Analyse the advantages to FF of the privatisation of the electricity and water industries.

Mark scheme

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

1. [3] Knowledge: Privatisation is the conversion of a state-owned business to private ownership. Competition should reduce prices. Contracts should ensure companies meet their commitments. Quality and certainty of supply should increase. Transparency should increase because private businesses are more responsive to customers and less bureaucratic than government agencies.
2. [2] Application: Aim of government privatisation is to improve water and electricity supply which should mean fewer supply interruptions. Prices have risen in water and electricity above the rate of inflation. Glasses manufacture: Water required to produce glasses frames; Electricity to run machines in glasses manufacture. Supply has been interrupted as a state-owned business. Reference to capacity of 16 million frames and actual output of 14 million frames or other relevant figures from the text. Only 85% of sales delivered on time; electricity and water supply problems will not help this improve.
3. [5] Analysis: Prices have risen in water and electricity above the rate of inflation, increasing costs for FF. Privatisation may increase competition and drive down prices which will lower costs to FF and increase profit. Improvement in reliability of supply should enable FF to increase capacity utilisation, reduce downtime and improve percentage of on-time deliveries. This will improve customer satisfaction and increase sales. FF is investing in 3D printers and CAD/CAM so a more reliable electricity supply will be increasingly important to the success of FF. ARA.