Swimming Pools (SP) SP is a public sector organisation. SP operates many swimming pools across country X. The main objective for SP is to provide a quality service to the local community. Each swimming pool is used by consumers from different market segments (see Table 1). Table 1: SP's market segments Market segment Time when pool is used by this segment Schools which rent the pool for swimming lessons Daytime Children for fun swimming Weekends Adults for fitness swimming Evenings SP currently uses price discrimination. Most of the swimming pools have a steady demand throughout each week. One of SP's swimming pools, The Lido, is currently making a loss. Table 2 shows the income statement for The Lido for the last 12 months. Table 2: Extract from The Lido's income statement ($000s) Revenue 280 Cost of sales 210 Gross Profit 70 SP Head Office allocated costs* 40 Overhead expenses 60 Profit/(loss) for the year (30) *Each of SP's swimming pools must pay for some of the Head Office costs The Lido is based in an area with many schools that are under the control of the government. Unemployment in the area is high. The manager has reduced the price for customers who are under 18 years old or do not have a job.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2018). 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. [Content] Part of a market
5. [Content] Made up of groups of customers who share similar characteristics, interests, etc.
6. [2] (Exemplar) Sub-group of a whole market (1)for consumers with similar characteristics such as age(1)
7. [1] (Exemplar) A group or portion of a whole market
8. [0] (Exemplar) It is the whole market
9. [Rationale] Identifies that it is part of a market aimed at specific customers
10. [Rationale] Again Identifies that it is part of a market but no reference to target group of customers
11. [Rationale] Incorrect definition
12. [1] C Example or some other way of showing good understanding e.g. Product that might not be adequately provided by the private sector/profit not an objective.
13. [1] B To provide a service to the local community/ social objectives
14. [1] A Owned/controlled by the state/government
15. [Content] A business owned and controlled by the government to provide services and products that might not be adequately provided by the private sector.
16. [3] (Exemplar) Owned and controlled by the state (1) to provide a social benefit (1) profit not an objective (1)
17. [Rationale] All 3 elements included – A + B + C
18. [2] (Exemplar) Owned by the government (1) e.g. fire service (1)
19. [Rationale] Only 2 elements A + C
20. [2] (Exemplar) Not run with the aim of making a profit (1) but aim to a service to the community (1)
21. [Rationale] Only 2 elements B + C
22. [1] (Exemplar) State owned enterprise (1)
23. [Rationale] Only 1 element A
24. [0] (Exemplar) Organization funded by the government
25. [Rationale] Too vague - private sector organizations may be funded by the government
26. [3] Correct answer with or without correct working
27. [2] Identifies correct data
28. [1] Formulae*
29. [0] No creditable content
30. [Content] (GP/Revenue) × 100
31. [Content] (70/280) × 100 = 25% accept 25
32. [3] (Exemplar) 25%
33. [Rationale] Correct answer
34. [3] (Exemplar) (70/280) × 100 = $25
35. [Rationale] Correct numerical answer
36. [2] (Exemplar) (70/280) × 100 = 2500
37. [Rationale] Not converted to a % but correct formula and data
38. [2] (Exemplar) (70/210) × 100 = 33.3%
39. [Rationale] Correct formula but cost of sales used instead of TR. OFR rule applies so 1 mark for correct formula and 1 mark for (OFR) answer
40. [1] (Exemplar) (30/280) × 100 = 1007140
41. [Rationale] 1 mark for formula but used profit rather than GP. OFR does not apply here, as the answer should have a decimal point after 10 i.e. 10.07140. If the decimal point in the correct position then 2 marks
42. [Content] Government/owners: more government spending needed – opportunity cost of spending
43. [Content] Customers: prices may increase, may have to travel to further swimming pool
44. [Content] Local community: poor service, travel to other pools
45. [Content] Workers: may be made redundant, lower wages
46. [Note] Reference to owners not having dividends, etc. are unlikely to be in context. Closure is not an impact unless it is taken through to show how the stakeholder would be impacted, i.e. The Lido may close leading to an increase in the funds available for the government to spend. ARA
47. [Content Advantages] Increase number of customers – particularly important for a publically owned business
48. [Content Advantages] Gives access to the swimming pool to more people, not dependent on income
49. [Content Advantages] Can be used to increase demand during off peak times
50. [Content Advantages] Can be used to decrease demand at peak times.
51. [Content Disadvantages] Reduce income – may be contributing to the loss made by The Lido
52. [Content Disadvantages] May be seen as a poor quality service
53. [Content Disadvantages] May be seen as unfair against people who pay full price
54. [Content Disadvantages] May lead to excess demand at off peak times and low demand at peak time
55. [Content Arguments for closure] The Lido will be subsidised by other swimming pools/the Government – is this a good use of taxpayers' money?
56. [Content Arguments for closure] Would a different facility be better one that could make a profit or cover its own costs?
57. [Content Arguments for closure] Is the local area the best for a swimming pool – would government money be better spent on creating jobs?
58. [Content Arguments against closure] Publically owned so profit is not the objective of the business – does it matter if The Lido makes a loss?
59. [Content Arguments against closure] The Lido only makes a loss when the allocation of Head Office costs are included - is this a fair allocation?
60. [Content Arguments against closure] The local community has high unemployment – closure is likely to affect these the most
61. [Content Arguments against closure] There are many schools in the local area the closure would reduce the ability for these to teach swimming.
62. [Content Arguments against closure] The Lido benefits local fitness/combats obesity