding.
Weak or no relevant application of business examples.
An argument may be attempted, but will be generic and
fail to connect cause(s) and/or consequence(s)/effect(s).
Level 2 5–8 Elements of knowledge and understanding, which are
applied to the business example.
Arguments and chains of reasoning are presented, but
connections between cause(s) and/or consequence(s)/
effect(s) are incomplete. Attempts to address the question.
A comparison or judgement may be attempted, but it will
not successfully show an awareness of the key features of
business behaviour or business situation.
Level 3 9–14 Accurate and thorough knowledge and understanding,
supported throughout by relevant and effective use of
the business behaviour/context.
Uses developed chains of reasoning, so that cause(s)
and/or consequence(s)/effect(s) are complete, showing an
understanding of the question. Arguments are well
developed.
Quantitative or qualitative information is introduced in an
attempt to support judgements, a partial awareness of the
validity and/or significance of competing arguments and
may lead to a conclusion.
Level 4 15–20 Accurate and thorough knowledge and understanding,
supported throughout by use of relevant and effective use
of the business behaviour/context.
Uses well-developed and logical, coherent chains of
reasoning, showing a range of cause(s) and/or effect(s).
Arguments are fully developed.
Quantitative and/or qualitative information is/are used well
to support judgements. A full awareness of the validity and
significance of competing arguments/factors, leading to
balanced comparisons, judgements and an effective
conclusion that proposes a solution and/or
recommendation(s).

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