Priya lives in town R which is situated in beautiful countryside with nice walks nearby. Many tourists visit town R. The town's council would like town R to become branded as a 'booktown', a town with many bookshops selling new and used books. The council announced a new financial scheme offering grants to attract entrepreneurs willing to open a bookshop. Priya applied for a grant to start up Priya's Bookshop (PB). Part of her grant application included a cash flow forecast, shown in Table 1.1. Table 1.1: Cash flow forecast, first three months of trading ($000) | | Month 1 | Month 2 | Month 3 | |:--------------------|:--------|:--------|:--------| | Cash in: | | | | | Owner's capital | 15 | 0 | 0 | | Grant | 20 | 0 | 0 | | Revenue | 4 | 6 | 11 | | Cash out: | | | | | Initial set up costs| 20 | 0 | 0 | | Utilities (power, water etc)| 0 | 0 | 2 | | Employee costs | 1 | 1 | 3 | | Purchases | 6 | 3 | 4 | | Marketing | 10 | 5 | 4 | | Opening balance | 0 | 2 | -1 | | Closing balance | 2 | -1 | X | Priya's grant application was successful and she opened PB well aware of the need for both cash and profit. Priya now wants to raise awareness of PB in town R. Priya did some market research and decided to use market segmentation. This will help her to decide on the promotional methods she could use for her bookshop. See Table 1.2. Table 1.2: Age and gender of residents in town R | Age group (years) | Percentage of residents in age group | Percentage of age group who are female | |:------------------|:-------------------------------------|:---------------------------------------| | 0-15 | 19% | 50% | | 16-64 | 63% | 55% | | 65+ | 18% | 60% |

Mark scheme

Marking points from the official mark scheme (May/June 2022). 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. Note: Do not accept 'segment' as a 'split' term
5. A correct definition should cover the following:
6. • splits a market into different groups
7. • segmentation could be by age/gender/geographic/demographic or each group has similar characteristics
8. Exemplar: Looks at different groups e.g. by sales value/volume [2] Both elements covered
9. Exemplar: Splits a market into groups, each of which has similar characteristics [2] Both elements covered
10. Exemplar: Splits a market into groups [1] An understanding of segmentation (no expansion)
11. Exemplar: Splits a market by sales value [1] Only one element of the flow identified
12. Exemplar: Segments a market [0] Tautology
13. ARA
14. [3] Award one mark for each point of explanation.
15. [3] C* Cash is the revenue a business has after sales while profit is revenue minus expenses
16. [1] B Profit is revenue minus expenses
17. [1] A Cash is the physical flow of money in and out of a business
18. Note: The difference does not need to have clear definitions – implied knowledge is acceptable when in the context of a difference
19. Content could come from:
20. • Cash is the physical flow of money in and out of a business
21. • Cash is the capital used to pay for day-to-day costs
22. • Cash is an example of revenue, ignoring any expenses
23. • Profit is revenue minus expenditure
24. • Profit is the difference between revenue and costs
25. • Profit is calculated at the end of a trading period
26. • Profit is shown on the Income Statement
27. Exemplar: Cash is the revenue a business has after sales while profit is revenue minus expenses [3] Shows a difference
28. Exemplar: Cash is more liquid than profits [3] Shows a clear difference
29. Exemplar: Cash is a current asset, but profit is on the Income Statement [3] These are not definitions but there is a clear difference
30. Exemplar: They appear on different accounting statements [3] A clear difference
31. Exemplar: Cash is the revenue a business has after sale. Profit is revenue minus expenses [2] Both elements correct but a difference not shown
32. Exemplar: Splits a market into groups [1] An understanding of segmentation (no expansion)
33. ARA
34. [2] Correct answer (with or without working or $)
35. [1] Correct formula/identifies correct figures
36. [0] No credible content
37. Content
38. Closing balance = opening balance + inflows – outflows (1)
39. Opening balance -1000
40. add inflows 11000
41. minus outflows 13 000 (1)
42. X = $3000 (accept –3000, (3000) or −3) (2)
43. Common incorrect answers
44. (2000) No marks no working
45. 3000 No marks No working
46. -1000+11000-13000 = 3000 [1] for calculation
47. 11000-13000 = -2000 [1] one mistake (not used opening balance) OFR for last stage
48. 1000+ 11000 - 13000 = 3000 [0] Incorrect opening balance and incorrect answer
49. Level 2b [4] Shows understanding of two benefits in context [4] Developed analysis of two benefits in context
50. Level 2a [4] Shows understanding of one benefit in context [3] Developed analysis of one benefit in context
51. Level 1 [2] Shows knowledge of two benefits [2] Limited analysis of two benefits
52. Level 1 [1] Shows knowledge of one benefit [1] Limited analysis of one benefit
53. Level 0 [0] No creditable content
54. Note: As the business has started trading, using the CFF either before or after starting trading is acceptable.
55. Knowledge of benefits may include:
56. • Anticipate potential shortfalls in cash
57. • Keep track of payments
58. • Understand the impact of future plans
59. • Manage surplus cash
60. • Track whether revenue/spending is on target
61. Application may include:
62. • Buying and selling new and used books
63. • Priya applied for a council grant for entrepreneurs willing to open a bookshop; grant application included a CFF
64. • Any information from Table 1.1
65. • Used to decide promotional methods
66. Analysis of benefits may include:
67. • PB is a new business and having a cash flow forecast will have helped/will help her to receive the grant – which allowed for initial survival
68. • Allows/ed Priya to plan ahead and manage the budget more effectively e.g. the deficit in the first few months – to avoid overdraft fees in months 2 and 3
69. • Many small businesses fail due to a lack of cash flow, so this allows/ed Priya to arrange an overdraft for months 2 and 3
70. • Allows Priya to manage cash flow, e.g. the deficit in months 2 and 3 could be overcome through reductions in cash outflows e.g. marketing.
71. ARA
72. App+App [4] Two entrepreneurial qualities explained in context
73. App [3] One entrepreneurial quality explained in context
74. K+K [2] Two entrepreneurial qualities identified
75. K [1] One entrepreneurial quality identified
76. Content and context could come from:
77. • Motivated - wants to start her own bookshop
78. • self-disciplined – financial discipline by creating a cash flow forecast
79. • risk-taking - has invested $15K of own capital
80. • creative - making appropriate marketing materials for 0 to 15-year-olds
81. • leadership - will manage up to 3 employees
82. • confident - starting own bookshop by risking $15K of own capital
83. • initiative – has applied for a $20K grant
84. Exemplar: She applied for a $20K grant which shows initiative and is motivated to start her own bookshop [4] Two applied qualities explained
85. Exemplar: Priya showed initiative by researching and applying for a $20K grant [3] Applied quality explained
86. Exemplar: Initiative and leadership [2] Two entrepreneurial qualities identified
87. Exemplar: Initiative is taking an opportunity available to you and risk taking is taking a decision which could have negative consequences [2] Two generic qualities explained
88. Exemplar: Initiative is taking an opportunity available to you [1] Generic quality explained
89. Justified judgement(s) that follows on from a discussion based on two promotional methods relevant to PB [7]
90. Recommendation(s) that follows on from a balanced argument relevant to PB [6]
91. A simple recommendation based on a balanced argument relevant to PB [5]
92. Shows knowledge of two promotional methods in context [4] A balanced argument based on analysis of two promotional methods with context [4]
93. Shows knowledge of one promotional method in context [4] Argument based on analysis of one promotional method with context [3]
94. Shows knowledge of two promotional methods [2] Limited analysis of two promotional methods [2]
95. Shows knowledge of one promotional method [1] Limited analysis of one promotional method [1]
96. No creditable content [0]
97. Knowledge may include:
98. • Above and/or below the line promotion with some explanation
99. • BTL examples: direct mail, in-store offers, direct selling, social media, trade shows, catalogues, sponsorship, branding and merchandising and targeted search engine marketing
100. • ATL: examples: radio, television, billboards, magazine and newspapers
101. Application may include:
102. • New bookshop
103. • Likely to be lots of competition in 'booktown'
104. • Any financial information from table 1.1
105. • Using market segmentation
106. • Any market research information from table 1.2
107. Analysis may include:
108. • BTL is cheaper than ATL and as PB is new and cashflow is restricted/poor – may not be able to survive/pay bills
109. • In-store offers; can offer 15% discount on books which would lead to increased revenue – increased profit
110. • ATL hits a mass audience – but too expensive
111. • Local radio; can advertise to target audience of 16–64 which increases sales of books – raises profile/brand awareness
112. • High competition means tourists are likely to impulse buy based on price so in-store and personal selling – may be useful to provide purchasing incentives so more sales
113. Evaluation may include:
114. • A recommendation for Priya based on arguments in context as to which promotional methods Priya could use
115. • A judgement over which method is/are most suitable
116. • An evaluation on the level of argument
117. • What the judgement/evaluation may depend on: target audience, type of book, price sensitivity, advertising elasticity, competition
118. Exemplar K: in store offers [APP: To persuade tourists to buy] [AN: Which increases sales] [DEV: As customers may be price sensitive due to competition] [EVAL: Priya should use both instore offers and social media As social media can help drive traffic and in store offers can convert browsers.]
119. Exemplar K: Social media [APP: To showcase book signings] [AN: As it is a cheap method and easily updated] [DEV: To build PB brand profile] [EVAL: However, it depends on whether Priya's target audience is likely to social media and how diligent she is in updating her profile.]