Analyse two benefits to CD resulting from internal economies of scale.

Mark scheme

Marking points from the official mark scheme (Feb/Mar 2024). The mark or mark type is shown in brackets.

1. A01 Knowledge and understanding: Internal economies of scale result from the increase in scale of operations of the business.
2. A01 Knowledge and understanding: Internal economies of scale include: marketing, purchasing, technical, financial and managerial.
3. A01 Knowledge and understanding: Benefits include: Reduced unit costs.
4. A01 Knowledge and understanding: Benefits include: Increased productivity due to greater technical economies.
5. A01 Knowledge and understanding: Benefits include: Being able to recruit higher quality managers.
6. A01 Knowledge and understanding: Benefits include: Lower costs for finance.
7. AO2 Application: Household cleaning product market is competitive.
8. AO2 Application: Competition from MNCs (likely to have low unit costs).
9. AO2 Application: Competition from smaller businesses in the environmental market segment (CD can gain price advantage).
10. AO2 Application: Substantial marketing budget (keep unit marketing costs low).
11. AO2 Application: Increased costs of chemicals and other materials due to inflation.
12. AO2 Application: Shareholder pressure for higher returns (link to profit margins).
13. AO3 Analysis: Reduced unit costs enable a reduction in price making CD more competitive and increasing sales.
14. AO3 Analysis: Lower unit costs could give CD a higher profit margin and therefore increase profits with which to satisfy shareholder desire for higher returns.
15. AO3 Analysis: Lower unit costs could offset the increasing cost pressures that CD faces and reduce the need to increase prices to customers.