Tippo Industries makes office furniture and supplies it directly to customers in its local area.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2014). The mark or mark type is shown in brackets.

1. [3] (a) Any three points × 1 mark each which may show it is important to supply direct or may show that it is not necessary – Supplying directly – Office furniture is likely to be bulky and may be easily damaged in transit so it is better to deliver directly to the buyer It may be custom-built for individual companies so may need to advise on site Saves the costs of using an intermediary such as wholesaler May have greater customer satisfaction as gives personal service Sales will increase Furniture has a long shelf life Able to assess consumer tastes Serves local area so may be known to customers May need to do this to be competitive. Not supplying direct – May have additional costs such as storage, delivery Wholesaler or retailer would help to clear production lines Wholesaler or retailer might buy in larger quantities. Any other relevant point.
2. [4] (b) Any two methods of communication × 1 mark each and 1 mark each for when they would be used - Beware Handling orders as in question Letter/written/accept PO service – When sending out catalogues of office furniture When sending out a quotation Email/Internet/electronic/online – Acknowledging an order Giving details of when the furniture might be delivered Telephone/call/mobile – Discussing any problems that might arise Clarifying any detail of the order Face to face/verbal/tell – When explaining what is available When a client visits the showroom Fax – When a document needs to be sent When an order is received. Any other relevant point
3. [4] (c) Any four points × 1 mark each and up to 2 marks for a well-developed point – The customer may need to complain if the office furniture is faulty or broken or unsafe The company may not have supplied goods fit for purpose including example The company may ignore complaints by customers/business is stronger than customer Customers may feel that having a consumer organisation to back them up will give them more success than as individuals They will be able to see that the furniture is made to a certain standard e.g. BSI mark Consumer legislation will provide them with some protection e.g. correct descriptions They may be buying on credit and need the protection of consumer credit legislation Consumers are more aware of their rights. Any other relevant point.
4. [2] (d) (i) Any two points × 1 mark each or one well developed point × 2 marks – Informal credit usually involves small amounts of money and the office furniture is likely to be expensive Informal credit is usually for a short period; credit for the office furniture may be required for some time Informal credit is usually given to customers who are known to the seller, Tippo Industries may not know many of its customers Does not want the risk of bad debts Does not help the cash flow Not a small-scale retailers so no personal contact. Any other relevant point.
5. [1] (ii) One mark for credit card/hire purchase/extended credit (deferred payments)/interest free loan for a certain period.
6. [6] (e) Level 2 (4-6 marks) Has discussed whether or not Tippo Industries should use vans from local transport firms or own its own fleet of vans and has given a reasoned opinion. (If a candidate discusses either hiring vans or owning its own vans, award 4 marks max) If Tippo Industries has used vans from local transport firms to make deliveries, it is likely that this has always been successful. It is likely that the charges made have been reasonable and the vans have been available when required. It may be now that trade has increased or that hire charges have gone up or that there have been problems with the hired vans. If Tippo Industries decides to invest in its own fleet of vans it will need to consider the capital costs of purchasing the vans, the costs of insurance, garaging and fuel costs and the costs of drivers. It will have to make sure that they are used most of the time or perhaps hired out to other companies. Owning your own vans has many advantages – the vans will be available when required, the furniture can be taken door to door in the quantities required, the vans can be used for advertising and there should be greater protection for the furniture as it is under the direct control of a company employee. I would recommend that Tippo Industries continues to use hired vans unless it is sure that using its own vans is economically justified. It might decide to investigate leasing instead. Level 1 (1-3 marks) Has commented on hiring vans and/or using its own transport with/without an opinion. Hiring vans can be expensive. They may not be available when required. If the company buys vans this will be expensive. There will be fuel and labour costs. They must be used all the time. I recommend purchasing some vans.