Cuddles Ltd is a public limited company making and selling a range of prams and pushchairs. It sells to retail stores in its home country and online to individual customers all over the world.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2015). The mark or mark type is shown in brackets.

1. [1] One mark for secondary or tertiary production
2. [4] Any two advantages explained × 2 marks
3. • Limited liability (1) for shareholders means their personal assets are not at stake if the company fails (1)
4. • Access to large amounts of capital (1) through a stock exchange (1)
5. • Has continuity of existence (1) even if the ownership of the shares changes (1)
6. • Limited liability encourages potential investors to buy shares (1)
7. • Legal entity (1) so the company is separate from its directors / shareholders (1)
8. • With large amounts of capital available can take advantage of economies of scale (1)
9. Any other relevant point
10. [2] Any one difficulty explained × 2 marks
11. • Setting up an attractive website that will enable buyers to use it easily
12. • Training workers to use the computers and software packages
13. • Training workers to handle online sales / process orders
14. • Cost implications of the equipment, storage, delivery to customers
15. • Goods may be returned as they are not as shown on the website
16. • Need for a secure site (1) that customers will feel comfortable about using (1)
17. • Unstable connections
18. • Language problems
19. Any other relevant point
20. [4] Any two commercial documents × 1 mark and 1 mark for purpose of each
21. • quotation - in response to an enquiry/when a request is made for prices
22. • catalogue/price list – to show the range of goods offered and prices
23. • advice note - to inform the buyer when goods have been despatched
24. • delivery note/consignment note – to accompany the goods sent
25. • invoice - to give the stores details of the goods sent and the total cost
26. • credit note - when the retailer has been overcharged/returned goods
27. • debit note - to correct an undercharge
28. • statement - to show the total amount owed for a series of transactions
29. • receipt - issued to prove that payment has been made
30. Any other relevant document
31. [3] Any three points × 1 mark each and up to 2 marks for a well-developed point –
32. • To encourage repeat business
33. • To attract customers
34. • To gain a competitive edge
35. • Because they are selling goods that might need maintenance/repair
36. • Because some of these items are large and may need to be delivered
37. • May produce additional income for the store
38. Any other relevant point
39. [6] Level 2 (4-6 marks)
40. Candidate has discussed whether or not Cuddles Ltd should sell to stores in other countries and has given a reasoned opinion.
41. (If a candidate has given a one-sided argument, award 4 marks max).
42. If Cuddles Ltd decides to sell to stores in other countries it should gain a wider market for its goods and so increased sales revenue. It will be a form of expansion and will contribute to the country's Balance of Trade. It will have to decide whether or not to organise the sales to stores itself or sell using an intermediary such as an agent.
43. Cuddles Ltd will, however, encounter some difficulties. It will have to make its goods according to specifications acceptable in the countries to which it is exporting. It will have to organise transport over greater distances than when it was selling at home. It will be paid in foreign currency. Payments may be delayed so causing problems of cash flow. There may be greater chances of theft or damage and so insurance and packaging costs may be greater. All these problems can be overcome.
44. If the country in which Cuddles Ltd is located belongs to a trading group it will be easier for Cuddles Ltd to export as it will not be subject to import duties and other restrictions. Cuddles Ltd may need to try to sell in one country and overcome the difficulties encountered there before considering a wider export market. I recommend that Cuddles Ltd should consider selling in other countries if it wishes to expand its business.
45. Level 1 (1-3 marks)
46. Candidate has commented on Cuddles Ltd considering selling to stores in other countries with/without an opinion.
47. If Cuddles Ltd decides to sell to stores in other countries it should gain a wider market for its goods. It will increase its sales. It will expand. It should make increased profits. Cuddles Ltd will, however, encounter some difficulties. It will have to organise transport over distances. Payments may be delayed. There may be greater chances of theft or damage. I recommend that Cuddles Ltd should consider selling in other countries.