Bilal's Homes (BH) Bilal is a sole trader, who buys and sells apartments for a profit. Bilal left university two years ago and moved back to his parent's home in city W. He lacks social skills but he has always been good at self-management, so he wanted to start his own business. Bilal bought his first apartment using money that he borrowed from his parents. He spent some time and money improving and upgrading the apartment and was able to sell it for a profit. Bilal paid his parents back and then had enough capital to purchase his second apartment. Since then, Bilal has bought three more apartments. Table 1.1 shows some financial details about the last three apartments that Bilal bought and sold. Table 1.1: Financial details about the last three apartments that Bilal bought and sold Apartment Purchase price Cost of improvements Selling price () and upgrades () ($) A 58000 8000 80000 B 120000 10000 150000 C 65000 15000 70000 Bilal has done some market research and has found out that customer demand for buying apartments in city W is increasing. He knows that he needs to purchase as many apartments as he can before the prices increase. However, he is limited by the capital he has in the business. Bilal has been approached by Sophie, another entrepreneur, who also buys and sells apartments. Sophie would like to enter into a business partnership with Bilal. She has provided Bilal with some details from the last year about her business. Bilal can use this data to help him decide if he would like to enter into the partnership (see Table 1.2). Table 1.2: Details about Sophie and her business in 2020 Number of apartments bought and sold 6 Number of apartments that made a profit 4 Number of apartments that made a loss 2 Profit margin 11% Capital available at end of year $150000 Sophie's main competencies Social skills and social awareness

Mark scheme

Marking points from the official mark scheme (May/June 2021). The mark or mark type is shown in brackets.

1. [2] A correct definition
2. [1] A partial, vague or unfocused definition
3. [0] No creditable content
4. Gaining information about the potential customers for a product/service
5. A correct definition should include the following elements:
6. • Gaining information / finding out about
7. • about the potential customers for a product/service.
8. ARA
9. Knowledge: C [1] Example or some other way of showing good understanding, e.g. one of Goleman's competencies
10. Knowledge: B [1] Understanding of the issues/problems/have empathy with
11. Knowledge: A [1] Understanding that it is do with society/community/organisations/people
12. Social awareness – an understanding of the problems that different members of society / the community / an organisation face; having empathy/understanding of the issues in a business e.g. is able to negotiate successfully.
13. ARA
14. [4] Correct answer(s) with or without correct working or units
15. [3] Correct calculation of total revenue AND total profit(s)
16. [2] Correct calculation of total revenue OR total profit(s)
17. [1] Formula (can be implied from the correct use of figures)
18. [0] No creditable content
19. Award full marks for a correct answer, with or without working or %
20. Content Formula: Total profit / Total revenue × 100 (1)
21. Apartment A – $14 000 profit
22. Apartment B – $20 000 profit
23. Apartment C – $10 000 loss
24. Total = $24 000 total profit
25. Total revenue = $80 000 + $150 000 + $70 000 = $300 000 (1)
26. $24 000 / $300 000 × 100 = 8% (4)
27. OFR
28. [2] Explanation of a way in which Bilal may add-value to the houses that he sells
29. [1] Identification of a way of adding value
30. [0] No creditable content
31. Knowledge may include:
32. • Difference between the price of a product and cost of inputs
33. • Increase in value of a product/service created by a business
34. • Created by the production process
35. Application may include:
36. • Renovation – Bilal might decorate, alter the layout, renew the bathroom/kitchen (allow any reasonable renovation of an apartment).
37. • Brand name – Bilal has been doing this for two years and house buyers may see his houses as being of a high-quality
38. • Buying at a low price
39. • Increasing the quality of the house
40. ARA
41. [Level 2b, 4 marks] Shows understanding of two factors which could influence demand in context
42. [Level 2b, 4 marks] Good analysis of two factors which could influence demand in context
43. [Level 2a, 3 marks] Shows understanding of one factor which could influence demand in context
44. [Level 2a, 3 marks] Good analysis of one factor which could influence demand in context
45. [Level 1b, 2 marks] Shows knowledge of two factors which could influence demand
46. [Level 1b, 2 marks] Limited analysis of two factors which could influence demand
47. [Level 1a, 1 mark] Shows knowledge of one factor which could influence demand
48. [Level 1a, 1 mark] Limited analysis of one factor which could influence demand
49. [0] No creditable content
50. Factors influencing demand could include:
51. • Price expectations/substitutes/complements – the price of the apartment will influence demand because it will affect the disposable income for potential customers.
52. • Mortgage rates – people often purchase apartments with a mortgage, so the rate at which the mortgage is repaid will affect their ability to purchase
53. • Tastes and preferences – the area in which the apartment is located may affect the willingness of customers to purchase
54. • Competition - the other apartments in the area for sale/rent will affect people's willingness to purchase
55. • Income levels
56. • Fashion – how trendy an area is
57. Context could come from relating to:
58. • Property market
59. • City e.g. to find jobs, avoid commuting
60. • Value added from renovations
61. • Renting versus buying
62. ARA
63. [Level 7 marks] Justified recommendation based on arguments in context
64. [Level 6 marks] Developed recommendation based on arguments in context
65. [Level 5 marks] An evaluative statement/recommendation based on arguments in context
66. [Level 3-4 marks] Shows understanding of a partnership in context
67. [Level 3-4 marks] Arguments based on Bilal entering into a partnership with Bilal.
68. [Level 1-2 marks] Shows knowledge of a partnership
69. [Level 1-2 marks] Limited analysis of becoming a partnership
70. [0] No creditable content
71. Knowledge may include:
72. • Two or more owners of a business
73. • Unlimited liability
74. • Possibility of conflicts
75. • Share decisions/skills/profits/losses
76. Application may include:
77. • Bilal will have to share his profit with Sophie – however Sophie's profit margin (11%) is higher than Bilal's at 8%.
78. • Sophie has managed to buy and sell more houses than Bilal in the past year.
79. • Sophie has a lower success rate (four out of six made profit) compared with Bilal (four out of five made profit, in total).
80. • Sophie has working capital of $150 000 which may allow Bilal to take advantage of the housing boom.
81. • Sophie has the social skills that Bilal lacks – may help to find buyers / be able to sell at higher prices / negotiate better rates with contractors – so add more value
82. • Bilal does not like working with other people – will this put him outside of his comfort zone.
83. Arguments may include:
84. • Have to share profits
85. • Less control for Bilal
86. • May disagree over direction of the business
87. However:
88. • Spreads the risks
89. • Sophie's skills complement Bilal's
90. • She can contribute capital
91. Recommendation based on arguments
92. ARA