PH owns student rental accommodation in all the major cities in country Y. PH used demographic segmentation in its market research. This research identified that university students would pay a premium for high specification rental accommodation. PH has specialist teams focused on sales, maintenance, customer service and finance. There is little opportunity for internal promotion. PH pays low salaries, however, it offers profit sharing to motivate its 150 employees. This has been effective as PH has had low labour turnover. In the last two years, profit levels have fallen by 75%. In 2024, 45 employees left PH. Complaints about maintenance and customer service have increased due to the lack of experienced employees in PH. The Finance Director is reviewing PH's existing sources of finance, shown in Fig 2.1. Bank loans 8% Owner's investment 28% Overdrafts 22% Mortgage 42% [Figure 2.1] Frank, the Operations Director, wants to improve the sustainability of PH's operations. He plans to: • stop renting out accommodation in some lower-income cities, and sell these buildings • upgrade accommodation in high-income cities • reduce the size of the workforce.

Mark scheme

Marking points from the official mark scheme (May/June 2025). The mark or mark type is shown in brackets.

1. [1] Identification of a method may include: Capital employed
2. [1] Identification of a method may include: Market capitalisation
3. [1] Identification of a method may include: Market share
4. [1] Identification of a method may include: Revenue (allow sales, sales turnover or turnover, income)
5. [1] Identification of a method may include: Quantity sold
6. [1] Identification of a method may include: Value of output
7. [1] Identification of a method may include: Number of employees
8. [1] Identification of a method may include: Area/space
9. [1] Identification of a method may include: Number of outlets
10. [1] Identification of a method may include: Number of customers
11. [1 AO1] Knowledge of demographic segmentation includes: The identification of groups of customers with similar or common needs or characteristics within a market
12. [1 AO1] Knowledge of demographic segmentation includes: Dividing the market according to factors that describe the population
13. [1 AO1] Knowledge of demographic segmentation includes: Specific customer groups / target markets
14. [2 AO2] Explanation of demographic segmentation (developed application to PH context): includes study of population data/trends; examples of demographic factors, e.g. age, gender, race, social class, income; a valid example of a business that uses demographic segmentation to plan how it markets its products, e.g. a luxury car manufacturer may use demographic segmentation to target its advertising at high-income individuals or PH targets its student rental accommodation at university students; used for marketing of different products or services to specific consumer groups; helps the business to adapt the marketing mix to the needs of the target customer group; different marketing decisions for different groups
15. [1] Formula: Labour turnover = number of employees leaving in 1 year / Average number of people employed × 100
16. [1] Use of correct figures in formula: 45 / 150 × 100
17. [1] Correct answer: 30%
18. [1 AO1] Knowledge of a use of a motivational theory: Change the way that employees are treated/managed/motivated at PH or relevant examples
19. [1 AO1] Knowledge of a use of a motivational theory: Make changes to increase motivation to maintain PH's low labour turnover/retain employees
20. [1 AO1] Knowledge of a use of a motivational theory: Understand employee behaviour/employee motivation
21. [1 AO1] Knowledge of a use of a motivational theory: Measuring employee needs
22. [2 AO2] Explanation of a use of Maslow's hierarchy of needs with context (e.g. explain how motivation affects how employees behave; explain the use with reference to one of Maslow's categories of need; offer more opportunities for internal promotion; increase employee salaries; encourage employees to stay in the business; change working conditions)
23. [1 AO1] Knowledge of one advantage using an overdraft: Quick - previously agreed / immediately available
24. [1 AO1] Knowledge of one advantage using an overdraft: Convenient – can use it as required
25. [1 AO1] Knowledge of one advantage using an overdraft: Flexible
26. [1 AO1] Knowledge of one advantage using an overdraft: No repayment schedule
27. [1 AO1] Knowledge of one advantage using an overdraft: No loss of ownership
28. [1 AO1] Knowledge of one disadvantage using an overdraft: High interest rates / fees
29. [1 AO1] Knowledge of one disadvantage using an overdraft: Can be recalled at any time
30. [1 AO1] Knowledge of one disadvantage using an overdraft: Often low limit available
31. [1 AO1] Knowledge of one disadvantage using an overdraft: Can only be used for short-term needs
32. [1 AO1] Knowledge of one disadvantage using an overdraft: Must be repaid
33. [1 AO2] Application of advantage/disadvantage to PH context (e.g. Use of demographic segmentation in its market research)
34. [1 AO2] Application of advantage/disadvantage to PH context (e.g. University students would pay a premium price for high specification rental accommodation)
35. [1 AO2] Application of advantage/disadvantage to PH context (e.g. Specialist teams focused on sales, maintenance, customer service and finance.)
36. [1 AO2] Application of advantage/disadvantage to PH context (e.g. Little opportunity for internal promotion)
37. [1 AO2] Application of advantage/disadvantage to PH context (e.g. Low salaries)
38. [1 AO2] Application of advantage/disadvantage to PH context (e.g. Offers profit sharing)
39. [1 AO2] Application of advantage/disadvantage to PH context (e.g. 150 employees)
40. [1 AO2] Application of advantage/disadvantage to PH context (e.g. Low labour turnover)
41. [1 AO2] Application of advantage/disadvantage to PH context (e.g. Profit reduced by 75%)
42. [1 AO2] Application of advantage/disadvantage to PH context (e.g. In 2024, 45 employees left PH)
43. [1 AO2] Application of advantage/disadvantage to PH context (e.g. Increased complaints about maintenance and customer service)
44. [1 AO2] Application of advantage/disadvantage to PH context (e.g. Use of data from Fig. 2.1)
45. [2 AO3] Analysis point (advantage): Quick - previously agreed / immediately available; the funds can be used for expansion immediately – leading to increased market share
46. [2 AO3] Analysis point (advantage): Convenient can use it as required; no time is wasted with application – can be used for other activities such as marketing
47. [2 AO3] Analysis point (advantage): Flexible; can be used for any type of purchase – to meet the business objectives
48. [2 AO3] Analysis point (advantage): No repayment schedule; this will reduce cash outflows – This money can be used to better maintain the properties rented, reducing customer complaints.
49. [2 AO3] Analysis point (disadvantage): High interest rates/fees; higher interest rates may increase costs – this will reduce profits
50. [2 AO3] Analysis point (disadvantage): Can be recalled at any time; the business may need to suddenly repay the money leading to cashflow problems – threatening business survival
51. [2 AO3] Analysis point (disadvantage): Often low limit available; The overdraft limit may be low. This will limit the investments that PH can make – therefore the business will not be able to reduce complaints.
52. [2 AO3] Analysis point (disadvantage): Can only be used for short-term needs; limiting the project that the money can be used for – some objectives may not be met
53. [2 AO3] Analysis point (disadvantage): Must be repaid; increasing cash outflows – less funds available for marketing
54. [1 AO1] Knowledge of sustainability of operations: Operating / surviving / remaining in business for the long-term / future / not running out of money / continuity / stable
55. [1 AO1] Knowledge of sustainability of operations: Efficiency
56. [1 AO1] Knowledge of sustainability of operations: Productive
57. [1 AO1] Knowledge of sustainability of operations: Day-to-day running of the business
58. [1 AO1] Knowledge of sustainability of operations: Keeping customers satisfied
59. [1 AO1] Knowledge of sustainability of operations: Maintaining profitability – reducing expenses and increasing revenue
60. [1 AO2] Application to PH context (e.g. Use of demographic segmentation in its market research)
61. [1 AO2] Application to PH context (e.g. University students would pay a premium price for high specification rental accommodation)
62. [1 AO2] Application to PH context (e.g. Specialist teams focused on sales, maintenance, customer service and finance.)
63. [1 AO2] Application to PH context (e.g. Little opportunity for internal promotion)
64. [1 AO2] Application to PH context (e.g. Low salaries)
65. [1 AO2] Application to PH context (e.g. Offers profit sharing)
66. [1 AO2] Application to PH context (e.g. 150 employees)
67. [1 AO2] Application to PH context (e.g. Low labour turnover)
68. [1 AO2] Application to PH context (e.g. Profit reduced by 75%)
69. [1 AO2] Application to PH context (e.g. In 2024, 45 employees left PH)
70. [1 AO2] Application to PH context (e.g. Increased complaints about maintenance and customer service)
71. [1 AO2] Application to PH context (e.g. Use of data from Fig. 2.1)
72. [1 AO3] Analysis point: Financial stability; reduce short term cash inflow – reduce debt burden and interest payments
73. [1 AO3] Analysis point: Focus on profit; increase profit margins – focus on core values
74. [1 AO3] Analysis point: Increased efficiency of workforce; may lose excellent employees who take knowledge to competitors – lose market share/customer service may reduce further due to losing more experienced employees
75. [1 AO3] Analysis point: Keeping customers satisfied; increased market share – more market power / ability to increase prices
76. [1 AO3] Analysis point: Business continues for the long-term; increased employee satisfaction from greater job security – reduced labour turnover
77. [2 AO4] Evaluation point: The impact of the plan depends on the timescales, future aims and objectives and financial liquidity of PH. After downsizing the amount of revenue generated may not meet shareholder expectations
78. [2 AO4] Evaluation point: Will demand for premium accommodation increase in the future? What are the demands of students?
79. [2 AO4] Evaluation point: Should PH repurpose its accommodation for a different target audience, create a subsidiary brand and grow market share?
80. [2 AO4] Evaluation point: Is market share and size the most important measure of success, or is profitability more important?
81. [2 AO4] Evaluation point: The extension strategy may generate a short-term boost to sales/market share, but will it be sustained in the long-term?
82. [2 AO4] Evaluation point: A judgement on whether the course of action is suitable for PH.