Analyse problems a business could experience in its first year of trading.

Mark scheme

Marking points from the official mark scheme (May/June 2017). The mark or mark type is shown in brackets.

1. [7-8] Good analysis of problems a new business could experience in its first year of trading.
2. [5-6] Some analysis of problems a new business could experience in its first year of trading.
3. [3-4] Some explanation of problems a new business could experience in its first year of trading.
4. [1-2] Understanding of problems for a new business.
5. [0] No creditable content.
6. Answers could include a focus on the need to: establish and build a customer base of loyal returning customers.
7. Establish itself in the market.
8. Effectively manage cash flow – generate sufficient working capital.
9. Establish good relations with suppliers.
10. Follow an effective pricing strategy that allows the business to compete effectively.
11. Failure to achieve such objectives likely to lead to problems of: lack of cash and working capital.
12. Uncompetitive production.
13. Inability to effectively market the business.
14. Insufficient demand to survive.
15. Failure to secure external finance.
16. Inability to repay start-up capital.
17. Credit to answers that might include analysis of how significant these problems might be and/or briefly how they might be solved.
18. Note: Some candidates may focus on the word trading in the question and this can then be developed into problems of trading internationally but must retain focus on a business in its first year.
19. [9-12] Effective evaluation of whether market research could reduce problems faced by a new start-up business.
20. [7-8] Limited evaluation of whether market research could reduce problems faced by a new start-up business.
21. [3-6] Analysis and some application of whether market research could reduce problems faced by a new start-up business.
22. [1-2] Understanding of market research and / or new start-up businesses.
23. [0] No creditable content.
24. Answers might well use material presented in section (a) to focus on some problems that might face a new start-up business.
25. Answers might then define market research and methods of market research.
26. Ways in which new business problems could be reduced by market research could include (prior to start-up and in the early period of trading.)
27. Better understanding of your target market.
28. Identify and keep up with market trends.
29. Set realistic targets for sales and revenue.
30. Make better informed marketing decisions (4Ps).
31. Better identify specific problems – sales fall due to new competitor, or substitute produce now available.
32. Identify new business opportunities.
33. Answers might well use Primary and Secondary market research methods as a framework for answering this question. Credit to be given as this approach supports and provides a relevant response.
34. Market research then has the potential to provide more accurate information / data relating to potential customers, existing and potential competitors / products, marketing opportunities – that may well reduce risk and facilitate more confident business decision making.
35. It is, however, expensive (particularly primary market research) and new start-up businesses may not have the finance or the inclination to engage in extensive market research.
36. ALSO not all problems experienced by a new start up business will be problems that can be solved by market research e.g. the internal management of the new business may be inadequate, sudden changes in the external environment may present significant problems for a new business such as recession and new competition, new technology etc.